What is Cross Docking and Why You Would Use It

What is cross-docking, and why you would use it

by JimmyAlyea

Cross-docking is a flexible operations arrangement between firms that involves multiple suppliers arriving at a designated time at the handling facility where inventory receipts are sorted and consolidated into outbound trailers for direct delivery to the customer.  Cross-docking is typically used to avoid storage and materials handling.  Mass merchants in the retail industry using cross-docking receive store-specific assortments and are able to maintain continuous inventory replenishment without having to hold large stocks of inventory.

Cross-docking is defined as a system in which inventory is not stocked in a warehouse but rather is shipped for stores from the manufacturer.  Shipments from manufacturers to Wal-Mart, a pioneer in cross-docking, arrive at Wal-Mart distribution centers where they are quickly sorted and transferred to trucks for direct delivery to stores.  Because products are stocked only at stores, Wal-Mart significantly reduces inventory and thus handling, storage, and operating costs.  Cross-docking streamlines the supply chain from the point of origin to the point of sale, which increases supply chain efficiency.  

Copyright 2012 James L. Alyea. All Rights Reserved.

About Jimmy Alyea:

Jimmy Alyea lives in Houston, Texas, and holds two Bachelor of Business Administration degrees (Supply Chain Management and Marketing) and a Master of Business Administration degree.  Follow Jimmy Alyea (James L. Alyea) on LinkedIn, Twitter, or Blog.

How a manufacturer can increase its responsiveness to customers through inventory management

How a manufacturer can increase its responsiveness to customers through inventory management

by Jimmy Alyea

The location and quantity of inventory can be used by manufacturers to increase supply chain responsiveness to customers. Generally, increasing inventory increases responsiveness.  “Responsiveness”  includes handling a large variety of products, meeting short lead times, meeting a high service level, handling supply uncertainty, responding to wide ranges of quantities demanded, and building highly innovative products.  The more of these capabilities a supply chain has, the more responsive it is.  However, a trade-off is involved between responsiveness and efficiency.  A manufacturer focusing on improving responsiveness may choose to increase inventory in the form of raw materials, work in process, and finished goods, but at the same time it decreases its efficiency by incurring higher inventory holding costs.

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For example, a furniture manufacturer using a flexible manufacturing process could increase its raw materials inventory to become more responsive to customers’ special orders, demand for variety, and/or for innovative products.  A manufacturer could also increase its responsiveness by locating large amounts of finished-goods inventory close to its customers, or a manufacturer with centralized inventories could ship direct to end customers or accommodate customer pickup at the factory.

Copyright 2012 James L. Alyea. All Rights Reserved.

About Jimmy Alyea:

Jimmy Alyea lives in Houston, Texas, and holds two Bachelor of Business Administration degrees (Supply Chain Management and Marketing) and a Master ofBusiness Administration degree.  Follow Jimmy Alyea (James L. Alyea) on LinkedIn, Twitter, or Blog.