Is cross-docking for you?It depends on yourcompany's needs

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Not for everyoneBV BILL MONGELLUZZO

TO cross-dock or not to cross-dock, that is the question.For some companies, it's ano-brainer to transfer goods

from one truck to another withoutputting them in long-term storage. Butthere's still a place for traditionalwarehousing.

Sometimes both practices are usedby diflerent divisions of the samecompany. Toyota is an example.

The automaker's manufacturingdivision, Toyota Motor Engineeringand Manufacturing, began convertingjust-in-time parts deliveries to itsplants from traditional warehousing tocross-dock operations six years ago. Atotal of about 60 to 65 percent ofparts to Toyota's plants are cross-docked, compared with 30 percent in1999.

By contrast, Toyota Motor SaiesU.S.A., which oversees the shipmentof service and replacement parts toToyota dealers aeross the eountry,prefers to maintain inventories atwarehouses to serve customers. TonyMinyon. national logistics manager atToyota Motor Sales, sees an opportu-nity to reduce lead times and lowertransportation costs by migratingsome warehouse operations to cross-dock, but it will be a slow process.

Cross-docking as a logistics strate-gy has been around for years. Forsome warehouse operations, it can bethe most etTicient way to move cartonsfrom inbound containers or trailers tooutbound conveyances. Toyota's U.S.manufacturing unit said it has reducedtruck miles driven, created a moreconsistent How of parts in smaller lots.

allowed more frequent deliveries andencouraged dedieated delivery routesto specific divisions within the manu-facturing operation.

The ideal cross-dock facility is along, narrow warehouse with manytruck doors and bays on oppositesides of the rectangle. A cross-dockfacility doesn't have to be costly toconstruct, nor does it need the storageracks and staging areas found in tradi-tional warehouses. "It doesn't have tobe pretty," said Brian Gibson, associ-ate professor of logistics at AuburnUniversity, a speaker at last month'sconference of the Council of SupplyChain Management Professionals.

In an etficient cross-dock opera-tion, cartons are removed frominbound containers or trailers on oneside of the facility and are scannedand moved immediately to a waitingtrailer on the opposite side of thebuilding without touching the floor.

Cross-docking can be effectivewhen properly managed. In one casestudy, Gibson said the shift from tra-ditional warehousing to cross-docking

2 0 The Journal of Commerce • www.joc.com November 6, 2006

reduced the product cycle time to twodays from seven. In a second casestudy, a company that invested$20,000 in a software system to modi-fy the sorting system at its cross-dockwarehouse improved the sorting rateby 50 percent and eliminated the thirdwork shift each day.

In another study, a retailer ofshoes and apparel asked suppliers topre-ticket their shipments so the retail-er could shift from a traditional ware-house operation. Cross-dockinghelped the retailer reduee its per-unithandling cost to 1.5 cents from 15.6cents and the cycle time to one dayfrom two to three days eompared toits traditional warehousing operation,Gibson said.

While such savings are attractive,not all logistics operations are suitablefor cross-docking. Weber Distribution,which operates 19 distribution centerson the West Coast, maintains cross-dock operations for some customers,such as Scholastic Books. Weberdeconsolidates book shipments andthen cross-docks them into full trailer-loads moving to Scholastics distribu-tion centers across the country.

However, when some customerssay they want to move to cross-dock.Scott Weiss, client solutions executive,tries to convince them to stick withtraditional warehousing. Directimporters who ship small product lotsto large retailers with multiple regionaldistribution centers across the countryare usually not candidates for cross-

docking, Weiss said. 'The shippingdate and must-arrive date are hard tomeet. It's not realistic." he said.Traditional warehousing, while pro-ducing some inventory-carrying costs,allows shippers and third-party logis-tics providers to manage inventoryand replenish their customers" shelveswith the right amount oi product atthe right time.

Carrying inventory is inherentlyrisky because merchandise is handledmultiple times, exposing it to damage,theft and storage costs, noted Minyonof Toyota Motor Sales. There is also adanger of obsolescence. However,unless a warehouse operator canmaintain a steady flow of product,preferably in truckload lots, to thesame customers or distribution cen-ters, cross-docking will not work.

But the ability to consolidate ship-ments from multiple suppliers to feedclose-by manufacturing facilities in ajust-in-time delivery schedule makes acompany a candidate for cross-dock-ing. For example, Toyota's manufac-turing division has a consolidationcenter in Los Angeles that receivesparts from 40 suppliers in the regionand ships the consolidated lots tothree plants on the West Coast.

That is one example of howToyota's manufacturing divisionreduced cycle time and lowered trans-portation costs by shifting many of itsoperations across the country fromtraditional warehousing to cross-dock-ing, said Steve Hagan. assistant man-

ager of logistics at Toyota MotorEngineering and Manufacturing.

Toyota used to do numerous "milkruns." picking up shipments at individ-ual suppliers' facilities and truckingthem long distances to manufacturingplants. The manufacturing divisionnow routes many of its parts ship-ments to Toyota s regional cross-dockfacilities and then trucks consolidatedshipments to the plants, lowering itslogistics costs through route planning,improved packaging, full-trailerloadshipments and cross-docking.

