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# What Is Cross-Docking: Definition, Types, Benefits

Syahirah Aiman
31/8/2023
13
mins

GEODIS, a global logistics provider, inaugurated a new cross-docking facility in Poland ﻿﻿﻿early this year﻿﻿﻿ to cater to Conforama, a leading French furniture retailer.

This enormous new 51,000 square metres (expandable to a further 17,000 sqm) facility boasts massive storage facilities and a huge amount of loading and unloading ramps and docks.

But this isn’t a warehouse facility — it’s a cross-docking facility.
But what is cross-docking? Let’s find out.

This article at a glance

Cross-docking is an operational procedure where products are transferred directly from inbound to outbound transport without traditional warehousing, cutting inventory and operational costs by eliminating unnecessary handling and storage. While cross-docking offers numerous advantages like faster shipping timelines and central location handling, there are also a few disadvantages to consider, such as reduced storage availability and handling complexity.

## What is cross-docking?

﻿﻿

Cross-docking is an operational procedure that involves directly transferring products from inbound to outbound transport, without the need for traditional warehousing or storage. Different types of cross-docking cuts inventory and operational costs by doing away with needless handling and storage.

How does this work in practice? Let’s get back to the Conforama example. Furniture from Conforama’s twenty manufacturing and assembly sites across Poland, Romania and Slovakia are loaded onto trucks. The trucks then head to its new cross-docking facility located in ﻿﻿﻿Pietrzykowice, Poland﻿﻿﻿ mentioned above. The furniture is repacked and reloaded onto other trucks waiting to set off for France, to be distributed to Conforama’s one hundred and sixty-seven French retailers. In short, the furniture isn’t being kept in the warehouse or storage — instead, it’s almost immediately dispatched again. This is how cross-docking works.

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## When is cross-docking used?

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Cross-docking suits retailers with high-volume shipments who prioritise speed in their supply chain’s transportation process. It’s particularly useful for retailers in the consumer goods and e-commerce sectors, as it enables shorter shipping times and faster turnaround times from order to delivery. Industries such as chemicals, food, and beverages also benefit from cross-docking as it reduces storage requirements and swiftly transfers products from farm to table.

## Types of cross-docking

Cross-docking can be categorised into two basic types based on the time products spend in cross-docking before reaching customers: pre-distribution and post-distribution.

1. Pre-distribution: In pre-distribution cross-docking, businesses specify how goods should be loaded, unloaded, and packed. Customers are identified before the goods leave suppliers.
2. Post-distribution: In post-distribution cross-docking, goods are categorised based on a retailer’s requests. Products spend more time in cross-docking facilities, allowing retailers to make informed decisions on shipping based on point-of-sale forecasts and trends.

## What are the advantages of cross-docking?

﻿﻿

Cross-docking enables businesses to create a leaner supply chain, accelerate order fulfilment, reduce costs, and speed up product delivery to hubs and customers.

These are the advantages of cross-docking:

### Faster shipping and receiving

With fewer or no interventions and handling after leaving the suppliers, goods arrive at their destination much faster. Big shipments are redistributed into smaller batches headed in the same direction, increasing shipping efficiency.

Receiving inventory is much quicker as they ship out almost immediately, eliminating the need to scan them into the warehouse management system (WMS).

### Increase cost savings

Cross-docking removes the need to operate and staff a large-scale warehouse, minimising inventory holding costs.

### Reduced time

Cross-docking reduces shipping time. When goods arrive at your warehouse, they are promptly transferred to another vehicle and dispatched to the customer.

Most items can be shipped out immediately, often within a few hours. This is a value-add for your clients, particularly in today’s world where customers track products' whereabouts in real-time.

### Central location for product handling

Cross-docking optimises supply chain processes by acting as a central hub for sorting and assigning products to multiple carriers based on destination.

### Minimal material handling

Cross-docking operations involve less material handling, leading to higher inventory turnover and reduced risk of damage or quality issues.

Perishable items such as food, and those with short shelf-life like medicine, reach customers sooner with less handling.

## Disadvantages of cross-docking

Although cross-docking offers numerous benefits, it also has some disadvantages. Opting for cross-docking means a business is tied to fewer suppliers, exposes its supply chain to vulnerability, has reduced storage capability, and handles more complex operations.

### Fewer suppliers

Not all suppliers are able to deliver ready-for-sale products to the cross-docking terminal. With fewer available suppliers, product options and pricing choices become limited.

### Supply chain vulnerability

Cross-docking reduces inventory and lead times, making the supply chain vulnerable to disruptions. Managing a centralised operation at a single cross-docking facility exposes a business to more risks. Any legal or political changes, or if a natural disaster strikes, could potentially halt all operations. Contingency planning becomes more challenging due to the faster pace of operations.

