2nd INTERNATIONAL CONFERENCE ON SUPPLY CHAINS

Cross Docking A Successful Method in

Warehouses: A Case Study of a 3PL Provider
Peggy Panousopoulou1, Eleni-Maria Papadopoulou2, Vicky Manthou3
1,2,3

Department of Applied Informatics, University of Macedonia,Thessaloniki, Greece

1

peggy@uom.gr, 2 elpap@uom.gr, 3 manthou@uom.gr

Abstract
Aiming to minimize transportation costs and increase supply chain effectiveness,
methods, such as cross-docking, have been developed. Cross docking enhances
lean manufacturing, through minimization of time wasted, equipment, labor, thus
optimizing the distribution process. The factors that have to considered, so that
cross-docking is properly implemented, are the effective products and information
flow, the use of information technology, the distance between suppliers and their
customers, the location of the cross-docking terminal, the coordination between
inbound and outbound flows and the demanded quantity of goods. Advantages of
cross-docking are the decrease in overall supply chain cost, decrease in the cycle
time of order, improved customer service, reduction in inventory and storage space.
Nevertheless, cross-docking is not always suitable for all organizations. The
establishment of advanced, and thus expensive, information technology constitutes
an obstacle. The effectiveness of cross-docking can be evaluated through simulation
techniques and advanced tailor-made software, so as to meet the needs and the
requirements of each company. This paper investigates the operational aspects of a
cross-docking system, by analyzing the case of a 3PL provider, operating in
Thessaloniki. The aim of the paper is to discuss the effectiveness of cross docking
implemented by a leading company in outsourcing.
Keywords: cross- docking, lean manufacturing, shipment, 3PL providers.

1.

Introduction

In comparison to the recent past, the role of supply chain management has
been upgraded and shifted from a strict coordination between supplies,
production, storage and shipment to a complicated system dealing with all the
functions of supply chain. According to Martin (2005), supply chain is a
system which consists of processes or functions, which in turn are analyzed
into both activities and items. The ultimate purpose of this system is the
decrease in supply chain costs and the improvement of customer service.
Consequently, it becomes apparent that the organizations always try to
find ways to increase the profitability of supply chains and decrease logistics
costs. Within this framework, three methods of decreasing the cost of supply
chain management have been developed: a) distribution network optimization,

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b) shipment consolidation, and c) cross docking (Gm and Bookbinder,

2004). This paper deals with the third method, namely the method of cross
docking.
The basic idea behind cross docking is the directly shipment of
finished goods from the production line, without having these items stored in a
warehouse. In fact, the primary objective of the cross docking method is to
enable the integration of shipments of different size to a unique shipment with
full truck loads, so that transportation costs can be minimized.
The present paper tries to investigate the role of cross docking
management in the framework of the supply chain management and how it
can be a competitive offered service for 3PL companies. This study aims at
exploring the impact of cross docking on 3PL, the factors that contribute to
its effective implementation and operation, as well as the obstacles that exist
in its use, which in the future should be solved in order 3PL companies to gain
maximum competitiveness from using it. Based on the objectives of the paper,
the study of the available international literature and the case study of a
leading 3PL company, the research questions that this research will try to
answer are the following:
1. What are the factors that contribute to the effective implementation of
cross docking method for 3PL companies?
2. What can the adoption of cross docking offer to a company?
3. What are the obstacles that exist in the effective implementation of the
cross docking method for 3PL?
4. How can a company achieve better costs through its supply chain by
using cross-docking?

2. Prior Research
Casadesus and Castro (2005) mention that the improvement of an
organizations quality has a positive impact on the improvement of supply
chain effectiveness. More precisely, five methods regarding the increase of
supply chains effectiveness are discussed: stock management, the
relationship between the organization and its suppliers, the increase of
response time to the customers, the creation of a competitive advantage, the
introduction of technology and the enhancement of communications
technology. However, the development of ways that minimize the cost of
supply chain is not mentioned. Similarly, many other researchers (such as
Fynes and Voss, 2002; Olhager and Selldin, 2004; Romano, 2002; Wong,
2003; Zineldin, 2004) do not mention cross docking when they analyse the
factors that contribute to the effectiveness and excellence of supply chain
management. As a result, the lack of many researches with regard to cross
docking, as well as its importance in logistics have raised the interest for the
conduction of this research.
According to Gm and Bookbinder (2004, p. 200) cross docking is
the practice of receiving goods and quickly processing them for reshipment
(minimum handling, no storage). Waller et al. (2006, p. 359) defines cross
docking as a process where warehouses function as inventory coordination
points rather than inventory storage points. In typical cross-docking systems,
goods arrive at warehouses from the manufacturer, are transferred to vehicles
serving the retailers, and are delivered to the retailers as rapidly as possible.

