A Tutorial on Crossdocking

1. 1 A Tutorial on Crossdocking

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3. 3 Crossdocking Can accomplish significant reductions in total costs and in lead times in a supply chain �Crossdock facilities (CF)� act as transfer points

4. 4 Crossdocking

5. 5 Traditional Distribution

6. 6 Traditional Distribution

7. 7 Direct Shipment

8. 8 550,000 warehouses in the U.S. alone (1995 estimate) Crossdocking can turn warehouses into transfer nodes, rather than storage nodes Crossdocking

9. 9 Fierce competition in all industries, especially retail Cooperating with supply chain partners to reduce the system-wide costs Internet allows companies to communicate among each other In real time At costs significantly lower than the past Applicability of CrossdockingHas Increased

10. 10 The world�s largest retailer >5,000 stores throughout the world Popularized crossdocking Wal-mart

11. 11 This Study Types of crossdocking When crossdocking is applicable Prerequisites Industries where crossdocking is applied Advantages and drawbacks Implementation issues Case Study: Ekol Logistics

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13. 13 Types of Crossdocking Pre-allocated supplier consolidation Pre-allocated crossdocking operator (CDO) consolidation Post-allocated CDO consolidation Pre-allocated: Destination is determined at the supplier Post-allocated: Destination is determined at the crossdock facility

14. 14 Supplier consolidation: The supplier builds the final (possibly multi-SKU) pallets that will be shipped to the final destinations. CDO consolidation: The final pallets are built by the CDO at the crossdock facility

15. 15 Crossdocking � Type 1

16. 16 Crossdocking � Type 2

17. 17 Crossdocking � Type 3

18. 18 Hybrid Facility Ex: Supervalu distribution center Incoming products are � Either crossdocked by feeding into a sortation system and routed to shipping doors, ...or... � Moved to the four-level inventory area through conveyors for storage

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20. 20 Products with predictable, high demand and high cubic volume flow Perishable products Ex: Supermarket chain ASDA partnered with Kimberly-Clark, the paper industry giant which supplies high-cube, low-value products such as toilet tissue and paper towels. Products very appropriate for a pilot crossdocking study

21. 21 Promotional products Sisko: �...Not recommended for crossdocking� Witt: �Mass merchandisers implement crossdocking for promotional products.� A scientific approach, possibly through building mathematical models, should be followed for identifying which of the two conflicting statements hold under which conditions.

22. 22 Lot control: Tracking the lot is required to have a time-sequenced availability to the customers Further complicates crossdocking Solution: Apply �FIFO Granularity� Crossdocked items that just came in are shipped. The older items are regularly replaced by those that come in new, avoiding product spoilage

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24. 24 Total commitment and continuous monitoring at all times by all the parties involved Effective communication between parties Perfect coordination of material flows. Many interrelated decisions have to be made under numerous resource and time constraints. Mathematical models can be of great use. Perfect quality requirements

25. 25 Sharing the costs and benefits of crossdocking: CDO benefits from decreased inventories, labor, and storage space requirements. Suppliers involved may have to make significant investment into technology Retailers may end up with higher inventory levels due to increased lead times. The CDO would prefer that the outbound trucks can wait for long time periods such that flexibility is achieved in scheduling The trucking company would not accept to absorb the cost related with the waiting time of its trucks.

26. 26 Trend in almost every industry: A decline in bulk-ordering and a shift towards smaller inventory modules Burden of sorting full pallet SKUs and merging them into multi-SKU pallets increases. This should be considered when reaching to an agreement and signing the contract with the supply chain partners.

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28. 28 Retail industry Wal-Mart, ASDA, Track �n Trail, Canadian Tire, Saks, Sears, and Belk Third-party logistics (3PL) companies, and especially LTL companies Columbian Logistics serves a large grocery wholesaler by consolidating paper products from four large manufacturers, and distributing them to approximately 200 stores. 3PL companies in the U.S. alone were estimated to gross about $56 billion.

29. 29 Automative industry Toyota distribution center in California Reduced lead times of parts from Japan to customers from 25 days to 11 days. Approximately one-third of the estimated 250,000 transactions made per day are crossdocked.

30. 30 Automative industry Mitsubishi Motor Manufacturing of America Crossdocking facility adjacent to the Mitsubishi assembly plant in Illinois Materials arrive at most two hours prior to each production schedule, supporting JIT (Just-in-Time) at the plant.

31. 31 Automative industry Goodyear Great Britain Leading tire-manufacturer Made the transition from a traditional supply chain to a crossdocking system increasing its service level decreasing its inventory releasing warehouse space reducing labor force required, and Eventually reducing operating costs by over 12%.