Kevin Thornberry. assistant logis-tics manager in Toyota's manufactur-ing division, said this strategy some-times results in holding extra invento-ry at the cross-dock facilities toachieve more truckload shipments, butthe reduced transportation costs offsetthe higher inventory-carry ing costs.

This strategy also allows Toyota tomaintain dedicated delivery routes toeach of the various divisions of itsmanufacturing operations, such as thewelding shop, power train unit andassembly plant. Hagan said. Toyotasends correct shipment sizes to eachdivision when they are needed for just-in-time manufacturing.

EfHcient cross-docking operationsrequire cooperation from suppliersand service providers who may beasked to adjust their work schedules,pre-ticket merchandise or alTix barcodes to cartons. This cooperationmay come easier than anticipated,however. Gibson said. He cited a

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November 6. 2006 The Journal ol Commerce • www.joc.com 2 1

SUPPLY CHAIN MANAGEMENT

retailer that increased its cross-dock-ing to 70 percent of its shipmentsfrom 38 percent, and ended up saving$21 million in operating costs.

Cross-docking operations rangefrom the manual movement of car-tons by forklifts from inbound to out-bound trailers to highly automatedoperations with costly conveyor beltsand sorting machines. If the volumewill support the large capital invest-ment of automation, the per-unitcosts of running cartons through aconveyor and sorting system can be as

little as one-fifth that of the manualprocess. Gibson said.

Minyon said that while automa-tion can be good, it will produce largesavings only if the underlying process-es are elTicient. "The process andstandard operating procedure aremost important." he said.

Weber's Weiss agreed. He saidautomation in many cross-dock facili-ties is confined to information-tech-nology improvements such as hand-held scanners or radio-frequencyidentification devices.

The key to any effectivecross-docking operation is theability to reduce the number oftimes merchandise is handled. Intraditional warehousing, whereproducts are stored and retrieved ata later date, a shipment can be han-dled 10 to 12 times on the way toits destination.

Eliminating two or more of thosetouches in high-volume operationswill reduce handling costs, shortenthe cycle time and result in a leanersupply chain. •

S ony, Dell, IBM. Lenovo,Fujitsu, in recent weeks, aseries of leading electron-ics mantifacturers have

sulTered the embarrassment andinconvenience of managing recalls oflaptop lithium-ion batteries knownto have overheated or set otT fires.And the safety recalls aren't limitedto computers. Last year, the U.S.Consumer Product SafetyCommission issued 400 recalls ol'unsafe products involving 67 millionproduct units in a variety of con-sumer sectors.

For manufacturers and retailers,product recalls can he a pain in theneck. Depending on the price oi" theproduct and the danger involved.the typical product recall attractsonly 30 to 40 percent of all unitsidentified as potentially dangerous.said Jonathan Dampier. vice presi-dent of marketing strategy atNewgistics Inc. Many consumersdon't know that a product is beingrecalled because the retailer or man-ufacturer doesn't have up-to-datecontact information. Constmiersoften ignore letters with warningsbecause they don't read what lookslike junk mail.

Mandatory product recalls candamage a brand, especially if therecalls are not handled effectively.That's why Toshiba initiated a vol-untary recall of notebook PCsrecently, even though the safetycommission cites no incidents

Reversal of fortuneNewgistics launches serviceto improve the supply chainfor product recallsBV ALAN M. FIELD

involving Toshiba laptops. The com-mission's Fast Track Product RecallProgram rewards companies thatlaunch their product recall programswithin 20 days of government noticeto escape much of the red tapeinvolved. Dampier said.

However, launching such pro-grams quickly and effectively is easi-er said than done. "It is very hardfor retailers and manufacturers toget this process up and runningwithin 20 days," Dampier said. "Atremendous amount of planningmust be done quickly."

First, companies need an effec-tive strategy for communicatingdetails about the product recall toconsumers. They also must establishan effective way to track productrecalls so they can report relevantdata to the commission, whichrequires it. Consumers need a quick,low-cost way to send their productback to a retailer or manufacturer.and track its arrival. Manufacturers

need to anticipate how many prod-ucts will be returned and when, sothey can plan for the warehousingspace to process the goods.

That's where Newgistics eomesin. The company specializes in tech-nology and services for the "reverselogistics" of returning recalled prod-ucts. Newgistics recently announceda service that incorporates a Webrecall portal where consumers canquickly download and print specialSmart Labels that make it possiblefor them to track their returnsonline as easily as they might trackshipments by FedEx or UPS.Consumers can alfix the labels anddrop their products into a U.S.postal box at no cost. Consumerswho don't use the Web can call atoll-free number to order a uniqueSmart Isabel that they can tracelater over the phone.

The service allows manufacturersand retailers to sec current dataabout how many recalled products

2 2 The Journal of Commerce • www.joc.com November 6. 2006