Crossing over time lag

Mr. B has ordered some stuff for immediate delivery to his store. Seeing the urgency of the situation and also the demand for the products from his customers, he could not think of any other way other than cross docking his products. By doing this he would not only receive the ordered products on time, but could also avoid any mishandling of the products, which is usually the case in a traditional warehousing operation. And in no time, he got the products at his doorstep without having to wait for long. 

 

What is cross docking?

“Cross docking is relatively new in retail logistics and the technique is used in the retail and trucking industries to rapidly consolidate shipments from different sources and realise economies of scale in outbound transportation. In the layman’s language, the idea is to transfer incoming shipments directly to outgoing trailers without storing them in between or with minimum storage,” explains Anil Kumar, Senior Manager - Warehousing, Shreyas Relay Systems Ltd.

 

It is a process that streamlines the supply chain from point of origin to point of sale and products go to the distributor and consequently to the customer faster. It is primarily linked to the retail sector though it can be used in the manufacturing and distribution as well. The entire cross-docking operation is dependent on the timely delivery of products, accurate management on the loading dock and effective ordering by the customer.

 

How does it work?

It all starts with the manufacturer getting orders for each individual store and delivering the goods on a stipulated date to the distribution centre. Even before the goods arrive at the distribution centre, the manufacturer sends an Advance Shipping Notice (ASN) to the centre of what is actually shipped from his end. This piece of information gets saved in the Warehouse Management System (WMS) and it helps the distribution centre in deciding whether to direct the products for outbound shipping to retailers or to ship them together in the next trailer when products from other manufacturers arrive. 

 

When the products finally arrive at the centre, they are unloaded and depalletised from trailers, scanned through barcodes and then verified against the ASN provided by the manufacturers initially. “Like for instance, a distribution centre might receive 20 pallets of a single SKU without labels for individual customers.  Labourers / workers will allocate and label the pallets for each customer and accordingly ship them in different trailers,” says Kiran Nandre, General Manager-Marketing, Shreyas Relay Systems Ltd.

 

Cross docking is effective in fast moving goods where the materials are moved in box-in - box-out / trolly-in - trolly-out / cage-in - cage-out. Cross docking can be classified into two different distribution modes - pre-distribution and post-distribution. “In pre-distribution cross docking, the customer is assigned before the shipment leaves the vendor, so it arrives to the cross dock palletized, labelled and kept ready for transfer of the goods. While, in post-distribution cross docking, the cross-dock itself allocates material to its stores,” explains Kumar of Shreyas Relay Systems Ltd. For instance, a cross-dock at a Wal-Mart might receive 20 pallets of a detergent without labels for individual stores. Workers at the cross-dock allocate 3 pallets to Store 23, 5 pallets to Store 14, and so on.

 

What makes it effective?

For a cross docking operation to be effective, it is very important to have a sound IT infrastructure in place, which would ensure timely and accurate information about products being shipped and avoid any confusion that might unnecessarily delay things. Automation would also shun the slightest possible error, which in turn would improve trust and collaboration between the trading partners.

A retailer would have to have an IT infrastructure to automate the replenishment process and avoid a stock-out. Similarly, distributors would also be informed about the products that are being shipped and they can eventually decide as to which products should be stored and which should be shipped. Moreover, whether it is in the case of the manufacturer or the distributor, the flow of the products need to be constantly tracked and continuous communication has to be there all the time. And this is possible only when there is an efficient IT infrastructure.

 

Cross docking as a practice, if managed effectively, can prove to be immensely beneficial. In multimodal trade, cross docking reduces turnaround time as well as saves handling costs, operational costs and the cost of inventory storage approximately up to 50 per cent.

 

Apart from that, cross docking has its own benefits for retailers, manufacturers and distributors. It allows manufacturers to have more stable production planning and manage low inventory level, since they need to deal with individual store demands. For distributors on the other hand, cross docking does not require them to have a large distribution centre area and relatively involves lower overhead costs, low IT infrastructure requirements and reduced risk of overloading warehouse capacity. There is also a reduction in the shrinkage of goods as a result of reduced double handling. For a retailer, cross docking would lower warehouse storage and this would mean a longer shelf life for his products and also more business productivity and more retail space.

 

The flip side

But there are risks involved in it too. Cross docking might be difficult if demand is uncertain. Under such circumstances shipments would lead to rise in inbound costs and warehouses would be unnecessarily holding back stocks instead of cross docking them. As Kumar puts it, “To perform cross docking, an adequate transport fleet is required in order to get the products shipped on time to the customers. It needs huge number of vehicles, skilled manpower and advance planning to get better turn around, in the absence of which cross docking can never be a hit.” Also, if not planned properly, it will simply lead to rise in the cost of operations.

 

Cross Docking in India

Speaking about the Indian market, cross docking has not found too many takers as yet since it is a new technique entirely. In the views of Ankit Gupta, Director, Total Logistics (India) Pvt Ltd, its acceptance is not much anticipated so far in the country. “But it will certainly get bigger once a centralised taxation system like the Goods & Services Tax (GST) comes into play. This will replace all the indirect taxes that the Indian Central and the State Government levies on different products and services and will bring more uniformity in the taxation policy,” he adds.

 

According to Nandre, 33 per cent of domestic cargo in India moves by rail multi-modal and it mainly works on cross docking very effectively. Major shipping activities are also using the same technique, though partially.

 

Nevertheless, most of the clients are looking at the pros and cons of this technique and are carrying out small experiments to test its effectiveness in the country. Examples can be cited of that of Mother Dairy and Wal-Mart, which are partially practicing cross docking in India. So there is ample scope for cross docking as a practice to be used in India in coming time.

 

Finally...

Though cross docking has been stunningly successful for retailers in many countries globally, its acceptance as a technique cutting down on costs and time by Indian retailers still needs to be seen. It’s being a new technique has not made inroad yet into the country’s supply chain. Also, the delay in the implementation of GST in the country could be another reason for its potential not being fully realised. But once it is implemented, cross docking could prove to be a success for India too.