Journal of Commerce

Keep it moving

BY DAVID BIEDERMAN

6 February 2006

Journal of Commerce

Cross-docks. Mixing centers. Flow-through centers. These small, speed-based distribution

facilities are springing up nationwide. But while the concept is taking off, it's nothing new.

Cross-docking is the process of moving a finished product from the manufacturer to a retailer's

shelf with as little handling in between as possible. It's been around for as long as there have

been trucks, according to George Powers, president of logistics provider American Port Services

in Savannah, Ga.

The difference is that instead of merely a way to speed domestic goods to market, cross-docking

has become a cornerstone of global logistics strategies for some of the biggest retailers.

Driven by a flood of Asian imports, current cross-dock usage far exceeds what Powers saw when

he founded APS 20 years ago. "Imports are flooding in but not necessarily in the quantities and

configurations that people need to ship them to stores" and distribution centers, he said.

According to a Lehman Brothers global equity research report, 50 percent of Sam's Club network

volume flows through 19 company cross-dock centers that collectively handle some 19 million

pallets annually. The centers are part of parent company Wal-Mart's global strategy to increase

facility throughput as it moves from category-based to velocity-based networks.

A 2004 report by the Boeing Center for Technology, Information and Manufacturing comparing

the supply-chain practices of leading mass merchandisers said 75 percent of Costco Corp.'s

goods are cross-docked, spending on average only nine hours in a distribution center.

Scale is what enables mass retailers such as Wal-Mart and Target to employ cross-docking for

competitive advantage, said Satish Jindel, president of SJ Consulting Group Inc. in Sewickley,

Pa. Consolidation and distribution based on individual stores' needs contribute to reduced

handling and warehousing costs, and given the volume moving through mass retailer supply

channels, that adds up to big savings. "It fits into the overall picture of having a lean supply

chain," he said.

As retailers fine-tuned their supply chains over the years, it became clear that reducing less-thantruckload

shipments into distribution centers was a priority, said Steve Lanter, executive vice

president of transportation operations for Ozburn-Hessey Logistics. Beholden to retail giants,

manufacturers got stuck with inventory and implemented strategies such as pool distribution and

cross-docking to move product more efficiently.

Goods from as many as 30 suppliers are consolidated into truckload shipments at Ozburn-

Hessey cross-docking facilities for distribution to mass-retail facilities or stores. The retailers

enjoy fewer deliveries, while suppliers get the benefits of outbound truckload rates. "It's a much

more efficient process that saves money all around," Lanter said.

Offshore sourcing has driven the need for cross-docking and portside deconsolidation,

said Dawn Salvucci-Favier, director of solutions management at Rockville, Md.-based

supply-chain software provider Manugistics. Concerns over carrier capacity also drive the

trend, as importers feel pressure to hold more stock and reduce lead times.

The retail, grocery and pharmaceutical industries are primary users of cross-docking. In

many