Optimizing Inventory Management with Cross Docking

1. What is Cross Docking and how does it work?
2. Why is Cross Docking needed?
3. Which products are suitable for Cross Docking?
4. What Cross Docking variants are there?
5. What are the advantages of Cross Docking?
6. What are the disadvantages of Cross Docking?
7. What should be considered in addition to Cross Docking?
8. Which tools are suitable for Cross Docking?
9. Cross Docking can pay off

Faster, better, cheaper - Almost all companies try to prove their competitive and performance by flexibility and low prices. For manufacturing companies, the costs for Inventory is a not insignificant cost driver. One way to minimize the costs for the required storage capacities and throughput times is cross docking. During this article you will learn what cross docking is and how it works, what it is needed for and which products are suitable for this model. After reading, you will also know which phases and variants companies go through, which advantages and disadvantages you should consider and which tools can support you in your inventory management. So let's not waste time – after all, time is (also in logistics) known to be money.

What is Cross Docking and how does it work?

Translated, the term Cross Docking means something like "Cross coupling" and describes a type of handling for goods in logistics. In this case, a company no longer stores its inventory in its own warehouse, but forwards the produced goods directly to the distribution center after production. This bypasses the logistics steps of storage, warehousing and retrieval as well as commissioning. Upon arrival at the distribution center, the delivered items are immediately assigned to the corresponding outgoing goods.

Why is Cross Docking needed? 

You're probably wondering why your company might need Cross Docking. If you produce large quantities of goods, you will tend to have high storage costs. However, if you use Cross Docking, you won't have a problem because in this case, the Storage costs are completely eliminated. At the same time, it's ensured that the correct quantities are always delivered to the ordering customers. This requires a smooth flow of information – from the manufacturer to the suppliers and to the end customers. This method is therefore particularly suitable for companies that handle large quantities of goods in plannable sizes.

Which products are suitable for Cross Docking?

Surely you have some products in mind that are suitable for Cross Docking – maybe even the products that your company produces. However, you should know that not every product is suitable for Cross Docking. An example would be food that requires a closed cooling chain. On the other hand, products that can be managed very well through Cross Docking include:

• New products or promotional items that have a fast and widespread sales in the market, such as chocolate Easter bunnies or chocolate Santas
• Products that no longer have to go through an internal quality assurance process, such as luxury goods or electronics
• Items that are particularly in high demand during a fixed season, e.g. winter shoes
• or products that have already been sorted, pre-picked, and packaged in another operation, like canned goods

What Cross Docking variants are there?

There are several types of Cross Docking that you can use. These differentiate in the handling of the goods turnover and commissioning.

• One-step Cross Docking

In this variant, the articles are pre-picked at the producing company, i.e. fully packed and addressed to the end customers. They are then sent via the transshipment points and finally delivered to the customers.

• Two-step Cross Docking

The two-step Cross Docking is also known as Break-Bull Cross Docking . The goods are forwarded unchanged to the transshipment point and divided into new units there. Then they are sent to the recipients.

• Multi-level Cross Docking

The third type of Cross Docking is multi-level Cross Docking. In this variant, additional process steps are taken at the transshipment point. These include, for example, labelling or kitting.

In practice, you can imagine a Cross Docking process like this: Your company produces and sells electronic items, but also buys products from other companies that it offers in its own online shop. The self-produced items are stored and picked. If consumers now buy your products and the purchased goods, the latter would be delivered by the hired suppliers and combined with your products at the shipping area of your Cross Docking point. This means that only a single delivery to your customers takes place.

What are the advantages of Cross Docking?

As you already know, Cross Docking does not require any own inventory. This saves you both time and space in your business that you can use for other tasks. If you work in a manufacturing company, you probably have already observed a chaotic storage. Several pallets are being delivered or should be stored after production. But as it often gets hectic, the pallets are simply put where there is space. This can lead to misunderstandings in the storage and stock booking, as it is not clear what exactly has been done with the affected products. By using Cross Docking, such time-consuming storage and retrieval processes, as well as the handling of returns, do fall off. You also save rent and ancillary costs as well as personnel costs because neither machines nor people are needed to put the goods together for shipping to your customers. This means that you have to take fewer safety measures to ensure the safety of your colleagues and protect your warehouse from burglaries and damage. In addition, the throughput times in your company are minimized and you can supply the end consumers faster. You can also respond flexibly to new requirements and changes through the use of Cross Docking.

What are the disadvantages of Cross Docking?

Despite the advantages, the introduction of Cross Docking in your company needs to be well thought out. Because you need some time and planning to establish this new system in your operation. This applies both to the pre-produced products and the smooth interaction of all participants in the supply chain. Even the smallest disruption and faulty communication can disrupt the entire process. Cross Docking is based on the Just-in-Time Principle. This means that the right products in the correct quantity and quality must be at the right place at the right time and the correct costs will be estimated. This usually requires an investment in the appropriate technology and associated IT systems that ensure transparent communication and a smooth process.

What should be considered in addition to Cross Docking?

What else do you need to consider to ensure that Cross Docking works for your business? On the one hand, the flow of information along the value chain must work smoothly and the individual transparent process steps must interlock. On the other hand, you must necessarily ensure that you adhere to the agreed delivery dates, as this is essential for a punctual delivery to the end consumers. For this smooth process, all Supply Chain Partners must have all data in real time. The IT systems working in the background have to transport all necessary data and synchronize product flows. When introducing a corresponding storage management tool, make sure to convey the necessary know-how to the responsible employees and involve them transparently in the functional methods. This is the only way they can react to potential errors and do their job well. To manage the goods turnover successfully, you should also make sure that you have enough provision and transport space available and that the transport company of your choice offers enough tours for you.

Which tools are suitable for Cross Docking?

For the coordination, control and optimization of process and product movements, it's best to use a warehouse management system, also Warehouse Management System called, back. This takes over the input and placement management as well as the stock checks and output management in your logistics. So they can also ideally support you in the introduction and implementation of Cross Docking. Feel free to check out our articles about the best free warehouse management apps. The following tools are also particularly suitable for your Warehouse Management:

PULPO WMS

Pickware

Shipcloud

pixi WMS

360ᵉ by e-velopment

MRPeasy

Zoho Inventory

SAP Extended Warehouse Management

active ilos

Cross Docking can pay off

Is Cross Docking worthwhile for every company? No. Can it be an enrichment for your company and save you costs as well as increase your flexibility? Absolutely. If you have weighed the pros and cons against each other and maybe already made a few calculations about your saving potential you will see that Cross Docking can definitely be beneficial for larger companies. However, you should not rush the transition to the new logistics method. Take enough time for planning and bring the affected colleagues on board to view the topic from as many sides as possible. Once you have set up a clean process, there is nothing standing in the way of production without storage.