Cross-docking

Good warehouse organization is an important part of a supply chain. You have to consider physical capacity, design and requirements of your storage point, as well as the specifics of your inventory to make sure it fits your warehouse and does not exceed the acceptable level. Managing a warehouse is a challenging process.

Cross-docking is a special logistics solution that can help to effectively organize your supply chain and optimize warehousing. Cross-docking is a practice, where suppliers deliver goods to storage facilities and they are immediately dispatched to stores and sales locations without being stored in the warehouses. Storage time and cost are being almost zero-reduced.

Importantly, to make this work, you have to consider the reorder volume, and the order requirements put ahead by the supplier. How well you calculate replenishment orders for all your stores and distribution centres will determine the success of the whole cross-docking operation.

Acquiring ABM Inventory, an effective inventory management solution, can help you to bring sensible benefits from using cross-docking.

The user sets a cross-docking (CD) status for the central warehouse (CW) or the distribution centre (DC). The goods placed in stores have to be marked with MTS (make to stock) or MTO (make to order) status. MTO-status is applicable for customized or pre-ordered items. The system automatically calculates replenishment and reorder volumes for all types of goods, and launches the process of real-time safety buffer adjustment for MTS-goods. The software allows these adjustments being made manually by system users.

The goods marked with CD-status do not need safety buffer stored in central warehouse. Supplier orders which are formed for “CD-goods” are directly influenced by the total demand across all sales points. There is no necessity to have extra safety stock in central warehouse for these goods. This is not applicable to the process of reordering from stores to central warehouses.

The orders placed from central warehouses centres to external suppliers using a cross-docking principle are formed manually.

Cross-docking order box

Cross-docking order box

To properly calculate the order the following factors have to be considered:

  1. Total demand across all stores for the goods which are being ordered on the day of order forming;
  2. Current inventory leftovers on the central warehouse - if there are leftovers stored on the central warehouse, the next order will be synchronized and
  3. Recalculated accordingly;
  4. PTO (pick-to-order) inventory on the central warehouse - the volume of such inventory will be included into the next order;
  5. MOQ/USQ (minimum order quantity and order frequency).

When a cross-docking order formed by the DC to be sent to the external supplier is being formed, the system synchronizes data with the original orders from the stores, which have served as a background for cross-docking order calculation. That is why system users can click a single button and easily find the chain of associated orders.

The packages of goods which are being delivered with the help of cross-docking from the supplier have to be divided at the central warehouse, meaning the order frequency at the central warehouse does not correspond to the order frequency in store. ABM Inventory has a solution - the system has a built-in function which allows to set the threshold of in-store demand level. As soon as this threshold, or limit, is being reached, the system automatically forms the order to be sent to the external supplier.

If system user sets 100% as the limit, the system forms the order for the external supplier when the new order demand across all stores will reach the MOQ at the central warehouse. However, this can be a bit risky as it may lead to lost sales across sales locations. If the threshold is set at the level of 80%, the next order will be inevitably formed even if the demand across the stores will constitute 80% of the central warehouse’s MOQ. And consequently, the order quantity will be rounded up. The same principle will be applied to the next order stages.

Additionally, the system has a function which can help to immediately distribute the increased quantity of goods between sales locations. Goods are not piled up at the central warehouses, instead, they are dispersed between stores.

If the system recalculates and changes order quantities, it marks the orders with a special * sign, and shows a pop-up window, indicating that “The order quantity was automatically increased to the order frequency of the central warehouse”.

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