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Freight Transportation

A Cross Dock Facility Can Cut Distribution Costs by 50%

Alex Stark | May 18, 2017

Here at KANE, we love warehousing. It’s a critical component of supply chains and we take great pride in the sophisticated application of technology to efficiently store products and get them to market.

But sometimes it’s best to keep products moving.

With the right set of supply chain characteristics, companies can leverage a cross dock strategy to speed factory-to-store-shelf cycle time and reduce distribution costs up to 50%.

What Happens at the Cross Dock Facility?

crossdock-pie-chart-highrez.jpgWith cross docking, incoming items are matched with pending orders and staged for immediate shipment. This tactic reduces storage costs and the labor to receive, put away and pick inventory.

A typical cross-dock program might look something like this:

  • Manufacturer ships inventory to cross dock facility, along with data on product type, volumes, and ETA.
  • Orders are sent to the cross dock, where they are matched with in-transit inventory.
  • The facility consolidates orders into proper shipping lanes and contacts carriers to set appointments.
  • The cross dock facility then schedules just the right amount of labor in advance to prepare shipments when inventory does arrive.
  • Inventory is received and placed in a staging area for a specific truck and is then loaded for delivery.

Items arrive from dozens, even hundreds, of retail suppliers and, after a brief stop off, go directly to the store.

What are the Benefits of a Cross Dock Strategy?

A well-implemented cross-dock program can slash costs, while still meeting fill rate requirements of retailers. More specifically, cross docking can be a cornerstone of Lean warehousing efforts, allowing companies to:

  • Reduce distribution costs by more than 50% on the items being cross docked.
  • Reduce facility operating costs. Cross dock facilities are smaller and simply cost less to operate than full-fledged distribution centers.
  • Reduce inventory. When the volume and timing of supply can be managed to precisely match demand, the need for large safety stocks is eliminated.
  • Reduce transportation costs. Transport mode shifts from high-cost LTL to consolidated truckload shipments that get there faster.
  • Increase retailer efficiency. Retailers receive fewer, precisely timed shipments, requiring fewer dock doors and receiving staff.

Why Don’t More Companies Use Cross Dock Facilities?

Cross docking is a proven supply chain strategy, but many retailers don’t use it because, frankly, it’s hard. You need tight planning and coordination among manufacturers, carriers and 3PL partners, as well as the systems to synchronize inbound and outbound flows. 

Products that offer the best opportunity for cross docking share the following characteristics:

  • Have SKUs with strong, predictable demand, such as popular items, household staple items, and promotion items linked to advertising blitzes.
  • Have supply sources that can provide the right product, in the right volumes, at precisely the right time.
  • Receive products in “store shelf ready” condition.

Consider cross docking another tool in your logistics belt. Just like anything worth doing, it takes deliberate effort and investment. However, the numbers don't lie. Cross docking eliminates cost elements that account for over 50% of traditional warehouse distribution costs.