Many brands incorporate cross docking warehouses into their fulfillment operations for delivery on consumer demand for faster, more affordable eCommerce shipping without breaking the bank.
Faster delivery means happy customers. As logistics experts, we can teach you everything you need to know about optimizing your supply chain.
Driven by Amazon Prime’s 2-day delivery guarantee, customers in today’s multi-channel retail environment have high expectations regarding selection, customer service, and shipment times across all offline and online storefronts.
This has made cross docking one of the most popular inventory management strategies for logistics managers, especially as part of an integrated freight consolidation strategy. Cross docking provides numerous benefits when cross-dock warehouses are designed properly to move inbound cargo to the loading dock for outbound delivery as quickly as possible.
In this article, we’ll explain everything you need to know about cross docking, how it works, and who it’s best for.
What Is Cross Docking?
Cross docking fulfills orders without the need for storage time in between. Goods are received, sorted, and then sent out to their destination.
Tactically, cross docking involves shifting intact pallets from one form of ground transportation, like rail or truck, to another form of transportation with no storage time in between. Cross-dock providers unload, sort, and scan inbound less-than-truckload (LTL) shipments before reconsolidating them with packages with the same next destination.
Then, providers reload shipments onto outbound trucks or rail to continue their journey. They may break down larger shipments into smaller batches for cheaper and faster delivery. Similarly, they may be able to consolidate goods going to the same place into fewer last-mile vehicles, which also reduces carbon emissions.
In other words, items are in and out in no time. Consequently, cross docking works best for merchants selling the following types of goods:
- Staple products with constant, predictable demand
- High-quality items that don’t require quality inspections during transit
- Perishable goods that require immediate shipment
- Pre-picked and pre-packaged orders from another warehouse
The global cross docking services market is expected to reach around $340 billion in market value by 2030. This is an increase of $140 billion compared to 2020 and could spell trouble for the warehousing industry. It seems that the growing consumer demand for fast delivery has meant that businesses are looking for faster fulfillment options, which cross docking provides.
The Future of Cross Docking
Looking at cross docking more strategically, the goal is almost the same as that of a traditional warehouse — receiving, storing goods, order picking, and shipping. But there’s one big difference: cross docking eliminates costly storage and manual order-picking functions as goods move from the manufacturer or eCommerce shop to the end customer.
Inventory inevitably loses value and incurs additional risk of loss every time it moves in the logistics process. Cross-dock warehouses reduce this waste.
Utilizing business systems and other technology to create an integrated cross docking network system creates a just-in-time (JIT) shipping process that reduces inventory costs, shortens transit times, minimizes the risk of damage, and improves the quality of service. If done correctly, cross docking is a win-win for merchants and customers, ensuring fast, affordable, and on-time delivery.
What’s the Difference Between Pre-Distribution and Post-Distribution Cross Docking?
Cross docking is a strategic way to make the distribution process efficient. But not all cross docking strategies are the same. Two approaches stand out: pre-distribution cross docking and post-distribution cross docking. We dive into these further below:
Pre-Distribution Cross Docking:
This occurs when businesses already know the end customer. Thus, items leave the supplier, and a fulfillment provider unloads, sorts, and repacks products at the cross-dock warehouse based on predetermined distribution instructions.
Pros:
- Cost Savings: Reduces warehousing costs such as long-term storage and inventory holding
- Better Inventory Management: This kind of cross docking facilitates just-in-time inventory practices which reduces excess inventory.
- Supply Chain Visibility: There is greater visibility into the supply chain so more informed decisions can be made.
Cons:
- Complex Operations: The sheer amount of coordination between suppliers, fulfillment providers, and distribution centers can make it complex to run operations smoothly.
- Dependent on Accurate Forecasts: With a heavy reliance on accurate demand forecasting to prevent stockouts or overstocking, you might face issues if the demand forecasting isn’t always accurate.
Post-Distribution Cross Docking:
When businesses don’t know the end customer, they postpone sorting until they can choose the proper cross-dock facility and customers based on location and demand. In this scenario, merchandise spends less time at a cross-dock warehouse. But merchants will more than offset added storage costs by making informed decisions about where to most efficiently forward stock inventory based on demand forecasting data.
Pros:
- Flexibility: Provides flexibility in reacting to changing demands by delaying sorting until customer orders are received.
- Fast Distribution: Handling and processing time is fairly minimal at the cross-dock facility, speeding up the distribution process.
- Adaptability: Businesses can choose cross-dock facilities based on demand and location.
