Uncovering the core concepts of Cross-docking
1) Introduction
From the moment people have clicked the checkout button and paid for the online product, there's only one question on their minds - "when will the product arrive?" But has anyone ever thought how much effort and money goes into delivering that product to one's doorstep?
From packing the product to storing it and finally shipping it via a shipping carrier or an online seller's own transportation channel, numerous steps go into building a successful eCommerce logistics channel. All these steps come with a cost that the seller has to incur to sell their products. And often, they're so high that there's less or no profit margin left for the seller.
Wondering what they should do to escape these labor, warehousing, and shipping costs? It's simple, include cross-docking in their business model.
2) What is cross-docking, and how does it work?
Cross-docking is an eCommerce logistic procedure that allows the immediate transfer of goods from manufacturers or sellers to customers or retailers with less or no involvement of storage. The system enables the removal of middlemen and unnecessary shipping costs and fastens the process of delivery, thereby increasing customer satisfaction.
3) How does cross-docking work?
In a conventional supply chain, the warehouse is of great importance as it serves as the link between the sellers and customers. From the moment the products are ready, they're kept in the warehouse waiting for demand to initiate the sales procedure. Once that happens, the products are loaded on vehicles and sent out for delivery or the next level of transportation, be it post offices or airports.
Contrary to that, in a cross-docking model, the finished goods are immediately loaded from the sellers' hub and sent to the customer or retailer. In rare cases, they sit in the cross-docking hub for a limited time and are quickly transported ahead.
4) Benefits of cross-docking
Online sellers looking forward to speeding up their order fulfillment process, trying to reduce costs, or eliminating the middlemen, could all switch to cross-docking and accomplish their goals.
Not only this, they can avail the benefits of the things listed below:
4.1) Simplified material handling
In the eCommerce logistics space, material handling consumes a larger portion of the seller's income. Since products are transported to multiple places, they need to be updated in the inventory management system and tracked throughout.
Thankfully, with cross-docking online sellers can totally eliminate that step and should only be concerned about the products dropping at the end location, be it to the customer or retailer.
4.2) No warehouse requirement
The cross-docking method eliminates warehouses and introduces cross-docking hubs or offices. These structures are more pocket-friendly and require less area as they don't store goods. Instead, they're used as distribution centers to move shipments ahead.
Plus, since there's no storage requirement, the cost needed to keep the products safe depending on their type and perishability also reduces.
4.3) Reduced transportation and labor cost
In the case of warehousing, online sellers need to hire people to load and unload fragile or sometimes even normal shipments. These goods are scanned and stored in the warehouse until the vehicle transporting them doesn't arrive at the location.
Once that happens, their packing is rechecked and then loaded on the trucks. This whole process takes place multiple times before reaching the customer or retailer and requires a handsome amount from the online seller.
With cross-docking, this step reduces as multiple halts drop down to one, i.e., the end customer.
4.4) Protects perishable goods
Cross-docking helps perishable goods reach their destination within a limited time frame. Since online sellers follow the first-in-first-out and last-in-last-out methods, they ship perishable goods such as meat, milk, fruits, herbs, etc., first, and then work on nonperishable items like biscuits, soaps, spices, etc.
4.5) Helps rapid delivery of products with high demand
During sales or offers, when products like phones, clothes, groceries, etc., are in high demand, online sellers can include them in cross-docking and make sure they reach the customers on time. This way, they can get an idea of the reduction in inventory and cater to it faster rather than not being able to respond to the demands.
5) Types of cross-docking
Majorly there are two types of cross-docking -
5.1) Pre distribution cross-docking
This is the most basic model of cross-docking. Here the goods are unloaded, arranged, and repacked as per the pre decided distribution instructions.
If the warehouse team is aware of the customer, then as soon as they receive the shipment, they prepare it as per the instructions given to them.
Generally, here goods don't stay much longer at the seller's hub and are immediately shipped, reducing the cost of transportation and halts.
