Cross-docking has a significant place in the supply chain industry and improvement in a supply chain has become essential for organizational growth because you can easily handle freight shipments within a limited period.
Cross-docking makes freight forwarding more efficient as it works with a strategy to get the most of out it, which further ensures that goods reach the destination at the right time while saving transportation costs. Due to this reason, cross-docking has become popular for moving goods from one place to another and it can be used in various industries.
This article covers the complete knowledge of cross-docking, its suitability, uses, and associated benefits.
What is Cross Docking?
Cross-docking is the process of delivering products directly from a manufacturing plant to the customer or retail chain via a distribution docking terminal where the sorting of received goods is handled while keeping the location in mind; after that, these goods are transported to the destination.
Cross-docking makes the supply chain management fast and efficient, products will be transported with minimal handling in the warehouses.
When Can Cross-Docking Be Used?
Cross-docking services are not always beneficial for every business before using these services there are various factors that are required to be considered such as cost, productivity, the durability of the goods, and demand of the customer. If this service reduces productivity and increases costs then it is advised to use another medium like consolidation.
What Sort of Commodities are Appropriate for Cross-Docking?
Cross-docking is beneficial for those businesses whose products always remain in high demand, which results in high volume shipment. The usage of cross-docking to ship natural and fresh products is a proven way to reduce cost and improve efficiency.
In cross-docking, perishable or natural goods are managed by following the concept of LIFO (Last In, First Out) for handling fragile products like vegetables, milk, fish, meat, etc that are delivered on a priority basis. On the other hand, non-perishable like soaps, biscuits and other packaged products are moved by following the FIFO (First In, First Out) concept.
High Demand Products:
Cross docking services bc can be utilized in a better way for high-demand products like clothing items, furniture, and smartphones, specially during the off-season with offers and discounts.
Types of Cross-Docking:
Pre-distribution and post-distribution are the two main categories of cross-docking that are described as under: –
This is also called pre-delivery allocation; in this process, products’ sorting, allocation, and labelling are done in the distribution docking terminal after identifying targeted customers. In case of cross-docking, it is already identified before the material leaves the manufacturing plants.
This process is also called delayed allocation in which sorting is suspended until appropriate customers are chosen based on demand. This sort of distribution service takes more time than the pre-distribution cross-docking because the goods may be in low demand.
[Key difference: In Pre-distribution Cross-Docking, customers are assigned before the shipment leaves to deliver from the hob of the seller, whereas in post-distribution, customers will be decided after the shipment arrives so that seller can arrange its product more smartly.]
Benefits of Cross-Docking:
Various businesses are taking the advantage of cross-docking services. In the future, more and more organizations will use this service. According to Transparency Market Research, businesses will use more 3PL (Third Party Logistics) cross-docking services than warehouses across different sectors comprising food & beverages, automotive, pharmaceuticals, paper, pulp, defence & aerospace, and healthcare. The global market that comprises cross-docking services is likely to grow with a value of US$ 340 Billion by the end of 2030.
Central Location for Products Handling:
Cross-docking provides a central location to handle various products that are received from different vendors. Handling of commodities includes sorting, allocation, and labelling. After arranging products, consignment trailers are used to ship the goods to distinct small stores.
This is an ideal service for B2B (Business To Business) order fulfilment that does not need to store goods in an inventory for a longer period.
Reduces the Packaging and Storage Cost:
Goods in cross-docking are stored for a shorter period of time; as a result, storage and inventory charges are reduced significantly. The storage charges are concerned with the finance that is used to spend on holding inventory/storage whereas inventory charges are a superset of storage charges, which include the costs that are not limited to equipment keeping.
Lower Transportation and Distribution Cost:
As different types of commodities are shipped to a single endpoint, trucks do not require multiple halts on the way. This automatically shirks transportation costs because less fuel is wasted due to minimized miles.
Fast Products Delivery:
While using cross-docking services, there is no need for a warehouse to store for a longer period. Besides, delivery of the products at a single point, which requires no halts on the way, means products will be delivered fast as compared to other methods of warehousing and distribution.
Reduces Risks Associated With Inventory Management:
There are various operations that are involved in inventory management such as tracking products’ movement, allotting storage, etc. It also includes managing multiple SKUs (Stock Keeping Unit), which are essential to differentiate an item from other products of similar kinds.
In case of cross-docking, the time to handle material in inventory gets reduced because of decrement in product shuffling in and out, which may spoil the quality of the perishable commodities such as food and beverage items. This process may improve inventory turnover if it is handled efficiently.
Distribution Docking Terminals Are Less Expensive and complex:
With cross-docking, businesses do not need to pay an extensive amount of rent to use the warehouses.
Other sorts of products like pharmaceuticals, makeup, vitamins, and supplements that have shorter-life-span can get benefit from a cross-docking service that makes the supply chain less complex.
Reduced Labour Costs:
As costs associated with material handling in inventory get lowered, this directly impacts the labour costs. Benefits that are obtained from decreased labour costs can be transferred to the customers. This way cross-docking helps the organizations to save mone