| Cross docking: Just-In-Time for Distribution |
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Warehousing without inventory
Of the four major functions of warehousing (receiving, storage, order picking, and shipping) the middle two are typically the most costly: storage because of inventory holding costs, and order picking because it is labor-intensive.
Cross docking is a logistics technique that eliminates the storage and order picking functions of a warehouse while still allowing it to serve its receiving and shipping functions. The idea is to transfer shipments directly from incoming to outgoing trailers without storage in between. Shipments typically spend less than 24 hours in a cross dock, sometimes less than an hour.
Cross docks are essentially transshipment facilities to which trucks arrive with goods that must be sorted, consolidated with other products, and loaded onto outbound trucks. Outbound trucks may be headed for a manufacturing site, a retail outlet, or another cross dock, depending on the application.
What makes cross docking different than traditional warehousing? In a traditional model, the warehouse maintains stock until a customer orders, then the product is picked, packed, and shipped. When replenishments arrive at the warehouse, they are stored until a customer is identified. In a cross docking model, the customer is known before the product gets to the warehouse and there is no need to move it to storage.
Does that mean that in the cross docking model the customer (a retail outlet, for example) has to wait some additional time for inbound transportation to the warehouse? Well, yes, but often the added certainty of strictly scheduled deliveries offsets any uncertainty associated with longer lead times, and there is no loss to the system. On the contrary, cross docking, when properly executed, enables firms to eliminate inventory costs and reduce transportation costs, often at the same time.
Motivation
Cross docking is attractive for two main reasons. In some cases, retailers identify waste associated with holding inventory for sku's with stable, high demand, and see cross docking as a way to reduce inventory holding costs.
The retailer essentially replaces inventory with information and coordination.
For other retailers, and for less-than-truckload (LTL) and small package carriers, cross docking is a way to reduce transportation costs. For example, individual retail outlets might receive shipments directly from vendors using LTL or small package carriers, leading to excessive inbound transportation costs. Cross docking is a way to consolidate those shipments to achieve truckload quantities. In one case that we know of, a retailer consolidated orders from more than 100 retail outlets to each of about 100 vendors and had the vendors ship truckload quantities to a cross dock operated by a third-party, rather than sending LTL shipments directly to the outlets. Crossdocking reduced inbound transportation costs and simplified receiving at the retail outlets.
Types of cross docking
The term “cross docking" has been used to describe different types of operations, all of which involve the rapid consolidation and shipment of products. Napolitano (2000) proposes the following classification scheme: Manufacturing cross docking - receiving and consolidating inbound supplies to support Just-In-Time manufacturing. For example, a manufacturer might lease a warehouse close to its plant, and use it to prep subassemblies or consolidate kits of parts. Because demand for the parts is known, say from the output of an MRP system, there is no need to maintain stock.
Distributor cross docking - consolidating inbound products from different vendors into a multi-sku pallet, which is delivered as soon as the last product is received. For example, computer distributors often source components from different manufacturers and consolidate them into one shipment in merge-in-transit centers, before delivering them to the customer.
Transportation cross docking - consolidating shipments from different shippers in the LTL and small package industries to gain economies of scale.
For small package carriers, material movement in the cross dock is by a network of conveyors and sorters; for LTL carriers it is mostly by manual handling and forklifts.
Retail cross docking - receiving product from multiple vendors and sorting onto outbound trucks for different stores.
Opportunistic cross docking - in any warehouse, transferring an item directly from the receiving dock to the shipping dock to meet a known demand.
The common elements to all of these operations are consolidation and extremely short cycle times, usually less than a day. The short cycle time is possible because the destination for an item is known before or determined upon receipt. With regard to information, there are two types of cross docking, sometimes called pre-distribution and post-distribution. In pre-distribution operations, the vendor prepares the product for direct transfer in the distributor's crossdock. For example, they might price items or attach bar codes. At a minimum, they label the incoming pallets so workers in the cross dock can put them directly into outbound trucks, without staging them. Pre-distribution is good for the distributor because operating costs are lower, due to not having to touch the product, but it is very difficult to orchestrate because the distributor's vendors (and there might be hundreds of them!) must know how much of each sku goes to which final customer, and they must label the product accordingly. Post-distribution operations alleviate this burden, but the cross dock must label items on receipt, meaning higher labor costs to the distributor.
Product selection
Generally speaking, a product is a good candidate for cross docking when its demand meets two criteria: low enough variance and high enough volume. In this sense, cross docking is very much like Just-In-Time manufacturing, which is most viable when demand has low variance and there is high enough volume to justify frequent setups (or alternatively, setups are inexpensive).
In the extreme case that demand for a product is constant, the warehouse can arrange to receive the right quantity on the right day, and simply move the product to the shipping dock. If demand is uncertain, cross docking is difficult because matching supply and demand is difficult. In addition to having low variance, demand for the product must be sufficient to warrant frequent shipments. If demand is too low, frequent shipments lead to excessive inbound transportation costs, and the warehouse would be better of holding stock rather than cross docking. One strategy that retailers use is to have centralized buyers determine what gets shipped to stores, instead of the stores themselves; that is, it is strictly a push distribution system and there is no need to carry safety stock.
The buyers have effectively taken all variance out of the demand (from the retail outlets, not from the customer). Stores use this technique. A good product for cross docking is also relatively easy to handle.
Supply chain relationships
From a management perspective, cross docking is a complex enterprise, involving extensive coordination between the distributor and its suppliers and customers.
Implementing a cross docking operation often means that channel partners will experience increased costs, or at least a few headaches along the way.
On the supply side, the vendor may be asked to delivery smaller shipments more frequently, or to attach price tags or bar codes. On the demand side, a customer may be asked to order only on certain days, or to allow a few more days lead time for delivery. All of these requirements lead to extra costs and coordination for channel partners, and the distributor should expect to pay for these services. Of course, the savings associated with cross docking must overcome these extra costs for the system to be viable.
There is also an increased requirement for quality in receiving. Because the goal of cross docking is to immediately transfer products to outbound trucks, there is no time to inspect quality on the receiving dock. Ideally, this would eliminate counting as well, although this level of confidence is rare.
Increased communications between channel partners is another requirement, and often a big obstacle. The distributor must know what is on each inbound truck before it arrives, the carrier must know the required delivery window, and so on. The most common way to handle these needs is through Electronic Data Interchange (EDI) systems.
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Articol disponibil in limbile: RO, EN
Data adaugarii: 27 Aug 2008
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