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Boysen and Fliedner (2010, p. 413) describe the cross docking terminal as
an intermediate node in a distribution network which is exclusively dedicated
to the transshipment of truck loads. According to another definition cross
docking involves the movement of material directly from the receiving dock to
the shipping dock with a minimum dwell time in between (Apte and
Viswanathan, 2000, p. 291). The operation of a cross docking network is
depicted in the following figure.
Figure 1. Cross docking network

Source: Reeves, 2007, p. 456

As a result, in comparison to a traditional warehouse, in a cross

docking warehouse the products flow almost directly, or within a short period
of time, from the supplier to the customer(s) without being stored, they are not
recorded as inventory and there is no need to be relabeled or repacked (Apte
and Viswanathan, 2000; Boysen et al., 2010).
Reeves (2007, p. 456) states that a cross dock is simply an
intermediate staging area for freight. In fact, cross docking is a solution to
the problem that many organizations have with regard to their shipment of
finished goods, within the concept of lean manufacturing. As Reeves (2007, p.
456) points out, one of the fundamental tenets of lean manufacturing is the
use of small batch sizes and just-in-time deliveries of materials directly to the
point of use on the assembly line. Lean manufacturing is based on the
continuous improvement and the reduction of waste in all aspects of
production process: time, raw materials, equipment (Quintero and Zwirko,
2008). According to George (2003), lean manufacturing focuses on the
maximization of the process speed, by decreasing all the potential wastes.
However, the problem with which many organizations come up is that when

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the distance between suppliers and customers is increasing, the organization

finds it difficult to succeed in an effective and direct shipment with low cost.
The method of cross docking is addressing this problem.
As Schaffer (2000, cited by Gm and Bookbinder, 2004, p. 200) points
out, there are three methods of cross docking in supply chains. The first
method is manufacturing cross docking. This method is distinguished
between current, there the products that are finished are moving from the
production line directly to the waiting truck and future, where the products
finished are stored in order to ship later. The second method is the distribution
center cross-docking. This method has three categories: a) current / active,
where finished products are loaded directly to a vehicle, b) current / same,
where finished products are stored in a conveyor to ship later but at the same
day and finally c) future, where finished products are stored until they are
categorized as current / same. The third method is the terminal cross
docking, where products from various DCs are sent to a break-bulk terminal
for shipment of mixed loads to customers.
From the above analysis one can conclude that knowing where and how
to eliminate waste is very important for the operation of supply chain, based
on the principles of lean manufacturing. In order to effectively operate the
supply chain, many companies prefer to invest in outsourcing with regard to
some or all the functions of the supply chain to other companies, known as
third party logistics provides (3PL) (Cain, 2009). The outsourcing of some
or all the functions of the supply chain to a 3L results in an important
increase in the operations of the supply chain, since cross docking enables
a 3PL to move your inventory from receiving to shipping with no interim
storage, drastically reducing storage and warehousing costs, while at the
same time cross docking allows 3PLs to facilitate fast replenishment of
goods (Cain, 2009, p. 1). Another advantage of 3PLs is that trucks are
always available when needed (Charkhgard and Tabar, 2011). As a result, a
3PL provider results in an increase in the overall efficiency of the supply
chain, through its contribution to the overall efficiency of the warehouses
operation; thus it allows the organizations to achieve higher profit margins
(Cain, 2006). The following figure depicts some examples of 3PLs contribution
to the warehouses efficiency.

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Source: Cain, 2006, p. 1

2.1 Factors that contribute to the effective implementation of cross

docking
The effective implementation of cross-docking has been studied by numerous
researchers. The factors that have been identified are mentioned in Table 1
below.
Table 1. Factors for effective implementation of cross docking
Authors
Apte and Viswanathan, (2000)

Boysen and Fliedner, (2010)

Van Belle et al., (2012)

Factors
Successful handling
Successful development of information
technology
Successful use of full track loads shipment
Successful use of the appropriate plans and
tools for management
Advanced
technology
systems
and
communication technology
Volume of business in the area
Layout and design of receiving and shipping
docks
Accurate and in time flow of information
Service required for each product
Schedule of the shipment
Schedule of the shipment
Layout of the cross dock terminal
Product value
Life cycle of the product
Distance between the supplier and its

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customers
Demanded quantity of goods

