What is Cross Docking and when should it be used?
Logistics costs occupy a very important place within any company, it is one of the most important factors to take into account in the production process and we must look at them with a magnifying glass if we want any company to come to fruition.
This importance has forced the development of new logistics techniques, with the aim of reducing costs, improving performance and optimizing merchandise management. Seeking to get the most out of the production process in the company, the logistics system baptized as Cross Docking was born by the experts who began to use it.
In this article we will explain how this distribution system can be used effectively, the most used types it presents and even the best cases in which it should be done.
- What is Cross Docking?
- How does cross docking work?
- Types of Cross Docking
- › Predistributed Cross Docking
- › Consolidated Cross Docking
- › Hybrid Cross Docking
- Advantages and disadvantages
- Differences with Dropshipping
What is Cross Docking?
Also known as cross-docking , it is a logistics technique that allows the distribution of merchandise without going through the traditional prior storage period.
In this method of distribution, companies receive merchandise from their suppliers in their own warehouses, treat it if necessary, and send it out to their customers in a period of time no longer than 24 hours. In these cases, the traditional picking process should not be carried out , in which the merchandise is placed on the shelves.
This system can be adapted without any problem to any type of merchandise: It does not matter that they are raw materials, components prepared to be transformed in factories or finished articles, ready to be used by the final consumer.
With this logistics technique, the merchandise only has to cross the warehouse docks, an action known in English as cross the docks , which is the English term that gives rise to the name.
How does cross docking work?
In any traditional supply chain, the warehouse plays a transcendental role, connecting suppliers (considered as ” supply ”) with customers (our ” demand ”). Since it is a discontinuous flow, supply and demand are not synchronized, and it is the figure of the warehouse that acts as a link, since it is in this place where the goods are kept until the moment of their departure.
However, in this system the function of the warehouse is completely different. Its importance is reduced to a place of management, where the goods are briefly treated and prepared for their departure.
Although there are several types of c ross docking , which we will talk about later, they are all characterized by following a common process:
- First, the distribution of the suppliers must be scheduled . Thus allowing to control the time the merchandise will arrive, and prepare to work with it.
- Subsequently, the merchandise will be received in the warehouse , being unloaded from the trucks of our suppliers.
- The merchandise will be registered and reviewed thoroughly in the verification process . With the aim of finding any breakage or incidence.
- If necessary, the merchandise will be modified (for reasons of packaging , breakage …)
- And lastly, the merchandise will be distributed among the customers . Which can be other suppliers, or the final consumers themselves.
It is estimated that to be considered as an effective cross docking process, the time elapsed from when the merchandise is received until it is distributed, that is, the complete process, must be less than 24 hours .
Types of Cross Docking
Despite the fact that all the cross docking variants have common characteristics and similarities between them, we can find different types of techniques. Among which stand out the predistributed, consolidated and hybrid cross docking.
Predistributed Cross Docking
Also known as direct cross docking, in this shipping system the merchandise does not undergo any modification or transformation . Both the labeling and the organization of the products themselves are predefined from the place and time of origin.
In this type of cross docking, the merchandise is received and directly, without too much waiting, it is delivered from the corresponding means of transport.
It is the most basic model, and does not require intervention by the warehouse.
Consolidated Cross Docking
Also called indirect cross docking, in this model the merchandise is transferred to a packaging area where they are reviewed and adapted to the demand . Therefore, it is necessary for the goods to be handled and prepared with the requirements of the end customer, before being sent to the destination.
Hybrid Cross Docking
To conclude we find the hybrid cross docking, which is the most complicated system to carry out. This model consists of preparing orders with two goods: the one that was already in storage and the one received from the transport trucks .
Although it requires almost perfect coordination, it is undoubtedly the most flexible cross docking model , since it allows to face a greater variety of situations.
Advantages and disadvantages
Although the greatest advantage that we can take from this logistics system is the speed with which the receipt and shipment of merchandise is processed, it is not its only strong point. We found several reasons to develop a good cross docking system:
- Dramatically improves efficiency and productivity within the supply chain.
- It is considered one of the fastest and most profitable distribution models on the market.
- It allows to evaluate the quality of the product in a simple way.
- It involves a considerable cost reduction in several areas: warehousing, personnel, inventory and distribution.
- It significantly shortens delivery times, and allows some agility to the supply chain . Saving therefore time in the dispatch of goods.
However, as in any other system we also find several disadvantages. Which should be valued when deciding to work according to this system or not. Some of the most important are:
- Not all providers are able to deliver ready-made products for the customer to the terminal.
- A high volume of merchandise is necessary for this logistics system to be profitable.
- It does not allow too much margin for error if the amount is not correct, if you want to meet the deadlines with the client.
- It requires spending a lot of time planning and coordination . It is not recommended to implement it in templates with few workers or with limited resources.
Differences with Dropshipping
If you have been a Palbin customer for a long time , or you are a true veteran of the distribution system, it is very likely that the term ” Dropshipping ” is also familiar to you, another well-known and particular logistics technique. Although similar, they are still two different techniques. Companies interested in reducing storage costs should only opt for one of them … But how do they differ? Is there one better than another?
The main difference between the two is that dropshipping does not require intermediate intervention . It does not even need a warehouse so that the products remain a few hours and are modified before the final shipment. Your provider sends them directly to the customer, you could even save the total cost of storage.
So … which of the two should you choose? Which one is the best? There is no definitive answer. If the objective is to get the merchandise to the customer quickly and directly , a dropshipper supplier should be chosen. If, on the other hand, the merchandise needs to be previously reviewed or treated for packaging reasons , without a doubt, cross docking is the best option.
In short, in each case it would be necessary to adapt to the needs of the company, and of course, the merchandise with which it works.