Warehousing and Distribution Center: The cross dock evolves
It's not just about increasing speed to market anymore. Today, cross docking is helping shippers make the most out of every mile—while cutting costs along the way.
By Maida Napolitano, Contributing Editor -- Logistics Management, 3/1/2009
It is not a pretty picture. Consumers are buying less, many retail stores are closing, and manufacturers are putting the brakes on production. The good news is that with less demand we're seeing fuel prices spiraling downwards...for now. So, how should this confluence of events affect your approach to cross docking, that age-old strategy of moving product directly from receiving to shipping with little or no inventory and minimal handling?
According to Mike DelBovo, senior vice president of 3PL provider Saddle Creek Transportation, Inc., cross docking should be, and will be, all the rage. "Now, more than ever, management is looking to find any way to save a dollar. This old concept has been made new again because it has been proven to cut costs."
Today's cross dock, however, is undergoing some twists and turns. Some traditional, "pure" cross-docking facilities are evolving by repositioning and becoming more flexible as they cope with changing global sourcing and destination points. And despite lower fuel costs, others are integrating with transportation strategies like consolidation and deconsolidation to maximize savings.
Cross docking goals have changed. It's not just about increasing speed to market anymore. In these tough times it's more about cutting costs, creating flexibility in your supply chain, and making the most out of every transportation mile. In the next few pages we'll take a look at what strategies and techniques cross dock operators and experts around the country have deployed so that they can better respond to challenging economic trends.
These strategies have transformed today's cross dock operations; and forced its evolution.
Strategy No. 1:
Don't just cross dock, consolidate.
You cross dock when you move a pallet from receiving directly into shipping; but in order to achieve even more savings, schedule receipts and shipments so that full truckloads of outbound shipments are consistently created.
"If I bring 10 trucks in and immediately send 10 trucks out, I know I'm going to save on my warehouse cross dock by not going into storage. Now, the real value is in bringing 10 trucks in and shipping out only 9, consolidated. Now I save a whole truck; now we're talking big money."
Consolidation is the practice of maximizing cube on a trailer by collaborating with suppliers so that shipments can be combined into full truckloads.
It's a simple matter of economies of scale. The more you transport per mile, the lower your cost per unit. Cutting down one trailer a day may not seem like much, but if it can save you $1,000 per day. That's a lot of savings, especially in today's cash-strapped environment.
Some traditional cross-docking facilities are evolving by repositioning and becoming more flexible as they cope with changing global sourcing and destination points. Above is a Saddle Creek cross-dock facility employee working on consolidating a load.
Strategy No. 2:
It may be time to relocate and deconsolidate.
As more products are being manufactured from across the Pacific, more East Coast-based companies have been relocating or adding West Coast cross docks and deconsolidating.
Deconsolidation is the process of breaking down a single shipment, which may consist of multiple ocean containers, into several smaller shipments and processing those shipments for immediate delivery. Combining that with a West Coast facility, you eliminate the costly and redundant transit of criss-crossing the country—twice—to ship from a West Coast port to an East Coast cross dock, then back across the country to West Coast stores.
For example, 40-foot ocean containers from Asia would arrive at your West Coast cross-dock/deconsolidation facility where product would get sorted and shipped to a retailer's distribution centers (DCs) in truckloads via higher capacity, less expensive, 53-foot inland transportation trailers.
Deconsolidating close to ports also enables the strategy of postponement. With ocean transit sometimes taking weeks, customers can postpone allocation of products to their stores until the product actually reaches port. By doing so, they take advantage of the latest demand trends, weather-related forecasts, or transportation costs variability.
Strategy No. 3:
You cross dock some; you store some.
In an economy that's taking a downturn, where you may be stuck with long distribution lines and rapidly declining demand, there exists a basic imbalance between supply and demand. Jack Kuchta, assistant vice president of the warehouse and distribution center engineering firm Transystems¦Gross & Associates, explains that inventory's got to go someplace; product will need to go into storage.
"A likely result for retail chains will be a hub and spoke pattern with the spokes being cross-dock facilities that balance day-to-day fluctuations, while larger hubs are forced to carry greater inventory or storage," he explains. And although storage putaway runs counter to cross-dock principles, it may provide the flexibility needed to weather these tough times.
Instead of pure cross-dock facilities with many doors, DelBovo sees a trend towards a multi-use facility, using cross docking as a partial strategy and working in tandem with traditional warehousing.
Strategy No. 4:
Investigate more creative and cost effective routes.
Today's cross-dock operators are re-routing and combining shipments to include multiple stops when picking up product from suppliers or when shipping them to customers.