32. 32 Telecommunications and electronics industries Characterized by a fast pace of change, with products typically having very short life cycles. Thompson Consumer Electronics, Panasonic, Ericsson, and National Semiconductor

33. 33 Apparel industry YoungWorld Children�s apparel and furniture retailer Capacity Inc. Importer of women�s sportswear Urban Outfitters Apparel and home furnishing retailer

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35. 35 Allows the efficient consolidation of products. Decreases inventory levels due to elimination of storage. Enables faster product flow (by eliminating �dwell�). Enables more frequent deliveries. Decreases inventory obsolescense due to reduced inventory and faster product flow.

36. 36 Decreases labor requirements and costs due to decreased material handling (through elimination of putaway to storage and order picking). The typical yearly cost per warehouse worker can be estimated around $40,000 in the U.S. Decreases inventory damage costs due to less material handling. Decreases the amount of space required, and thus increases the handling capacity of the facility.

37. 37 Supports customers� Just-in-Time strategy. Accelerates payments to suppliers (which is an important argument that can be used to convince suppliers to participate in crossdocking). Improves the relations with the supply chain partners. Enables faster completion of incomplete orders due to more frequent deliveries.

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39. 39 Risk of stockout: Any unavailability of the product at the suppliers Any delays in the supply chain Any failure to coordinate perfectly Union fears of losing jobs The main savings in crossdocking come from decreased inventory and labor costs.

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41. 41 Type 2 Crossdocking Implementation

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44. 44 1) The CDO and the supplier receive order details from the retailer store. 2) If pre-allocated supplier consolidation is carried out, the supplier builds store specific pallets and label/tag them. These pallets may be multi-SKU pallets. If CDO consolidation is carried out, then the supplier prepares just single-SKU pallets (to be sorted at the crossdock facility). If pre-allocated CDO consolidation is carried out then each case in the pallet should include the information of which specific store it is heading on a label/tag. 3) The supplier loads the truck that will deliver the shipment to the crossdock facility.

45. 45 4) The supplier sends the Advance Shipping Notice (ASN) to the CDO. 5) The carrier notifies the CDO on the arrival date and time. 6) At the crossdock facility, the dock door for inbound receiving is determined and the labor and handling equipment are scheduled to meet the delivery. 7) The dock door for outbound shipment (from the crossdock facility) is determined. 8) The outbound carrier is notified of the pick-up time, load description, destination, and delivery date and time.

46. 46 9) The retailer store is notified of the outbound shipment details. 10) The truck/trailer with the supplier�s delivery reaches the crossdock facility. 11) Manual checks are performed on a small percentage of the supplier�s delivery, to ensure accuracy of the ASN.

47. 47 12) If pre-allocated supplier consolidation is carried out, then the pallets in the inbound shipment are transferred to outbound dock door/truck/trailer. Otherwise pallets are broken into cases, allocated to open orders per destination (in the case of post-allocated CDO consolidation), sorted with respect to each retailer store, and loaded to the outbound truck/trailer from the outbound dock door. 13) The outbound truck/trailer leaves the crossdock facility and delivers to the retail store.

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49. 49 Leading 3rd party logistics (3PL) firm Major crossdock operator (CDO) in Turkey 7 distribution centers (DCs) in Istanbul, Turkey alone and 3 other warehouses in other cities in Turkey Total warehouse area of 120,000 m2

50. 50 Clients International mass retailer Appearel and home products retailer Sportswear retailer Home electronics company Pharmaceuticals company

51. 51 Crossdocking for some clients Mass retailer �ABC� Pharmaceuticals Fast moving consumer goods (FMCG)

52. 52 Mostly pre-allocated CDO consolidation (type 2 crossdocking) Referred to as �flow-through� by Ekol managers Pre-allocated supplier consolidation (type 1 crossdocking) only for two major international FMCG companies 30% of the volume Most suppliers do not wish to sort out and label their products as pallets before sending them to Ekol�s DCs Quality control requirements Also traditional warehousing in the same facility

53. 53 A �project firm� Work with clients for determining customized solutions Compute the increase in costs and lead times if type 2 crossdocking is carried out instead of type 1 crossdocking Quantify the increase in costs and lead time when traditional warehousing is carried out instead of crossdocking

54. 54 Benefits for ABC Traditional benefits of 3PL Eliminating the long truck queues that accumulated in front of ABC retail stores Used to come in LTL from suppliers The suppliers� trucks arrive at Ekol�s distribution center (DC) and unload their (mostly non-palletized) loads. Ekol consolidates these products into pallets and ships them to ABC stores immediately.

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56. 56 Receiving non-palletized shipments Meeting the delivery requirements Assuring delivery quality Delayed deliveries Lack of planning by some of the clients Facility limitations Seasonality in products Quality concerns

57. 57 Customs regulations Sports shoes pass through Halkali Customs Office, whereas sports shoes are categorized as shoes and pass through Tuzla Customs Office Traffic regulations Very short time span available for decision making

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