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A Tutorial On Crossdocking
A Tutorial On Crossdocking
Gürdal Ertek
1
Sabancı University
Sabancı University
Crossdocking
• A supply chain strategy
• Inbound materials are
– Directed to outbound doors and are
directly loaded into outbound
trucks
...or...
– “Staged” for a very brief time period
before loading
• Inbound product flow is synchronized
with outbound product flow to
essentially eliminate storage of 2
inventory
Crossdocking
• Can accomplish significant reductions
in total costs and in lead times in a
supply chain
• “Crossdock facilities (CF)” act as
transfer points
3
Crossdocking
B
A
A Crossdock
A
Facility
B A
B
• Receiving
• Staging (<24hr)
B
• Shipping Stores
Stores
Suppliers
4
Traditional Distribution
B
A
A A
Warehouse
B A
B
• Receiving
• Putaway
B
• Storage Stores
• Replenishment
Suppliers • Picking 5
• Shipping
Traditional Distribution
6
Direct Shipment
A
B
A
A A
Warehouse
B A
B
• Receiving
• Putaway
B
• Storage Stores
• Replenishment
Suppliers • Picking 7
• Shipping
Crossdocking
• 550,000 warehouses in the U.S. alone
(1995 estimate)
• Crossdocking can turn warehouses
into transfer nodes, rather than storage
nodes
8
Applicability of Crossdocking
Has Increased
• Fierce competition in all
industries, especially retail
• Cooperating with supply chain
partners to reduce the system
wide costs
• Internet allows companies to
communicate among each other
– In real time
– At costs significantly lower than
9
the past
Walmart
• The world’s largest retailer
• >5,000 stores throughout the world
• Popularized crossdocking
10
This Study
• Types of crossdocking
• When crossdocking is applicable
• Prerequisites
• Industries where crossdocking is
applied
• Advantages and drawbacks
• Implementation issues
• Case Study: Ekol Logistics
11
Types of Crossdocking
Types of Crossdocking
12
Types of Crossdocking
1. Preallocated supplier
consolidation
2. Preallocated crossdocking
operator (CDO) consolidation
3. Postallocated CDO consolidation
• Preallocated: Destination is
determined at the supplier
• Postallocated: Destination is
determined at the crossdock facility 13
• Supplier consolidation:
The supplier builds the final
(possibly multiSKU) pallets that
will be shipped to the final
destinations.
• CDO consolidation:
The final pallets are built by the
CDO at the crossdock facility
14
Crossdocking – Type 1
Preallocated 1 1
1 2 3
2 2
Supplier 3 3
Consolidation
15
Crossdocking – Type 2
Preallocated 1 1
1
2 2 2
3
3 3
CDO
Consolidation
16
Crossdocking – Type 3
2 2
3 3
CDO
Consolidation
17
Hybrid Facility
• Ex: Supervalu distribution center
• Incoming products are
º Either crossdocked by
feeding into a sortation
system and routed
to shipping doors,
...or...
º Moved to the fourlevel
inventory area through
conveyors for storage 18
When is Crossdocking
Applicable?
Applicable?
19
When is Crossdocking
Applicable?
Applicable?
• Products with predictable, high
demand and high cubic volume flow
• Perishable products
• Ex: Supermarket chain ASDA
partnered with KimberlyClark, the
paper industry giant which supplies
highcube, lowvalue products such
as toilet tissue and paper towels.
• Products very appropriate for a
pilot crossdocking study 20
When is Crossdocking
Applicable?
Applicable?
• Promotional products
– Sisko: “...Not recommended for
crossdocking”
– Witt: “Mass merchandisers
implement crossdocking for
promotional products.”
• A scientific approach, possibly
through building mathematical
models, should be followed for
identifying which of the two
conflicting statements hold
under which conditions. 21
Perishable Products
Perishable Products
• Lot control:
– Tracking the lot is required to have a
timesequenced availability to the
customers
– Further complicates crossdocking
– Solution: Apply “FIFO Granularity”
• Crossdocked items that just came in are
shipped.
• The older items are regularly replaced by
those that come in new, avoiding product
spoilage
22
Prerequisites of Crossdocking
Prerequisites of Crossdocking
23
Prerequisites of Crossdocking
Prerequisites of Crossdocking
• Total commitment and continuous
monitoring at all times by all the
parties involved
• Effective communication between
parties
• Perfect coordination of material
flows.
– Many interrelated decisions have to
be made under numerous resource
and time constraints. Mathematical
models can be of great use.
• Perfect quality requirements
24
Prerequisites of Crossdocking
Prerequisites of Crossdocking
• Sharing the costs and benefits of
crossdocking:
– CDO benefits from decreased inventories,
labor, and storage space requirements.
– Suppliers involved may have to make
significant investment into technology
– Retailers may end up with higher inventory
levels due to increased lead times.
