Implementing a successful crossdocking operation

Key concepts The best way to reduce costs and improve efficiency is to eliminate a function, not just improve it.

03/01/2000


Key concepts

The best way to reduce costs and improve efficiency is to eliminate a function, not just improve it.

There are several requirements -- including partnershipping, confidence, communications, personnel and equipment, and management -- for establishing a crossdocking operation.

Plant engineers are continually looking for opportunities to increase operational efficiency. In this regard, the four functions of warehousing -- receiving, storing, picking, and shipping -- offer great improvement potential in each individual step, plus even more in how they work together. Although these savings are often substantial, the best way to reduce cost and improve efficiency is not simply improving a function, but eliminating it.

Crossdocking is one excellent way to accomplish the cost reduction goal. This approach reduces material handling time and expense by sending received goods directly to other company locations or customers. The process eliminates storing and picking, which are the two most expensive handling operations; and increases inventory turns, reduces inventory carrying costs, and speeds product flow.

Numerous approaches

Crossdocking is not a new concept. Many operations already engage in "opportunistic" crossdocking, which involves filling existing orders with received product, even when like items are already in storage, or shipping received product to fill backorders.

Just-in-time (JIT) is basically crossdocking for the receipt of components or raw materials. However, crossdocking is just as applicable, and possibly more so, to the shipping of finished goods.

Distribution crossdocking involves the receipt of full unit loads (pallets), and the shipping of either the same unit loads or unit loads composed of sorted pallets.

Terminal crossdocking is a truck sortation and consolidation of orders. In this case, unit loads received from two or more manufacturing or distribution operations are placed on the outbound vehicle so that they can be shipped to another location or customer at the same time.

Crossdocking can be further divided into current or future operations.

Current crossdocking moves material directly from receiving to shipping without any intermediate staging.

Future crossdocking stages product between receiving and shipping. The amount of time items are staged can vary, but it would be hard to consider that an operation is actually crossdocking if product was staged much more than a day.

Requirements

On the surface, crossdocking appears so simple that one would naturally assume it can be implemented without much effort. Nothing can be farther from the truth. In fact, most failures result from insufficient understanding of the requirements for successful crossdocking and lack of planning for the execution.

The requirements for crossdocking are broken into six categories:

1. Partnershipping with other members of the distribution chain

2. Absolute confidence in the quality and availability of product

3. Communications between supply chain members

4. Communications and control within the cross-

> docking operations

5. Personnel, equipment, and facilities

6. Tactical management.

Partnershipping

The fact that crossdocking involves receiving and shipping means it encounters other members of the distribution chain. When one member of the supply chain implements crossdocking, it frequently results in other parts incurring increased effort and cost. The tactic of forcing the other members of the supply chain to absorb this cost will, at best, only result in grudging cooperation, and, at worst, cause total failure.

For example, if crossdocking requires that empty trailers be staged and wait to be loaded during outbound manufacturing crossdocking, it is foolish to assume the trucking company will absorb the cost of having the extra trailers onsite. The proper approach is to work with the trucking company to minimize the cost of providing the extra trailers and pay for any reasonable additional costs.

In the case of manufactured finished goods crossdocking, the supplying member of the chain is the manufacturing operation. Therefore, it is imperative that manufacturing be consulted and appropriate changes be made to the cost structure to account for the changes that must be made to accommodate crossdocking.

Confidence

Crossdocking is a real-time operation, and demands material flow without interruption. The crossdocking operation has to be absolutely certain that the correct products, with the required quality, are available when needed.

Before crossdocking is attempted it is essential that:

- Specifications are set for all appropriate requirements

- Specifications are clearly communicated to all parties

- All parties have an opportunity to review, request revisions, and agree to the requirements

- Formal test program is conducted where the ability of all parties to meet the requirement is established.

After crossdocking is initiated, there has to be a formal analytical system that measures and tracks adherence to requirements and provides constant feedback. All specifications should be periodically reviewed and modified appropriately.

Communications between members

Since crossdocking is a real-time operation, information must be immediately available. The receiving function must know what product is on a shipment before it arrives. The only way to accomplish the flow of information with sufficient speed is for the supplying operation to communicate with receiving via electronic data interchange (EDI) or other computer-to-computer techniques.

The receiving operation must provide the trucking company with required delivery time, and the transporter must confirm this time. Here again, the most obvious method of communications is EDI.

Communications and control

Once material arrives at the crossdocking operation, it must move swiftly through the facility without interruption. To accomplish the task of internal communications, a warehouse management system (WMS) -- with bar coding and RF communications -- must be in place.

Personnel, equipment, and facilities

Crossdocking eliminates or greatly reduces storing and picking. However, to offset these situations, requirements for receiving and shipping increase. Before attempting crossdocking, requirements should be clearly understood, and sufficient resources allocated to ensure that all needs are met.

Given the uncertainty of transportation times, it is frequently necessary that arriving trailers be staged before receiving, and empty trailers staged for shipping. Therefore, it is necessary that there is sufficient room to stage these trailers, and there is equipment and personnel available to move them to the appropriate location. To stage the trailers, a crossdocking operation often has to have a yard tractor and trained driver.

Frequently, various work load leveling techniques, such as truck appointments, are used to reduce shipping and receiving manpower and equipment requirements. Crossdocking greatly reduces the flexibility to level work load; therefore, while total work load may remain constant, peak work may increase significantly. It is necessary to analyze the amount, duration, and timing of the peak work load to determine how best to use dock equipment and maximize labor productivity.

