Optimal Decision-making on Product Ranking
For Crossdocking/Warehousing Operations
Zhengping Lii, Malcolm Yoke Hean Lowii, Yuan Guan Limiii, Bin Maiv
i,iii,iv
Singapore Institute of Manufacturing Technology, 71 Nanyang Drive, SINGAPORE 638075.
ii
School of Computer Engineering, Nanyang Technological University, Nanyang Avenue, SINGAPORE 639798.
{izpli,iiiyglim,ivbma}@simtech.a-star.edu.sg, iiyhlow@ntu.edu.sg
Abstract- The physical distribution of goods is one of the key
success factors in today’s fast moving markets. Many companies are
involved in the search for efficient distribution alternatives, as the
lead times for customer order-fulfillment need to be shortened while
the costs and risks of warehousing need to be minimized.
Crossdocking is defined as an operation strategy that moves items
through flow consolidation centers or cross docks without putting
them into storage. This removes the need for distribution
warehouses in the supply chain, and allows the customers to receive
complete deliveries for their orders. However, not all products are
suitable for crossdocking operations. In real practice, a pure
crossdocking scenario is not common. A crossdocking center or
distribution center is normally a combination of crossdocking and
warehousing facilities. Industry needs guideline and model to
support crossdocking/warehousing decision-making and to evaluate
the applicability of crossdocking operations for their particular
business situation. This paper presents a systematic procedure and
model for the evaluation of the ranking of product’s suitability for
crossdocking in a distribution center or crossdocking center. A
prototype system based on the approach had been developed and is
also introduced in the paper.
I. BACKGROUND
Due to high inventory carrying costs, it is often not possible
to stock all the products in a distribution warehouse. Direct
deliveries from manufacturers remove the need for
warehousing in the supply chain, but often result in multiple
deliveries to the customer with high transportation costs.
Crossdocking is an operation strategy that moves items through
flow consolidation centers or crossdocks without putting them
into storage. It can help to reduce inventory and consolidate
transportation at the same time.
The traditional warehousing and distribution faces the
challenge of fulfilling increasing consumer demand. The new
challenges put pressure primarily on the companies’
warehousing and distribution system. As the number of
partners and delivery points grow, the volume of orders
decreases, but their frequency increases. As the time for
receiving goods becomes shorter, the prescription relating to
the working hours of drivers becomes stricter and also order
lead time becomes even shorter [1]. There is ever increasing
pressure to reduce inventories. So a trend toward smaller and
fewer warehouses will transfer many warehouse operations
into crossdocking operations in the 21st century [2]. The
warehouse is undergoing a transformation from a solid
physical facility used to house inventory to one that distributes
products in the shortest possible time at the lowest possible
cost.
In addition, Just-In-Time concept being accepted widely,
make-to-order and assemble-to-order production policies are
applied to more and more products. The implementation of
crossdock operations repositions the focus from warehousing
inventory to one of managing inventory through-flow in transit
from suppliers to customers. In the fast moving consumer
goods (FMCG) crossdocking scenario, retailers submit their
order to suppliers on a specific day. Each supplier consolidates
orders and sends truckloads of product to the crossdock. There,
workers transfer products to trailers bound for individual
stores, so that outgoing trailers contain products for a single
store from many vendors. Transportation costs are lower
because shipments in and out of the crossdock are in truckload
quantities. In this process, the warehouses acting as crossdocks
are transformed from inventory repositories to points of
delivery, consolidation and pickup [3].
However, crossdocking operations increase the complexity
of material flow control. This is especially evident when a
multitude of suppliers are included in the processes. Each of
the individual consignments related to an end customer
delivery must be identified and information on the associated
customer order must be available at all the terminals where
consolidation is performed. Due to the complexities and
challenges of crossdocking operations, industry needs
systematic approaches for evaluating the potential for
crossdocking application. Not all products are suitable for
crossdocking. Distribution center is normally a combined
model of warehousing and crossdocking. It means that both
traditional warehousing and crossdocking co-exist. With
different cost structure and the limited capacity of
crossdocking and warehousing, one key question that needs to
be answered is that what products should go through
crossdocking and what product should go through
warehousing.
In this paper, we reviewed current research and applications
on crossdocking planning and operations. Based on this, we
propose approaches for evaluating products’ suitability for
crossdocking to enable user to make optimal decision on
crossdocking or warehousing decision. A tool for crossdocking
product ranking is developed and will be briefly introduced.
 II. LITERATURE REVIEW
In FMCG crossdocking, retailers receive products from
multiple vendors who use distributors with multiple
warehouses. In general, crossdocks are complex and requires a
high degree of coordination between suppliers, customers and
distributors to create shipments based on anticipated supplies
and demands [4].
