Cross-Docking Can Reduce Costs and Increase Speed

In many warehouse and distribution centers, the most efficient way to handle materials is to ship them out almost immediately after they are received. This process, known as cross-docking, can be the most cost-effective materials handling option as well as the fastest.

Cross-docking works like this: Products arrive at your dock. But instead of receiving them and then warehousing them until they are ready to be shipped, these products never go into inventory. Instead, they are immediately shipped right back out to customers — in many cases without ever spending more than a few minutes or hours in your possession.

Minimal Touches

Supply chain theory says the fewer touches a particular package or shipment has, the cheaper and more efficient it is for the business. Conversely, the longer materials are held in your warehouse or distribution center, the more costs are incurred.

So cross-docking offers the perfect solution to both reducing storage and warehousing costs while at the same time speeding up delivery to customers. There are fewer labor costs, fewer opportunities for theft or damage, and no need to conduct inventory or worry about theft or damage.

Cross-Docking Test Case

Let’s look at the example of automobile tires. Under the old model, a retail chain that specializes in tires might warehouse thousands of different tires representing dozens of different brands. When an individual retail store needs to replenish its supply of a particular type of tire, it submits an order to the warehouse, the tires are picked and sent to the store, and the inventories of both the warehouse and the store are updated.

Under the cross-docking model, the warehouse might stock zero tires or perhaps only a handful of the most popular models. Instead, orders are placed with suppliers only after each retail store submits their order. Tires are then shipped to the warehouse then immediately repacked and sent to each retail store.

Retail stores get their tires faster, the warehouse runs leaner and with fewer labor and storage costs, and the tire chain’s profits grow as the system becomes more efficient.

Products Benefitting from Cross-Docking

Tires may be only one example, but there are other products that would even more clearly benefit from cross-docking. Thes include things like perishable foods, high-cost items that are more prone to theft, materials that are marked with barcodes or include RFID chips for quick handling, and a business’s best selling items that have high velocity.

For an illustration of how cross-docking can increase both the speed and profitability of a business, one need look no further than Amazon. Each of the online retailer’s hundreds of mammoth distribution center holds onto products for as little time as possible. Instead, through cross-docking, Amazon has been able to minimize inventory, warehousing, and labor costs while moving toward same-day delivery for many customers.