You are on page 1of 11

Optimal Decision-making on Product Allocation for Crossdocking and Warehousing Operations

Zhengping Li Singapore Institute of Manufacturing Technology, 71 Nanyang Drive, Singapore 638075 Fax: +65-67916377 E-mail: zpli@simtech.a-star.edu.sg Malcolm Yoke Hean Low School of Computer Engineering, Nanyang Technological University, N4, Nanyang Avenue, Singapore 639798 Fax: +65-6792 6559 E-mail: yhlow@ntu.edu.sg Roland Yan Guan Lim Singapore Institute of Manufacturing Technology, 71 Nanyang Drive, Singapore 638075 Fax: +65-67916377 E-mail: yglim@simtech.a-star.edu.sg
Abstract: Many companies search for efficient distribution alternatives, as the lead times for customer order fulfillment need to be shorten while the costs and risks of warehousing need to be minimized. Crossdocking is an operation strategy that moves items through consolidation centers or crossdocks without putting them into storage. A distribution center normally is a combination of crossdocking and warehousing facilities. The operator of the center needs to be clear on what products should go through by crossdocking or warehousing. Industry needs guidelines and models to support decision-making and produce alternative plan for allocating products to crossdocking and warehousing operations. This paper presents a systematic approach and optimization model for producing product allocation plan in FMCG supply chains. A case study based on the proposed model and a prototyping system is introduced. Testing analysis is also given in the paper.
Keywords: crossdocking, logistics planning, optimization, supply chain management Biographical notes:

Zhengping Li is a Senior Research Engineer with Singapore Institute of Manufacturing Technology (SIMTech), Singapore. He obtained Ph.D. in Supply Chain Management from Nanyang Technological University in 2001. He has many years of research and consultancy experiences in supply chain management, operations management, logistics planning, production planning, vehicle routing, crossdocking system design, etc. He has been the principal investigator for a number of research and industry projects. Malcolm Yoke Hean Low is an Assistant Professor in the School of Computer Engineering at Nanyang Technological University (NTU), Singapore. Prior to this, he was with the SIMTech. He received his Bachelor and Master of Applied Science in Computer Engineering from NTU in 1997 and 1999 respectively. In 2002, he received his D.Phil. degree in Computer Science from Oxford University. His current research interest is in the application of parallel and distributed computing for the modeling, simulation, and optimization of complex systems. Roland Yan Guan Lim is a Research Scientist in SIMTech. He works in the fields of strategic supply chain planning, manufacturing strategy, operations management, modeling and design of supply chain and logistics network, intelligent manufacturing systems, advanced IT architecture for supply chain, logistics and computer integrated manufacturing systems. He obtained an Engineering Doctorate degree from Cranfield University UK.