A significant amount of research work on crossdocking has
focused on the crossdock facility design. Barthold and Gue [5]
studied the best shape for a crossdock by analyzing the
assignment of receiving and shipping doors. The staging of
products in a crossdock to avoid floor congestion and increase
throughput has also been studied together with the effects of
different combinations of number of workers in receiving and
shipping on throughput [6]. A simulated annealing procedure
was used to construct effective layout to reduce labor costs [7].
Another important research area for crossdocking is to treat
crossdocks as a network of distribution and transshipment
points. Donaldson et al. [8] studied a network of crossdocks for
the US Postal Service where 148 Area Distribution Centers
serve as crossdocks, each receiving, sorting, packing and
dispatching mail according to operating schedules. Mail not
processed on time must be shipped by air, incurring additional
costs and “critical-entry” times, when mail must arrive at the
destination center, must be coordinated with transportation
schedules to avoid overshooting specified cut off times. Each
distribution center serves as an origin as well as destination
node where schedules were driven by mail delivery standards.
Ratliff et al. [9] studied a load-driven network, in which
deliveries take place when there are sufficient products waiting
for transportation. They studied the North American
automobile delivery systems to determine the ideal number and
location of crossdocks in a network and how shipments flowed
between them. In their study, a minimum inventory strategy
was the key in attempting to minimize the number of vehicles
at the mixing center (crossdocks).
Crossdocking operations planning and scheduling also has
been studied in recent years. Chen, Guo and Lim [10] studied
crossdocking network scheduling where time windows for
deliveries and pickups are considered. They also considered
crossdock-handling costs which are use to penalize delays. Yu
and Egbelu [11] studied the scheduling issue of inbound and
outbound trucks in crossdocking systems with temporary
storage. They try to find the scheduling sequence for both
inbound and outbound trucks to minimize total operation time
when a temporary storage buffer to hold items temporarily is
located at the shipping stock. Chen and Lee [12] develop
polynomial approximation algorithm and branch-and-bound
algorithm to minimize the makespan for products going
through a crossdocking facility.
Crossdocking can be complex and difficult to manage,
involving a large number of transshipment points and vehicles.
The well-known success of Wal-Mart [13] in crossdocking
requires coordinating 2000 dedicated trucks over a large
network of warehouses, crossdocks and retail points. Maytag, a
large distributor of household appliances maintains 41
crossdock facilities where “no inventory is held” [14].
Despite there being several research publications, there is
very little published research on the approaches for evaluating
the potential of crossdocking operations for a company and the
suitability of a product for crossdocking operations. This is
perhaps because the complexity of its implementation on a
large scale has prevented crossdocking from becoming a
common systematic distribution model. However, logistic
service providers capable of offering a crossdocking service
are increasingly available on the market, and the developments
in information technology have also made the management of
crossdocking operations easier. Nevertheless, there is still an
absence of systematic guidelines that can help supply chain
managers to determine the suitability of crossdocking for
certain business and products and assess the benefits of
crossdocking for their particular business situation. There is a
requirement for a model to support crossdocking and
warehousing decision-making. This topic is still not well
studied and this paper will work on the issue.
III. PROBLEM DESCRIPTIONS
Traditionally, goods are processed in warehousing approach,
where it arrives from the manufacturer and is stored into
inventory at the warehouse. Goods take up space in the facility
and are stored there for a period of time for anticipated
demand. In crossdocking, goods arrive from the manufacturer
into the crossdock. Goods are stored in the facility for at most
24hours. They are then consolidated, sorted and sent to their
respective destinations.
Comparing to traditional warehousing, crossdocking has
some obvious advantages. First crossdocking eliminates two
cost- and labor-intensive functions: storage and order picking
of a traditional warehouse, while still allowing it to serve
receiving and shipping functions. Handling costs is reduced
because it minimizes “the number of touches”. Second, the
speed of material movement is faster, cargo normally takes a
few days and even months in traditional ware housing and it
only normally takes less than 24 hours in a crossdock. Third,
inventory is much lower and the throughput is higher in
crossdocking compared to traditional warehousing. In addition,
when timing is well coordinated, products can be made
available in shorter time windows, thus reducing cycle times.
So crossdocking’s impact to supply chain is to make it more
responsive to customer demand as compared to traditional
warehousing.