Cons:
- Less Inventory Visibility: Post-distribution can mean less visibility into inventory levels which may cause an imbalance in inventory levels.
Which Cross Docking is Right for Your Business?
When choosing between pre-distribution and post-distribution cross docking, you’ll need to take into account factors, including:
- Demand Variability: For businesses that have unpredictable demand, post-distribution cross docking is a better choice because it offers greater flexibility to adapt to fluctuating market conditions.
- Customer Awareness: If the end customer can be accurately forecasted, pre-distribution cross-docking can offer greater efficiency and cost savings.
By assessing the pros and cons of each approach, businesses can make the right choice based on their industry, customer pool, and the current market.
Need help knowing where your business should forward-stock your inventory? Try our free tool, NetworkVu. NetworkVu is a free planning tool that makes it easy to design your warehouse footprint. You can connect your eCommerce cart or upload your sales data to generate a report that shows you the best place for your warehouse to meet customer demands for fast delivery.
What Is a Cross-Dock Warehouse?
Cross docking stations are where providers sort and reorganize inventory for shipment to the same place.
It may seem odd to see the terms cross-dock and warehouse together since cross docking aims to eliminate the costs, delays, and risks that come with traditional warehousing. However, while cross docking aims to reduce inventory storage, it still requires a safe, enclosed space to unload and rearrange inbound goods for more efficient outbound shipment.
Think of cross docking warehouses or facilities more like a train station where passengers gather and wait briefly to board a nonstop commuter rail to the city.
What’s the Difference Between Cross Docking and Warehousing?
Cross docking is often confused with transloading and traditional warehousing. Transloading involves sorting and re-palletizing inventory at each phase of intermodal shipping, and the primary function of warehousing is to keep stock on hand until the brand sells it.
Alternatively, cross docking involves unloading goods directly from incoming transport onto outbound transport with little (ideally none) long-term storage in between.
Retailers previously relied on multiple suppliers to bring products to individual retail stores, whereas cross docking allows vendors to bring products to one central location.
Compared to warehousing, cross docking offers benefits such as reduced costs, faster order fulfillment, and better inventory turnover. You’ll typically have lower costs because of the reduced need for long-term storage for inventory.
By avoiding traditional warehouse processes, items can reach customers much quicker. cross docking uses just-in-time inventory management so businesses can maintain optimal inventory levels and achieve higher inventory turnover rates.
What Are Cross Docking Warehouse Design Best Practices?
In cross docking, many deliveries occur in a single day, so suppliers must utilize technology like Electronic Data Interchange (EDI) to stay informed in real time about deliveries that must be dispatched that day. Which cargo will arrive at which gate? Where should they transport goods? You can see why successful shops can’t depend on manual processes to plan shipments in precise time slots.
Successful cross docking requires perfect organization within the warehouse. Here are 3 facility design best practices to consider:
1. Shape of the Warehouse
Cross-docks come in various formations based on the number of doors required and the central space needed to move inbound items to the outbound area of the warehouse. cross docking demands tremendous efficiency and speed from equipment. From the moment forklifts arrive, goods must travel throughout the cross docking facility via power pallet trucks and conveyor belts at the fastest pace possible.
Small-to-medium-sized cross docks are usually an I-shape or narrow rectangle to maximize the use of central doors. For larger docks, alternative shapes that expand the central area and make distant doors closer are preferable. For instance, an X-shape is best for docks larger than 200 doors, and a T-shape is recommended for dock sizes between 150–200 doors.
In the long run, the optimal shape of each cross docking warehouse depends on freight flow patterns and factors like goods turnover, distance, gates, and buffer spacing.
2. Number and Placement of Dock Doors
Keep in mind that more dock doors don’t necessarily correlate to more efficient cross docking facilities. For example, placing dock doors on the opposite wall far away would lead to efficiency-killing congestion. This layout may make placing straight conveyor belts easier, but a better layout would be doors on only one wall or 90 degrees to each other.
This allows high-speed mowers to travel between incoming and outgoing doors quickly. Plus, remember that you need ample space for pallet staging activities near shipping doors, and aisles should be oversized in high-traffic areas.
3. Inbound and Outbound Transportation Schedule
For cross docking to achieve its two top objectives — minimizing costs and maximizing productivity — inbound and outbound tracks must arrive and operate in the correct order. Otherwise, misalignment, such as outbound trucks arriving ahead of the goods they’re scheduled to deliver, leads to overcrowding and traffic jams in the dock. Accordingly, cross-dock facility design and organization must account for truckloads, transit times, and vehicle wait times.