Dr. Roland Lim has taught in Nanyang Technological University in subjects of SCM, Logistics, CIM, Advanced manufacturing systems. 1. INTRODUCTION The traditional warehousing and distribution meet challenges in fulfilling increasing consumer demand. The challenges put pressure primarily on the companies warehousing and distribution system. As the number of partners and delivery points grow, the volume of orders decreases. However, as their delivery frequency increases, the time for receiving goods becomes shorter. The prescription relating to the working hours of truck drivers become stricter and also order lead time becomes even shorter (Babics, 2005). There is ever increasing pressure to reduce inventories in the logistics channels. A trend toward smaller and fewer warehouses will transfer many warehouse operations into crossdocking operations in the 21st century (Brockmann, 1999). The implementation of crossdocking operations repositions the focus from warehousing inventory to one of managing inventory through-flow in transit from suppliers to customers. In the fast moving consumer goods (FMCG) crossdocking scenario, retailers order products from suppliers who consolidate orders and send truckloads of product to the crossdock. There, workers transfer products to trailers bound for individual stores, so that outgoing trailers contain products for a single store from many vendors. Transportation costs could be lower because shipments in and out of the crossdock are in truckload quantities. In this process, the warehouses are transformed from inventory repositories to points of delivery, consolidation and pickup (Chen et al. 2006). Global companies such as Wal-Mart (Simchi-Levi et al. 2003) and UPS (Forger, 1995) have reported implementation of crossdocking. The well-known success of Wal-Mart in crossdocking requires coordinating 2000 dedicated trucks over a large network of warehouses, crossdocks and retail points. Crossdocking operations increase the complexity of material flow control. It could involve a large number of transshipment points and vehicles. This is especially evident when a multitude of suppliers are included in the processes. Not all products are suitable for crossdocking (Li, et al. 2008). And even if they are suitable, logistics managers are still skeptical to the idea of not having any safety inventory or crossdocking capacity is not enough for all the suitable products. So there are very few pure crossdocking operations. In reality, some blend of crossdocking and traditional warehousing occurs [8]. It means both traditional warehousing and crossdocking co-exist. Especially in FMCG supply chains, a model combining both crossdocking and traditional warehousing operations is highly feasible and cost effective due to the characteristics of fast moving consumer goods. However, the selection of distribution strategy for products depends on a number of factors; e.g. product volume, product value, product life cycle, facility space constraints etc. (Li, et al. 2008). Due to the complexities and challenges of crossdocking operations, industry needs proper approaches for evaluating the potential for crossdocking application. Also, with different cost structures and the limited capacity of crossdocking and warehousing, it is a challenge to produce a plan to allocate products to crossdocking and warehousing operations. Logistic service providers capable of offering crossdocking service are increasingly available, and the developments in IT have also made the management of crossdocking operations more efficient. Nevertheless, there is still an absence of systematic guidelines on product allocation planning for crossdocking and warehousing operations. In this paper, we first review current research and applications on crossdocking operations and planning in Section II. Then we clarify the research issues to be investigated in this paper in Section III. A new approach is proposed for allocating products to crossdocking-warehousing operations in Section IV. A case study is introduced in Section V by applying the tool developed for crossdocking product allocation planning. Section VI summarizes the paper and discusses the application potential and future work. 2. LITERATURE REVIEW Research work on crossdocking has focused on areas such as crossdocking system and layout design, network design, and crossdocking operations planning and scheduling. Rohrer (1995) discussed modeling methods and issues as they are applied to crossdocking systems. He described how simulation helps to ensure success in crossdocking system design by determining optimal hardware

