The impacts of cross-docking operation on supply chain management

Abstract

Cross-Docking has been widely characterized as warehouse elimination and inventory cost reduction in supply chain management literatures. It is a logistics technique that removes the storage and picking functions of a warehouse. When goods arrive at the cross-dock, they are unloaded from the incoming vehicles, sorted and consolidated according to customer demand, conveyed and loaded onto outbound vehicles for delivery to customers. A proper application of cross-docking in logistics can greatly improve the performance of distribution systems. However, replacing traditional distribution process by cross-docking also changes the modes of members in distribution system to handle the demand uncertainty, related to inventory overstock and shortage cost. This research aims to reveal the suitability and impacts of cross-docking on supply chain. Two major types of cross-docking, pre-distribution cross-docking (Pre-C) and post-distribution cross-docking (Post-C) are studied. We consider the cross-docking system including one cross-dock and multiple stores (or suppliers). The decision making problems for single item are analyzed in the system. We construct a model where a single supplier serves multiple customers via a cross-dock. To illustrate the suitability of cross-docking, the distribution strategies with distribution center (DC), Pre-C and Post-C are analyzed respectively, and pair-wisely compared in terms of average inventory cost. Another model is built to analyze the preference of Pre-C and Post-C when lateral transshipments among outlets are allowed and difference of operational cost between Pre-C and Post-C at cross-dock are considered. The different operational performances are investigated and compared. The third model is concerned with the situation of multiple suppliers serving one retailer through a cross-dock. We mainly consider the reduction of transportation cost through consolidation at cross-dock. By analyzing the ordering decision for direct delivery without consolidation, consolidation with cross-docking and distribution center, we compare their costs and determine the situation in which cross-docking is preferred. This research shows that the suitability of cross-docking depends on its business environment, involving variance of demand, leadtime, number of stores, and coefficient of demand relationship, and other factors.