It should be mentioned that there is a need of implementing other

innovations first, so as to effectively introduce the method of cross docking,
such as postponement, systems for the direct response to customers
demands, mass customization and good retail location (Apte and
Viswanathan, 2000). Within this framework, Boysen et al. (2010, p. 135)
argue that the efficient operation of such a system requires an appropriate
coordination of inbound and outbound trucks, e.g. by computerized
scheduling procedures.
2.2 Key elements and obstacles of cross docking
The main advantage of cross docking is the decrease in cost of supply
chain (Gm and Bookbinder, 2004). This is achieved through the shipment
of different orders at the same time period. In addition to that, it has been
estimated that with this method the products stay in storage for less than 12
hours (Waller et al., 2006). Boysen et al. (2010, p. 136) state that economies
in transportation cost can be realized by consolidating divergent shipments to
full truckloads without depending on (enlarged) inventories at the cross dock,
concluding that the coordination between inbound and outbound flows is an
important factor on which the effectiveness of cross docking method is
based.
The study of Apte and Viswanathan (2000) mention that another
advantage of cross docking is the decrease in the cycle time of order. This
results in the improvement of both the responsiveness and the flexibility of the
distribution network.
Apart from this, van Belle et al. (2012) mention that the use of cross
docking in comparison to the use of traditional distribution centers benefit an
organization, since it allows improved customer service, reduction in the
storage space, faster delivery of finished goods from the supplier to the
customers, lower number of overstocks, lower risk of both damage and loss of
products, as well as faster inventory turnover. Additionally, van Belle et al.
(2012) state that cross docking offers the following benefits compared to
point-to-point deliveries: a) reduction in transportation cost, b) reduction in
labor cost, c) shipment integration, d) improvement in the utilization of
resources, such as full truck loads. Finally, the authors support that this
method allows the organization to meet better the needs of customers
regarding the quantities of shipments.
The benefit of improved customer service is also mentioned by some
other researchers. For example, Gm and Bookbinder (2004) argue that
the method of cross docking aims at improving customer service, since
cross docking allows the organizations to transfer the products from their
origin directly to their destination with a minimum dwell time in between (Apte
and Viswanathan, 2000).
In addition to that, many researchers focus on the advantage that cross
docking offers with regard to the reduction caused in the organizations
inventory (Apte and Viswanathan, 2000; Waller et al., 2006; Boysen et al.,

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2010). Apart from this, the study of Waller et al. (2006) has indicated that
since the retailer is not carrying inventory in the distribution center through the
use of cross docking, the retailer benefits from the bullwhip.
On the other hand, one main disadvantage of cross docking is that the
technology which is being used may be quite expensive (Apte and
Viswanathan, 2000). In addition to that, when there is a distance between the
warehouse and the distributions centers in retail supply chain, as well as
when there are a lot of stores, then economies of scale have a negative
impact and may outweigh the benefits of cross docking. More precisely, the
research of Waller et al. (2006) has reached to a relevant and interesting
conclusion, by examining the inventory of retail supply chain. Given the fact
that cross-docking, by definition, takes cycle and safety stock out of the
distribution center, allowing for more physical capacity for new product, the
more the number of stores that an organization has, the less the benefit of
cross docking. The justification behind this, is the fact that as the number of
stores is increasing, the possibility that one store has higher demand in
comparison to others is also increasing, resulting in economies of scale. As a
result, economies of scale should be stable during time, so as cross docking
does not have a negative impact.
The above mentioned advantages and disadvantages are summarized
n Table 2 below.
Table 2. Advantages and disadvantages of cross-docking
Advantages of cross docking
Decrease in cost of supply chain (Gm
and Bookbinder, 2004)
The products stay in storage for less than
12 hours, the retailer benefits from the
bullwhip (Waller et al., 2006).

Disadvantages of cross docking

Quite expensive technology (Apte and
Viswanathan, 2000).
There is a distance between the
warehouse and the distributions centers
in retail supply chain and economies of
scale have a negative impact (Waller et
al., 2006).
Economies in transportation (Boysen et The more the number of stores that an
al., 2010).
organization has, the less the benefit of
cross docking. (Waller et al., 2006).
Decrease in the cycle time of order (Apte
and Viswanathan, 2000)
Improvement of customer service,
reduction in the storage space, faster
delivery of finished goods from the
supplier to the customers, lower number
of overstocks, lower risk of both damage
and loss of products, faster inventory
turnover (Van Belle et al., 2012)
The transfer of the products from their
origin directly to their destination with a
minimum dwell time in between (Gm
and Bookbinder, 2004)
Reduction in the organizations inventory
(Apte and Viswanathan, 2000; Waller et
al., 2006; Boysen et al., 2010).

