Crossdocking

Crossdocking
A supply chain strategy Inbound materials are Directed to outbound doors and are directly loaded into outbound trucks ...or... Staged for a very brief time period before loading

Inbound product flow is synchronized with outbound product flow to essentially eliminate storage of inventory

Crossdocking
Can accomplish significant reductions in total costs and in lead times in a supply chain Crossdock facilities (CF) act as transfer points

Crossdocking

Crossdock A Facility

B Suppliers

Receiving Staging (<24hr) Shipping

Stores
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Traditional Distribution

Warehouse

B Suppliers

Receiving Putaway Storage Replenishment Picking Shipping

Stores
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Traditional Distribution

Direct Shipment

Warehouse

B Suppliers

Receiving Putaway Storage Replenishment Picking Shipping

Stores
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Crossdocking
550,000 warehouses in the U.S. alone (1995 estimate) Crossdocking can turn warehouses into transfer nodes, rather than storage nodes

Applicability of Crossdocking Has Increased

Fierce competition in all industries, especially retail Cooperating with supply chain partners to reduce the systemwide costs Internet allows companies to communicate among each other
In real time At costs significantly lower than the past

Wal-mart
The worlds largest retailer >5,000 stores throughout the world Popularized crossdocking

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This Study
Types of crossdocking When crossdocking is applicable Prerequisites Industries where crossdocking is applied Advantages and drawbacks Implementation issues Case Study: Ekol Logistics
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Types of Crossdocking

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Types of Crossdocking
1. Pre-allocated supplier consolidation 2. Pre-allocated crossdocking operator (CDO) consolidation 3. Post-allocated CDO consolidation Pre-allocated: Destination is determined at the supplier Post-allocated: Destination is determined at the crossdock facility 13

Supplier consolidation: The supplier builds the final (possibly multi-SKU) pallets that will be shipped to the final destinations. CDO consolidation: The final pallets are built by the CDO at the crossdock facility
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Crossdocking Type 1
Supplier Crossdock Facility 1 2 3 Stores

Preallocated 1 2 3

1 2

Supplier Consolidation

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Crossdocking Type 2
Supplier Crossdock Facility 1 2 3 Stores

Preallocated

1 2 3

1 2 3

CDO Consolidation

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Crossdocking Type 3
Supplier Crossdock Facility Postallocated 1 2 3 1 2 3 Stores

CDO Consolidation

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Hybrid Facility
Ex: Supervalu distribution center Incoming products are
Either crossdocked by feeding into a sortation system and routed to shipping doors, ...or... Moved to the four-level inventory area through conveyors for storage

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When is Crossdocking Applicable?

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When is Crossdocking Applicable?

Products with predictable, high demand and high cubic volume flow Perishable products Ex: Supermarket chain ASDA partnered with Kimberly-Clark, the paper industry giant which supplies high-cube, low-value products such as toilet tissue and paper towels. Products very appropriate for a pilot crossdocking study

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When is Crossdocking Applicable?

Promotional products
Sisko: ...Not recommended for crossdocking Witt: Mass merchandisers implement crossdocking for promotional products.

A scientific approach, possibly through building mathematical models, should be followed for identifying which of the two conflicting statements hold under which conditions.

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Perishable Products
Lot control: Tracking the lot is required to have a time-sequenced availability to the customers Further complicates crossdocking Solution: Apply FIFO Granularity
Crossdocked items that just came in are shipped. The older items are regularly replaced by those that come in new, avoiding product spoilage
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Prerequisites of Crossdocking

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Prerequisites of Crossdocking
Total commitment and continuous monitoring at all times by all the parties involved Effective communication between parties Perfect coordination of material flows.
Many interrelated decisions have to be made under numerous resource and time constraints. Mathematical models can be of great use.
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Perfect quality requirements

Prerequisites of Crossdocking
Sharing the costs and benefits of crossdocking:
CDO benefits from decreased inventories, labor, and storage space requirements. Suppliers involved may have to make significant investment into technology Retailers may end up with higher inventory levels due to increased lead times. The CDO would prefer that the outbound trucks can wait for long time periods such that flexibility is achieved in scheduling The trucking company would not accept to absorb the cost related with the waiting time of its trucks.

