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What is Cross Docking? Meaning.

Cross-Docking is a distribution system in Supply Chain Management to decrease inventory storage, handling costs and operating costs by streamlining the flow between the supplier and the manufacturer.

Crossdocking has a few variants:

  • Consolidation: Shipments of multiple manufacturers are being consolidated in a central location for one delivery destination to achieve economy of transport.

  • Hub and Spoke: Shipments from one manufacturer are being deconsolidated in a central location for multiple delivery destinations.

  • Deconsolidation: Large shipments (ship, railcars) are being deconsolidated into smaller lots and/or or other types of conveyance (trucks)

Typically, transportation vehicles of suppliers and receivers are "docking" on opposite sides of the cross docking distribution center, ideally at the same time.

Advantages of Cross-Docking. Benefits

Besides the reduction of inventory storage, handling costs and operating costs that was already mentioned, other benefits of cross docking include:

  • Short transportation times in combination with low costs.

  • Decreased warehousing costs.

  • Economies of Scale in outbound flows (from the distribution center to the customers.

  • Inventory function of a distribution center becomes minimal, while still maintaining the value-added functions of consolidation and shipping.

  • Inbound flows (from suppliers) are directly transferred to outbound flows (to customers) with little, if any, warehousing.

  • Achieving Full Truckloads. Shipments typically spend less than 24 hours in a crossdocking center, sometimes less than an hour. In conventional distribution systems, goods are stored in a distribution center or kept in inventory at the supplier and wait until ordered by a customer. This leads to many Less Than Truckloads (LTLs). With cross-docking, goods are already assigned to a customer. The distribution center receives goods from suppliers, sorts them immediately to be shipped to a consolidated shipment (often including other orders from other suppliers) to the customers. More shipments tend to be Full Truckloads.

Cross Docking does require good (electronic) cooperation and tracking (RFID) between the parties involved.

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Compare with: 3rd Party Logistics  |  Inventory Management  |  Vendor Managed Inventory  |  Outsourcing  |  Lean Manufacturing  |  CPFR  |  Business Process Reengineering  |  Vertical Integration  |  Bullwhip Effect

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