To cross-dock or not to cross-dock, that is the question. For some companies, it's a no-brainer to transfer goods from one truck to another without putting them in long-term storage. But there's still a place for traditional warehousing.
Sometimes both practices are used by different divisions of the same company. Toyota is an example.
The automaker's manufacturing division, Toyota Motor Engineering and Manufacturing, began converting just-in-time parts deliveries to its plants from traditional warehousing to cross-dock operations six years ago. A total of about 60 to 65 percent of parts to Toyota's plants are cross-docked, compared with 30 percent in 1999.
By contrast, Toyota Motor Sales U.S.A., which oversees the shipment of service and replacement parts to Toyota dealers across the country, prefers to maintain inventories at warehouses to serve customers. Tony Minyon, national logistics manager at Toyota Motor Sales, sees an opportunity to reduce lead times and lower transportation costs by migrating some warehouse operations to cross-dock, but it will be a slow process.
Cross-docking as a logistics strategy has been around for years. For some warehouse operations, it can be the most efficient way to move cartons from inbound containers or trailers to outbound conveyances. Toyota's U.S. manufacturing unit said it has reduced truck miles driven, created a more consistent flow of parts in smaller lots, allowed more frequent deliveries and encouraged dedicated delivery routes to specific divisions within the manufacturing operation.
The ideal cross-dock facility is a long, narrow warehouse with many truck doors and bays on opposite sides of the rectangle. A cross-dock facility doesn't have to be costly to construct, nor does it need the storage racks and staging areas found in traditional warehouses. "It doesn't have to be pretty," said Brian Gibson, associate professor of logistics at Auburn University, a speaker at last month's conference of the Council of Supply Chain Management Professionals.
In an efficient cross-dock operation, cartons are removed from inbound containers or trailers on one side of the facility and are scanned and moved immediately to a waiting trailer on the opposite side of the building without touching the floor.
Cross-docking can be effective when properly managed. In one case study, Gibson said the shift from traditional warehousing to cross-docking reduced the product cycle time to two days from seven. In a second case study, a company that invested $20,000 in a software system to modify the sorting system at its cross-dock warehouse improved the sorting rate by 50 percent and eliminated the third work shift each day.
In another study, a retailer of shoes and apparel asked suppliers to pre-ticket their shipments so the retailer could shift from a traditional warehouse operation. Cross-docking helped the retailer reduce its per-unit handling cost to 1.5 cents from 15.6 cents and the cycle time to one day from two to three days compared to its traditional warehousing operation, Gibson said.
While such savings are attractive, not all logistics operations are suitable for cross-docking. Weber Distribution, which operates 19 distribution centers on the West Coast, maintains cross-dock operations for some customers, such as Scholastic Books. Weber deconsolidates book shipments and then cross-docks them into full trailerloads moving to Scholastic's distribution centers across the country.
However, when some customers say they want to move to cross-dock, Scott Weiss, client solutions executive, tries to convince them to stick with traditional warehousing. Direct importers who ship small product lots to large retailers with multiple regional distribution centers across the country are usually not candidates for cross-docking, Weiss said. "The shipping date and must-arrive date are hard to meet. It's not realistic," he said. Traditional warehousing, while producing some inventory-carrying costs, allows shippers and third-party logistics providers to manage inventory and replenish their customers' shelves with the right amount of product at the right time.
Carrying inventory is inherently risky because merchandise is handled multiple times, exposing it to damage, theft and storage costs, noted Minyon of Toyota Motor Sales. There is also a danger of obsolescence. However, unless a warehouse operator can maintain a steady flow of product, preferably in truckload lots, to the same customers or distribution centers, cross-docking will not work.
But the ability to consolidate shipments from multiple suppliers to feed close-by manufacturing facilities in a just-in-time delivery schedule makes a company a candidate for cross-docking. For example, Toyota's manufacturing division has a consolidation center in Los Angeles that receives parts from 40 suppliers in the region and ships the consolidated lots to three plants on the West Coast.
That is one example of how Toyota's manufacturing division reduced cycle time and lowered transportation costs by shifting many of its operations across the country from traditional warehousing to cross-docking, said Steve Hagan, assistant manager of logistics at Toyota Motor Engineering and Manufacturing.
Toyota used to do numerous "milk runs," picking up shipments at individual suppliers' facilities and trucking them long distances to manufacturing plants. The manufacturing division now routes many of its parts shipments to Toyota's regional cross-dock facilities and then trucks consolidated shipments to the plants, lowering its logistics costs through route planning, improved packaging, full-trailerload shipments and cross-docking.
Kevin Thornberry, assistant logistics manager in Toyota's manufacturing division, said this strategy sometimes results in holding extra inventory at the cross-dock facilities to achieve more truckload shipments, but the reduced transportation costs offset the higher inventory-carrying costs.
This strategy also allows Toyota to maintain dedicated delivery routes to each of the various divisions of its manufacturing operations, such as the welding shop, power train unit and assembly plant, Hagan said. Toyota sends correct shipment sizes to each division when they are needed for just-in-time manufacturing.
Efficient cross-docking operations require cooperation from suppliers and service providers who may be asked to adjust their work schedules, pre-ticket merchandise or affix bar codes to cartons. This cooperation may come easier than anticipated, however, Gibson said. He cited a retailer that increased its cross-docking to 70 percent of its shipments from 38 percent, and ended up saving $21 million in operating costs.
Cross-docking operations range from the manual movement of cartons by forklifts from inbound to outbound trailers to highly automated operations with costly conveyor belts and sorting machines. If the volume will support the large capital investment of automation, the per-unit costs of running cartons through a conveyor and sorting system can be as little as one-fifth that of the manual process, Gibson said.
Minyon said that while automation can be good, it will produce large savings only if the underlying processes are efficient. "The process and standard operating procedure are most important," he said.
Weber's Weiss agreed. He said automation in many cross-dock facilities is confined to information-technology improvements such as handheld scanners or radio-frequency identification devices.
The key to any effective cross-docking operation is the ability to reduce the number of times merchandise is handled. In traditional warehousing, where products are stored and retrieved at a later date, a shipment can be handled 10 to 12 times on the way to its destination.
Eliminating two or more of those touches in high-volume operations will reduce handling costs, shorten the cycle time and result in a leaner supply chain.