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An Important Issue
Trend in almost every industry:
A decline in bulk-ordering and a shift towards smaller inventory modules

Burden of sorting full pallet SKUs and merging them into multi-SKU pallets increases. This should be considered when reaching to an agreement and signing the contract with the supply chain partners.
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Industries in which Crossdocking is Applied

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Industries in which Crossdocking is Applied

Retail industry
Wal-Mart, ASDA, Track n Trail, Canadian Tire, Saks, Sears, and Belk

Third-party logistics (3PL) companies, and especially LTL companies

Columbian Logistics serves a large grocery wholesaler by consolidating paper products from four large manufacturers, and distributing them to approximately 200 stores. 3PL companies in the U.S. alone were estimated to gross about $56 billion.

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Industries in which Crossdocking is Applied

Automative industry Toyota distribution center in California
Reduced lead times of parts from Japan to customers from 25 days to 11 days. Approximately one-third of the estimated 250,000 transactions made per day are crossdocked.

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Industries in which Crossdocking is Applied

Automative industry Mitsubishi Motor Manufacturing of America
Crossdocking facility adjacent to the Mitsubishi assembly plant in Illinois Materials arrive at most two hours prior to each production schedule, supporting JIT (Just-in-Time) at the plant.

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Industries in which Crossdocking is Applied

Automative industry Goodyear Great Britain
Leading tire-manufacturer Made the transition from a traditional supply chain to a crossdocking system
increasing its service level decreasing its inventory releasing warehouse space reducing labor force required, and

Eventually reducing operating costs by over 12%.

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Industries in which Crossdocking is Applied

Telecommunications and electronics industries
Characterized by a fast pace of change, with products typically having very short life cycles. Thompson Consumer Electronics, Panasonic, Ericsson, and National Semiconductor

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Industries in which Crossdocking is Applied

Apparel industry
YoungWorld
Childrens apparel and furniture retailer Importer of womens sportswear Apparel and home furnishing retailer

Capacity Inc. Urban Outfitters

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Benefits and Drawbacks of Crossdocking

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Benefits of Crossdocking
Allows the efficient consolidation of products. Decreases inventory levels due to elimination of storage. Enables faster product flow (by eliminating dwell). Enables more frequent deliveries. Decreases inventory obsolescense due to reduced inventory and faster product flow.
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Benefits of Crossdocking
Decreases labor requirements and costs due to decreased material handling (through elimination of putaway to storage and order picking). The typical yearly cost per warehouse worker can be estimated around $40,000 in the U.S. Decreases inventory damage costs due to less material handling. Decreases the amount of space required, and thus increases the handling capacity of the facility.

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Benefits of Crossdocking
Supports customers Just-in-Time strategy. Accelerates payments to suppliers (which is an important argument that can be used to convince suppliers to participate in crossdocking). Improves the relations with the supply chain partners. Enables faster completion of incomplete orders due to more frequent deliveries.

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Benefits of Crossdocking
Applicability of crossdocking + Stockout and inventory costs -

Positive Feedback Loop for Wal-mart

Costs
+ Prices offered to customers

(+) Positive feedback loop

Predictability of Sales -

Number and scope of promotions

+
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Drawbacks of Crossdocking
Risk of stockout:
Any unavailability of the product at the suppliers Any delays in the supply chain Any failure to coordinate perfectly

Union fears of losing jobs

The main savings in crossdocking come from decreased inventory and labor costs.
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Implementation of Crossdocking

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Type 2 Crossdocking Implementation

Supplier Crossdock Facility 1 2 3 Stores

Preallocated

1 2 3

1 2 3

CDO Consolidation

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Step 1 Order Step 4 Supplier Step 2 Preallocated

Arrival Date &Time

ASN Crossdock Facility Step 9

Shipment Details

Stores

Step 8

Step 5

1 2 3

1 2 3
Step 3 Step 6 Step 7
Pickup Time ...