Pros and Cons of Cross Docking
Cross docking, like most things, offers both pros and cons. We dive into these so you can better understand if this is the right strategy for your business:
Pros:
- Reduced Costs – Cross docking can lead to cost savings across the supply chain. By minimizing inventory levels and eliminating unnecessary storage and transportation, you can save on inventory holding costs and transportation expenses and labor costs. Plus, lower inventory levels can mean reduced insurance premiums, while a streamlined supply chain can mean lower administrative overhead costs.
- More Efficiency – With cross docking, products bypass storage altogether by moving directly from inbound to outbound docks. This removes the need for warehousing and reduces handling time, increasing the efficiency of the supply chain. According to research, 41% of customers prefer to receive their orders within 24 hours, making cross docking an important strategy in meeting these demands.
- Quicker Order Fulfillment – Cross docking speeds up the order fulfillment process by eliminating storage and handling time. Products reach customers faster, meeting tight delivery deadlines and increasing customer satisfaction. For businesses seeking to optimize their fulfillment strategy, cross docking provides a way to process orders quickly and get to the customer faster.
- Reduces Risk of Cargo Damage – With reduced handling across the supply chain, there is a reduced risk of cargo damage. This benefits your overall profitability and increases customer satisfaction.
- More Environmentally Friendly Than Warehousing – Cross docking reduces the environmental footprint linked to warehousing, including energy consumption, land use, and transportation emissions. Businesses can contribute to sustainability efforts through cross docking.
Cons:
- Inventory Shortage – A potential drawback of cross docking is the risk of inventory shortage. As products move quickly, this can mean there’s limited time for inventory management and replenishment. However, you can introduce improved inventory management practices, such as introducing automated systems, real-time data analytics, and vertical storage systems, to maintain adequate inventory levels.
- Need for New Technology – You may need to invest in new technologies and systems when implementing a cross docking strategy. Although digitizing the supply chain can offer benefits, it can be a steep learning curve for employees, which can slow down the distribution process.
- Requires Precise Scheduling – Because goods move straight from inbound to outbound docks without storage, any delays or disruptions in the process can cause ripple effects across the entire supply chain. An inaccuracy in scheduling can lead to missed delivery deadlines or increased costs.
- You’ll Need a Big Budget to Begin – Implementing cross docking requires a large upfront investment in technology, infrastructure, and operational resources. Although cross docking can lead to long-term cost savings, it may initially stretch your purse strings.
FAQs
Below, are common questions about cross docking to make this logistics strategy clearer for you. Keep reading to learn how cross docking can benefit your business and how Ware2Go can help you make the most of it.
Who Uses Cross Docks?
Retailers, distributors, manufacturers, and transportation companies use cross docking to move goods quickly and efficiently. While real and eCommerce sectors often use cross docking, it can be used across a diverse range of industries. Essentially, any business wanting to streamline the fulfillment process can use cross docking.
Why Is Cross Docking Used?
Cross docking is used for faster order fulfillment, reducing inventory holding costs, and improving service levels. cross docking bypasses storage and handling, so goods are moved quickly through the supply chain, meeting customer demand for fast delivery while increasing operational efficiency and cutting costs. Cross docking is a win-win, especially for businesses moving high-volume, time-sensitive goods.
When Should Cross Docking Be Used?
Cross docking should be used where there’s high-volume distribution, seasonal sales fluctuations, or you carry perishable inventory. If you want to streamline omnichannel fulfillment, cross docking makes this much easier to accomplish.
The Importance of Technology on Cross Docking
Besides possessing a well-organized cross-dock network, another core requirement for using cross docking is to access advanced analytics and real-time data that connects the eCommerce retailer, delivery driver, and customer from the order through the last mile and delivery.
Without access to modern IT technology, the high degree of organization required to make cross docking warehouses work effectively is impossible. For this reason, eCommerce SMB’s partner with fourth-party logistics (4PLs) providers to carry the heavy technology lift and provide a nationwide warehouse network that can handle increased demand on equipment and facilitate nationwide 2-day shipping guarantees.
To learn more about how Ware2Go can help you take advantage of cross docking, please contact one of our fulfillment experts.es work effectively is impossible. For this reason, ecommerce SMB’s partner with fourth-party logistics (4PLs) providers to carry the heavy technology lift – and provide a nationwide warehouse network that can handle increased demand on equipment and facilitate nationwide 2-day shipping guarantees.
To learn more about how Ware2Go can help you take advantage of cross-docking, please reach out to one of our fulfillment experts.
