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A Tutorial on Crossdocking

A Tutorial on Crossdocking. Gürdal Ertek Sabancı University. Crossdocking. A supply chain strategy I nbound materials are D irected to outbound doors and are directly loaded into outbound trucks ...or... “S taged ” for a very brief time period before loading

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A Tutorial on Crossdocking

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  1. A Tutorial on Crossdocking Gürdal ErtekSabancı University

  2. Crossdocking • A supply chain strategy • Inbound materials are • Directed to outbound doors and are directly loaded into outbound trucks ...or... • “Staged” for a very brief time period before loading • Inbound product flow is synchronized with outbound product flow to essentially eliminate storage of inventory

  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. B A A B A B Crossdocking Crossdock Facility A • Receiving • Staging (<24hr) • Shipping B Stores Suppliers

  5. B A A B A B Traditional Distribution A Warehouse • Receiving • Putaway • Storage • Replenishment • Picking • Shipping B Stores Suppliers

  6. Traditional Distribution

  7. B A A A B A B Direct Shipment A Warehouse • Receiving • Putaway • Storage • Replenishment • Picking • Shipping B Stores Suppliers

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

  9. Applicability of CrossdockingHas Increased • 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

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

  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

  12. Types of Crossdocking

  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. 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. Crossdocking – Type 1 Crossdock Facility Supplier Stores 1 Preallocated 1 1 2 3 2 2 3 Supplier Consolidation 3

  16. Crossdocking – Type 2 Crossdock Facility Supplier Stores 1 Preallocated 1 1 2 3 2 2 3 3 CDO Consolidation

  17. Crossdocking – Type 3 Crossdock Facility Supplier Stores Postallocated 1 1 2 2 3 3 CDO Consolidation

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

  19. When is CrossdockingApplicable?

  20. When is CrossdockingApplicable? • 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. When is CrossdockingApplicable? • 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. Perishable Products • 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

  23. Prerequisites of Crossdocking

  24. Prerequisites of Crossdocking • 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. Prerequisites of Crossdocking • 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. An Important Issue • 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.

  27. Industries in which Crossdocking is Applied

  28. Industries in which Crossdocking is Applied • 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. Industries in which Crossdocking is Applied • 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. Industries in which Crossdocking is Applied • 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. Industries in which Crossdocking is Applied • 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. Industries in which Crossdocking is Applied • 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. Industries in which Crossdocking is Applied • Apparel industry • YoungWorld • Children’s apparel and furniture retailer • Capacity Inc. • Importer of women’s sportswear • Urban Outfitters • Apparel and home furnishing retailer

  34. Benefits and Drawbacks of Crossdocking

  35. Benefits of Crossdocking • 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. Benefits of Crossdocking • 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. Benefits of Crossdocking • 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.

  38. Benefits of Crossdocking Positive Feedback Loop for Wal-mart Applicability of crossdocking - Costs + + Pricesoffered to customers Stockout and inventory costs (+) Positive feedback loop - Predictabilityof Sales Number and scope of promotions + -

  39. Drawbacks of Crossdocking • 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.

  40. Implementation of Crossdocking

  41. Type 2 Crossdocking Implementation Crossdock Facility Supplier Stores 1 Preallocated 1 1 2 3 2 2 3 3 CDO Consolidation

  42. Step 1 Order ASN ShipmentDetails Step 4 Step 9 Step 8 Arrival Date &Time Step 2 Preallocated Step 5 1 2 3 Step 3 Step 6 Step 7 PickupTime... Crossdock Facility Supplier Stores 1 2 3

  43. Step 12 Step 13 Step 10 Step 11 CDO Consolidation Crossdock Facility Supplier Stores 1 2 3

  44. Implementation of Crossdocking 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. Implementation of Crossdocking 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. Implementation of Crossdocking 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. Implementation of Crossdocking 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.

  48. A Case Study: Ekol Logistics

  49. Ekol Logistics • 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. Ekol Logistics • Clients • International mass retailer • Appearel and home products retailer • Sportswear retailer • Home electronics company • Pharmaceuticals company

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