The Power of Cross Docks in a Post-Pandemic Multichannel Shopping Environment
One of the top trends that will continue into 2024 is that omnichannel will continue to reign supreme. The pandemic and its aftermath showed brands that they need to maximize every selling channel available – eCommerce, direct-to-consumer, retail, distributors, marketplaces – the list goes on. But with all those channels, companies need a way to store, sort, and distribute inventory appropriately, while having a view into every point of the supply chain.
After many retailers and brands opened new facilities to keep up with the pandemic-fueled trend of shopping from home, they’ve since closed or consolidated many of those same distribution and fulfillment centers. Amazon, Walgreens, StitchFix, Wayfair, BigLots, and others have announced the closing of distribution centers in the last six months, citing operational costs and a post-pandemic slump in online-only shopping. Consumers now want a variety of ways to shop depending on daily changes in their lives. While eCommerce continues to grow, especially with the rise of social commerce, so do other shopping methods like store-based click-and-collect.
According to an October Insider Intelligence survey conducted by Bizrate Insights, 44% of US click-and-collect buyers purchased something else when picking up their items with nearly a quarter of respondents saying they actually shopped the rest of the store and even paid at another checkout. Inventory gathering dust at any point in the supply chain, especially at unneeded distribution and fulfillment centers, isn’t beneficial to any brand no matter what sales channels they have.
Third-party cross-docking, or short-term storage of inventory, is becoming more mainstream in favor of opening a new distribution center, which can add to higher last-mile costs. While having owned buildings can provide reassurance that you always know where your inventory is, the right visibility and technology can make it a seamless process to outsource for less of an investment. In addition, since cross-docks are often located in areas closer to the end-consumer in more densely populated areas, utilizing them can eliminate the need to open an additional distribution or fulfillment center.
Flexible Fleets and Access to the Gig Economy
Today’s newer cross docks also cater to a more flexible fleet including space for smaller vehicles from sedans to SUVs. This also opens up possibilities for brands to tap into the gig economy for their final mile and middle mile floor-loaded freight. Smaller vehicles are more able to easily navigate busy city streets and even deliver to stores and retailers in congested urban areas with tight parking spaces and docks.
By utilizing smaller vehicles and tapping into the gig economy, companies can respond quicker to fluctuations in demand without the need for a massive capital investment in their own distribution center or fleet. The gig economy provides on-demand access to additional transportation resources allowing for cost-effective scaling. It also enables companies to optimize routes, reduce idle times, and enhance overall fleet efficiency in new ways. In addition, cross docks with ramps that can handle multiple vehicle sizes, provide the most flexible and efficient way to move goods to their final destination since they don’t even need to wait for a shared truck to fill up if an SUV will do.
Better Inventory Management
Cross docking promotes improved inventory management by minimizing the need for extensive warehousing space. Instead of storing large quantities of goods in a central location, products are quickly transferred from inbound to outbound vehicles, reducing the time spent in storage. This streamlined process enhances inventory turnover rates, lowers holding costs, and minimizes the risk of unneeded products. A consolidated network with a smaller number of distribution centers plus the addition of cross docks allows brands to save on operational costs while still delivering products at the same speed.
With the aid of advanced technology and real-time data analytics, companies can optimize their supply chains, reduce stockouts, and enhance overall inventory accuracy. With access to real-time inventory visibility, businesses can better monitor stock levels, track shipments, and respond promptly to changes in demand. A recent study in the Journal of Engineering Research sought to establish that the combination of cross-docks and using heterogeneous trucks could decrease the total cost of a supply chain. For the case study examined, it found that the combination reduced cost by 36%, not an insignificant amount!
Cross-docking facilities can also play the role of consolidation stations for both traditional freight and parcels. The shared (LTL) approach optimizes capacity, reduces transportation costs, and minimizes the environmental impact associated with less efficient transportation methods.
LTL shipping is particularly advantageous for businesses that deal with smaller quantities of goods and don’t require full truckloads for individual shipments. Cross docking becomes the linchpin in orchestrating the smooth transfer and consolidation of diverse shipments, enabling companies to achieve cost savings while contributing to a more sustainable and eco-friendly supply chain. It’s incredibly challenging to create an LTL or shared truckload shipment while meeting desirable delivery times without the use of a cross-dock.
Traditional distribution networks often involve multiple handling stages, from receiving goods to storing, picking, and shipping. Of course, each handling step introduces the risk of errors, damages, and delays. Strategic cross docking, however, minimizes the need for extensive handling by swiftly transferring products from inbound to outbound vehicles, thereby reducing the likelihood of damages and errors that you’d find from going through traditional hub and spoke LTL or parcel networks. With newer cross-dock technology, brands can receive the same visibility into where their products are with multiple scan events.
The efficiency gained from reduced handling not only enhances the overall supply chain reliability but also lowers operational costs associated with labor, equipment maintenance, and facility space. This aspect makes cross-docking an attractive option for companies looking to optimize their logistics processes and remain cost-effective in an increasingly competitive market.
In conclusion, the growing popularity of cross-docking over the expansion of distribution or sortation centers is driven by its ability to offer more flexible fleets, access to the gig economy, improved inventory management, shortened delivery times, shared loads, and more efficient transitions. As companies continue to navigate the challenges of the modern supply chain, the adoption of cross-docking emerges as a strategic and forward-thinking solution, enabling businesses to stay agile, responsive, and competitive in an ever-evolving market.