Cross-Docking can be a great way to cut transportation costs if done right, because handling of goods while in transit, adds labor and time, which in turn costs the organization hard dollars and profit. But cross-docking is not without its challenges. A recent piece over on Supply Chain Digest on how interest in cross-docking is high, but challenges are many did a great job in summarizing some of the largest challenges.
Unpredictable Customer Demand
The organization might know with 95% certainty that it is going to sell 500,000 units of its new mobile phone in the United States, but it may have a hard time predicting at a granular level which markets are going to take off first, and which markets will be the hottest. That can make it difficult to determine whether to route 500, 5,000, or 50,000 to a local DC.
IT System Support
Many TMS (Transportation Management Systems) and WMS (Warehouse Management Systems) were not designed to support cross-docking. Consider these quotes from participants at the recent WERC (Warehouse Education and Research Council) annual conference who said that “the WMS wants the goods to be in a pickable location before it can allocate the goods to the DC orders” and that, in the ERP system, “goods received one day simply could not be allocated for orders until the following day”. How can an organization support cross-docking if the systems don’t support it?
Changing Business Dyanmics
In some organizations, the business dynamics, which depend on local and global market conditions, can be as unpredictable as the customer demand.
In order to cross-dock goods from four different suppliers onto the same outbound truck, all four suppliers have to ship the required quantities on time.
In order to cross-dock goods from four different source locations onto the same outbound truck, all of the carriers have to deliver on time.
The facility needs to be designed to accommodate the crossdock process. If the facility can only support two trucks at a time, for example, it is hard to cross-dock off of four trucks onto one.
First In, First Out (FIFO) principles can also add complexity, because companies in expiration date sensitive industries, are reluctant to ship a more recently manufactured/received product if older product is sitting on the shelf, even if that requires extra handling than would be the case if inbound receipts were crossdocked for cross-docking customers.
At some companies, cross-docking is still “high touch,” resulting in higher processing costs than the organization initially thought was possible.
So what can a company do to overcome these challenges and get benefits from cross-docking? Stay tuned.