Le Huynh Khanh Vy MBA 27

Explain Cross-docking
I. Definition:

Cross docking is a logistics procedure where products from a supplier or manufacturing plant
are distributed directly to the users, which can be next level manufacturers, retailers or the
end consumer, in order to minimize or no handling and storage time. To be more specific, the
name ‘cross docking’ explains the process of receiving products through an inbound dock
and then transferring them across the dock to the outbound transportation dock. Once the
inbound transportation has been docked its products can be moved either directly or
indirectly to the outbound destinations; they can be unloaded, sorted and screened to identify
their end destinations.

In a typical cross-docking, inventory is stored for little to no time at all before leaving for its
next destination. Thus, it can decrease inventory storage handling costs and operating costs
by minimizing some stages in supply chain flow.

For example, two trucks arrive at a logistics center. One carrying clothing and other cell
phones. Both of these items are needed by retailer XYZ immediately. Rather than shipping
large quantities in advance to be stored until needed, the suppliers of these products ship only
the quantity ordered to a single facility shortly before the required date. When these trucks
arrive, the inventory is unloaded onto the receiving dock location to be sorted and staged for
shipment. After the order is staged a truck may be loaded to order specification and shipped
to retailer XYZ.
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II. Cross- Docking advantages

First: In some cases, the cost in the supply chain, which is determined by the retailer,
associated with inventory goods. In this case, Cross Docking is seen as a method to reduce
inventory costs. Providing a central place for products to be sorted and products consolidate
to be delivered to multiple destinations in the most productive and fastest method. This
process can be described as “hub and spoke”

Second: For some retailers or distributors small products, Cross Docking is seen as a way to
save transportation costs. This process can be described as “consolidation arrangements”. For
example, retailers can receive freight shipments directly from suppliers that use (LTL) Less-
Than-Truckload or single shipments. Break down large product loads into smaller loads for
transportation to create an easier delivery process to the customer. This process can be
described as “deconsolidation arrangements”. However, this makes the cost of inbound
increase too much (due to the high number of vehicles leading to an increase in costs such as
gasoline, maintenance, and upgrades vehicles, labor cost ...). Cross Docking is a way to
bundle these shipments together to achieve a certain amount of vehicles so that reducing
transportation costs and simplify distribution for retail stores.

III. Types of Cross-Docking

The term "Cross Docking" has been used to describe different types of activities in the supply
chain. It involves how to sort and deliver products as soon as possible. Napolitano (2000)
proposed some different types of Cross Docking as following:

Manufacturing Cross Docking: support and collect raw material for Just - in – time
activities in manufacturing. For example, a manufacturer may rent a warehouse near its
factory. To prepare for assembling or collecting components of each part of the product
together. Because the demand for raw material is known as before based on the output from
an MRP system (Material Requirements Planning). Thus, the manufacturers no need to suffer
a high level of inventory.

Distributor Cross Docking: receive products from different suppliers into one pallet which
will be delivered to the final destination as soon as the last product is received. For example,
many parts of a computer may distribute from different distributors, so in cross-docking,
these parts will be delivered and consolidated into a single shipment for customers.

Transportation Cross Docking: This activity consolidates many packaged and products
from different distributors followed (LTL) Less-Than-Truckload methods or Full container
load (FCL)

IV. Coss-Docking Requirement

A special feature of Cross - Docking is that the time for goods to be delivered to the
warehouse and the destination of shipment is known. Thus, the exchange of information,
system integration, and close coordination between relevant partners must be timely and
accurate, so the warehouse management system (WMS), Electronic data interchange system
(EDI) and the automatic identification and data capture technology (Auto ID) need to apply
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smoothly and accurate among each partners including: manufacturers, suppliers, distributors,
stores, etc…An identification number in each item required to use a code or RF card (Radio
Frequency card) if applying RFID (Radio Frequency Identification) technology.

Depending on economic scales, the warehouse needs to be designed suitable for applying
technological process and special equipment. Normally, operation in cross-Docking requires
a modest amount of space to move goods directly and rapidly from in-door to out-door. Most
popular warehouse model for Cross- docking is a rectangular shape.