configuration and software control. Apt and Viswanathan (2000) addressed a framework for understanding and designing crossdocking systems and discussed techniques that can improve the overall efficiencies of logistics and distribution networks. Napolitano (2000) investigated on design crossdocking system, analysis of cost saving and benefits of crossdocking and maintenance of crossdocking systems. Barthold and Gue (2000) determined the best shape for a crossdock by analyzing the assignment of receiving and shipping doors. A simulated annealing procedure was used to construct effective layout to reduce labor costs. The staging of products in a crossdock to avoid floor congestion and increase throughput has also been studied together with the effects of different combinations of number of workers in receiving and shipping on throughput (Barthold et al. 2001; Bartholdi and Gue 2002) Some other researches treat crossdocks as a network of distribution and transshipment points, and consider how to determine the location of the crossdocks. Campbell (1994) Klose and Drexl (2005) investigated on location of cross docks and other kinds of intermediate warehouses. Donaldson et al. (1998) studied a network of crossdocks for the US Postal Service where 148 Area Distribution Centers serve as crossdocks, each receiving, sorting, packing and dispatching mail according to operating schedules. Mail not processed on time must be shipped by air, incurring additional costs and critical-entry times. Each distribution center serves as an origin as well as the destination node where schedules were driven by mail delivery standards. Ratliff et al. (2001) studied a load-driven network, in which deliveries take place when there are sufficient products waiting for transportation. In the area of crossdocking scheduling, Li et al. (2004) considered short term scheduling of material handling inside the terminal for a given truck schedule. They model the jobs and resources (forklifts) as a machine scheduling problem and present a meta-heuristic for its solution. McWilliams et al. (2008) covered a specific truck scheduling problem at a parcel hub. A simulation-based scheduling approach with an embedded genetic algorithm is proposed. The results showed that the proposed scheduling approach is able to reduce the amount of time required to unload the inbound trailers by approximately 3.5 percent compared to a previously developed algorithm and about 16.1 percent compared to an approach that is representative of current industry practice. Chen, Guo and Lim (2006) studied crossdocking scheduling where time windows for deliveries and pickups are considered. They also considered crossdock-handling costs which are use to penalize delays. Yu and Egbelu (2007) studied the scheduling issue of inbound and outbound trucks in crossdocking systems with temporary storage. They try to find the scheduling sequence for both inbound and outbound trucks to minimize total operation time when a storage buffer to hold items temporarily is located at the shipping stock. Chen and Lee (2007) develop polynomial approximation algorithm and branch-and-bound algorithm to minimize the makespan for products going through a crossdocking facility. Based on the above reviews, despite there being a number of research publications on crossdocking operations, there are limited published research on the approaches for decision-making on product allocation for crossdocking and warehousing operations. Especially, in strategic and tactical level planning, there is still an absence of systematic approaches that can produce product allocation plan for crossdocking and warehousing operations. 3.PROBLEM DESCRIPTIONS Companies invest time and money on the issue of gaining a competitive edge over their rivals especially for FMCG products that have a quick turnover and relatively low cost. The profits made from these products are relatively low. However when they are sold in big volume, the cumulative profit on such products can be significant. To increase their revenue, companies have realized the importance of reducing their distribution cost at the same time meeting the customer demand. The crossdocking-warehousing decision on what and how many products should go for crossdocking could be a complex decision considering product popularity, volume, demand variation and lift cycle etc. It is quite a challenge for a crossdocking manager or operators to make the right decision with these complexities. The objective of this research is to study optimal approaches for allocating products to crossdocking and warehousing operations and develop tools for product allocation to assist logistics managers in their product distribution strategies. The main issue is how different products can be allocated to crossdocking and warehousing so that the total operations cost of the facility is minimized with demand fulfilled during a period of time. The following assumptions are applied in this study:

