When companies cut costs, they must still ensure shelves are stocked with the right product to meet demand when those demands change every day. To achieve these goals, more and more companies are finding that crossdocking must play an integral part in their distribution model.
To gain a better understanding of crossdocking practices, issues, and challenges, Saddle Creek Corp. commissioned an independent party to survey professionals involved in warehousing, distribution and transportation. A total of 547 surveys were completed in February 2008, making this research statistically valid.
Of these respondents, 52% currently crossdock, 13% do not crossdock now but plan to crossdock in the next 18 to 24 months and 31% have no plans to crossdock.
Of those who have implemented crossdocking, 28% are veterans, having crossdocked for more than 10 years. Another 30% have been crossdocking for four to 10 years. However, the practice is still drawing new practitioners, as 32% of those who crossdock have been operating a crossdock for just one to three years.
Many respondents plan to expand their crossdocking efforts. About half of those who currently crossdock have considered crossdocking even more of their total SKU throughput. This combination of new and established crossdocking practitioners helps to confirm the growing role of crossdocking in the industry.
Crossdocking is the process of receiving product and shipping it out the same day or overnight without putting it into storage. Crossdocks are generally used for ‘hub-and-spoke’ arrangements, consolidation or deconsolidation.
Crossdocks generally can be divided into three levels of complexity:
• One touch: Products are touched only once, as they are received and loaded outbound without being placed on the warehouse dock. This is the highest velocity, and the focus is on productivity.
• Two touch: Products are received and staged on the dock then loaded outbound without being put into storage. The focus is on outbound load optimization and gaining transportation efficiencies.
• Multiple touch: Products are received and staged on the dock, then reconfigured for shipment and loaded outbound, directly from the warehouse dock. Typically, crossdocks can be developed using a variety of strategies, including:
• Either pre-picked to a customer order or bulk-picked to a pooling location to handle the ‘last-mile’ shipment to the customer.
• Pre-picked orders to a less-than-truckload (LTL) carrier break-bulk facility from where the LTL carrier’s network is used.
• Pre-picked orders transferred to LTL through the use of a third-party warehouse facility to handle the crossdocking process.
• From multiple plants (deconsolidated) into a thirdparty crossdock that, within hours, picks and consolidates all products from all plants into customer or route orders and then delivers.
• Consolidating LTL into truckload, which reduces the number of deliveries to retail outlets.
In keeping with the product-in/product-out nature of crossdocking, 66% of respondents report that products reside at their crossdocking facility for one day or less. For 29% of these respondents, products reside at their crossdocking facility for half a day or less.
Throughput and 3PLs
On average, respondents who currently crossdock report that approximately 27% of their throughput volume is crossdocked. Those who plan to crossdock expect a somewhat lower average (19%), probably wanting to start cautiously. Saddle Creek’s research shows that two-thirds of respondents crossdock more than 10% of their throughput volume, providing further evidence that crossdocking is on the rise significantly.
Respondents who are currently crossdocking are spread across the board when it comes to the total number of SKUs in their warehouse/DC operations. Roughly a quarter of respondents who crossdock have fewer than 500 SKUs. Another quarter have more than 10,000 SKUs, with the remaining respondents distributed evenly in between.
Given all the variables of crossdocking, many survey respondents say they look to 3PLs to help manage the process. One-third of respondents who currently crossdock use a 3PL, either exclusively or in addition to inhouse resources.
On average, those using a 3PL outsource 44% of their crossdock volume, with 29% outsourcing more than 75% of their crossdock volume. Today, crossdocking practices for outsourced operations are closely aligned with operations handled in house.
Companies that outsource are slightly more likely to crossdock temperature-controlled goods. Of all the respondents that crossdock, 15% crossdock temperature- controlled goods, while 20% of those companies that outsource crossdock these products. Perhaps this reflects a desire to steer clear of growing food-safety concerns by seeking out expert assistance.