### Reduced storage availability

With cross-docking, businesses have less control over inventory and face challenges in tracking, maintaining product quality, and ensuring availability compared to traditional warehousing. Products may be temporarily stored outdoors or in unfavourable spots while they wait to be loaded.

### Handling complexity

Cross-docking involves additional steps and coordination, which increases complexity and requires extra resources such as new software, potentially impacting costs. Warehouse management software (WMS) is needed to help simplify the complexity, tracking all inbound and outbound inventory using data collection devices and peripherals such as barcode scanners, mobile computers, conveyors, automated storage and retrieval systems, RF and RFID systems, and wireless networks. All of these add to initial cross-docking set-up costs.

## Cross-docking vs. Dropshipping

Cross-docking and dropshipping both avoid storing inventory in a warehouse but they are two distinct inventory management approaches. In cross-docking, goods are sorted and sent immediately to customers when they reach a business’s cross-docking facilities. Meanwhile, dropshipping involves shipping products directly from suppliers to consumers, with a company acting as a middleman who promotes the items to consumers. Dropshipping avoids the need to pay additional inventory holding and delivery costs for the company.

## Direct shipment vs. Cross-docking

In direct shipment, the customer typically purchases the item directly from the manufacturer or supplier. Direct shipment reduces transportation costs and allows for complete control and visibility over the product’s journey. The seller may need to plan logistics and allocate storage space, ensuring proper packaging and choosing the best shipping method for the customer’s needs.

Cross-docking is the operational management method of unloading goods and transferring them to outbound delivery vehicles, which reduces costs and speeds up the supply chain.

## Pre-distribution vs. Post-distribution cross-docking

Cross-docking may be generally divided into two types, pre-distribution and post-distribution cross-dockings.

1. Pre-distribution cross-docking means receiving goods at a central hub and then delivering them to separate stores or customers.
2. Post-distribution cross-docking means receiving goods at individual stores or customers and subsequently distributing them to other stores or customers.

Both approaches enhance supply chain efficiency, and it is important that you select the most suitable method according to your unique requirements.

## 3 methods of cross-docking

There are three methods cross-docking can be executed at a cross-docking facility:

### 1. Continuous cross-docking

In this method, goods are swiftly transferred from one truck to another at a central location. Trucks wait for each other to arrive to complete the transfer efficiently.

### 2. Consolidation cross-docking

Multiple shipments are combined into one outgoing vehicle to optimise transportation efficiency and avoid sending partially loaded trucks.

### 3. Deconsolidation cross-docking

The opposite of consolidation cross-docking, a fully loaded truck unloads many different products, which are then sorted into smaller orders and separately placed onto a number of departing trucks.

## Is cross-docking suitable for my business?

Cross-docking offers time and cost savings by reducing the need for storage and handling. However, it also presents logistical challenges and requires coordination.

Cross-docking is typically more suitable for big businesses, as the initial costs for building a cross-docking facility are huge, amounting to hundreds of thousands of dollars. These businesses usually manage a large volume of shipments, and cross-docking would make sense for them as their inbound and outbound delivery vehicles would be fully loaded.

## How to implement cross-docking

In order to incorporate cross-docking into their operations, companies require a warehouse docking terminal where incoming merchandise is received and arranged for transportation. Subsequently, the items are taken off their pallets and dispatched to specific outbound delivery vehicles using forklifts or conveyor belts.

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## Cross-docking FAQs

### What is a cross-docking warehouse

A cross-docking warehouse is a facility where goods are received from inbound trucks, sorted and inspected in a central area, and then directly loaded onto outbound trucks for shipping. Shipments normally spend less than 24 hours in a cross-docking warehouse before being delivered to their final destinations.

### What is the average price for cross-docking?

Setting up a cross-docking warehouse or terminal and acquiring the necessary transport trucks and systems can require a significant initial investment. In Isfahan, Iran, for example, the fixed cost of establishing a cross-dock facility was about ﻿﻿﻿USD $ 400,000﻿﻿﻿ in 2020.

### What is an example of cross-docking?

Walmart is a notable example of a successful implementation of cross-docking. They unload inventory directly from incoming trucks and load them onto outgoing trucks without intermediate storage. This streamlined process, supported by strategic supplier relationships and advanced inventory management systems, enables Walmart to cut costs and offer competitive pricing.

### What is a cross-docking strategy?

A cross-docking strategy reduces the need for extensive warehousing and workforce by efficiently transferring products from one transportation mode to another at a docking facility. By adopting this approach, businesses achieve cost savings and expedite the process of fulfilling orders.

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