– The CDO would prefer that the outbound
trucks can wait for long time periods such
that flexibility is achieved in scheduling
– The trucking company would not accept to
absorb the cost related with the waiting time 25
of its trucks.
An Important Issue
An Important Issue
• Trend in almost every industry:
– A decline in bulkordering and a shift
towards smaller inventory modules
• Burden of sorting full pallet SKUs and
merging them into multiSKU pallets
increases.
• This should be considered when
reaching to an agreement and signing
the contract with the supply chain
partners.
26
Industries in which
Crossdocking is Applied
Crossdocking is Applied
27
Industries in which
Crossdocking is Applied
Crossdocking is Applied
• Retail industry
– WalMart, ASDA, Track ‘n Trail,
Canadian Tire, Saks, Sears, and Belk
• Thirdparty logistics (3PL)
companies, and especially LTL
companies
– Columbian Logistics serves a large
grocery wholesaler by consolidating
paper products from four large
manufacturers, and distributing them to
approximately 200 stores.
– 3PL companies in the U.S. alone were
28
estimated to gross about $56 billion.
Industries in which
Crossdocking is Applied
Crossdocking is Applied
• Automative industry
– Toyota distribution center in California
• Reduced lead times of parts from Japan to
customers from 25 days to 11 days.
• Approximately onethird of the estimated
250,000 transactions made per day are
crossdocked.
29
Industries in which
Crossdocking is Applied
Crossdocking is Applied
• Automative industry
– Mitsubishi Motor Manufacturing of
America
• Crossdocking facility adjacent to the
Mitsubishi assembly plant in Illinois
• Materials arrive at most two hours prior to
each production schedule, supporting JIT
(JustinTime) at the plant.
30
Industries in which
Crossdocking is Applied
Crossdocking is Applied
• Automative industry
– Goodyear Great Britain
• Leading tiremanufacturer
• Made the transition from a traditional
supply chain to a crossdocking system
– increasing its service level
– decreasing its inventory
– releasing warehouse space
– reducing labor force required, and
• Eventually reducing operating costs by
over 12%.
31
Industries in which
Crossdocking is Applied
Crossdocking is Applied
• T
T elecommunications and
electronics industries
– C
C har
har a
a cterized by a fast pace of
change, with products typically having
very short life cycles.
– Thompson Consumer Electronics,
Panasonic, Ericsson, and National
Semiconductor
32
Industries in which
Crossdocking is Applied
Crossdocking is Applied
• Apparel industry
– YoungWorld
• Children’s apparel and furniture retailer
– Capacity Inc.
• Importer of women’s sportswear
– Urban Outfitters
• Apparel and home furnishing retailer
33
Benefits and Drawbacks of
Crossdocking
Crossdocking
34
Benefits of Crossdocking
Benefits of Crossdocking
• Allows the efficient consolidation
of products.
• Decreases inventory levels due to
elimination of storage.
• Enables faster product flow (by
eliminating “dwell”).
• Enables more frequent deliveries.
• Decreases inventory
obsolescense due to reduced
inventory and faster product flow.
35
Benefits of Crossdocking
Benefits of Crossdocking
• Decreases labor requirements
and costs due to decreased
material handling (through
elimination of putaway to storage
and order picking). The typical
yearly cost per warehouse worker
can be estimated around $40,000
in the U.S.
• Decreases inventory damage
costs due to less material
handling.
• Decreases the amount of space
required, and thus increases the
handling capacity of the facility. 36
Benefits of Crossdocking
Benefits of Crossdocking
• Supports customers’ JustinTime
strategy.
• Accelerates payments to
suppliers (which is an important
argument that can be used to
convince suppliers to participate
in crossdocking).
• Improves the relations with the
supply chain partners.
• Enables faster completion of
incomplete orders due to more
frequent deliveries. 37
Benefits of Crossdocking
Positive Feedback
Applicability
of crossdocking
Loop for Wal
Loop for Wal mart
mart
Costs
+ +
Stockout and Prices
inventory costs offered to
(+) Positive feedback loop customers
Predictability Number and scope
of Sales of promotions +
38
Drawbacks of Crossdocking
Drawbacks of Crossdocking
• Risk of stockout:
– Any unavailability of the product at the
suppliers
– Any delays in the supply chain
– Any failure to coordinate perfectly
• Union fears of losing jobs
– The main savings in crossdocking
come from decreased inventory and
labor costs.
39
Implementation of
Crossdocking
Crossdocking
40
Type 2 Crossdocking
Implementation
Preallocated 1 1
1
2 2 2
3
3 3
CDO
Consolidation
41
Step 1
Order
Shipment
ASN Details
Step 4 Step 9
Supplier Crossdock Stores
Stores
Facility Step 8
Arrival
Step 2 Date
&Time
Preallocated 1
Step 5
1
2 2
3
3
Step 3
Step 6 Step 7
Pickup
Time
...