5.2) Post distribution cross-docking
In this method of cross-docking, the goods aren't arranged until the customer list is prepared. This means the goods are kept at the seller's hub for a long time, and once the final customer list is prepared, they're arranged, repacked, and loaded on the trucks.
This method offers online sellers more time to think about the logistic channels and forecast the sales for the future.
6) Methods of cross-docking
Cross-docking includes three methods, namely continuous cross-docking, consolidation arrangements, and de-consolidation. Given below is a brief look into what these methods signify.
6.1) Continuous cross-docking
As the name suggests, continuous cross-docking includes a steady flow of inventory where there is less time between unloading and loading of shipments. The moment the supplier sends the shipment, it's quickly verified against the customers and loaded for delivery.
6.2) Consolidation arrangements
Consolidation arrangements exclude shipping of goods immediately as they are received. In this method, small units of goods are gathered together and shipped as one big shipment. This reduces the transportation cost as the online seller doesn't have to ship every small parcel.
However, it extends the stay of goods at the cross-docking hub as the warehouse staff has to wait for all shipments to arrive before loading the complete unit on the vehicle.
6.3) De-consolidation
This method is the opposite of consolidation arrangements and requires breaking down large shipments into smaller ones for ease of delivery.
7) Who can switch to cross-docking?
Generally, cross-docking is advised for any online seller dealing with high order volumes. However, any type of organization can adopt this model and benefit from it.
Here are a few examples of businesses that should incorporate cross-docking in their business model.
7.1) Food and beverage industry
Often fresh foods and dairy products that are perishable in nature need to be transported to different retailers from time to time. Using a cross-docking system can help online sellers fulfill this obligation without worrying about the product being damaged or crossing its shelf life.
7.2) Defense and aerospace
In the defense and aerospace industry, usually, most shipments are bulky in nature. Therefore, cross-docking is the best way to make sure the goods reach their destination on time in a single batch.
7.3) Pharmaceuticals
Often there are situations in the medical field that require urgent delivery of medicines or vaccines. In both cases, the supplier can't rely on shipping carriers who wait to gather enough shipments before shipping them to the desired locations.
Hence, cross-docking is the most preferable option for pharmaceuticals to meet their demands on time.
7.4) Consumer goods
Many-a-time during holiday season sales, discounts, and other offers, consumers demand the same products, like appliances, clothes, automobiles, food, etc., in large quantities. To fulfill these demands, sellers must have a quick and flexible logistics channel, and this can only be possible with cross-docking.
7.5) eCommerce
The digital world has created new possibilities for online sellers to reach more customers. However, this benefit also requires the online seller to stick to their promise of on-time delivery. Therefore to reach the end users quickly and grow their business faster, eCommerce business owners should embrace cross-docking in their business model.
8) Conclusion
A lot of online sellers struggle to decide whether or not cross-docking will be beneficial for their businesses. In our opinion, one should check their order volumes and type of customer demands before coming to any conclusion.
If you think cross-docking can reduce your expenses and help attain customer satisfaction, you must switch to cross-docking. In case you've mixed opinions, conduct thorough research and then make a move.
9) FAQs
Upon going through the article, if you still find any concept unexplanatory, go through the frequently asked questions section to find your answer.
9.1) What is cross-docking?
Cross-docking is an eCommerce logistic procedure that permits the transfer of goods from sellers to customers without any storage system. The method eliminates the concept of warehouses and gives way to a direct logistic channel. It also reduces shipping costs making the whole process pocket-friendly for the seller.
9.2) What are the benefits of cross-docking?
Apart from reduced shipping and warehousing costs, cross-docking offers benefits like easier material handling, perishable goods protection, lesser labor cost, quick delivery of products of high demand, and much more.
9.3) Which industries should include cross-docking in their business model?
Industries like the food and beverage industry, pharmaceuticals, consumer goods, eCommerce, etc., should use cross-docking in their business model.
9.4) What are the types of cross-docking?
There are mainly two types of cross-docking-
- Pre distribution cross-docking
- Post distribution cross-docking