Cross-Docking Explained: Here’s What You Need to Know
October 27, 2021
Retail supply chains are designed to enable efficiency, speed, and cost-savings all while ensuring that products get to the end user at the right time.
Labor, in particular, is a logistics cost that tends to make up a big percentage of the overall costs.
Fortunately, there is a way to reduce labor by reducing the need to stow away products, or eliminate the need for full inventory storage at an interim location all together. Cross-docking is a logistics system that makes distribution more efficient and fast-tracks the fulfillment and inventory replenishment cycle.
The automotive industry has focused for decades on optimizing a just-in-time delivery and cross-docking supply chain model for decades.
In this article, we will discuss the types of cross-docking processes available to retail businesses, along with benefits, and how a 3PL can help you implement a cross-docking solution.
What is cross-docking?
Cross-docking is a lean supply chain model that involves the immediate or faster transfer of finished goods directly from suppliers or manufacturers to customers or retailers with little to no handling or storage (e.g., stopping a truck at a distribution center to put it on another truck without storing the inventory inside the warehouse).
This enables faster replenishment, reduced middle- and last-mile shipping costs by positioning inventory closer to the end customer (e.g., using a distributed inventory model), and better servicing of your end customers.
In most cases, finished goods are unloaded from the incoming transport (from the supplier) into the inbound dock, sorted and consolidated at the cross-docking terminal, and promptly loaded onto an outgoing vehicle (to the customer or retailer) at the outbound dock. This saves time and labor at the receiving dock and helps get the inventory on to the next leg of its trip.
Benefits of cross-docking
Cross-docking enables a leaner supply chain and is ideal for businesses looking to accelerate their order fulfillment process, reduce costs, and speed up the time it takes for products to reach hubs and/or customers.
Here are a few of the benefits of cross-docking for ecommerce.
Faster shipping & receiving times
Since labor to store products can be reduced or eliminated entirely, goods reach the final destination much sooner. Shipping efficiency also increases as the bigger batches are broken down into smaller shipments and loaded to freight going in the same direction.
What’s more, receiving inventory is less complex since receiving only requires accounting for inventory being received and then shipped, rather than scanning inventory into a warehouse management system (WMS) for the purpose of optimizing the movement of goods.
Reduced costs and time savings
Cost of goods sold (COGS) accounts for a significant portion of inventory expenses. Not only does a business have to purchase product, they are also required to pay for first-mile and last-mile shipping and carrying costs as well.
But with cross-docking, a business doesn’t need an extensive ecommerce warehouse to cost-effectively get product to their customers. Cross-docking makes for a more efficient inventory management process to support faster replenishment such as just-in-time inventory.
Also, instead of tracking inventory flow throughout your entire ecommerce supply chain, inventory tracking is done in bulk. And by reducing labor, you save time while keeping inventory shipments intact for a more efficient inventory storage system.
Provides a central site for handling products
At the cross-docking location, product is sorted and then assigned to multiple carriers based on the shipment’s destination.
Additionally, having a central hub to handle inventory is a great solution for B2B fulfillment that doesn’t require the need to store inventory and pick and fulfill single items.
Reduce material handling
Cross-docking operations involves less material handling, i.e., less need to track movement, facilitate storage, and protect and manage multiple SKUs. With cross-docking, you’re able to maintain a high inventory turnover.
Some items also benefit from less material handling throughout the supply chain to maintain quality. This is especially true for perishable items, such as food and beverage items.
Additionally, some products have a shorter shelf-life (e.g., makeup, pharmaceuticals, and vitamins and supplements), which benefit from end customers or other businesses receiving product sooner thanks to a less complex supply chain.
High-quality products also benefit from cross-docking because there’s less of a chance of product being damaged from being stored temporarily before being picked and shipped.
Who can benefit from cross-docking
Cross-docking is a term that is commonly used by importers and exporters with stable, consistent demand and high inventory turnover. But, almost any kind of business can adopt this process if it fits with their supply chain strategy and infrastructure. Below are the types of businesses that benefit from a cross-docking supply chain model.
Companies selling time-sensitive products
Does your business sell essential, high-demand products or perishable items that have a shorter shelf-life?
If yes, you should consider opting for cross-docking. Cross-docking eliminates the need for a supplier to store goods before being sold to another business, thus shortening the time product can reach the end user.
With cross-docking, once a bulk of product is received, it is immediately transported via a forklift, conveyor belt, or pallet truck to the outbound transportation dock. This, in turn, reduces the risk of perishable goods crossing their expiry date and offers retailers a longer sales window.
Companies that use multiple suppliers
Since inventory typically moves directly from one destination to another, bypassing full storage processes, it becomes easy to manage goods coming in from multiple suppliers, or to distribution centers in other regions.
