whats cross docking

What is Cross-Docking?

In a Cross-docking operation, products are brought in one side of the warehouse and placed on pallets or in totes which are then immediately moved to the outbound department for shipment. Orders aren’t built until they’ve passed inspection by the outbound department, improving efficiency, and reducing the potential for errors.

What is it not? Cross-docking is NOT order picking, because orders aren’t built until just before shipping. It’s also not last-minute processing where orders are built just before or after they’re shipped (or simply stuffed into boxes). Order picking requires an order pull list; cross docking requires product ready to be picked. gofreighthub.io is the place for you to go, for the best services.

Why Cross-Dock?

The purpose of a cross-docking operation is to reduce the time it takes from when products are received until they’re shipped, as well as to improve accuracy. While not all companies have achieved overnight shipments, many have been able to cut fulfillment times significantly. The result is improved customer service and higher rates of on-time shipping. This leads to fewer out-of-stocks which leads directly to increased sales (fewer lost sales) and reduced costs (less inventory).

Results can vary widely depending upon process changes, but you’ve probably heard at least one horror story about how much faster an order took with cross-docking vs. traditional methods: It used to take us 12 hours to process a single order, but now it only takes 2 hours.

Who Uses Cross Docking?

Walmart and Zara have been using cross-docking for years, but the list of companies that use this method is growing rapidly. For example, several major appliance makers use it as do most catalog merchandise companies. In fact, according to industry research firm Info ready, more than half of catalogers have adopted some form of cross-docking.In addition to being popular with catalogers, ecommerce retailers are also employing the technique – Amazon has been using it for more than ten years and eBay (Marketplace) began implementing the system in 2007. Even online retailer Fab implemented a cross-dock solution last year after a successful test run.

How do you set up a Cross Docking operation?

While the initial setup of your cross dock might require a little time and money, it’s nothing compared to the longterm savings that this system provides. Depending on your current fulfillment process, it might be as simple as hiring someone to load products onto carts which are moved from receiving directly to outbound fulfillment. At the other extreme, you could have multiple receiving departments before using an automated conveyor system to get product into totes ready for shipment. In the case of Walmart and Zara, their systems involve two-sided conveyors with products moving in opposite directions depending upon whether they’re incoming or outgoing (receive and ship). Either way, though, the goal is to move product with the least manual intervention possible.

While you might be tempted to set up your cross-docking system in place of your current order picking process, it’s best to use the same equipment (room and conveyors) that you already have. This way, when you want to revert back to pick packing (for whatever reason), it’s easy enough to do.

What are some of the concerns in moving towards Cross Docking? 

By reducing labor needs, cross docking has an immediate impact on payroll expenses; however, this cost savings may be offset by increased costs for receiving and having products on hand. Goods in transit also increases inventory requirements unless sales forecasting changes radically or is reduced due to improved service levels. The key is to be able to forecast accurately and reduce level of inventory accordingly.

How can you put a meter on Savings?

While there are innumerable variables in the setup and size of your operation, one way to calculate savings in a cross-docking environment is by estimating labor savings. The goal here is to estimate labor costs per order (pick packing) vs. per unit (pick rate x units picked per hour x number of units ordered). This calculation provides an approximation for how much more it would cost your company to pick an order when compared with simply moving product from receiving directly through outbound shipping ($0.50 – $5/unit) depending upon speed of process. Then multiply this difference with volume and number of orders to determine total savings.

Under a traditional pick packing process, you would have to compare costs of labor and equipment per order vs. labor and equipment per unit to measure savings under a cross-docking system. In most cases, the volume is high enough to offset the initial cost associated with the equipment, so this approach is typically not required. You also need to make sure that your account for increased costs from receiving as well as potential changes in your sales forecasts. Though, you’re looking at a minimum of 10% – 15%. With each additional percentage point in saving on labor, it’s an easy justification for potentially upgrading your conveyors or room size.

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About the Author

Eddie Miller

Eddie is an Associate Editor in London, UK. He coordinates client content and sponsored articles. Eddie has two Masters in language and spent half his life in the teaching field. He now owns an Amazon business and runs a wooden DIY workshop.