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2.3 Evaluation of cross docking effectiveness

The various alternatives regarding cross docking techniques, as well as the
result of the system can be evaluated through simulation techniques (Apte
and Viswanathan, 2000). The information which is required in order to make a
simulation technique includes: the layout of the equipment, the specifications
of the equipment, flow charts for the product, the schedule regarding the
receiving and shipment of products, and the capacity of the warehouse.
From the above analysis it can be assumed that the method of cross
docking results in a reduction in the logistic cost, since it leads to decreased
transportation cost, increased delivery time of products from the suppliers to
the costumers, without an increase in inventory (Sung and Song, 2003) and
by improving customer service (Apte and Viswanathan, 2000). Apart from the
reduction in transportation cost and in inventory holding, other advantages of
cross docking are the improved customer service, the shorter delivery time
and the reduction in the storage space van Belle et al., 2012). In fact, cross
docking is related to the lean manufacturing, which focuses on the more
frequently and faster deliverance of products, at the lowest cost, without any
wastes in time, labor, and equipment.

3. Research Methodology
The purpose of this study is to investigate whether the process of crossdocking represents an effective logistics practice, by interviewing, in depth, a
representative of one of the leading 3PL providers in the region of
Thessaloniki. The interview was enabled by a semi-structured questionnaire
that was constructed based on the review of literature on the concept of
cross-docking. The case study results are presented below. The type of
interview, that took place in the firm's offices, was the interview in depth and
the outcomes are figured out below. There is a research limitation, namely the
fact that only one case study is analyzed, but this aims to present the strategy
followed by the market leader.

3.1 Case Study

3.1.1 Companys profile
The company has a long history in the field of logistics, representing one of
the most competitive 3PL companies in Thessaloniki. The companys facilities
include warehouses for both dry and cold storage, railway and cross dock
facilities. Furthermore, the company owns both frigo and silo trailers, as well
as liquid food tanks.
Besides the assets that support the logistics functions, cutting edge
Information Technology has been adopted, including ERP, WMS, and
wireless technology that facilitate prompt execution of warehouse tasks. Due
to the upgraded skills of the IT department, an internal network has been
developed, supporting on line information sharing. Further applications have
been established, in order to handle routing issues, along with communication

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and data exchange systems. The company focuses intensely on customer

service, and therefore has established email, proxy, report intranet and file
servers, trying to enhance internal circulation of information that reaches final
customers.
Moreover, the company is committed to excellence and is certified
according to ISO 9001:2008, ISO 22000:2005 (HACCP) and Safety & Quality
Assessment System (SQAS), covering all business units.
The companys structure includes the finance, the technical and the new
projects departments that are in line with the transportation, the warehousing
and the marketing departments. Furthermore, it provides a variety of services,
such as dry and cold storage, picking, distribution, repacking, reportinginvoicing, liquid- food transport, dry and frozen products transport, railway
transport, office renting and cross-docking.
The companys clientele consists of well known multinational companies
and major chains of super markets. The majority of products that are being
handled include foodstuff under controlled temperature.
3.1.2 The cross-docking process of the 3PL Company
The cross docking process is considered to be of pivotal importance to the
company under study, as it enables the cargo receipt and temporary storage
in a loading area, waiting for loading on another truck within 24 hours,
according to the interviewee. The cross docking process facilitates the prompt
distribution of products that have short life cycle (fresh produce, chicken,
eggs, fresh fish and dairy products). Thus, the companies that exploit this
option can be categorized into food companies and super markets. In more
detail, the process refers to the fact that products from various distribution
centers are sent to the break-bulk terminal for shipment of mixed loads to
customers.
But the process is mainly supportive, and not a primary one, as it
depends on the customers demand. Therefore, there is no dedicated
personnel to this task, and the time between the customer order till the cargo
shipment is only one day. The revenue percentage that is derived from this
task reaches just the 3% of total revenues. The relevant charge is based on
the number of pallets, namely charge per import/export of pallet. Cargoes
from multiple shippers arrive at the companys premises, which are then
consolidated into a full truck load, and further distributed to multiple
consignees.
The facilities needed for the cross docking process include large space
for loading, as well as multiple ramps, which already exist at our premises,
namely the loading lane, so that no additional investments were realized. A
corresponding scheduling process must be executed, though, regarding both
the area for the pending shipments and the number of the required ramps. In
the first case, the number of pallets per day is needed, as well as the interim
time between receipt and shipment. In the second case, the number of trucks
that have to be handled per day, and the number of import pallets per truck
have to be registered.
The information system that supports the process of cross docking is the
WMS, and in case there are interfaces with the customers information system,
real time information is realized. The reason why the company under

