The cross-dock revolution--are you in or out?

While it’s certainly not a new strategy, a recent survey tells us that cross docking is gaining momentum as manufacturers and retailers look to reduce transportation costs and increase service levels by increasing the speed of product to their customers. Are you part of the cross-docking movement?

In September 2007, Saddle Creek Corporation, a Florida-based third-party logistics (3PL) provider, announced that it had started construction on a new 60,000-square-foot, high-volume cross dock facility for Sam’s Club in Hattiesburg, Miss. “We’ve seen significant growth in our cross docking for Sam’s Club since we started working with them more than 16 years ago,” says Leta Hardy, director of marketing for the company. “Cross docking’s ability to dramatically reduce transportation costs gives Sam’s Club that all-important competitive edge. ”
It’s not just Sam’s Club that’s been jumping on the cross-docking bandwagon. Hardy says that they’ve been expanding cross docking services for several of their customers—a trend that reflects the industry as a whole. A January 2008 survey of logistics professionals conducted on behalf of Saddle Creek by RBI-US, Logistics Management’s parent company, shows over half (52 percent) of respondents are already doing some form of cross docking in their distribution operations; and another 13 percent are planning to add it to their logistics game plan in the next 18 to 24 months.
The strategy isn’t new. On average, respondents tell us that they’ve been cross docking for the past seven years. Many do it to reduce transportation costs, but most cross dock because they want to increase customer service levels by increasing the speed of product to their customers.
“Times have changed quite a bit,” observes Jeff Wolpov, president and CEO of Distribution Solutions Inc. (DSI), a New Jersey-based third party logistics provider that cross docks mainly for retail clients such as Citi Trends, Stein Mart, Toys R Us, and the Macy’s Merchandising Group. “If you go back 15 years ago, you used to have a three-month shipping window. Today you have a three-day shipping window.” Wolpov further explains how a season used to be three months long. Today a full price season is a mere one week, and then customers suddenly begin seeing markdowns. “You better have that merchandise in your stores during that one week of full-price selling; otherwise you’re shipping into a markdown,” he adds.
Cross docking is simply a mechanism for speed. Product is received in a facility, occasionally consolidated with products going to the same destination, and then immediately shipped without ever going into long-term storage. It requires advanced knowledge of the inbound product, knowledge of the product’s destination, and a system and infrastructure for routing the product to the proper outbound vehicle.
According to Wolpov, established cross-docking best practices today have found retailers shipping a majority of their merchandise—about 80 percent—at the beginning of a season. That 80 percent is being made floor-ready overseas in pre-packs, he says, since the further back you can push value-added services in the supply chain, the more cost effective the labor and the higher your profit margin. “That pre-pack is what gets cross docked,” explains Wolpov. “The remaining 20 percent is placed in inventory where it eventually gets picked as needed to replenish store shelves.”
Whether you are cross docking full pallets of merchandise or breaking them down to case level distribution, cross docking is a tried-and-tested strategy that’s here to stay. In the next few pages, we learn how the strategy has been doing wonders to different parts of the supply chain. In the first case study, Toyota shows us a thing or two about how they are keeping a leg up on the competition. Here they describe how they use cross docking to consolidate parts delivery to their plants. In the second study, we see how DSI has brought cross docking to a whole new technological level for its many retail customers.
Toyota’s need for speed
In the seventies and eighties, Toyota started producing cars and trucks in North America from plants in Kentucky, Canada, and California. Each site planned their logistics support independently with each plant receiving production materials from suppliers in high frequencies and low quantities in keeping with their philosophy of low inventory through just-in-time (JIT) Logistics.
Over the next two decades, consistent with the company’s belief to “build them where we sell them,” the carmaker experienced a rapid expansion with manufacturing plants opening in Indiana, West Virginia, Alabama, Mexico, and Texas. “This expansion resulted in a high level of complexity that became increasingly difficult to manage,” recalls Dave Maxwell, a logistics engineer for Toyota Motor Engineering and Manufacturing North America Inc. (TEMA), a division that oversees vehicle manufacturing and R&D operations for the carmaker.
Suppliers began expressing concern over shipping parts in such high frequencies and low quantities for eight different plants. And with transportation costs escalating, management knew something had to change. “We recognized that leveraging the separate demands into a single, integrated environment would not only make life easier for our suppliers, but we could save miles and still protect the high frequency delivery that is core to our corporate philosophy,” says Maxwell.
By 2000, plans for an integrated logistics network that would support all the plants began to unfold. Steve Hagan, now an assistant manager for Logistics Projects & Planning for the recently-created Logistics Control Division of TEMA, was there from the start.