This method enables you to efficiently and quickly receive, sort, combine, and ship loads from different vendors to keep transportation and warehousing costs at a minimum.
Types of cross-docking
Today, many ecommerce players are switching from the traditional distribution management model to a cross-docking approach. There are a two major types of cross-docking: pre-distribution and post-distribution.
With pre-distribution cross-docking, goods are unloaded, sorted, and repackaged based on predetermined distribution instructions.
If the warehouse staff is aware of the end-customer even before the supplier ships out the goods, then as soon as the shipment reaches the dock it is unloaded, sorted, and repacked according to pre-agreed upon distribution instructions.
In this pre-distribution method, inventory spends very little time at the cross-docking warehouse. It is bet suited for retailers that manage their own warehouses and have direct insights into all of their own customer and supplier relations.
With the post-distribution process, goods are stored in the cross-docking facility until the next leg of the journey is clear, i.e., the demand is mapped and customers are identified. This type of service would result in inventory staying at the cross-docking warehouse for a slightly longer period of time.
But, on the flip side, distributors and retailers get to take the time needed to strategically decide which location to ship the inventory to based on inventory forecasting numbers and current inventory counts.
3 methods of cross-docking
Depending on the type of business, the products you sell, and your customers’ needs, here is a break down of the three more common methods of cross-docking.
1. Continuous cross-docking
With continuous cross-docking, there is a non-stop and direct flow of inventory through a cross-docking facility from inbound to outbound shipments.
Continuous cross-docking results in short waiting periods between unloading and loading of shipments in case of events like trucks arriving at different times at the facility.
2. Consolidation arrangements
Consolidation arrangement involves the merging of many small shipments into one larger load before being shipped out. This is beneficial since it is not always profitable to ship out each small parcel individually from the cross-docking facility.
With a consolidation arrangement, the goods do need to be temporarily stored at the warehouse until they form full truckload shipments (most likely in a staging area and not with other inventory). But, the benefit lies in the fact that it helps reduce shipping costs.
The de-consolidation approach to cross-docking is the opposite of the consolidation arrangement method.
With de-consolidation, the large load is broken down into smaller batches to make it easier and quicker to transport to customers. This is method is typically used in direct-to-consumer fulfillment.
Trust your fulfillment logistics with ShipBob
If you want to maximize your fulfillment operations, it’s important to implement automation for real-time control and visibility over inventory, orders, shipments, and returns.
ShipBob is a 3PL that offers premium fulfillment services, a growing logistics network, and a best-in-class automation and technology for online brands that serve the end customer and businesses.
ShipBob’s range of third-party logistics solutions include:
- DTC fulfillment
- B2B ecommerce
- Kitting and assembly,
- Warehouse picking and packing
- Inventory management
- Returns management
Additionally, ShipBob offers cross-docking solution at select fulfillment centers available upon request by assisting you in sending inventory to another ShipBob fulfillment center, as well as other locations if we have the labels ahead of time.
ShipBob’s global fulfillment network is powered by a centralized proprietary fulfillment software. This allows you to distribute your inventory using insights that help you identify an ideal inventory allocation strategy. This, in turn, reduces shipping costs, speeds up transit times, and improves customer satisfaction.
“It’s so helpful knowing that we have the options to expand so easily. We know that we can compare the markets simply, and because ShipBob [has] already set up [multiple fulfillment centers in various countries], it’s a simple choice. We don’t need to compare the logistics as intensely.”
Nakisah Williams, founder of Craft Club Co.
To learn more about our fulfillment solution, click the button below for more information and custom pricing.
Here are answers to some of the most common questions about cross-docking.
What is a cross-docking facility?
A cross-docking facility is a type of sorting center with minimal storage space. Goods that arrive here are quickly sorted according to inbound and outbound shipments and then immediately shipped out, often within 24 hours.
What is a cross-docking strategy?
A cross-docking strategy minimizes warehousing activities and labor by immediately transferring freight from one mode of transportation to another at the docking facility as soon as possible. This method helps deliver cost savings and ensures faster fulfillment time.
Why is cross-docking used?
In the traditional warehousing system, inventory is unloaded from incoming railcars or semi-trailers, and stored within the warehouse. Then, they are repacked and shipped. But, with a cross-docking system in place, orders are fulfilled much faster. This supply chain strategy is used for goods that are perishable, or when juggling multiple vendors.
Does ShipBob offer cross-docking services?
ShipBob is a 3PL that specializes in direct-to-consumer fulfillment and offers specialized services such as B2B orders and kitting at all locations, and even cross-docking at select fulfillment centers upon request for customers who use ShipBob’s fulfillment solution. ShipBob can help send inventory to other ShipBob fulfillment centers as well as other location as long as we have the labels ahead of time. Request a quote here to learn more.