Currently, many businesses apply Cross Docking technology to optimize the storage process, shorten goods storage time and minimize costs. So what is Cross Docking and how does it benefit the warehouse storage process? In the article below, 1C Vietnam will provide detailed and specific answers to these questions.

1. What is Cross Docking?

Cross Docking is a technique to eliminate the two functions of storing and collecting goods at the warehouse while still ensuring the normal functions of receiving and transporting goods. Goods will be transferred directly from the supplier or manufacturer to the place of consumption without the need for transit through warehouses.

In Cross Docking , goods are received directly from the supplier and shipped directly to the customer without needing to be stored in a warehouse. This entire process usually takes place within a day or even just a few hours.

Cross Docking is commonly used in many logistics industry activities, including:

• Manufacturing: Gathering components or spare parts from different suppliers to produce finished products.
• Distribution: Collecting goods from different manufacturers for distribution to retail stores.
• Transportation: Consolidating goods from different origin points to transport to a common destination.

2. How is Cross Docking different from traditional warehouses?

Traditional warehouse and Cross Docking are two distinct warehouse management models.

In a traditional warehouse, goods are stored until a customer order arrives. When the order arrives, the products are picked, packed and shipped.

Cross Docking is different, customers know about the product before arriving at the warehouse. Goods do not need to be stored in the warehouse but are shipped directly to customers. The shipping process must follow a strict schedule to ensure on-time delivery. If Cross Docking is done properly, businesses can eliminate inventory fees and reduce transportation costs.

3. Types of Cross Docking

Cross Docking is classified into 5 main types, including:

• Cross Docking for manufacturers: Supports the collection and synthesis of input supplies to ensure production according to the JIT (Just in time) method. For example, a machinery assembly plant may rent a nearby warehouse to collect and sort input materials. After collecting all the necessary parts, the factory will proceed with assembly based on the needs of each pre-planned part.
• Cross Docking distributor: Supports collecting goods from many different suppliers and delivering them to customers. For example, a distributor can search for many different sources of machinery components and ensure delivery of the required quantity to customers.
• Freight Cross Docking : Consolidate and combine multiple shipments from different carriers to deliver transaction scale benefits. For example, a transportation company may collect many small shipments from different manufacturers and transport them to a central warehouse. Then, the shipments will be combined and delivered to customers.
• Retail Cross Docking : Supports importing goods from many different suppliers and delivering them to retail stores. For example, a distributor may import consumer goods from multiple suppliers and ship them to mini supermarkets or retail grocery stores.
• Opportunistic Cross Docking : Cross Docking operations can be applied at any warehouse to fulfill a customer order. For example, a distributor may move goods from a receiving point to a shipping point to fulfill a customer's order.

4. Items suitable for Cross Docking

Cross Docking is a warehousing model where goods are received, sorted and delivered directly to the final destination without the need for storage. This model is suitable for products that meet two criteria:

• Low demand fluctuation: Cross Docking requires businesses to be able to accurately predict demand to ensure there is enough goods to deliver to customers. If demand is highly volatile, businesses may have difficulty balancing supply and demand.
• Large volume of goods: Cross Docking requires a large enough volume of goods to create economic efficiency. If the cargo volume is too small, shipping and storage costs may exceed the benefits of Cross Docking .

Below are some types of products suitable for Cross Docking :

• Perishable items: These items need to be shipped immediately to avoid damage.
• High-quality items: These items typically do not require quality inspection during the receiving process.
• Labeled items: These items do not need to be repackaged before being shipped to the customer.
• Promotional items and newly launched items: These items often have low demand fluctuations.
• Key retail items: These items often have stable demand and low fluctuations.

5. Advantages and disadvantages of Cross Docking

Cross Docking is an effective logistics method that can help businesses reduce costs, increase operational efficiency and reduce the risk of goods damage. However, businesses need to consider the pros and cons of Cross Docking before applying this method, specifically:

5.1. Advantage

The Cross Docking model is an effective warehouse management method, applied by many businesses. This model has the following 4 outstanding benefits:

• Reduce inventory costs: For goods with high and stable demand, storing goods in the warehouse will incur wastage costs such as storage costs, inventory costs, etc. Cross Docking helps Enterprises optimize storage and reduce inventory costs.
• Reduce transportation costs: Retail stores often have to spend a lot of money when using small goods transportation services. Cross Docking helps businesses consolidate retail shipments into a number of full truck loads, thereby reducing input transportation costs and simplifying goods receipt at retail stores.
• Speed up the circulation of goods: Cross Docking helps businesses quickly transfer goods from manufacturers or suppliers to customers, thereby meeting customer needs in a timely manner.
• Reduce loading and unloading costs: Cross Docking does not require businesses to reserve a lot of goods in the warehouse, thus helping to reduce loading and unloading costs.

For the Cross Docking model to be highly effective, businesses need to pay attention to the following factors:

• There needs to be close coordination between related departments such as production department, logistics department, sales department,...
• A modern warehouse management system is needed to support Cross Docking operations.
• There should be clear Cross Docking procedures and training for employees.

With outstanding benefits, the Cross Docking model is increasingly being applied by many businesses.

5.2. Defect

Cross Docking is an effective warehouse management model, bringing many benefits to businesses. However, this model also has some disadvantages that businesses need to consider before applying:

• Consumes a lot of time: If the business does not ensure effective operating processes, the Cross Docking model will cost the business a lot of time if there is a problem during transportation. Therefore, businesses need good management and support from technology to ensure smooth operations.
• Need a large amount of investment capital: Businesses need to invest in infrastructure, equipment and technology to deploy the Cross Docking model. This cost can be quite high, especially for businesses that are just starting out.
• Dependent on suppliers: Cross Docking model depends on suppliers. If a problem occurs during the process of receiving goods due to delays or errors from the supply source, the business will need to spend time processing it, leading to delayed delivery. This causes businesses to lose business and lose credibility with partners.
• Transportation issues: Cross Docking is mainly transported by road. Therefore, transportation costs may be higher than traditional warehouse models. In addition, the place where goods are gathered needs to have enough outside space for employees to move goods.

To limit the disadvantages of Cross Docking , businesses need to plan to implement the model methodically and effectively. In addition, companies also need to have close coordination with suppliers and partners to ensure the model operates smoothly.

6. Relationship between Cross Docking and supply chain

From many perspectives, Cross Docking is a complex business activity, requiring close coordination between relevant parties. Implementing Cross Docking will result in some changes and require a cost or cause obstacles during the implementation process for partners.

• The supplier will need to provide smaller and more frequent shipments, and apply price labels or barcodes (if necessary).
• The customer will need to place the order by a certain number of days or allow a delivery lead time of more than a few days.

Overall, Cross Docking is an effective solution that helps businesses reduce costs and improve operational efficiency. To apply successfully, the company needs careful preparation in terms of systems, human resources and operating procedures. Don't forget to follow other articles on 1C Vietnam's website to learn and update more useful information about corporate governance.