What Is Cross Docking?
Cross docking is a methodology for the distribution of goods in which the company outsources the shipping and short storage of products to a distribution center, which, in an agile and organized way, forwards the items to customers.
In this way, the company does not have to worry about having a physical space to use as stock.
On the other hand, you need to be more careful so that the purchase arrives unharmed and within the agreed deadline at the consumer’s home.
Thus, the so-called DCs, distribution centers, assume a fundamental role within the logistics operation of a company.
The Origin Of Cross Docking
“Cross docking”, in a literal translation, means something like “crossing docks” .
The term emerged in the United States in the 1930s to explain a distribution process where goods unloaded by ships were left in warehouses and then placed on conveyor belts .
These conveyors transported the products directly to the trucks, according to the planned routes.
The idea was to optimize delivery time , classifying items to different destinations or combining loads from the most varied origins, but going to nearby addresses.
How Does Cross Docking Work?
Despite being a logistical operation that may have some variation in its process, in general, cross docking works like this:
- The customer makes a particular purchase and this order, along with a series of other purchases, is recorded by the company
- The company notifies its suppliers about the volume of orders placed
- Suppliers deliver the goods to the distribution center
- The logistics operation team (or the carrier) reviews, separates and organizes shipments as per orders
- The team places the loads in the delivery vehicles towards the customers’ destinations.
What Are The Advantages Of Cross Docking?
For those who have doubts about the benefits of cross docking, here are some advantages that this distribution model can bring to your business:
Reduction Of Inventory Costs
You don’t need to reserve a physical space for an inventory, at most a small place to receive suppliers and already forward the products to their final recipients ‒ customers.
Lower Logistics Costs
It’s not just inventory expenses that decrease, the entire logistics chain also has lower expenses.
After all, we are talking about a leaner dynamic , especially if technological solutions are included.
In this case, operating costs tend to be even lower.
Distribution centers tend to operate much more efficiently than traditional inventories, since their task is only to check the goods and send them for delivery.
In addition, quality control is also more assertive and failures, such as the forwarding of wrong or defective products, and shipments sent to other destinations, tend to decrease.
In other words, the customer also benefits from this high performance.
Decrease The Number Of Missing Products
As we are talking about an on- demand delivery , you don’t have to worry about whether or not the requested product is in stock.
In addition, there is no need to forecast demand, everything is left to the suppliers .
Less Chance Of Theft
Thefts are one of the main reasons for retail losses, and much of this loss is due to the excessive time that products stay in stocks.
With cross docking, the window in which merchandise stays on CDs is much smaller , reducing the chances of such incidents.
Better Use Of Delivery Vehicles
Cross docking also makes it possible to optimize the operation of delivery vehicles, as it ensures better use of the useful space for loads and manages to direct the goods according to common routes.
And The Disadvantages Of Cross Docking?
Disadvantages may not be the best word, but there are certainly challenges that need to be overcome so that the methodology can be successfully implemented.
Almost all of them are based on the need for correct and organized planning to make the transition to the new distribution model.
We separate some complicating factors that can be obstacles to the implementation of cross docking:
- Lack of synchronization between all parties involved
- Communication problems between company and suppliers
- Management without a holistic view of the supply chain
- Suppliers in disbelief in relation to the efficiency of the process
- Lack of optimized routes to facilitate deliveries
- Failures in the separation of goods in the transshipment area.
What Are The Types Of Cross Docking?
There is not just one type of cross docking, there are at least three well-known ones , which differ in some aspects and vary according to the type of movement and client.
Below, we talk a little about each of these models:
It is the more traditional model , in which the supplier delivers the products to the DC and the carrier or the logistics operation team receives, checks and forwards the goods to the final consumer.
Consolidated Or Hybrid Movement
As the name suggests, it is a variation between continuous movement and storage .
In this model, a part of the load is sent to the distribution center, and the other part is directed to the stock so that the items can be combined and complete the customer‘s order.
This practice is common when the consumer makes a purchase from different suppliers in a marketplace, for example.
As the goods have different times to arrive at the DC, it is waited until they all arrive and the order can be dispatched in a single shipment.
Here, the big difference is the end customer.
This cross-docking model is mostly used in B2B relationships , where, normally, a single company places high-volume orders, enough to fill the maximum capacity of a vehicle – the so-called Full Truck Load (FLT).
Know When Is The Ideal Time To Implement Cross Docking In Your Organization
Although cross docking is a model with numerous advantages, not every company will necessarily benefit from its implementation.
Also because making this decision is a very important step, which requires a certain level of demand and, in particular, investment.
So, before making this kind of transition, you need to first make sure you have reliable suppliers, and then keep an eye out for these four scenarios:
Stable And Predictable Flows
If your business has a number of loyal and regular customers, who always order more or less the same products , within a small margin of error, cross docking can work well.