As above analyze, in order to successfully apply cross-docking procedure the most important
requirement is on-time in information exchange, accuracy in information and exploitation
process.

For example, Wal-mart has built a modest and most effective information system. Especially
the application of RFID technology - radio frequency identification technology. EDI -
Electronic Data Interchange - electronic transfer technology - cloud technology that ensures
and protects the exchange of information between partners (manufacturers, suppliers,
distributors, stores). Thanks to these technologies, Wal-mart's information flow is continuing
to transfer smoothly. This is an important step for cross-docking procedure to be effective.

In general, a product is considered to be suitable for Cross Docking if it meets two criteria:
low fluctuations and large volume. If demand is uncertain, Cross Docking is difficult to
implement because it is difficult to balance supply and demand.

Below is a list of some types of products suitable for Cross Docking:

 Perishable items require immediate transportation.
 High-quality items without quality checking during delivery.
 Products have been tagged (barcoded, RFID), labeled and ready for sale to customers.
 Promotional items and items are being launched to the market.
 Retail products with stable and low demand.
 Customers’ orders are selected and pre-packaged from a factory or warehouse.

V. Cross-Docking in Vietnam

Currently, many Vietnamese enterprises are aware of the importance of supply chain and
cross-docking. Not only because the supply chain has long-term advantages that businesses
have perceived, especially in saving costs and improving service quality, but also because the
supply chain has been the main strategy that can help companies have competitive
advantages in the trend that fast moving consumer goods (FMCG) are gradually being
popularized.

In the global market

For large enterprises and corporations in the world, Cross-docking has been deployed and
popularized in many different activities such as: Manufacturing (collecting raw material,
components from different suppliers such as Toyota, Dell, ...), distributing (consolidating and
delivering goods from warehouse to retail stores such as Wal-mart or Meijer, etc.) or
transportation (sort and gather lots of goods, items until full trucks to take advantage of scale)

In Vietnamese market
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In Vietnam, due to business characteristics, the business has not expanded enough in the
global network. So most businesses do not build cross-docking distribution centers for
themselves. Instead, the main cross-docking in Vietnam is implemented by 3PLs when
sorting goods, items from many factories in Vietnam, then, exporting goods to foreign
customers. Because Vietnamese Logistics companies are currently operating mainly in the
local market or regional market. They operate as an agency or take into account for each
stage for international logistics companies.

Meanwhile, there are over 25 multinational logistics companies are operating in Vietnam
(about 70-80% market share of logistics service in Vietnam). Therefore, 3PLs, when sort and
consolidate product in Cross – docking, are selected mainly from famous companies such as
APL Logistics, Maersk Logistics, OOCL Logistics ...

Logistics companies provide warehousing service and freight service. However, the
warehouse service which provided today still follows the traditional model, which means
warehouse is mainly used to store goods without following any systems. So that why cross
docking procedure has not been used in a popular and effective way in Vietnam.

VI. References:

https://www.logisticsclub.vn/cross-docking/
https://www.logisticsclub.vn/cross-docking-2/
http://ibc-ueh.com/blog/2015/09/15/cross-docking/
http://vlr.vn/logistics/news-2517.vlr
https://logistics4vn.com/cross-docking-la-gi
https://gosmartlog.com/tin-tuc/cross-docking-tai-sao-can-phai-co-mot-cach-tiep-can-toan-
dien/
https://www.aalhysterforklifts.com.au/index.php/about/blog-
post/what_is_cross_docking_understanding_the_concept_definition
https://vilas.edu.vn/cross-docking-va-milk-run-trong-logistics.html
https://www.youtube.com/watch?v=JhpL1sjg0K0
https://www.youtube.com/watch?v=MlvWcr0sOEo
https://www.youtube.com/watch?v=Vy6xFW2qrAg
https://www.youtube.com/watch?v=zugxNgmddCM
https://www.youtube.com/watch?v=_OWrZp3ronA