The supply chain is a system which consists of processes or functions, which in turn are analysed into both activities and items. The ultimate purpose of this scheme is the decrease in supply chain costs and the improvement of customer service. In comparison to the recent past, the role of supply chain management has been upgraded and shifted from a strict coordination between supply, production, storage and shipment to a complicated system dealing with all the functions of the supply chain.
Consequently, it becomes apparent that the organisations always try to find ways to increase the profitability of supply chains and decrease logistics costs. Within this framework, three methods of reducing the cost of supply chain management have been developed:
- Distribution network optimization
- Shipment consolidation and
- Cross – docking.
The basic idea behind cross – docking is the direct transfer of finished goods from the production line, without having these items stored in a warehouse. In fact, the primary objective of the cross – docking method is to enable the integration of shipments of different size to a single load with full truck loads so that transportation costs can be minimized. Cross-docking is a creative distribution strategy for the goods that are time-sensitive. This method works as explained below:
The inbound trucks are discharged in a cross-dock and directly reloaded to the outbound trucks with minimum standby time (standby time is commonly shorter than 24 hours). Efficient operations of cross-docks require accurate and simultaneous operations of inbound and outbound trucks by contriving proper scheduling approaches. For this purpose, several scheduling procedures have been introduced over the recent years. In general, scheduling helps taking advantage of limited resources at a time so as to optimise the objectives. The scheduling process for the trucks commonly divides transportation procedure into two parts:
- Discharging inbound trucks
- Loading outbound trucks.
Of course, there is a time lag for conveying the cargo inside the cross-dock terminal. This delay includes the required time for investigating, categorizing and carrying the materials. Each terminal has several doors. The doors are scheduled for the trucks. The distance between each pair of doors is already determined; hence, there is another delay for carrying the materials between the pairs of doors as well. Overall, scheduling is a new horizon in cross-docking systems. It helps the manager’s transport and distributes their cargo faster. This improves the overall efficiency of the organisation.
The following types of products are generally suitable for cross-docking-
- Back-ordered items
- Seasonal (or promotional) merchandise
- High-volume products in steady demand
- High-value products
- Products having short lead-times.
The products not suitable for cross-docking are:
- Bulky, awkward items that are difficult to handle
- Items arriving before seasonal promotions begin
- Slow-moving, low-value products
- Items purchased in large bulk quantities
- Products having long lead-times (including overseas shipments).
Cross-docking can provide significant inventory savings. In its purest form, there is no storage. Therefore, there is no routing to storage areas, no subsequent retrieval from storage racks, and no rerouting back to dock areas. Both the costs of holding inventory and the costs of handling the inventory are eliminated or drastically reduced.
The following expenses are cut in this strategy:
- Warehousing, maintenance, transportation, and human resources. This method also leads to shorter delay in delivery, improving client satisfaction, needing less storage room, smoother work flow, as well as lower risk and loss.
- The benefits of the cross-docking system are more conspicuous in cases with higher distribution costs.
- A good example holds for car manufacturers. To meet their needs of their assembly lines and distribution centres, they have been increasingly attracted to cross-docks. These docks are usually run by logistical companies to manage on-time delivery of goods.
Cross docking is a costly process. Adequate technologies have not been developed to implement the process. There is a distance between the warehouse and the distributions centres in retail supply chain and economies of scale have a negative impact.
The benefits of cross docking are reduced if the organisation has some stores. Companies in the new changing globalized environment, search creative ways to insert to their supply chain to minimize their costs and manage their inventory levels effectively. Cross-docking operations increased throughput at critical distribution points by unloading shipments directly onto outbound transport, which eliminates the need to store freight.