In a B2B model, for example, where there is a lot of predictability in demand , it is more feasible to count this alternative than to store a large amount of goods in a safety stock.
Perishable And Low Shelf Life Products
Another scenario where cross docking can be a good option are those businesses that work with products that deteriorate over time or quickly expire, such as food companies, for example.
After all, it is possible to cut costs with refrigerated inventories, to name just one advantage.
Promotions And Special Offers
Special events, such as commemorative dates or promotions period, tend to have a higher volume of orders.
In this sense, cross docking ends up being the ideal solution, as it manages to optimize deliveries even when there are peaks in demand .
No wonder, retail and outlets are the customers that most use this type of service.
Expensive Goods With Short Delivery Times
Keeping stocks full of high-value goods , such as electronics and appliances, is not a good option, both in terms of cash flow and because of the risk of theft or high cost with security.
Another important point is that, more and more, customers are looking for companies that have fast shipping.
Therefore, having the cross docking system ends up being advantageous for these two aspects: meeting on demand and delivering with agility .
How To Implement Cross Docking In Companies? [Step By Step]
Does your company fit into any of the above scenarios and consider yourself ready to make this transition , but don’t know how?
So, this step-by-step guide on how to implement cross docking in your business will be very useful for you.
Check out the tips and get to work!
Make A Pilot Project
Messing with your supply chain is something quite invasive, which should not be done without a minimum of planning .
So, before investing heavily in this logistical transformation, do a test.
Start operating with a lower volume of deliveries to work on best practices.
Train Your Collaborators
Any kind of change requires adaptation and training .
Your team needs to be prepared to handle each step of the cross docking.
It all starts with a good dialogue with suppliers, goes through a detailed analysis of the goods , care when placing the products in transport and ends with the guarantee of delivery within the stipulated time.
Any situation outside this scenario will hinder the success of the model.
Partner With Distribution Centers
CDs are the main key pieces for the cross docking system to work.
After all, they are the places where your products are delivered by the suppliers and go to the customer‘s address.
Therefore, it is essential to partner with companies that have a physical space that can be used as a distribution center.
Outsourcing ends up being the most viable alternative for those businesses that are unable or interested in investing in their own space to function as a DC.
Count On A Good ERP
Having the support of technology is also very important.
With a good integrated business management system (ERP) , it is possible to have detailed information about the different operations that involve the supply chain.
For example, you can know what goods are going to be received, in what quantity, on what date and where they need to be delivered.
This data is critical so that cross docking can be much more efficient and synchronized .
Make A Correct Negotiation With Suppliers
A relationship between companies and suppliers needs to be guided by trust, especially in a distribution system such as cross docking, where a failure can tarnish the reputation of a business .
When closing contracts, make the terms and rules of the agreement very clear.
Make sure the supplier always has a minimum volume of certain items on hand and set a deadline for replacements.
Count On A SAC
Even if you surround yourself with all care, no one is free from the risk of making a mistake.
When you have a close and active customer service , the consumer feels much more secure , as he knows that there is an open channel for interaction.
Always Seek To Implement Improvements
It’s not because you’ve received few complaints at SAC that your cross docking system can’t improve.
It is always possible to seek evolution , whether for the final consumer or in operational matters.
Who knows it’s not possible to deliver even faster or with free shipping ?
Or even, can certain costs not be cut?
Cross Docking Vs Drop shipping: What Are The Differences?
Like cross docking, drop shipping is also a type of operation based on logistical efficiency, but the similarities end there.
In drop shipping, the company responsible for the sale has no control over the delivery journey of the products.
In other words, it simply forwards the order to the supplier, who is responsible for sending the goods to the final consumer.
The figure of DCs does not exist, as the products traded come directly from the suppliers’ stock.
Drop shipping is widely used in e-commerce and by those companies that work with product catalogs, especially in segments that have more complicated logistics, such as the furniture sector, for example.
As freight and storage costs end up being high in these cases, it does not pay to maintain distribution centers.
Companies That Use Cross Docking
Cross docking ends up being a distribution and logistics solution widely used by companies of different sizes because of its excellent cost-effectiveness.
One of the first large corporations to invest in the system was Walmart , still in the 1970s.
At the time, the alternative emerged to supply the lack of interest of suppliers in going to stores in more remote regions to take the products.
Furthermore, over time, Walmart was able to offer far more merchandise than physical stores could contemplate.
Another example of a company that uses cross docking, this one in national territory, is Perdigão .
The food giant realized that it was financially and logistically smarter to spread CDs in strategic locations than to create factories in the most different corners of the country.
Privalia , an online outlet selling fashion, home and sports items, in turn, uses a logistical strategy to sell goods at a much more affordable price.
Thanks to cross docking, the company, which has a distribution center in Barcelona, Spain, is able to prepare orders much faster and deliver worldwide.
Other companies that make use of the cross docking model:
- American stores
- Roche Diagnostic
- Eroski Group.