How to Maximize the Advantages of Cross-Docking for Warehouse Efficiency

by | May 12, 2021 | Automation, Inventory Management, Order Management, Retailers

Receiving shipments from suppliers and moving inventory to individual stores is complex and costly. If you’re looking to optimize labor costs, maximize space utilization, leverage existing technologies, and reduce transportation costs, cross-docking is a great option. Unfortunately, cross-docking can also come with many pitfalls, especially if you are doing it for the first time.

Let’s review the basics of cross-docking and some tips to help you get started.

What is cross-docking?

In cross-docking, there needs to be a distribution center (DC) or warehouse as part of the retailer’s distribution network. 

Cross-docking is a logistics practice of unloading goods from an incoming truck and loading them directly into outbound trucks. Unlike other methods, cross-docking does not involve storing goods in the warehouse or DC.

Some retailers may reference products moved “door-to-door” or “flow-through” as cross-docking, which is one method, while other cross-dock products/cartons/pallets are “marked for” a given location.

  • With the flow-through model, retailers are alerted to what the suppliers have packed and shipped. The retailer will pre-allocate products for stores in advance of the delivery. When products arrive, items are pulled from the inbound delivery, relabeled for the store allocated to that carton and routed to the shipping dock. 
  • In the marked-for model, the retailer communicates to the suppliers, on the purchase order, the quantity of the item needing to be pre-packed and cartons/pallets labeled by store prior to shipping. Since the suppliers have already labeled cartons/pallets, when products arrive, items are pulled from the inbound delivery and routed directly to the shipping dock, needing no relabeling

DCs that support cross-docking often have specialized conveyor systems to distribute cartons to their destinations.

What are the advantages of cross-docking?

Cross-docking can be advantageous when retailers order products that are shipped directly to stores by suppliers. Also, if a retailer is managing inbound transportation from suppliers using their carrier or fleet network and there are stores within the lane or route, implementing a cross-dock program allows for picking up supplier products on the return trip, eliminating “empty” miles. 

One of the main advantages of cross-docking is that it enables greater throughput without the need for opening up a new warehouse or DC. Because items spend little to no time in your warehouse, costs associated with handling and storage are reduced and deliveries are faster. 

By automating warehouse receiving processes, cross-docking increases efficiencies and reduces costs. Cross-docking creates advantages for both the buying organization (retailer or distributor) and the selling organization (supplier). This makes cross-docking a win-win for everyone.

Advantages of Cross-Docking

Buyers (Retailers or Distributors)

Sellers (Suppliers)

  • Obtain volume discounts through bulk purchasing
  • Reduce transportation costs for prepaid freight terms
  • Reduce transportation costs for collect freight terms
  • Reduce the need for order fulfillment resources
  • Postpone or eliminate the building of new facilities
  • Improve timeliness for fulfilling orders
  • Reduce labor costs through less inventory handling
  • Manage a single purchase order with picking, packing and labeling by location
  • Reduce or eliminate warehousing costs
  • Eliminate the need to support individual store deliveries
  • Reduce safety stock by eliminating the need to order full case quantities
  • Manage consolidation of ASN data
  • Get products to stores faster
  • Fewer EDI document charges with consolidated orders and ASNs

How do you implement cross-docking?

Automating the exchange of data between buyers and sellers is essential to successful cross-docking. Data exchange allows buyers to effectively plan for receiving the goods in the DC. 

Here is a typical workflow:

  1. Buying organization sends electronic purchase order to supplier
  2. Supplier sends advance ship notice (ASN) to buying organization
  3. Supplier packs and labels goods, and sends them to buying organization’s DC
  4. Buying organization receives goods at DC, scans barcode labels and directs shipments to appropriate trailer
  5. Goods are shipped to one or more stores

Looking for expert advice on cross-docking?

SPS Commerce has helped thousands of retailers, distributors and suppliers streamline the complexity of cross-docking.

For retailers and distributors, our Community solution ensures your supplier community can meet your requirements for purchase orders, advance ship notices and labels.

For suppliers, our Fulfillment (EDI) offering is pre-built to ensure you meet all your retailer’s cross-dock requirements.

Scott Bolduc