In real practice, a pure crossdocking scenario is not
common. A crossdocking center or distribution center is
normally a combination of crossdock and warehouse. Some
products go for crossdocking and some products go for
warehousing based on product property, user demand and
facility capacity. Even for the same type of product, part of the
products could go for crossdocking and the rest go for
warehousing. This is because not all products are suitable for
crossdocking, and even if they are suitable, logistics managers
are still skeptical to the idea of not having any safety inventory
or crossdocking capacity is not enough for all the suitable
products. Especially in FMCG supply chain, a model
combining both crossdocking and traditional warehousing
operations is highly feasible and cost effective due to the
characteristics of fast moving consumer goods. The selection
of distribution strategy for the products depends on a number
of factors such as product volume, product value, product life
cycle, and facility space constrains.
Many companies invest a lot of time and money to
investigate on this area to gain a competitive edge over their
rivals especially for Fast Moving Consumer Goods (FMCG)
products that have a quick turnover and relatively low cost.
While the profits made from these individual products are
relatively, they are often sold in big volume and the cumulative
profit on such products can be significant. To increase their
revenue, companies have realized the importance of reducing
their distribution cost and at the same time meet the customer
demand. Currently, there is a lack of a proper system or tool to
assist logistics managers to evaluate and select the type of
distribution strategy for a particular product. The crossdocking-
warehousing decision on what and how many products should
go for crossdocking could be a complex decision considering
product popularity, volume, demand variation and product life
cycle. It is a challenge task for a crossdocking manager or
operators to make the right decision given these complexities.
The purpose of this research is to study the approach and
develop tools for Crossdocking Product Ranking so as to assist
logistics managers in their product distribution strategies. With
product data input from the user, the application will generate
scores to rank products on their suitability for crossdocking.
The ranking result could be used by a company to define
product distribution strategy and determine the
crossdocking/warehousing capacity of facilities.
The product ranking includes two main steps: First, product
property information is collected. These include product type,
volume, destination, product life, packing attributes, and
historical demand information. Product data is preprocessed
according to system requirement. Second, a product’s
suitability for crossdocking will be evaluated based on product
information and weights of different factors will be calculated.
With the product ranking result, trade-off between cross-
docking and warehousing could be evaluated. The evaluation
result could also be used for strategic level crossdocking-
warehousing decision making, such as for facility capacity and
layout design.
IV. CROSS-DOCKING PRODUCT RANKING MODULE DESIGN
AND DEVELOPMENT
Figure 1: Evaluation of product suitability for crossdocking
A. Factors to be Considered in Crossdocking Suitability
The product ranking and selection logics take in product
details and previous inventory movement data to generate
scores and rankings for products according to their suitability
for cross docking. The suitability of products for crossdocking
is evaluated from four aspects: Product Popularity, Total Cubic
Movement (volume), Demand variation and Product Value &
Life (Figure 1).
• Popularity: refers to the number of times a product
appears on the orders from the customers. A higher
popularity would mean more frequent and larger quantity
of the product would be moving through the facility. A
product with a higher popularity would be more suited for
crossdocking as the products need not be stored into
inventory and is transported straight to the destination. It is
reasonable to put high priority for crossdocking to those
products with high popularity. We define “popularity =
number of appearances on orders”. For the computation
of popularity, the Crossdocking Product Ranking and
Selection Tool do not take into account the quantity sold.
The omission of quantity in the calculation of popularity is
because quantity factor has already been taken into
consideration in the total cubic movement category.
• Total Cubic Movement: refers to the total volume of a
product that is moved through the facility. As space is a
constraint in a facility, assigning a product with a high
cubic movement through a crossdock would definitely
save inventory cost. The product no longer needs to take
up storage space in the facility for a longer period of time,
allowing the space to be utilized for other products. So
crossdocking should be conducted for those items with
higher cube movement, so that less storage space is
needed.
Product volume * demand = total cubic movement
• Demand Variation: refers to the demand patterns of a
product. A product with a constant demand is more
suitable for crossdocking since this will make the
crossdocking operations efficient. It is more suitable to
keep an inventory for a product with erratic demand and
fulfill the related orders with stock.
 Coefficient of variation = standard deviation / µ C. Make Use of the Ranking Information
(mean) Once the product’s suitability ranking for crossdocking
A low coefficient of variation means low demand obtained, it is important to make use of the ranking
variation information.
• Product Value & Life Cycle: the inventory risk and cost First, the ranking data could be used for strategic level
for products with higher values and short life cycle (e.g. decision to decide what products should go for crossdocking or
MP3 players) and product shelf life (such as flesh milk). warehousing. The product volume could be calculated based
Products nearing the end of product lifecycle will be on historical demand and/or demand forecast for a particular
higher than those products with lower value and long time period. In strategic level, a facility capacity plan should be
product life cycle. In this study, product life refers to the generated to decide on how much crossdocking and
lower number of product life cycle and product shelf life warehousing capacity would be maintained for a period.