o o o o o

The model is applied to a distribution center which has both crossdocking and warehousing functions, and the capacities for crossdocking and warehousing are limited; Multiple types of products are processed in the facility; Products are packaged in pallets. One pallet includes one type of product; A container can take multiple pallets which are with different type of products; Unit product processing costs by warehousing and crossdocking are known.

An example of the problem is given below. Considering the following scenario: A retailer R sells 3 products: Product A, Product B and Product C. The space required for each product of A, B and C are 75, 150 and 375 respectively. Retailer Rs distribution center has both warehouse and crossdock facilities with limited capacity. The supplied capacities of warehousing and crossdocking are 350 and 150 respectively. Unit product processing costs could be calculated. In this example, we assume that the cost of 1 unit of space through warehouse for products A, B, C are 10, 30 and 50 respectively. The cost of 1 unit of space through crossdock for products A, B, and C are 20, 40 and 20 respectively. The supply of capacity of the facility may not be equal to the demanded capacity. We can model the problem generically into a linear programming (LP) problem by expressing the problem variables in standard form. The problem is formulated as below: Minmize Z = 10 Xa [W] + 30 Xb [W] + 50 Xc [W] + 20 Xa [C] + 40 Xb [C] + 20 Xc [C]

Where Z refers to the total cost of distributing products A, B and C through the warehouse and crossdock facility; Xa , Xb and Xc refer the amount of space allocated to products A, B and C, either through warehouse or crossdock. The solution is subject to constraints of capacity, for example, Xa [W] + Xb [W] + Xc [W] 350 and Xa [C] + Xb [C] + Xc [C] 150; and demand constraints such as the demand for product A should be fulfilled, the Xa [W] + Xa [C] 75. With increasing number of products and constraints, finding an optimal solution for the above problem can be challenging. 4.CROSSDOCKING/WAREHOUSING ALLOCATION MODEL DESIGN AND DEVELOPMENT To generate an optimal crossdocking/warehousing allocation plan with a minimum cost while still meeting the demands for all the products based on product operational costs, the following steps are applied: Firstly, information on product attributes are collected. These include product type, customer, destination, time, packing attributes, and historical demand information; Secondly, with product information, unit product costs based on inventory, storage, material handling, product outdated costs etc could be calculated. For example, if a high volume item is put to storage, it may incur high warehousing cost; Then facility capacity could be allocated to products with trade-offs between crossdocking and warehousing costs and the product allocation plan is produced; Finally, the total cost of the optimal allocation plan would be calculated. 4.1 Unit product cost for crossdocking and warehousing operations The suitability of a product for crossdocking could be evaluated from a number of attributes of the product, such as popularity, cubic movement, demand variation, product value, and product life cycle. Popularity refers to the number of times a product appears on the orders from the customers. A higher popularity would mean more frequent and larger quantity of the product would be moving through the facility. Cubic movement for a product refers to the total volume of a product that is moved through the facility. As space is a constraint in a facility, assigning a product with a high cubic movement through a crossdock would definitely save inventory cost. So crossdocking should be conducted for those items with higher cubic movement. Demand variation refers to the demand patterns of a product. A product with a constant demand is more suitable for crossdocking since this will make the crossdocking operations more efficient. Furthermore, the inventory risk and cost for products with higher values and short life cycle will be higher than those products with lower value and long product life cycle. Since products with short life cycles become obsolete faster, it is necessary to push these products to the sales floor as fast as possible. Distribution of these types of products through a crossdock is appropriate.

The suitability of a product for crossdocking is linked with the processing cost of the product. A products high suitability for crossdocking means that the relative unit processing cost for this product by crossdocking could be low. The unit product cost for crossdocking and warehousing is the sum of the different cost elements for processing a unit of this product, including inventory cost, transportation cost, material handling cost, storage cost and order-lost cost (Li, et al., 2008). It could be the total processing cost divided by the total number of the particular product during a period. Many costing approaches have been studied (Ala-Risku et al., 2003) in earlier literatures. In this paper, we assume that the average unit crossdocking and warehousing costs could be calculated and taken as known. 4.2 Crossdocking/Warehousing Allocation Decision-making The problem is about allocating the facility capacities to products with trade-offs between crossdocking and warehousing costs. When the number of products and facilities considered increase, the combined alternatives are increased greatly. We looked for different approaches and found that the execution time by Vogels Approximation Method (VAM) method would not be exponentially increased when more products and facilities were added. UV method is suggested by a number of references as an efficient method to check for optimality and process any changes if necessary to any basic feasible solutions (Winston, 1994). So we use VAM and UV Methods to produce a trade-off model for allocating products to crossdocking/warehousing operations. VAM is used to find a feasible good solution, but not guaranteed to be optimal. It solves a linear programming problem and the time spent on executing VAM module will not be exponentially increased when more products and facilities are added. This makes the optimization process more efficient. Also, VAM is preferred since the initial basic feasible solution obtained by this method is either optimal or very close to the optimal solution. To check for optimal solution and process changes to the solution if needed, the UV Method is applied. The UV Method in general uses shadow prices of each cells cost and the space constraints to check if it is necessary to amend a basic feasible solution (BFS) to reach an optimal solution. So, VAM provides a solution set that allows a product to incorporate usage of both crossdocking and warehousing facilities. The algorithm designed first finds a BFS using the VAM and then checks for and iterates to optimality using the UV method. 4.3 Modeling and Solution by VAM In VAM, firstly, the problem set is modeled into a tableau. The product information and the space constraints of the two facilities are taken from the values from Section III as a simple example for explaining the logic. Using these values, we proceed to fill in the tableau. The crossdock and warehouse facilities as the sources of space are identified by their names on the leftmost column of the tableau, while their space capacity values are shown as numbers on the extreme right column (Table 1). The products are labeled on the top row of the tableau, with their required space value as numbers filled into the bottom row of the tableau. Within each cell of the tableau, the cost value pertaining to a particular product and the facility will be placed on the top right hand corner. The cost values are the key factors of the VAM and are essential to work out the solution. Applying the above tableau format in Table 1, the example values from Section III are entered into the tableau; the tableau model for a BFS with product and facility values can be seen in Table 2. Table 1: Tableau Format
P[1] S[1] A11 S[2] A21 Space Required REQ[1] C21 A22 REQ[2] C11 A12 C22 A23 REQ[3] P[2] C12 A13 C23 CAP[2] P[3] C13 Capacity Supplied CAP[1]