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Supplier

Crossdock Facility

Stores

Step 12 Step 13

1 2

3
Step 10 Step 11 CDO Consolidation

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Implementation of Crossdocking
1) The CDO and the supplier receive order details from the retailer store. 2) If pre-allocated supplier consolidation is carried out, the supplier builds store specific pallets and label/tag them. These pallets may be multi-SKU pallets. If CDO consolidation is carried out, then the supplier prepares just single-SKU pallets (to be sorted at the crossdock facility). If pre-allocated CDO consolidation is carried out then each case in the pallet should include the information of which specific store it is heading on a label/tag. 3) The supplier loads the truck that will deliver the 44 shipment to the crossdock facility.

Implementation of Crossdocking
4) The supplier sends the Advance Shipping Notice (ASN) to the CDO. 5) The carrier notifies the CDO on the arrival date and time. 6) At the crossdock facility, the dock door for inbound receiving is determined and the labor and handling equipment are scheduled to meet the delivery. 7) The dock door for outbound shipment (from the crossdock facility) is determined. 8) The outbound carrier is notified of the pick-up time, load description, destination, and delivery date and time.

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Implementation of Crossdocking
9) The retailer store is notified of the outbound shipment details. 10) The truck/trailer with the suppliers delivery reaches the crossdock facility. 11) Manual checks are performed on a small percentage of the suppliers delivery, to ensure accuracy of the ASN.

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Implementation of Crossdocking
12) If pre-allocated supplier consolidation is carried out, then the pallets in the inbound shipment are transferred to outbound dock door/truck/trailer. Otherwise pallets are broken into cases, allocated to open orders per destination (in the case of postallocated CDO consolidation), sorted with respect to each retailer store, and loaded to the outbound truck/trailer from the outbound dock door. 13) The outbound truck/trailer leaves the crossdock facility and delivers to the retail store.

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A Case Study: Ekol Logistics

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Ekol Logistics
Leading 3rd party logistics (3PL) firm Major crossdock operator (CDO) in Turkey 7 distribution centers (DCs) in Istanbul, Turkey alone and 3 other warehouses in other cities in Turkey Total warehouse area of 120,000 m2
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Ekol Logistics
Clients
International mass retailer Appearel and home products retailer Sportswear retailer Home electronics company Pharmaceuticals company

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Ekol Logistics
Crossdocking for some clients
Mass retailer ABC Pharmaceuticals Fast moving consumer goods (FMCG)

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Mostly pre-allocated CDO consolidation (type 2 crossdocking)

Referred to as flow-through by Ekol managers

Pre-allocated supplier consolidation (type 1 crossdocking) only for two major international FMCG companies
30% of the volume Most suppliers do not wish to sort out and label their products as pallets before sending them to Ekols DCs Quality control requirements

Also traditional warehousing in the same facility 52

Ekol Logistics
A project firm
Work with clients for determining customized solutions Compute the increase in costs and lead times if type 2 crossdocking is carried out instead of type 1 crossdocking Quantify the increase in costs and lead time when traditional warehousing is carried out instead of crossdocking

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Benefits for ABC

Traditional benefits of 3PL Eliminating the long truck queues that accumulated in front of ABC retail stores
Used to come in LTL from suppliers

The suppliers trucks arrive at Ekols distribution center (DC) and unload their (mostly non-palletized) loads. Ekol consolidates these products into pallets and ships them to ABC stores immediately.

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Ekol Logistics: Challenges

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Ekol Logistics: Challenges

Receiving non-palletized shipments Meeting the delivery requirements Assuring delivery quality Delayed deliveries Lack of planning by some of the clients Facility limitations Seasonality in products Quality concerns 56

Ekol Logistics: Challenges

Customs regulations
Sports shoes pass through Halkali Customs Office, whereas sports shoes are categorized as shoes and pass through Tuzla Customs Office

Traffic regulations Very short time span available for decision making

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Acknowledgements
Can Krcan, Cem Kumuk, Alper Hubar

Gler Kzleni

Anonymous Referees

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