(by weeks). Since products with short life become obsolete Secondly, the product ranking for crossdocking suitability
faster, it is necessary to push these products to the sales could be used in the calculation of unit product cost for
floor as fast as possible. Distribution of these types of crossdocking and warehousing. A high ranking for
products through a crossdock is appropriate. crossdocking means the product’s relative cost for
Priority = value per unit / product life crossdocking would be lower than that of warehousing. The
unit cost information could be used in allocating products to
B. Product Crossdocking Ranking Calculation
crossdocking and warehousing operations optimally in a
To generate scores for the products, attributes of each
distribution center. The table below shows an example of unit
product must be used to calculate the values for the four
costs (for crossdocking and warehousing) of products passing
factors. Equations for the computation of values for each factor
through a facility.
are as follows:
Thirdly, the ranking for product’s suitability for
• popularity = number of appearances on orders
crossdocking is very useful for allocating products to
• product volume * demand = total cubic movement
crossdocking and warehousing in operational level. During a
• coefficient of variation = standard deviation / µ (mean)
time period, the available capacity for crossdocking and
• priority = value per unit / product life cycle
warehousing in a facility is limited. The products’ processing
After calculating the values for the four factors, as the range of
in the facility should be optimized (minimum processing cost)
values differ in every score category, there is a need to
by the proper allocation of products to crossdocking and
normalize the values to an identical scale. The Min-Max
warehousing. So the ranking data could be used on a
Normalization method is used to normalize the values into the
crossdocking/warehousing product allocation planning that
desired range of 0.0 to 1.0, which is the range use in our tool to
yields the minimum total processing cost [15]. As shown in Fig
represent and rank the scores. Min-Max Normalization
2, Rxd refer to product’s suitability ranking for crossdocking
Formula for the original data is defined as:
and Rwh refer to the relative suitability ranking for
(current_ value− min_value) warehousing (Rwh=1-Rxd). Rxd/Rwh is the relative index for
× (new_ max− new_ min)+ new_ min
(max_value− min_value) the product’s suitability for crossdocking. Products with
Rxd/Rwh >1 are prefer for crossdocking.
Here min_value, max_value is the initial range. By
normalization, the four types of product data are in a more
comparative format.
Besides normalizing the scores to an identical scale, users
might need to place an importance on certain score categories.
Therefore the system will require the user to input weights for
each score category for each product such that the total value
of the weights sum up to 1.0.
Using the normalized values and user specified weights for
each product, the final score of a product’s suitability for
crossdocking is calculated by adding the values for the four
factors together. The higher the score is for a product, the more
Fig 2: UNIT PRODUCT OPERATION COSTS
suitable it is for crossdocking. The final computation of the
scores is shown below: V. MODULE DEVELOPMENT
Final score = Weight A * Popularity Score + Weight B * A crossdocking product ranking tool has been developed to
Cubic Movement Score + Weight C * compute the ranking of products’ suitability for
Variation Score + Weight D * PLC Score crossdocking/warehousing. With the described factors above
Where Weight A + Weight B + Weight C + Weight D = 1.0 taken into consideration, the system will need the following
input data from the user:
 • Product details: dimensions (volume), weight, value and service. Retailer X is interested in looking at the possibility of
product life cycle. implementing a crossdock facility for its own operations as
• Product delivery orders that passes through the facility. well. Its current distribution system consists of a warehouse
The order information is used for the computation of (700m2) and a network of trucks to transport their goods to and
demand variance and popularity. from their many stores around the island. We assume that
• Product handling and holding cost by crossdocking and Retailer X’s warehouse has the geographical and physical
warehousing of the facility. The can also be calculated requirements of a crossdock, and that the transportation and
based on the properties of the product. information system of the company meets the basic needs for
The desired output from the Scoring and Ranking Module is crossdocking operations.
a list of products ranked according to their suitability for Table 1: Product Attribute Data
crossdocking. Then we do analysis on the output data and
PRODUCT VALUE WEIGHT LIFE CYCLE
attempt to explain the results in detail. The output of the NAME (/SKU) DIMENSION (kg) (weeks)
module is the ranked product list with their suitability for Bread 100 70x70x100 50 4
crossdocking.