Where:

P[j] = Product j; REQ[j] = required space for P[j]; S[i] refers to Crossdock and Warehouse operation mode. CAP[i] = space capacity available at S[i]; C[i][j] = Cost of the cell[i][j] ;

A[i][j] = units of space allocated to cell[i][j]. Notice that the tableau in Table 2 has an extra row named un-allocated goods. This row appears only when the total demand space is greater than the space capacity supplied by the facilities. Table 2: A Tableau cost model for a BFS
A Crossdock Warehouse Un-allocated goods Space Required 10 20 0 75 B 30 40 0 150 C 50 20 0 375 Capacity 150 350 100

VAM looks ahead one step and constructs a penalty for not being able to allocate space to the remaining cells in a row or column whose cost is the smallest, but instead picks the cell with the second smallest cost. The key idea is to determine the opportunity cost associated with each possible assignment. A products opportunity cost refers to the highest facility cost minus the lowest facility cost. This means allocating space to the product that has the highest influence (opportunity cost) over the total cost and choosing the cell with the cheapest cost to allocate the space to. The solution steps of VAM method are as follows: Step 1: Determine the penalty between the lowest two cells in all rows and columns Step 2: Identify the row or column with the largest penalty Step 3: Allocate as much units of space as possible to the lowest-cost cell in the row or column with the highest penalty. If two or more penalties are equal, allocate as much as possible to the lowest-cost cell in these rows or columns. Step 4: Stop the process if all row/column requirements are met. If not, go to Step 5. Step 5: Recalculate the differences between the two lowest cells remaining in all rows and columns. Any row and column with zero supply or demand should not be used in calculating further difference. Then go Step 2. By applying the above steps to the problem, a feasible basic solution is found in which 75, 50 and 30 of crossdocking capacity is allocated to product A, B, C respectively and 350 warehousing capacity are allocated to C product also. The total cost of the distribution plan could be calculated as: 75C11 + 50C12 + 25C13 + 350C23 + 100C32= 7510 + 5030 + 2550 + 35020 + 1000= 10500. The distribution plan shown in Table 3 is the initial BFS set for the minimum cost using VAM. This BFS is not guaranteed to be an optimal solution for the problem set. Table 3: VAM Solution Set
A Crossdock 75 Warehouse Un-allocated goods Penalty Space Required 20 0 0 75 10 50 40 350 0 100 10 50 0 30 375 B 30 30 20 C 50 Capacity 150 350 0 Penalty 20 20 0

4.4 Modeling and Solution by UV method After finding a BFS using VAM, it is important to check if the BFS is optimal. If the BFS is detected to be not optimal, changes to the allocation solution have to be done. UV Method is used to check and amend the BFS to reach an optimal solution. The idea of the UV Method is to use the modifiable cost property to check for the optimal solution. We use u[i] to represent the size of a reduction in every cost in row i; and v[j] to represent the size of reduction in cost in

column j. We refer to u[i] and v[j] as modifiers. The letters u and v used to denote the modifiers are why this method is referred to as UV method. After applying the modification, the cost for cell[i][j] is equal to c[i][j] - u[i] v[j]. We are able to do this because a characteristic of the optimal solution is that for every modification by the modifier in the optimal solution, it should not lose its identity. A basic cell in the tableau is the cell where a capacity value has been allocated in the feasible solution. Our goal is to choose a set of values for the u[i] and v[j] to achieve the outcome of c[i][j] - u[i] - v[j] = 0 in every basic cell. Since the number of variables is greater than the number of equations by 1, we have one extra degree of freedom. It means we can choose to assign an arbitrary value to any one of the modifiers and calculate the other modifiers. Therefore we can arbitrarily set a particular u[i] or v[j] value to 0, and check if any non-basic cell can generate a further saving in the cost. With the example carried on, the initial BFS was found using VAM, and modifier value can be obtained by solving the system of linear equations in Table 4. Table 4: UV Method Calculation
Crossdock 75 Warehouse Un-allocated goods Space Required 75 0 = u3 + v1 100 150 20 = u2 + v1 0 = u3 + v2 A 10 = u1+ v1 50 40 = u2 + v2 B 30 = u1 + v2 25 20 = u2 + v3 350 0 = u3 + v3 375 C 50 = u1 + v3 Capacity 150 350 100

