Cross-docking: Definition, types and benefits

 

If you are looking to deliver goods faster to your customers, cross-docking can turn out to be an efficient method of logistics for your business. Do you know what cross-docking is? Here is more about what cross-docking is, its benefits, and its types.

What is cross-docking?

Cross-docking is a common term in the logistics and supply chain management industry. Cross-docking means the transfer of goods from one ground transport vehicle such as a truck to another ground transport vehicle without any storing or warehousing in between.

During the process of unloading from one vehicle and loading in another vehicle, goods are sorted, scanned and reconsolidated from the point of view of their destinations. Based on the nature of operations, there are two types of cross-docking. Here types of cross-docking:

Types of cross-docking

Here are the types of cross-docking.

Pre-distribution: In this method distribution directions are pre-decided. While unloading, goods are arranged and consolidated in a pre-decided distribution order. It means that the customers are then listed down before products leave the suppliers.

Post distribution: In this type, the process of sorting is kept on hold until the customers are listed down. As a result, products have a comparatively prolonged stay in a distribution or sorting centre. However, this process helps sellers to make informed decisions. They can plan inventory, sales, etc., accordingly.

How does cross-docking work?

The cross-docking makes use of modern technologies such as electronic data interchange (EDI). Such technologies give real-time information to transporters. It keeps transporters well-informed about information such as when the incoming trucks are going to arrive. Accordingly, a plan of which products need to be loaded in which outbound trucks is drawn. In order to avoid congestion at the unloading dock, outbound trucks are scheduled. Here is how cross-docking works:

• The inbound truck arrives at the cross-docking centre.
• Goods are unloaded and sorted based on their outbound locations.
• Outbound trucks are loaded with the sorted products.
• Products are then dispatched to their destinations.

For example in a B2B logistics scenario, a multilocation retail grocery chain orders wheat, rice, and other millets from different suppliers to a cross-docking centre. Then, they are sorted according to the retail outlet locations and dispatched to the respective locations.

What is a cross-decking centre?

A cross-docking centre is a facility is a place where inbound and outbound logistics take place constantly. In other words, it is a centralised distribution centre having the capability of handling multiple inbound and outbound logistics. Here is how usually retailer with multiple retail stores at scattered locations use cross-docking centres.

As explained earlier, the order of goods for multiple stores arrives at the cross-docking centre. The loading/unloading stations are used for unloading goods. The cross-docking centre has a facility to sort goods as per the locations. They are sorted while outbound logistics are scheduled immediately and sent to their destinations.

What is the difference between a warehouse and a cross-docking centre? Here is a quick look at the differences.

Cross docking centre	Warehouse
The main purpose is unloading and sorting.	It serves the main purpose of storage. Products are dispatched as the orders are received.
Products arrive and are dispatched quickly. Turnaround time is very less.	Products are stored for a longer time.
May or may not have a packaging and repackaging facility.	It has a packaging facility and products are packaged at the time of dispatch.
It is comparatively cheaper.	It is more expensive than the cross-docking centres.

The turnaround time of a cross-docking centre is very short. Products do not stay in the cross-docking facility for long as they do in the warehouse.

Advantages of cross-docking

• Faster delivery: Cross-docking involves no warehousing and storage halt. It only halts for loading, unloading and sorting. The shipments are delivered faster. Faster deliveries automatically lead to customer satisfaction.
• No need for warehousing: In the cross-docking method, the need for storage is eliminated. Since cross-docking is cheaper than warehousing, it saves the cost of storage and packaging.
• Reduced transportation cost: Since all products going in the same direction are loaded together, it saves fuel and reduces the cost of transportation too.
• Reduced packaging cost: Since the products are only sorted and delivered faster, it reduces the cost involved in packaging and inventory management.
• Overall reduced cost: Cross-docking reduces overall cost. For example, labour, packaging and storage costs are minimal.
• Optimisation of supply chain: Cross-docking enables optimisation of supply chain management.
• Minimal shipping damage: Cross-docking involves minimal handling and therefore, leads to minimal shipping damages.

Suitability of cross-docking

Although cross-docking saves costs and has several benefits, it is not suitable for all kinds of businesses. Here are main two types of companies for whom cross-docking is beneficial.

• Companies that sell perishable or time-sensitive products: Time to market is crucial for businesses that are into the food and pharmaceutical industry. Since, cross-docking is one of the quicker logistics ways, it is suitable for such businesses.
• Businesses with multiple suppliers and destinations: Cross-docking is most suitable for wholesalers and traders who order goods from multiple suppliers from different locations and then they need to be dispatched to multiple destinations.

Here are some of the products for which cross-docking makes more sense than others:

• Perishable or time-sensitive products
• Products that usually do not require quality checks in logistics
• Products that do not need packaging or re-packaging.
• Goods and products that are supplied with high urgency

Conclusion

Cross-docking can offer various advantages for your business including saving cost and customer satisfaction. However, you need to evaluate overall logistics cost as it has to make business sense for your company. For example, many businesses prefer to stay closer to the far-away customers in the form of warehousing. Their products are stored in a warehouse that is located near the customers’ location and dispatched as and when the order is received. This way is faster and more efficient in some cases. Therefore, before choosing any method for logistics for your business, you need to evaluate the cost and other overall benefits before choosing the right method for your business.