Is cross-docking for you?

It depends on your company's needs

ss

Not for everyone

BV BILL MONGELLUZZO

O cross-dock or not to crossdock, that is the question. For some companies, it's a no-brainer to transfer goods from one truck to another without putting them in long-term storage. But there's still a place for traditional warehousing. Sometimes both practices are used by diflerent divisions of the same company. Toyota is an example. The automaker's manufacturing division, Toyota Motor Engineering and Manufacturing, began converting just-in-time parts deliveries to its plants from traditional warehousing to cross-dock operations six years ago. A total of about 60 to 65 percent of parts to Toyota's plants are crossdocked, compared with 30 percent in 1999.

By contrast, Toyota Motor Saies U.S.A., which oversees the shipment of service and replacement parts to Toyota dealers aeross the eountry, prefers to maintain inventories at warehouses to serve customers. Tony Minyon. national logistics manager at Toyota Motor Sales, sees an opportunity to reduce lead times and lower transportation costs by migrating some warehouse operations to crossdock, but it will be a slow process. Cross-docking as a logistics strategy has been around for years. For some warehouse operations, it can be the most etTicient way to move cartons from inbound containers or trailers to outbound conveyances. Toyota's U.S. manufacturing unit said it has reduced truck miles driven, created a more consistent How of parts in smaller lots.

allowed more frequent deliveries and encouraged dedieated delivery routes to specific divisions within the manufacturing operation. The ideal cross-dock facility is a long, narrow warehouse with many truck doors and bays on opposite sides of the rectangle. A cross-dock facility doesn't have to be costly to construct, nor does it need the storage racks and staging areas found in traditional warehouses. "It doesn't have to be pretty," said Brian Gibson, associate professor of logistics at Auburn University, a speaker at last month's conference of the Council of Supply Chain Management Professionals. In an etficient cross-dock operation, cartons are removed from inbound containers or trailers on one side of the facility and are scanned and moved immediately to a waiting trailer on the opposite side of the building without touching the floor. Cross-docking can be effective when properly managed. In one case study, Gibson said the shift from traditional warehousing to cross-docking

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reduced the product cycle time to two days from seven. In a second case study, a company that invested $20,000 in a software system to modify the sorting system at its cross-dock warehouse improved the sorting rate by 50 percent and eliminated the third work shift each day. In another study, a retailer of shoes and apparel asked suppliers to pre-ticket their shipments so the retailer could shift from a traditional warehouse operation. Cross-docking helped the retailer reduee its per-unit handling cost to 1.5 cents from 15.6 cents and the cycle time to one day from two to three days eompared to its traditional warehousing operation, Gibson said. While such savings are attractive, not all logistics operations are suitable for cross-docking. Weber Distribution, which operates 19 distribution centers on the West Coast, maintains crossdock operations for some customers, such as Scholastic Books. Weber deconsolidates book shipments and then cross-docks them into full trailerloads moving to Scholastics distribution centers across the country. However, when some customers say they want to move to cross-dock. Scott Weiss, client solutions executive, tries to convince them to stick with traditional warehousing. Direct importers who ship small product lots to large retailers with multiple regional distribution centers across the country are usually not candidates for cross-

docking, Weiss said. 'The shipping date and must-arrive date are hard to meet. It's not realistic." he said. Traditional warehousing, while producing some inventory-carrying costs, allows shippers and third-party logistics providers to manage inventory and replenish their customers" shelves with the right amount oi product at the right time. Carrying inventory is inherently risky because merchandise is handled multiple times, exposing it to damage, theft and storage costs, noted Minyon of Toyota Motor Sales. There is also a danger of obsolescence. However, unless a warehouse operator can maintain a steady flow of product, preferably in truckload lots, to the same customers or distribution centers, cross-docking will not work. But the ability to consolidate shipments from multiple suppliers to feed close-by manufacturing facilities in a just-in-time delivery schedule makes a company a candidate for cross-docking. For example, Toyota's manufacturing division has a consolidation center in Los Angeles that receives parts from 40 suppliers in the region and ships the consolidated lots to three plants on the West Coast. That is one example of how Toyota's manufacturing division reduced cycle time and lowered transportation costs by shifting many of its operations across the country from traditional warehousing to cross-docking, said Steve Hagan. assistant man-

ager of logistics at Toyota Motor Engineering and Manufacturing. Toyota used to do numerous "milk runs." picking up shipments at individual suppliers' facilities and trucking them long distances to manufacturing plants. The manufacturing division now routes many of its parts shipments to Toyota s regional cross-dock facilities and then trucks consolidated shipments to the plants, lowering its logistics costs through route planning, improved packaging, full-trailerload shipments and cross-docking. Kevin Thornberry. assistant logistics manager in Toyota's manufacturing division, said this strategy sometimes results in holding extra inventory at the cross-dock facilities to achieve more truckload shipments, but the reduced transportation costs offset the higher inventory-carry ing costs. This strategy also allows Toyota to maintain dedicated delivery routes to each of the various divisions of its manufacturing operations, such as the welding shop, power train unit and assembly plant. Hagan said. Toyota sends correct shipment sizes to each division when they are needed for justin-time manufacturing. EfHcient cross-docking operations require cooperation from suppliers and service providers who may be asked to adjust their work schedules, pre-ticket merchandise or alTix bar codes to cartons. This cooperation may come easier than anticipated, however. Gibson said. He cited a