The new solution will be tested again by pivoting the tableau if any changes are needed. This iteration will go on until all new revised cost follow the rule of u[i] + v[j] c[i][j] <= 0 for all the non-basic cell, which means that no possible savings can be achieved anymore (for details of UV method, please refer to Winston (1994)). We go through the iterations and get an optimal solution as shown in Table 5. For this solution, the total cost is: Z = 75C11 + 75C12 + 350C23 + 75C32 + 75C33= 7510 + 7530 + 35020 + 750 + 250= 10000. So the final solution by UV method is less than the solution value of 10500 from the VAM solution set. Table 5: UV Method Solution Set
A Crossdock 75 Warehouse Un-allocated goods Space Required 75 0 75 150 20 0 25 375 10 75 40 350 0 B 30 20 C 50 Capacity Left 150 350 100

A software solution has been developed for the crossdocking-warehousing decision-making process based on the above VAM and UV logics. 5. CASE STUDY AND TESTING We have carried out testing with a case study. In the case study, retailer X in Singapore has a chain of stores selling a variety of products, which include household items, electronic goods, grocery products, toiletries, foodstuff, pharmaceuticals and clothing. Xs business has grown over the past few years, starting from a small store to a chain of stores. Competition however has also become more intense, and X realizes the need to improve on its operations to lower cost and increase bottom line profits. The company relies greatly on its distribution operations for its business. An efficient distribution system would greatly improve Xs profits and improve customer service. As crossdocking has been gaining much popularity all over the world, the retailer X is interested in looking at the possibility of implementing a crossdock facility for its own operations as well.

The company supplied us some product data and inventory movement data. They expected that the Crossdocking Product Selection and Allocation Tool could help them to identify what products were the most suitable for crossdocking and obtain a possible optimal allocation plan that would yield the lowest holding and handling costs. We focus on products details and warehouse capacity for the suitability of implementation of a crossdock. We assume that Xs distribution center has the physical crossdocking facilities, and that the transportation and information systems of the company meet the basic needs for crossdocking operations. Table 6 shows a subset of products details from the company. As input from the company, the average processing cost per SKU (stock keeping unit) by crossdocking and warehousing are all defined as 30. Due to the difference in attributes and suitability for crossdocking, the actual processing costs per SKU of different products could be different. In this case, the total types of product are 19. The scoring of the suitability for crossdocking is a value between 0 and 1 which is calculated by another module with the high value as more suitable for crossdocking. The rank of a products suitability for crossdocking is a number from 1 to 19 based on their scoring values with 1 given to the product most suitable for crossdocking. For the product with average ranking, the unit crossdocking and warehousing costs are all 30. We decrease a products unit crossdocking cost by 1 if the product is one position higher in its ranking of suitability for crossdocking (ranking from 1 to 19 for the nineteen types of products) than the product with average ranking. So a relative crossdocking cost of 21 could be obtained for the product that is the most suitable for crossdocking. At the same time, it means the product is not so suitable for warehousing. The relative warehousing cost of per unit of this product is high. It can be defined as 39. In this way, we produce every type of the products unit relative crossdocking and warehousing costs based on their ranking for crossdocking suitability. Table 6: Product Attribute Data
VALUE (/SKU) 100 120 50 35 500 350 200 200 600 300 180 144 192 96 100 120 24 120 72 WEIGHT (kg) 50 40 5 5 15 1 0.1 1 25 2 10 10 10 15 30 30 24 5 20 LIFE CYCLE (weeks) 4 100 100 2 20 12 10 5 12 12 100 30 100 6 4 3 6 1 6

