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Cross-Docking: Best Way to Lowering Costs While Optimizing Fulfillment

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What is cross-docking

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Isn’t it amazing how some products manage to reach their destination in a flash?

Wouldn’t it be even better if they were timely and affordable?

Logistics and supply chain strategies can vary from company to company. But in retail, a powerful method for lowering costs and increasing efficiency is “cross-docking.”

You can use the cross-docking strategy in a highly competitive market like logistics. It can enhance your competitive advantage and meet your customers’ needs.

What is cross-docking?

Cross-docking refers to the logistics strategy of distributing products from a supplier directly to a retailer. The process involves minimal handling and storage.

You can view cross-docking as a transaction. The cashier or product carrier is at one end. The buyer or retailer is at the other.

In this way, they do not have to wait a long time for their goods or rent a tremendous amount of warehouse space.

Advantage of cross-docking

What is the best way to decide whether cross-docking fits within a company’s logistics strategy?

To help you make a more informed decision, we have provided a list of the advantages and disadvantages of cross-docking.

It doesn’t need a warehouse

A cross-dock facility may replace traditional warehouses in many cases. This is because they need less space and are easier to construct. As a result, companies can save on both variable and fixed assets.

The majority of cross-dock companies maintain dedicated cross-dock warehouses when they cross-dock. A great example is Indiegogo or Kickstarter fulfillment. So, for example, if there is a bulk delivery of pop a shot, it can be delivered this way quickly.

Material Handling

Cross-docking terminals will streamline material handling, improving efficiency and reducing costs.

Cross-docking can help you with:

  • In-motion labeling
  • Destination scan
  • In-motion weighing
  • Label verification

Inventory Handling is less risky

Because a warehouse is no longer needed, inventory management risks are not an issue.

Lower Transportation and Distribution Cost

Cross-docking facilities can transport several products together to similar destinations. This results in full loads and lowering transportation costs.

Additionally, eliminating unnecessary processes from the routing process will result in fewer wasted miles. Therefore, it can give your business a reduction in fuel usage and associated vehicle service costs.

Lower Storage and Packaging Costs

With cross-docking, warehouses don’t keep inventories in their storage for a long time. As a result, it reduces storage costs significantly.

Through automation in the cross-docking terminal, the cost of packaging will also decrease.

Faster screening of products

Automated machines at the terminals can screen your products more efficiently. As a result, it reduces the number of days the parcels spend in shipment.

Faster delivery of products to customers

The fast-screening process of products will result in a higher turnover. This is because the customer can now receive the product sooner.

Disadvantage of cross-docking

Still, cross-docking is not without risks. So, besides the upsides, you should also take a close look at them.

We have outlined a few risks below.

Attention and management are required

It is imperative to set up a cross-docking system. However, careful planning and money are necessary for it to be effective.

Furthermore, the moving and shipping stocks at the terminal will incur labor costs.

Your partners don’t have enough storage space

The elimination of warehouses through cross-docking reduces costs. But, if a company’s potential partners lack the storage space needed for cross-docking, it will be challenging to implement cross-docking effectively.

Freight Handling may cause damages to the product

A cross-docking system is appropriately designed. But any additional loading can make the system jam and cause product damage.

The product may not arrive on time

Suppliers sometimes fail to deliver the right product at the right time due to errors. It can affect customer satisfaction.

cross-docking

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What are the reasons why some companies don’t use Cross-docking?

Cross-docking is a working and proven logistic strategy. But many businesses don’t use cross-docking due to its difficulties.

Manufacturers, carriers, and 3PL partners must coordinate closely to streamline inbound and outbound logistics. In addition, all parties must synchronize their systems.

Products that have the best cross-docking potential have the following features:

  • Products that are in shelf-ready packaging (SRP) or retail-ready packaging (RRP)
  • Items with robust and predictable demand, such as popular items and household staples.
  • Sources of supply can deliver the right product at the right time, with the right volume.

Who can benefit from cross-docking?

Businesses can adopt a cross-docking process to fit their supply chain strategy and infrastructure. Here are a few companies that can enjoy a cross-docking supply chain model.

Companies that rely on many suppliers

It becomes easier to manage goods coming in from many suppliers in different areas. In addition, it bypasses the need for an entire storage process since inventory moves from one destination to another.

This method enables you to efficiently and quickly receive products from different vendors. Cross-docking facilities can promptly sort, combine, and ship the products. It cuts transportation and storage costs dramatically.

Products with a limited shelf life

Do you sell essential, in-demand, or perishable items with a limited shelf life?

Choosing cross-docking would be a wise choice in this case. With cross-docking, goods are not stored by the supplier before being sold to another company. The result is a shorter time to get the product to the consumer.

The products are immediately transported to the outbound dock after receiving a bulk of them on the inbound dock. As a result, retailers can offer longer sales windows. In addition, it minimizes the risk of perishable goods passing their expiry date.

Could I benefit from cross-docking?

Ultimately, cross-docking is a logistical method that requires excellent timing and procedure. But it also lowers overhead costs and streamlines turnaround times.

It could make a big difference to your bottom line and shorten your lead time. Having always-stocked shelves, low prices, and on-time shipments could mean a lower retail price for your customers.

When it comes to warehousing, transportation, or distribution costs, it is beneficial to invest in a 3PL service that can assist you in implementing cross-docking strategies.

Your logistics arsenal should include cross-docking.

But, of course, it requires dedication and investment like any worthwhile endeavor. Yet the results speak for themselves.

Cross-docking eliminates over 50% of the costs compared to traditional warehouse distribution.

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