Companies with high numbers of SKUs seem to be somewhat more likely to outsource their crossdock operation. For example, of those companies that outsource, 28% handle 10,000 to 19,999 SKUs, while 22% of the total respondents who crossdock internally have that variety of SKUs.
A significant number of respondents plan to begin crossdocking or crossdock more in the next 18 to 24 months. Nearly one-quarter of respondents who currently crossdock (23%) plan to increase outsourced crossdocking in the next one to two years. Another 20% are unsure of their plans. Similarly, more than a quarter (28%) of those respondents who are planning to crossdock in the next two years expect to use either a 3PL provider exclusively or both in-house resources and a 3PL.
Many of those who plan to outsource expect to start small, with 32% saying they’ll outsource less than 25% of their shipments. Yet, others (11%) anticipate outsourcing more than 75% of their shipments. Overall, respondents expect to outsource an average of 41% of their shipments.
With so many companies crossdocking on their own or with the help of a third party, it is important to understand what motivates them to use the practice. Companies are finding that crossdocking gives them an important opportunity to take costs out of their supply chains and accelerate the velocity of inventory, so they can get their products to market more quickly and economically.
As indicated by the survey results, improved customer service—both to the direct customer and the end user— is the primary reason that companies consider crossdocking. Crossdocking allows products to reach their destination more quickly and economically, ensuring that products are on the shelves when needed and supply chain costs can be reduced. In many cases, crossdocking is part of an effort to provide just-in-time service.
As today’s business environment shifts from “supply chain” to “demand chain,” companies are faced with the challenges of minimizing inventory and reducing warehouse costs when possible, while keeping retailers’ shelves full.
Inventory costs money. Crossdocking gives companies the ability to send products in Monday night, deliver them Tuesday and sell them later that same day. Products coming into a crossdocking center usually have been pre-allocated against a replenishment order. Less inventory is carried in the stores, so they have fewer overstocks, and yet, the shelves are full. It’s all about speed and turnover.
Products coming into a crossdocking center usually have been pre-allocated against a replenishment order. Less inventory is carried in the stores, so they have fewer overstocks, and yet, the shelves are full. It’s all about speed and turnover.
Crossdocking also offers opportunities for cost control in many areas, most notably warehouse space, labor and transportation.
• Warehouse space costs. The inherent simplicity of a traditional pallet-in, pallet-out crossdock makes it a fairly inexpensive way to handle product. Since considerable volume can be handled on a relatively small scale, companies can avoid the major brick-and-mortar investment of a huge warehouse and the costs associated with that facility.
• Transportation costs. Survey respondents also viewed crossdocking as a prescription to combat rising transportation costs. In fact, this benefit ranked second highest when respondents were asked to select the single-greatest benefit of crossdocking.
It should come as no surprise, then, that the biggest opportunities for crossdock savings are transportation related. Considerable freight savings can be achieved by consolidating LTL shipments into full loads—a practice that 62% of respondents who crossdock noted as a benefit of crossdocking. Taking advantage of transportation efficiencies also allows companies to mitigate the impact of today’s rising fuel costs.
• Labor costs. Labor costs are clearly a focus for companies who will begin crossdocking in the near future. Of those respondents who plan to crossdock in the next 18 to 24 months, 18% cited reduced labor costs as the most anticipated benefit of crossdocking.
Crossdocking is not without its challenges, of course. The majority of survey respondents indicate that their operations are effective, but there is still room for improvement.
A growing number of companies are recognizing these benefits and making crossdocking part of their distribution solution. For many, using a 3PL to help manage the process allows them to minimize or avoid some of the pitfalls with the practice. Regardless of how the operation is handled, it is important to establish clear objectives up front. If goals include streamlining the supply chain and getting products to market more efficiently and economically, crossdocking may be the right answer.
This article is based on a white paper from Saddle Creek Corp., a third-party logistics services company providing integrated warehousing, transportation, contract packaging and value-added services nationwide. A full copy of the paper, including extensive charts, is available at www.SaddleCrk.com/whitepaper or by calling 888-878-1177.