If the crossdocking operation involves breaking down or rebuilding unit loads or sorting cases, it is necessary to plan for the space, equipment, and labor to perform these functions. There has to be enough space to stage the pallets before and after the sortation system. Sufficient personnel and/or equipment has to be provided to stage pallets, depalletize cases, repalletize cases, and move the pallets to shipping.

The use of crossdocking finished manufactured products has the potential of significantly reducing cost and improving customer service. Frequently, however, significant changes are required in quality control methods and production scheduling.

Some operations produce products and use finished goods inventory as a quality control hold until testing is complete. Crossdocking eliminates finished goods inventory; therefore, the product has to be tested and approved as soon as it leaves production. While this approach may appear to be an impossible task, it can have the desirable effect of forcing an operation to address quality problems and evaluation techniques.

By addressing these problems, the operation is transformed to make quality built-in rather than inspected-in. This transition is not easy, but usually more than pays for itself in increased production, reduced scrap, and improved product acceptance in the marketplace.

On the other hand, there are operations that find crossdocking to be so important that they are willing to ship unapproved product and recall it if testing shows the item is not acceptable. This operation can only be done if product is infrequently substandard and there is a tested, foolproof way of having all of the defective product recalled.

It is not uncommon for some products to require significantly more of certain production resources than others. Production capacity is calculated on average requirements, and products are produced in a sequence that seeks to minimize the peak requirements of the limited resources.

In crossdocking, production has less flexibility in scheduling to minimize the peak load on these resources. Therefore, before crossdocking is implemented it may be necessary to increase the capacity of limiting resources.

Some production operations produce products that require aging before they are capable of being shipped. In this case, the only way to crossdock is to modify the operation so that the product is ready for shipment when it is produced. While modifying the process may be expensive, the advantages often outweigh the costs. A product that will be damaged during shipping will more likely than not be damaged during normal handling.

Crossdocking results in savings in product handling. Perhaps most important, by eliminating the dwell time, product is available to the customer in a more timely manner.

Production planning is frequently done to minimize changeover and cleanup time. Crossdocking can reduce scheduling flexibility and increase the need to changeover and cleanup. The impact of these increases can frequently be minimized by improving the cleanup and changeover operations and/or by providing extra equipment to reduce or eliminate the need to perform these two tasks.

Tactical management

In many ways, the tactical management of crossdocking is the least considered, but most important, part of implementing the concept. With all the planning, partnershipping, addition of equipment and systems, and changes in manpower, crossdocking still requires a high level of tactical execution to work.

For example, no matter how well EDI works, it is still necessary for someone to actually direct the over-the-road and yard tractor drivers so the trucks are spotted at the correct doors. When the inevitable problems crop up, there has to be someone in charge of redeploying resources and working around the problems.

Unfortunately, the need for tactical management is often neglected, and the function added to the work of an already busy first-line supervisor. To prevent the lack of tactical management from becoming a barrier to successful crossdocking implementation, it is imperative that supervisory workload be evaluated and, if required, additional resources be provided. These additional resources can be some combination of work load shedding to other supervisors, additional supervisors, and clerical support.

-- Edited by Ron Holzhauer, Managing Editor, 630-320-7139, rholzhauer@cahners.com

Sortation equipment requirements

Functional requirements for sortation equipment have to be carefully developed so it performs as required. At a minimum, functionality must include:

- Average and maximum through-puts

- Sortation requirements

- Software communication with the WMS

- Case label printing, application, and verification requirements

- Storage for future crossdocking functionality

- Merging requirements

- Maximum and minimum case weights and dimensions

- Location, placement tolerance, size, and symbology of existing bar code labels

- Input and output buffer storage capacity for increasing labor productivity

- Future sortation, capacity, and product requirements.

Essential crossdocking ingredients

Many operations have the physical elementsto crossdock already in place. In these facilities, there is a temptation to implement the concept without developing a formal program. Since crossdocking requires that many internal and external functions work closely together, attempting to implement the idea without a formal program is the path to failure.

The formal program must include:

1. Teams comprised of appropriate internal

and external personnel for each category

2. Development of required changes

3. Plan to implement these changes

4. Implementation and testing of the changes

5. Crossdocking implementation plan

and schedule

6. Implementation of a crossdocking

pilot program

7. Evaluation of the pilot program and the

implementation of required modification

8. Implementation of crossdocking

9. Formal periodic review of the crossdocking

operation and the implementation of

appropriate improvements.

Components of WMS

The warehouse management system for a typical crossdocking operation requires several components:

- Receipt of the notification from the supplier by way of

> EDI of the shipping time, date, carrier, SKUs, quantity,

> and bar coding information for each order

- Receipt by EDI of the scheduled arrival time and date

> from the carrier

- Receipt by EDI of order detail from the customer

- Notification by EDI of the shipping carrier pick up time,

> load description, destination, and delivery date and time

- Notification of the customer by EDI of shipment detail, carrier, and arrival date and time

- Selection of dock location for the receiving and shipping

> trucks

- Recording of the bar code on each pallet received

- Comparison of the received pallet bar code to the

> receiving EDI

- Identification and notification of receiving variances

- Supervisory control of sortation and other equipment

- Creation and tracking of bar code and other label

> information for application to cases and pallets

- Direction of personnel for moving material

- Tracking and reporting of supplier and carrier

> performance

- Tracking and reporting of warehouse performance, including labor utilization

- Planning of operations, including manpower and dock utilization.





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