PRODUCT NAME Bread Detergent Rice Fresh Milk Television Digital Camera Nike Shoes Apple Ipod T-Shirts DVD Player Facial Cotton Foamy Facial Wash Prickly Heat powder Laurier Super Nabisco Biscuits Coffee Maker Coke Drink FHM Magazines Campbell Soup

DIMENSION 70x70x100 70x100x70 100x100x20 80x70x40 100x100x70 50x50x30 50x50x50 80x50x30 60x80x75 30x60x80 67x54x25 40x40x50 60x50x40 80x60x50 70x50x75 80x100x80 40x60x40 60x40x60 90x60x20

With the above inputs and the approached discussed previously, we produce the result for allocating products to crossdocking and warehousing operations based on demand and available capacities as shown in Table 7. A total cost of the allocation is calculated as 7260. Since the total capacity of warehousing and crossdocking is less than the demanded capacity, some products are not allocated. Some observations and discussions from the case:

The model and the tool developed can help the company to identify the products suitability for crossdocking and obtain a feasible optimal allocation plan that would yield the lowest processing costs. The total demand of capacity of all the products is 339. The available crossdocking and warehousing capacities are 150 separately. An allocation plan could be produced with 39 cubic meters of products not allocated. A total cost of 7260 is obtained for the allocation plan which is the optimal result by Vogel and UV methods. The costs for meeting individual product demands are also calculated. The product with high suitability ranking for crossdocking such as bread is fully allocated with crossdocking capacity and those products with low ranking for crossdocking are more likely to be allocated with warehousing capacity. This allocation plan is a high level plan for allocating products to crossdocking and warehousing separately. This is because the algorithm look for minimum cost solution. In operational level, the actual allocation of products should also consider the timing of arrival and departure and the availability of the products. The allocation plan could be used for capacity planning and design of crossdocking/warehousing facilities to meet future demand requirements. It can also be use as constraints for lower level planning on product mixing and sorting operations.

With known products allocation to crossdocking and warehousing in the tactical level, crossdocking operators still need to know how to mix and match the incoming direct freight items, incoming staple items and warehousing items in a crossdock to meet customer demands at operational level. The combination of both storage and crossdocking is not a simple matter of capacity constraints in the facility. It is an issue of how to produce the outbound containers (based on demand) from a group of inbound containers and warehouse items by adjusting the content of the containers. Ideally, the transfer from the inbound containers to the outbound containers should be optimized with minimum transfer costs. We consider producing model and offer the means to help distribution centers to offer the means to adjust the content of containers passing through to better meet evolving demand. Table 7: Product Allocation Result

6.CONCLUSIONS In FMCG distribution, a model combining both crossdocking and traditional warehousing operations is highly feasible and cost effective due to the characteristics of FMCG. However, the selection of crossdocking and warehousing strategies to be used for the product distribution depends on a number of factors. In this paper, we reviewed current research and applications on crossdocking planning and operations, and proposed an approach and