42
Supplier Crossdock Stores
Stores
Facility
1
Step 12
Step 13
2
3
Step 10 Step 11
CDO
Consolidation
43
Implementation of
Crossdocking
Crossdocking
1) The CDO and the supplier receive order details from
the retailer store.
2) If preallocated supplier consolidation is carried out,
the supplier builds store specific pallets and
label/tag them. These pallets may be multiSKU
pallets. If CDO consolidation is carried out, then the
supplier prepares just singleSKU pallets (to be
sorted at the crossdock facility). If preallocated
CDO consolidation is carried out then each case in
the pallet should include the information of which
specific store it is heading on a label/tag.
3) The supplier loads the truck that will deliver the
shipment to the crossdock facility. 44
Implementation of
Crossdocking
Crossdocking
4) The supplier sends the Advance Shipping Notice
(ASN) to the CDO.
5) The carrier notifies the CDO on the arrival date and
time.
6) At the crossdock facility, the dock door for inbound
receiving is determined and the labor and handling
equipment are scheduled to meet the delivery.
7) The dock door for outbound shipment (from the
crossdock facility) is determined.
8) The outbound carrier is notified of the pickup time,
load description, destination, and delivery date and
time. 45
Implementation of
Crossdocking
Crossdocking
9) The retailer store is notified of the outbound shipment
details.
10) The truck/trailer with the supplier’s delivery reaches
the crossdock facility.
11) Manual checks are performed on a small percentage
of the supplier’s delivery, to ensure accuracy of the
ASN.
46
Implementation of
Crossdocking
Crossdocking
12) If preallocated supplier consolidation is carried out,
then the pallets in the inbound shipment are
transferred to outbound dock door/truck/trailer.
Otherwise pallets are broken into cases, allocated to
open orders per destination (in the case of post
allocated CDO consolidation), sorted with respect to
each retailer store, and loaded to the outbound
truck/trailer from the outbound dock door.
13) The outbound truck/trailer leaves the crossdock
facility and delivers to the retail store.
47
A Case Study: Ekol Logistics
A Case Study: Ekol Logistics
48
Ekol Logistics
Ekol Logistics
• L
L eading 3rd party logistics (3PL)
firm
• M
M ajor crossdock operator (CDO) in
Turkey
• 7 distribution centers (
7 distribution centers ( DCs
DCs ) in
Istanbul, Turkey alone and 3 other
warehouses in other cities in
Turkey
T otal warehouse area of 120,000 m 2
• T
49
Ekol Logistics
Ekol Logistics
• Clients
– International mass retailer
– Appearel and home products
retailer
– Sportswear retailer
– Home electronics company
– Pharmaceuticals company
50
Ekol Logistics
Ekol Logistics
• Crossdocking for some clients
– Mass retailer “ABC”
– Pharmaceuticals
– Fast moving consumer goods
(FMCG)
51
• Mostly preallocated CDO consolidation
(type 2 crossdocking)
– Referred to as “flowthrough” by Ekol
managers
• Preallocated supplier consolidation
(type 1 crossdocking) only for two major
international FMCG companies
– 30% of the volume
– Most suppliers do not wish to sort out and
label their products as pallets before sending
them to Ekol’s DCs
– Quality control requirements
• Also traditional warehousing in the same
facility 52
Ekol Logistics
Ekol Logistics
• A “project firm”
– Work with clients for determining
customized solutions
– Compute the increase in costs and
lead times if type 2 crossdocking is
carried out instead of type 1
crossdocking
– Quantify the increase in costs and
lead time when traditional
warehousing is carried out instead of
crossdocking 53
• Benefits for ABC
– Traditional benefits of 3PL
– Eliminating the long truck queues that
accumulated in front of ABC retail
stores
• Used to come in LTL from suppliers
• The suppliers’ trucks arrive at
Ekol’s distribution center (DC) and
unload their (mostly nonpalletized)
loads.
• Ekol consolidates these products
into pallets and ships them to ABC
stores immediately. 54
Ekol Logistics: Challenges
Ekol Logistics: Challenges
55
Ekol Logistics: Challenges
Ekol Logistics: Challenges
• Receiving non
Receiving non palletized shipments
• Meeting the delivery requirements
• Assuring delivery quality
• Delayed deliveries
• L
L ack of planning by some of the
clients
• Facility limitations
• Seasonality in products
• Quality concerns 56
Ekol Logistics: Challenges
Ekol Logistics: Challenges
• Customs regulations
• Traffic regulations
– S
S ports shoes pass through Halkali
Customs Office, whereas sports shoes
are categorized as shoes and pass
through Tuzla Customs Office
• V
V ery short time span available for
decision making
57
Acknowledgements
Can Kırcan, Cem Kumuk, Alper Hubar
Güler Kızıleniş
Anonymous Referees 58