Cross docking is a faster way of transporting goods to customers. Instead of spending time at a warehouse, the goods arrive at a distribution centre where they are quickly sorted and sent off on the next leg of their journey. The goal is to streamline the supply chain so products can reach their destination in the most efficient way possible.
This is an example of cross docking: A retail distribution centre receiving deliveries of products from multiple suppliers. The products are sorted by destination and loaded directly onto delivery trucks to be sent to individual stores.
Cross docking vs Direct Shipping
Direct shipping is the process of shipping goods directly from the manufacturer to the customer, bypassing traditional distribution centres and warehouses. Its goal is to reduce the time and costs involved in moving goods through the supply chain.
On the other hand, cross docking involves the delivery of goods to a distribution centre with minimal storage and handling in between. The aim of this is to optimise the flow of goods through the supply chain by reducing transportation costs and handling.
Types of Cross docking
There are 2 types of cross docking, namely pre- and post-distribution cross docking.
| Type of cross-docking | Supplier warehouse required | Information about the customer | Time taken to ship from distribution facility |
|---|---|---|---|
| Pre-distribution | Yes | Known beforehand | Shorter |
| Post-distribution | No | Not known beforehand | Slightly longer |
Pre-distribution cross docking
In this type of cross docking, the supplier knows who their customers are and how the goods should be packed. Therefore, the sorting and allocation of goods will take place in the supplier’s warehouse before they are shipped to each customer.
Post-distribution cross docking
Post-distribution cross docking is for suppliers who have yet to receive information on their recipients. In this case, the goods are shipped to a distribution facility, where they are stored for a short period of time.
When the supplier receives instructions on where the goods should be delivered to and who the recipients are, they are sorted in the centre itself and shipped out.
Methods of Cross docking
There are 3 ways of handling goods as they are prepped for the next leg of their journey. They are consolidation, deconsolidation, and continuous cross docking.
Consolidation
Consolidation involves sorting and collating incoming goods from multiple suppliers before sending them to customers.
For example, when a customer buys different items from Taobao, the order is sent to the distribution facility. Once the items arrive at the facility, the staff unload, sort and group them before sending them to the customer.
Deconsolidation
Deconsolidation is the opposite of consolidation – it is the separation of a large load of goods into smaller shipments so that they can be shipped out to different destinations.
For example, a supermarket may receive a large shipment of groceries like spinach. The staff will map out the amount of spinach to be distributed to each grocery store and the route. Once the allocation is complete, the goods will be shipped out.
Continuous cross docking
Continuous cross docking involves minimal handling as goods are simply transported from one vehicle to the next. In this method, the flow of goods from the supplier to the customer is uninterrupted.
Companies that use this method are often those that ship perishable goods such as groceries and flowers.
Benefits of Cross docking
Cross docking creates a leaner supply chain, giving rise to a range of benefits including shorter shipping times, reduced costs and a lower likelihood of product damage.
Shorter shipping times
With cross docking, it is unnecessary to scan individual items and store them in an inventory system when they arrive at a distribution centre. This helps to reduce the processing time.
Additionally, goods do not need to be handled and repackaged so they can be quickly sent to the next destination.
Reduced costs
Cross docking eliminates the need for warehousing. Instead, it uses a distribution facility, which is often cheaper to rent and maintain due to its size.
Moreover, fewer trucks are needed since goods are grouped and shipped according to each customer’s order. Less staff is also required since minimal handling is involved.
Lower likelihood of product damage
Products are less likely to be damaged as they experience minimal handling and only remain in the warehouse for a short period of time. Once they reach the distribution centre, they are often quickly shipped out.
Drawbacks of Cross docking
Despite the benefits of cross docking, there are some drawbacks such as supply chain disruptions, reduced storage, and difficulties with tracking inventory. However, these can be remedied with additional measures put in place to anticipate the disruptions.
Prone to supply chain disruptions
There are multiple links in this supply chain, and unforeseen events such as poor weather conditions in one leg of the journey may cause the transportation of goods to be disrupted. A robust logistics system is required to manage the effects of such situations.
Less storage space
Oftentimes, there is limited storage available in cross docking distribution centres, making it challenging to store products in the event of shipping delays. For example, if the transport carrier picking up goods from the distribution centre arrives late, the facility may become full.
However, with careful planning and proper inventory management, this can be mitigated.
Difficulties with inventory tracking and management
Since there is no proper warehouse for storing goods, there may be a lack of inventory control. It can be difficult to track products, manage stock levels, and monitor their condition.
To address this, clearer communication and coordination among suppliers, transportation providers, and distribution centre staff can be encouraged. An inventory management system can help as well.