"With this economy, what used to be truckloads shipping out to a cross-dock facility might change into half-truckloads," says DelBovo. "You may be costing yourself more per unit, because you can't get the full utilization of a truck."
For example, because of declining demand, supplier A in Nebraska and supplier B in Ohio may each be shipping only half-truckloads directly to a cross-dock facility in Florida, resulting in higher transportation costs per unit.
Consider first picking up the half-truckload from Nebraska, then the other half-truckload from Ohio to create a more cost-effective truckload for the long-haul travel to Florida.
Sunbelt picks up furniture from multiple manufacturers and furniture importers, transports items to Sunbelt facilities where they are cross docked to furniture retailers in the 17-state “sunbelt” area that they service. The company cross docks about 5,000 pieces of furniture daily.
Strategy No. 5:
Use the latest technological forecasting tools that incorporate current market trends for planning your cross dock.
One of the most ideal items to cross dock are those with consistent, continuous sales such as "staple" items like milk and toilet paper. "The prime requisite for successful cross docking," says TranSystems' Kuchta, "is predictable demand."
Unfortunately, today's supply chain is characterized by a dwindling product stream with unpredictable demand causing today's cross dock to become more of a challenge to execute.
Kuchta suggests using demand modeling technology to help with predicting demand. "These are mathematical models that incorporate not only internal data but also current market data to predict how a business will react," he adds. "The better the tools you have for predicting demand, the easier it is to cross dock."
Sunbelt Furniture Xpress Transforms its Cross Dock
Now that we've covered the strategies currently being used by cross dock operators, let's take a look at a recent cross-dock transformation story.
Sunbelt Furniture Xpress, a specialized carrier of new furniture, has been cross docking for 42 years. Over the past few months, the company has re-invented its cross-dock operation to combat a challenging housing and furniture market. Stan Froneberger, vice president of sales and marketing, explains: "As business has declined, we've had to work smarter to reduce handling, to reduce miles and to consolidate our loads to make them tighter and more defined."
The company picks up furniture from multiple manufacturers and furniture importers, transports items to Sunbelt facilities where they are cross docked to furniture retailers in the 17-state "sunbelt" area that they service. They cross dock about 5,000 pieces of furniture daily. The main bulk of their delivery—about 90 percent—goes to small chain retailers in the southern U.S. with six stores or less.
While some cross dock proponents may cringe at cross docking large, heavy, bulky furniture, it's been the key to Sunbelt's success. "Furniture can be an expensive commodity, so we're very conscious about not damaging the product," he adds. "With cross docking, there is less handling of an item, so you are less susceptible to damaging that item."
All of Sunbelt's freight is typically handled by hand with a two-man team. "Less than 10 percent is palletized, so we don't use any forklifts. Manual loading also allows for better stacking and packing of the product in the trailers creating tighter, consolidated loads while reducing shipping costs," says Froneberger.
And while the actual physical cross dock may be largely manual, the planning and execution behind the operation is where the company concentrates a large part of its technology. Using e-mails and fax, the carrier is in constant communication with its customers to set up pick-up and delivery stops. These are entered into a computer system where district fleet managers are planning routes, tracking every pick-up and delivery, consolidating loads, reducing excess miles, and eliminating deadhead miles.
Froneberger believes in the notion that "if a trailer is loaded correctly, then it delivers correctly." The company also keeps track of the hours and associated dock costs used to move the freight across each facility.
Originally, the company operated two large cross dock facilities within North Carolina. "By keeping track of costs, we realized that we were spending a lot of time and money shuttling between these two facilities," recalls Froneberger. North Carolina's furniture market was also changing significantly; major manufacturers were shifting production to low-wage countries in Asia. "We didn't see a need for 180,000 square feet of combined cross-docking space on the East Coast when we were seeing more products coming in on the West Coast," says Froneberger.
To top it all off, as home sales declined, the company saw its business decline. All of these major economic developments have paved the way for major restructuring changes in the way Sunbelt operates its cross docks.
"We opened a 15,000-square-foot facility in Fontana, Calif., and are consolidating into one larger 114,000-square-foot facility in Hickory, N.C.," explains Froneberger. Their Hickory cross-dock expansion is due to be completed in early 2009. In the short term, there are also plans to open another facility in Dallas, Texas, close to more ship points.
"When it's all said and done," he adds, "there's going to be the same amount of cross-dock square footage in the Sunbelt system, but it will just be more efficiently spread over three locations closer to ports and markets."
By not shuttling between facilities, there will be less handling and consequently less damage with fewer claims from damage. Froneberger sums up the overall benefits of his company's cross-dock restructure.
"It shrinks our customers' time to market and significantly reduces our transportation and handling costs. It becomes a win-win for everyone."
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