Dr. Oktri Mohammad Firdaus Dr. Singgih Saptadi Crossdocking Dr. Oktri Mohammad Firdaus Dr. Singgih Saptadi

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

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

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

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

Traditional Distribution

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

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

Applicability of Crossdocking Has 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

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

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

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

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

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

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

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

When is Crossdocking Applicable? 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

When is Crossdocking Applicable? 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.

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

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.

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.

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.

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.

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

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.

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

Step 1 Order Step 4 ASN Step 9 Crossdock Facility Supplier Stores Shipment Details Crossdock Facility Supplier Stores Step 5 Arrival Date &Time Pickup Time ... Step 8 1 2 3 Preallocated Step 2 1 Step 6 Step 7 Step 3 2 3

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