How to be a lean, mean cross-docking machine

Thinking about adding cross docking to your operation? A materials handling engineer explains what changes you’ll need to make.

Today’s “lean” warehousing managers are trimming the fat by eliminating unnecessary tasks and by improving value-added activities. One strategy they frequently adopt is cross docking, the practice of expediting the flow of product from receiving to shipping with a minimum of handling in between.
Although cross docking has become something of a buzzword lately, it’s a strategy that has been around for decades. Why rehash an old practice? Because cross docking helps shippers address specific business needs that are more important today than ever.
A Little Product, A Lot of Savings
First, cross docking accelerates speed to market by routing items to their end destinations as soon as they are received. “Our cross-docked items literally spend zero time on the warehouse floor,” reports Steve Avila, shipping and receiving traffic manager at Emulex Corporation, a manufacturer of computer hardware that cross docks about 85 percent of its shipping volume. “They go in one door and immediately out the other,” he says.
Cross docking also improves the bottom line. Because product is not sent into inventory, companies that cross dock reduce their storage requirements and consequently eliminate storage-related labor and inventory costs.
McCain Foods USA Inc., which manufactures nearly one-third of all french-fried potatoes produced internationally, has been cross docking its high-volume, fast movers for more than a year. Director of Warehousing Timothy Egan saw the benefits firsthand. “We saved twenty to thirty percent in total warehouse costs by not sending product into storage. And that’s with just one percent of our total SKUs (stock-keeping units) being cross docked,” he explains
Finally, cross docking allows companies to meet customers’ specific needs when time is of the essence. Some examples of such needs include product promotions and other timed marketing strategies, support of just-in-time practices, and consolidation of multiple supplier networks.
Despite these proven benefits, not many companies are cross docking today. Those that do often find themselves cross docking only a small percentage of their shipping volume. One reason, perhaps, is that the concept of not storing product in anticipation of demand is often difficult for managers to grasp.
Egan agrees: “Our supervisors had to change their way of thinking. Instead of storing product in the warehouse, they had to get product out the door and set up labor differently to make it happen.”
Other companies simply don’t know where to start, or may even get involved in cross docking by accident. That was the case for Emulex, Avila says. “We were incurring a tax liability for shipping from one of our plants in Mexico directly to our customers. This forced us to rethink our shipping practice and set up a cross-docking operation here in the U.S,” he says. In McCain’s case, cross docking began as part of the company’s lean, Six Sigma quality initiative in manufacturing and spilled over to its distribution operations.
What, When, and How to Do It
Many times cross docking cuts across interacting functions, including those that happen outside the four walls of the warehouse. It can take a wide variety of forms, from simple pallet movement to complex carton handling involving conveyor sortation systems.
Identifying the most appropriate cross-docking system for your business can require sorting out a complicated web of details.
Regardless of the specifics, though, adopting a systematic approach to managing change will be crucial if you’re to successfully renovate your distribution center (DC) and redesign its operations to accommodate cross docking. The following are some guidelines to help you get started:
Step 1. Product and Supplier Selection
Not all products can be cross docked. The best candidates are those that exhibit high levels of predictability, popularity, and cube movement; these should be identified based on an analysis of each product’s history. Figure 1 illustrates this concept. Other ideal cross-dock candidates include:
Perishable products that require immediate shipment;
High-quality items that do not require extensive quality checks during receipt;
Products that are pre-tagged, pre-ticketed, and ready for sale;
Items for promotional events and initial product launches
Products with continuous, consistent demand, such as “staple” items like milk and toilet paper;
Product moving from one retail store to another;
Pre-picked, pre-packaged orders from another facility;
Back-ordered items.
Supplier selection. Manufacturers that have their own DCs have a distinct advantage when it comes to cross docking. By keeping track of production runs, they can anticipate finished-goods receipts from their regular suppliers and re-route them to shipping as soon as inbound pallets are received in the DC. For retailers and distributors, selecting the ideal suppliers for a cross-docking program tends to be more involved. Choose suppliers that consistently provide the correct quantity of the correct product at the precise time it will be needed. The best suppliers for cross docking include those that can:
Configure products for efficient handling through the next point in the supply chain;
Consistently comply with customer mandates for labeling, ticketing, packaging, and product quality;
Effectively and efficiently share information with their customers.
Step 2. Planning and Designing the Operation
When planning a cross-docking program and deciding on the most appropriate design for your needs, it is important to first assess your current facility’s capabilities. How much change will be necessary will depend on the volume and handling requirements of the products you selected. Typically, when fewer items are being cross docked fewer renovations are needed. The type of handling unit involved also has a significant influence on your setup. A simple, full-pallet transfer from receiving to shipping, for example, tends to be easier to implement than an elaborate carton cross dock that may require complicated conveyor sortation systems. Specific considerations to keep in mind include:
Dock-area layout and capacity. Because most cross-docking activity is concentrated at receiving and loading docks, ensure that you have an adequate number of dock doors as well as enough capacity in those areas. Where possible, eliminate racks to create more dock space. Make sure product can flow quickly and freely through the DC. “At McCain, our only renovation for our full-pallet cross dock was to create new aisles and re-route travel paths to allow quicker access from inbound to outbound doors,” notes Egan.
Yard management. To comply with the rigid receiving/shipping schedule needed for cross docking, you may need a yard tractor and trained driver to move trailers around the yard. A yard manager must also be on hand to ensure that trucks are spotted at the right doors at the right times, resolve equipment issues, and coordinate incoming and outgoing trucks so that delays can be avoided.
Material handling equipment. When cross docking, it’s important to move large volumes of product in a short time. Using double pallet jacks to transport pallets can double throughput. Conveyors that are installed on the floor of truck trailers and connect to inbound and outbound pallet conveyors within your facility can significantly speed up pallet transfer (see Figure 2).
Where appropriate, powered extendibles can aid in loading and unloading cartons as well. Conveyor sortation systems add speed by automatically routing cartons from receiving to shipping and, if needed, to print-and-apply stations for the application of new shipping labels. Figure 3 illustrates a “before” and “after” example of a sortation system that has been renovated to accommodate cross docking.
Personnel. When it’s time to choose managers for a new cross-docking operation, remember that forward thinking is a critical success factor. “Cross docking cannot fully achieve its objectives without a good core of receiving/shipping supervisors and logistical planners who can identify product that needs to be cross docked and redirect personnel to make it happen,” says Egan. Avila agrees: “Supervisors must be able to recognize opportunities for pre-receiving or pre-allocating receipts before the actual product arrives.”
You may need additional personnel to accommodate cross docking’s requirements, but that doesn’t necessarily mean hiring more employees. Some companies outsource their labor requirements to a third-party provider. “With outsourced labor, budgets can be fixed on a piece-rate basis without the hiring/training headaches,” says Scott Orman, West Regional VP of Operations & Business Development for Supply Chain Solutions, an outsourced labor company that provides cross-docking labor for many large retailers.
Information systems. Some shippers have cross docked successfully using paper-based systems, but a real-time, paperless information flow among trading partners is strongly preferred.
Electronic data capture, using bar coding and radio frequency (RF) devices, improves dock productivity by automatically directing the driver to the proper outbound door. It also enables real-time order tracking and reduces the error rates that plague paper-based systems. Even better, radio frequency identification (RFID) tags relay inbound and outbound information without any line-of-sight scanning. Pallet information is automatically captured as arriving and departing shipments pass by RFID portals located on the docks.
Because cross docking moves fast, it’s important to not only capture data in real time but to also utilize it right away. “We track the total number of shortages on orders and discrepancies or damages in product received, and we report in real time so that our customer can adjust, communicate, and fill discrepancies within a fifteen-minute window of the identified issue,” Orman says.
Step 3. Cost Justification and Sharing
How much will it cost to implement cross docking at your company? For both Emulex and McCain Foods, startup costs for their cross-dock initiatives were insignificant, but the savings and benefits were considerable. “We improved inventory turns to six per quarter with cross docking, versus an average of two or three without cross docking,” says Avila.
For a complex, capital-intensive cross dock, it’s best to evaluate the effect on each SKU’s profitability. Where suppliers must take on additional responsibilities, gain-sharing—the practice of sharing projected savings—can be initiated with suppliers that make cross docking in your facility possible.
Step 4. Implementation and Maintenance
As with any renovation, a comprehensive plan will pave the way for a smooth implementation. If you’re a first-time cross docker, start with a pilot program. That will allow you to study the effects of cross docking on a small scale and resolve any weaknesses before rolling it out to an entire product line or network of facilities.
Be prepared for contingencies. This may include keeping a small inventory of cross-docked product in your facility. Standard operating procedures should also be in place so orders are not delayed and product can still be cross docked even when fewer units than expected are received (perhaps due to miscounts or damage). For example, consider redistributing orders and giving priority to your larger customers.
Continuous Improvement
Once your cross-docking operation is up and running smoothly, don’t sit back and assume that your job is done. “Cross docking should be an ongoing, continuous-improvement project,” advises Egan.
Instead, look for ways to get even more benefit from this increasingly popular strategy. For example, supply and demand conditions change constantly, so periodically monitor cross-docked products to determine their sustainability in your program. Another option: For increased benefits, gradually add new products to the cross-docking mix once you’ve
mastered the system.
If successfully planned, designed, and implemented, renovating your DC to enable cross docking can lower your operating costs, reduce inventory investment, and improve product turns—all stepping stones toward a “leaner” warehouse.

Source : Maida Napolitano,Logistics Management.