“Linkage of multiple plant processes into one proved challenging,” says Hagan. “We had a very difficult 18 months learning from our problems and adapting our network to meet our supplier, plant, and 3PL needs.”
However, central to this consolidated logistics theme was the practice of cross docking. Plants determined where there was enough volume to bring freight directly from the supplier to the plant in the frequency required. If there wasn’t enough freight to meet those criteria, then that freight was put into the integrated logistics network and cross docked. The company designed and built cross dock facilities strategically located to minimize miles and maximize support to each nearby manufacturing plant.
Trucks are now dispatched from the cross dock facility to multiple suppliers on specified routes. The driver verifies that each supplier has prepared the proper freight for each delivery, and once the drivers have finished their routes they return to the designated cross dock facility where parts for multiple production runs and multiple plants are unloaded in pallets using regular lift trucks.
Pallets of parts headed for the same area for the same destination plant are immediately consolidated and staged by order sequence. Based on a planned schedule, each plant’s order sequence is loaded onto an outbound truck to be delivered just in time. Maxwell explains that this ensures that the plant receives the proper freight, in the proper condition, in the proper quantity, in the proper sequence at the proper time.
“After full integration in Toyota’s network with all of the plants,” says Hagan, “each plant was able to get miles reduction—and cost reduction—by picking up smaller volume suppliers combined with other larger parts requirements.” Delivery frequency to the plant was increased from 12 delivery cycles to 24, and routing from the on-site cross dock enabled dock-specific routing to each plant. A part delivery truck which used to have multiple stops to different assembly docks in a plant now had one, single-dedicated truck delivery to one assembly dock from its cross dock facility.
Both Maxwell and Hagan acknowledge that although they wouldn’t have done anything differently from their initial implementation, they are still changing and evolving their process to this day. With new plants slated to open in Canada and Mississippi by the year 2010, “we must consistently evaluate the structure of our organization,” says Maxwell.
DSI goes state-of-the-art
DSI has been doing various forms of cross docking for retailers over many years. As business shifted to a more retail-focused environment, more and more cross docks were required at the case level where the actual sort and segregation of inbound containers was often slow and laborious—sometimes taking two workers about three to four hours (or six to eight man-hours) to sort inbound cartons.
That’s fine if you’re doing a couple hundred cartons a day. But to sort 20,000 cartons, it becomes expensive. DSI knew that to satisfy growing customer demands they had to step up their cross docking process. In 2006, the company built a bi-directional sliding shoe carton sortation system that had the capacity to cross dock 70 cartons per minute in their Newark, N.J., facility. With six power unloading lanes and 20 gravity-fed loading lanes, DSI’s Wolpov says the company created a “high-speed, mechanized solution for our cross docking problem.” When asked how long cross-docked products stayed in this new automated facility, Wolpov simply responds, “It doesn’t.”
Working with forwarders, DSI is able to get electronic packing lists of exactly what’s in an inbound container. “With postponement distribution, our customers can create allocations right before we back it into our door,” says Wolpov. This ability allows their customers to change allocation to their stores based on the latest sales figures, weather-related forecasts, or transportation costs variability for different regions.
Cartons are manually unloaded onto powered conveyor lanes and scanned. This scan triggers the carton’s allocation and determines the carton’s end destination. The system then prints out a final destination label that is manually applied. The carton travels for four to six minutes through a network of powered conveyors before it’s diverted to the proper outbound loading lane where it gets stacked into the final destination truck en route to that retailer’s DC.
Despite substantial up-front costs, labor savings of the automated system were undeniable. Wolpov reports a labor savings of about 50 percent; and, from a reporting perspective, the automated system is light years ahead of their manual operation. “I can tell you where every carton is, which truck is carrying it and how many cartons I’ve shipped in an hour,” says Wolpov.
As with every implementation, DSI’s came with a few hiccups. “First we had to learn how to drive this thing,” recalls Wolpov. “Initially, it took 20 hours to cross dock 18,000 cartons. Now, we can cross dock 18,000 cartons before lunch.” Another learning factor was the need to properly manage the trailer yard to sustain the constant fluid work flow required by their cross docking system. “If I can’t get an inbound container in, I’m going to have people standing around and waiting.”
Wolpov explains that it all came down to getting people to understand how the system worked and figuring out the necessary labor required to keep it working.

Source : Maida Napolitano, Logistics Management