solution for allocating products to crossdocking and warehousing operations optimally. The costing of products based on their attributes on product value, dimension, lift cycle etc are also discussed in the paper. VAM and UV Methods are applied to produce a trade-off model for allocating products to crossdocking and warehousing operations. VAM solves a linear programming problem for finding feasible and good solution efficiently. Then the UV Method has been applied to check if it is necessary to amend a basic feasible solution (BFS) to reach an optimal solution. In the optimization model, the system takes into account the goal of finding the minimum cost of distributing the products. The case study shows that the model and the tool developed can help the company to identify the products suitability for crossdocking and obtain a feasible optimal allocation plan that would yield the lowest processing costs. The result is a high level plan which is useful for facility capacity planning and distribution strategy decisionmaking. It could be applied to the design of distribution facilities to meet future demand requirements. In operational level, the allocation of products to crossdocking and warehousing should consider the timing of products arrival and departure too. Further development would incorporate actual product costing based on the ranking of the suitability for crossdocking. Multiple cost factors such as material handling cost, inventory cost, and storage cost would be considered. Further research will also be conducted on optimal product mixing and matching by which the group of outbound containers could be produced by transferring materials between inbound containers and warehouses. We will also consider integrated solution for truck scheduling and door assignment for the combined scenario of crossdocking and warehousing operations. ACKNOWLEDGEMENT This research is supported by Singapore Institute of Manufacturing Technology and the School of Computing Engineering, Nanyang Technological University as part of the Collaborative Research Project Crossdocking Planning and Dynamic Scheduling for FMCG Supply Chain. REFERENCES Ala-Risku, T. Karkkainen, M. Holmstrom, J. (2003), Evaluating the Applicability of Merge-in-transit, The International Journal of Logistics Management, Vol. 14(2), pp. 67 82. Apte, U. M., Viswanathan, S. (2000) Effective crossdocking for improving distribution efficiencies, International Journal of Logistics: Research and Applications, Vol. 3, No. 3, pp. 291-302. Babics, T. (2005) Crossdocking in the Sales Supply Chain: Integration of Information and Communication Relationships, Periodica Polytechnica Ser. Transportation Engineering, Vol. 33, No. 12, pp. 6976. Bartholdi, III J.J., Gue, K. R. (2000) The best shape for a crossdock, INFORMS National Conference, San Antonio. Bartholdi, III J.J., Gue, K.R., Kang K. (2001) Staging freight in a crossdock, Proceedings of the International Conference on industrial engineering and production management, Quebec, Canada. Bartholdi, III J.J., Gue K.R. (2002) Reducing labor costs in an LTL crossdocking terminal, Operations Research, Vol. 48 No. 6, pp. 82332. Brockmann, T. (1999) 21 Warehousing Trends in the 21st Century, IIE Solutions, Vol. 31, No. 7, pp. 36-40. Campbell, J.F. (1994) A survey of network hub location, Studies in Locational Analysis, Vol. 6, pp.31-49. Chen, F. and Lee, C.Y. (2007) Minimizing the makespan in a two-machine cross-docking flow shop problem, Europe Journal of Operational Research, October 2007. Chen, P., Guo, Y., Lim A., and Rodrigues B. (2006) Multiple crossdocks with inventory and time windows, Computers and Operations Research, Volume 33(1), pp. 43 63. Donaldson, H., Johnson, E. L., Ratliff, H.D. and Zhang M. (1998), Network Design for Schedule-Driven CrossDocking Systems, Technical Report, The Logistics Institute, Georgia Tech. Forger, G. (1995) UPS starts worlds premiere crossdocking operation, Modern Material Handling, pp. 36-38. Klose, A. and Drexl, A. (2005) Facility location models for distribution system design, European Journal of Operational Research, Vol.162, pp.4_29.

Ratliff, H. D., Vate, J.V., and Zhang, M, (2001) Network design for load-driven cross-docking systems, Technical Report, The Logistics Institute, Georgia Tech. Li, Y., Lim, A. and Rodrigues, B. (2004) Crossdocking - JIT scheduling with time windows, Journal of the Operational Research Society, Vol. 55, pp.1342_1351. Li, Z.P., Low, Y.H. and Lim, Y.G. (2008) Optimal Decision-making on Product Ranking for Crossdocking Operations, the 6th IEEE International Conference on Industrial Informatics, Daejeon, Korea. McWilliams, D.J., Stanfield, P. M. and Geiger, C. D. (2008) Minimizing the completion time of the transfer operations in a central parcel consolidation terminal with unequal-batch-size inbound trailers, Computers & Industrial Engineering, Vol.54, No. 4, pp. 709-720. Napolitano, M. (2000) Making the move to crossdocking: a practical guide to planning, designing, and implementing a cross dock operation, Warehousing Education and Research Council. Rohrer, M. (1995) Simulation and crossdocking, In: Proceedings of the 1995 Winter Simulation Conference, pp. 846-849. Simchi-Levi, D, Kaminsky, P. (2003), Designing and managing the supply chain, 2nd Ed., New York: McGrawHill. Winston, W.L. (1994), Transportation, Assignment, and Transshipment Problems, Operations Research Applications and Algorithms, Duxbury Press, pp. 338. Yu, W. and Egbelu, P.J. (2007) Scheduling of inbound and outbound trucks in crossdocking systems with temporary storage, Europe Journal of Operations Research, pp.377-396.