Detergent 120 70x100x70 40 100
Figure 3 shows the flow of the generation of product
Rice 50 100x100x20 5 100
ranking. Firstly, all product details and demand history are read
Fresh Milk 35 80x70x40 5 2
into 2 separate arrays. The system will scan through the details
array and demand array to compute the scores. Once the Television 500 100x100x70 15 20
product ID is matched from both arrays, the particular record Digital
Camera 350 50x50x30 1 12
will be inserted into the SelectedList array and the total
Nike Shoes 200 50x50x50 0.1 10
quantity and popularity values will increase. The mean of the
Apple Ipod 200 80x50x30 1 5
product will then be calculated and used to compute the
T-Shirts 600 60x80x75 25 12
variance and standard deviation while scanning through the
SelectedList array . Volume and product life cycle value will DVD Player 300 30x60x80 2 12
also be computed. Facial Cotton 180 67x54x25 10 100
Foamy Facial
Wash 144 40x40x50 10 30
Prickly Heat
Powder 192 60x50x40 10 100
Laurier
Super 96 80x60x50 15 6
Nabisco
Biscuits 100 70x50x75 30 4
Coffee
Maker 120 80x100x80 30 3

Coke Drink 24 40x60x40 24 6

Figure 3: Crossdocking product ranking module
development
VI. CAST STUDY AND TESTING
With the above modeling and solution approach, we have
carried out testing with a case study. The description of the
scenario is as follows:
Retailer X has a chain of stores selling a variety of products.
These products include household items, electronic goods,
grocery products, toiletries, foodstuff, fresh meat and poultry,
pharmaceuticals and clothing. Retailer X’s business has grown
over the past few years, starting from a small store to a chain of
stores all over the island. Competition however has also
become more intense, and Retailer X realizes the need to
improve on its operations to lower cost and increase bottom
line profits.
Retailer X relies greatly on its distribution operation for its
business. A good and efficient distribution system would
greatly improve Retailer X’s profits and improve customer
FHM
Magazines 120 60x40x60 5 1
Campbell
Soup 72 90x60x20 20 6
The company supplied a subset of their inventory product
data (for SKU) (shown in Table 1), together with a week’s
collection of inventory movement data through its warehouse
facility. Processing costs per SKU are also given by the
company. Average weightages (0.25 each) are given to the four
factors of popularity, cubic movement, demand variation, and
value/PLC. Retailer X hopes that through the Crossdocking
Product Ranking & Selection Tool, they can identify which
products are most suitable for crossdocking and obtain a
possible optimal distribution plan that will yield the lowest
holding and handling cost for the subset of products.
Calculation results are obtained by the ranking tool as shown
in Table 2. Observations made from the case study are as
follows:
• Generally daily foodstuff has a higher cubic movement
and popularity, with low demand variance as they are
consumed all the time, which explains the higher
rankings. Some of the ranking results are predictable,
 e.g. Rice and Bread which are consumed daily tops the
list with majority of the non-food stuff on the bottom
half of the list.
Table 2: Product Ranking Results
• Food stuff such as bread and rice are in high popularity.
Also their demand variations are low and cubic
movements are high. So they ranked high in suitability
for crossdocking.
• For electronic products, there is a split between the
rankings, with half on the top and half at the bottom.
This is mainly due to the popularity and total cubic
movement of the different electronics products.
• Magazine is another exception, although scoring low,
magazines product life cycle priority is very high. This
is because a magazine has short shelf life, after which it
will be obsolete. This explains why it is ranked higher
than some of the other products.
• Toiletries are also split throughout the ranking list.
Although all of them are daily used items, their rankings
differ because of their total cubic movement and
popularity. As mentioned in previous section, popularity
only takes into account the number of orders made and
not the quantity ordered.
VII. CONCLUSION
This paper investigates the approach for ranking products’
suitability for crossdocking and presents a systematic
procedure and model for the evaluation of ranking of product’s
suitability for crossdocking in a distribution center or
crossdocking center. A prototype system based on the
approach discussed in the paper had been developed and is
introduced in this paper.
With the approach proposed, a case study is conducted for a
subset of data from a retailing company. The case study
demonstrates that the approach is feasible. The result provides
a guideline for the company to allocate products to
crossdocking operations and determine the capacity of the
facility. Observations from the case study and discussion on
the further usage of the approach is provided. The approach
and tool described in this paper provide industry with guideline
and model to support crossdocking/warehousing decision-
making and to evaluate the applicability of crossdocking
operations for their particular business situation.
Based on the ranking and other factors, we have carried out
further work in developing optimal system to take into account
the goal of finding the minimum cost of distributing the
products to crossdocking and warehousing operations. Further
work will also be carried out to incorporate the ranking of the
suitability for crossdocking as considerations for strategic level
capacity allocation and planning in crossdocking network.
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