The supply chain’s efficiency has a demonstrable effect on an organization’s growth. Cross-docking logistics is a critical strategy that firms may use to remain ahead of the competition. When cross-docking is performed properly, it may significantly reduce the time required to handle shipments.
Cross-Docking – What is it?
Cross-docking is one of the logistics techniques that may assist you in meeting client demands and improving your competitive advantages like logistics. It is a method of freight transportation in which raw materials, partial components, or finished goods are transferred directly from a manufacturer or supplier to users, including next-level producers or end customers, with little or no storage time.
When a company is a part of an international logistics network, it enables more competitive prices and streamlines delivery. In addition, with the advancement of technology that enables real-time data exchange and analysis, it is now possible to reduce the cushion of supply inventory on hand through techniques, which improves a company’s inventory efficiency and operations, allowing less investment to be stuck up in inventory.
Cross-docking occurs in the cross-dock terminal, a small space comprised of the inbound and outgoing docks, often located in a warehouse. After the inbound transportation is docked, products can be unloaded to the terminal. The products can then be screened and sorted to determine their final destinations. Finally, products can be transferred to the outbound dock through the conveyor belt, pallet truck, forklift, or other means of transportation before trucks, trailers, rail cars, or other modes of transportation are used. Typically, items stay less than one day at the terminal and less than an hour in certain cases. In simpler words, cross-docking may be thought of as a hub and spoke or spoke and wheel, distribution network, similar to the one used by many airlines you may be acquainted with, such as United Airlines, Guam, and Cathay Pacific, Hong Kong.
Compared to a point-to-point approach, airlines favor hub airports because they enable airlines to link to the greatest number of locations with the fewest routes. Cross dock, for the same reason, is a transportation-optimized option that results in considerable cost savings for the business.
Benefits of Cross Docking
- Handling of Material: At the cross-docking terminal, material handling will be simplified, resulting in significant efficiency gains (i.e., destination scan, in-motion labeling, label verification, in-motion weighing, etc.)
- No requirement for a warehouse: In many situations, traditional warehouses will be phased out in favor of cross-dock facilities, which are quicker to construct, need less square footage, and provide a firm with both fixed and variable asset cost reductions. When a third-party logistics provider is used for cross-docking, such as NimbusPost fulfillment, most cross-docking firms maintain a specialized cross-dock facility.
- Cost of packaging and warehousing: This technique will lower storage costs since inventory time should be kept to a minimum. Additional packaging costs will also be reduced due to automation practices at the cross-docking
- Costs of Transportation and Distribution: Because items headed for the same endpoint may be carried together, each transportation journey will have a full load, lowering transportation costs on a scale. Additionally, because the routing has been improved (hub and spoke) by eliminating inefficient operations such as “pick-location” or “order picking,” fewer kilometers will be spent, lowering fuel and related vehicle servicing expenses.
- Products are Evaluated More Frequently: By implementing streamlining and automation at the terminals, products will be tested more effectively, resulting in a significant reduction in the time parcels spend in transportation.
- Products are Delivered to Customers Effortlessly: Due to the faster testing process, there is a higher product turnover, which means that items may now be provided to consumers more quickly.
- Inventory Handling Risks Are Reduced: As a warehouse is no longer required, risks about inventory management are eliminated. Apart from the benefits of cross-docking, one should examine the relative dangers and prerequisites before pursuing this method.
Apart from the cross-docking risks inherent in cross-docking for the providing firm, there are a few other criteria to check:
- Sufficient Transport Carriers: A substantial transportation fleet is required to ensure the proper operation, as a large portion of its process is dependent on shipping.
- Automated Logistic System: It is critical to have a smart integrated system that enables suppliers to stay current on point-of-sale data (i.e., sales activities and trends) that provides insight into future orders. For example, Wal-Mart, which cross-docks 85 percent of its inventory, is known to employ a proprietary satellite telecommunication system to relay real-time information to its users.
- Achieve a high volume to be cost-savvy: Scale economies also apply here. A large number of items can help reduce expenses, including operational and shipping costs.
When should cross-docking be used?
- Inventory with a stable demand: With predictable product demand, a regular timetable and system can be established to support recurrent deliveries and may be enhanced to reduce costs through further effective analysis. Additionally, it removes the requirement for excess inventory to be held in the event of a stock out.
- Inventory that is time-sensitive and perishable: Time-sensitive items (e.g., groceries) must be delivered to users within an acceptable amount of the remaining shelf life. By skipping the storage stage and delivering directly through the cross-dock terminal, time is saved, which frees up space for the short shelf life of the items, provides a longer sales window for the products, and may result in better services and products for users.
- Crowdfunding and Online Flash sales: When a crowdfunding campaign raises money for a product, it is typically a one-time distribution to supporters, with cross-docking being the preferred mode of delivery. Similarly, when an e-commerce company experiences a flash sale or a significant increase in sales volume due to a special event, cross-docking is frequently the most cost-effective method of delivering goods to the end-user.
Is Cross-Docking the Best Option for Your Products?
Cross-docking continues to be a critical approach for resolving a variety of logistical issues. It is among the key reasons India retains a strategic benefit as an e-commerce distributor, particularly for cross-border exports from China to the rest of the world: India is a leading freight hub by volume. Additionally, it establishes Indian as the optimal location for e-commerce businesses.