United States/Australasia Discussion Agreement (USADA)

The members of the USADA providing direct service to Australia and New Zealand from the United States have conducted the quarterly review of the Emergency Fuel Adjustment Factor (EFAF) and wish to advise that effective December 15th, 2006 the new EFAF wiil be as follows; $398.00 per TEU The members will continue to monitor the EFAF on a three month cycle, and adjustments wiil be made following the review period with appropriate notice given to the trade. Should you have any questions regarding the charge, please do not hesitate to contact the carriers as listed below: All rate actions undertaken by the members of USADA are done on a voluntary and non-binding basis.

ANL, CMA-CGM, Hamburg Sud, Hapag-Lloyd AG, Marfret, Wallenius Wilhelmsen

November 6. 2006

The Journal ol Commerce www.joc.com 2 1

SUPPLY CHAIN MANAGEMENT

retailer that increased its cross-docking to 70 percent of its shipments from 38 percent, and ended up saving $21 million in operating costs. Cross-docking operations range from the manual movement of cartons by forklifts from inbound to outbound trailers to highly automated operations with costly conveyor belts and sorting machines. If the volume will support the large capital investment of automation, the per-unit costs of running cartons through a conveyor and sorting system can be as

little as one-fifth that of the manual process. Gibson said. Minyon said that while automation can be good, it will produce large savings only if the underlying processes are elTicient. "The process and standard operating procedure are most important." he said. Weber's Weiss agreed. He said automation in many cross-dock facilities is confined to information-technology improvements such as handheld scanners or radio-frequency identification devices.

The key to any effective cross-docking operation is the ability to reduce the number of times merchandise is handled. In traditional warehousing, where products are stored and retrieved at a later date, a shipment can be handled 10 to 12 times on the way to its destination. Eliminating two or more of those touches in high-volume operations will reduce handling costs, shorten the cycle time and result in a leaner supply chain.

ony, Dell, IBM. Lenovo, Fujitsu, in recent weeks, a series of leading electronics mantifacturers have sulTered the embarrassment and inconvenience of managing recalls of laptop lithium-ion batteries known to have overheated or set otT fires. And the safety recalls aren't limited to computers. Last year, the U.S. Consumer Product Safety Commission issued 400 recalls ol' unsafe products involving 67 million product units in a variety of consumer sectors. For manufacturers and retailers, product recalls can he a pain in the neck. Depending on the price oi" the product and the danger involved. the typical product recall attracts only 30 to 40 percent of all units identified as potentially dangerous. said Jonathan Dampier. vice president of marketing strategy at Newgistics Inc. Many consumers don't know that a product is being recalled because the retailer or manufacturer doesn't have up-to-date contact information. Constmiers often ignore letters with warnings because they don't read what looks like junk mail. Mandatory product recalls can damage a brand, especially if the recalls are not handled effectively. That's why Toshiba initiated a voluntary recall of notebook PCs recently, even though the safety commission cites no incidents

Reversal of fortune
Newgistics launches service to improve the supply chain for product recalls
BV ALAN M. FIELD

involving Toshiba laptops. The commission's Fast Track Product Recall Program rewards companies that launch their product recall programs within 20 days of government notice to escape much of the red tape involved. Dampier said. However, launching such programs quickly and effectively is easier said than done. "It is very hard for retailers and manufacturers to get this process up and running within 20 days," Dampier said. "A tremendous amount of planning must be done quickly." First, companies need an effective strategy for communicating details about the product recall to consumers. They also must establish an effective way to track product recalls so they can report relevant data to the commission, which requires it. Consumers need a quick, low-cost way to send their product back to a retailer or manufacturer. and track its arrival. Manufacturers

need to anticipate how many products will be returned and when, so they can plan for the warehousing space to process the goods. That's where Newgistics eomes in. The company specializes in technology and services for the "reverse logistics" of returning recalled products. Newgistics recently announced a service that incorporates a Web recall portal where consumers can quickly download and print special Smart Labels that make it possible for them to track their returns online as easily as they might track shipments by FedEx or UPS. Consumers can alfix the labels and drop their products into a U.S. postal box at no cost. Consumers who don't use the Web can call a toll-free number to order a unique Smart Isabel that they can trace later over the phone. The service allows manufacturers and retailers to sec current data about how many recalled products

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