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investigation is selected by the clients as the cross docking partner is because

it enables the move of their inventory from receiving to shipping with no
interim storage, drastically reducing storage and warehousing costs.
The factors that contribute to the successful management of crossdocking consist of the following, according to the degree of importance: (1)
the life cycle of the product, (2) the product value, (3) the successful handling
regarding the physical flow of the products, (4) the successful use of full track
loads shipment, (5) the successful use of the appropriate plans and tools for
the management of cross docking procedures, (6) the routing of the vehicles
used in the cross dock, (7) the schedule of the shipment, (8) the successful
development of information technology, so as to better manage the flow of
information, (9) the accurate and in time flow of information, as well as the
service required for the items, which affects the stock out cost negatively
when it is high, (10) the layout of the cross dock terminal, (11) the demanded
quantity of goods, (12) the distance between the supplier and its customers,
(13) the distance between the warehouse and the distribution centers, (14)
the volume of business in the area, the layout and design of receiving and
shipping docks, (15) the location of the cross docking terminal.
The advantages that derive from the cross-docking process, according
to the degree of importance, are: (1) the lower risk of both damage and loss of
products, (2) the faster delivery of finished goods from the supplier to the
customers, (3) the decrease in cost of supply chain through the shipment of
different orders at the same time period, (4) the economies in transportation
cost realized by consolidating divergent shipments to full truckloads without
depending on (enlarged) inventories at the cross dock, (5) the products stay in
storage for less than 12 hours, (6) the decrease in the cycle time of order,
resulting in the improvement of both responsiveness and flexibility of the
distribution network, (7) the reduction in the storage space, lower number of
overstocks (8) the faster inventory turnover, (9) the reduction in transportation
cost, (10) the improved customer service, (11) the shipment integration (full
truck loads), and (12) the reduction in labor cost.
Besides the advantages, the most common problems that derive are the
lead times of each order, and the possibility of full truck load.

4. Discussion
Casadesus and Castro (2005) have mentioned five ways to increase supply
chains effectiveness, as they are already mentioned in the section of
literature review. Cross-docking is not included in those methods. However,
as our case study indicates, the practice of cross-docking facilitates the
achievement of those methods, as it represents a practice for inventory
management, facilitates the increase of response time to the customers, and
increases competitive advantage, always supported by the available
information technology.
The company under study recognized all the factors mentioned in
literature review (Apte and Viswanathan, 2000; Boysen and Fliedner, 2010;
Van Belle et al.,2012), as factors that contribute to the effective
implementation of cross docking. The ranking of those factors, though,
provides additional insight into the companys priorities. Of highest importance

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are the product features to be regarded, as they refer to perishable goods.

Furthermore, the distribution and routing process, along with the relevant tools
are highly rated, whereas the location of the cross-docking centre and
distance among the supply chain members are not held to be of major
importance.
This is also the case for the advantages of cross-docking, where the
ranking arranged by the interviewee increases its contribution. The most
critical issues refer to the minimization of damages and losses. Improved
customer service follows, thus resulting in improved responsiveness, whereas
cost and inventory management issues follow.
As long as the technology used in cross-docking is considered, no
additional cost needs to be occurred, since the WMS that the 3PL already has
established and exploited, is utilized. So the opinion that expensive
technology is needed to support the specific task (Apte and Viswanathan,
2000) may be misinterpreted. The value adding service that the company
under study provides refers to the development of interfaces with the
interested clients, so that they share real time information with their clients.

5. Conclusion
Companies in the new changing globalized environment, search creative
ways to insert to their supply chain in order to minimize their costs and
manage effectively their inventory levels. Cross-docking operations increase
throughput at critical distribution points by unloading shipments directly onto
outbound transport, which eliminates the need to store freight.
In the present paper, the role of cross docking management and the
competitive advantage that it can provide are examined. The framework of the
a 3PL company that offers successful cross-docking services has presented
in order to point out the impact of cross docking on 3PL and the factors that
contribute to its effective implementation and operation.
Based on the international literature and the case study of a leading 3PL
company, factors that contribute to the effective implementation of cross
docking method for 3PL companies have been mentioned. The systems for a
successful cross-docking must include automated material handling, order
processing and warehouse management systems as well as strong
relationships between supply chain partners. Furthermore the obstacles that a
3PL company may face in the effective implementation of the cross docking
method were discussed as well as the parameters that may can lead to
competitive advantage through cross docking. Clear and continually
communication with all involved members, sharing of information, quality and
product availability are a few characteristics that may lead to effective and
profitable cross-docking.

Acknowledgment
Authors would like to thank Mrs. Sophia Makiou, Logistics Manager of Makios,
3PL Company.

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