THE ROAD TO CROSS-DOCKING

CHRIS O'LEARY

Cross-docking may just represent the single biggest opportunity today for retailers and wholesalers to streamline the industry's complex distribution system.

The practice, in which products typically are transferred from manufacturer to store-bound vehicles at the distributor warehouse without extensive handling or long-term storage, promises to boost efficiency enormously.

Thus far, however, cross-docking is only being used sporadically by a few manufacturers and distributors for shipping a limited number of product lines.

The big questions facing the industry now are whether cross-docking will take hold on a widescale basis anytime soon, and if the considerable investment in information technology and facility upgrading necessary to achieve that goal is worth it. Cross-docking also will be one of the key issues distributors will be talking about next week at the Food Industry Productivity Conference in Memphis, Tenn.

"Intuitively, cross-docking makes sense. The industry right now is in the analysis and planning stages," said David Cooke, vice president of distribution and warehousing at Bi-Lo, Mauldin, S.C.

"People are trying to find how much volume they can ship that way, and based on that estimate, what they can save. They are trying to find out what kind of changes they should make and the costs of those changes," Cooke said.

Ken Wagar, vice president of procurement and inventory management at Spartan Stores, Grand Rapids, Mich., said the industry still has a long road to travel before cross-docking takes hold in a big way.

"There are systems required to facilitate the process that most of us don't have in place yet. The biggest challenge of all is [upgrading] our facility configurations. Today we can't support a heavy volume of cross-docking; we're just not laid out right to do it."

Gary Capshaw, vice president of logistics and quality service at Fleming Cos., Oklahoma City, said the long-term goal for distributors should be to enact cross-docking procedures. But how soon that can happen is another matter. "Cross-docking is a more efficient way to distribute, and we're committed to doing it. But we've got to develop the systems to do it right," Capshaw said.

The major challenge for distributors now is determining how to move from the drawing board to implementing full-fledged cross-docking programs for moving large amounts of merchandise.

Determining which products best fit into a cross-docking program is also a key issue.

The prime candidates for cross-docking, retailers and wholesalers interviewed by SN said, include high-volume promotional items, merchandise typically part of direct-store-delivery programs, other merchandise that easily can be shipped in full-pallet loads, and specialty items in areas such as general merchandise and baked goods.

However, moving to cross-docking for shipping all items carried in supermarkets may not only be a long way off, it may not make economic sense, distributors said.

To expand cross-docking substantially, retailers and wholesalers agreed, two factors are essential in many cases: upgrading information technology systems and renovating existing warehouse facilities.

Information Systems

By and large, distributors cited the need to upgrade existing information system programs as the first step in moving forward big time with cross-docking.

Retailers, manufacturers and distributors will need to share complex product ordering, scheduling and delivery information. If manufacturers fail to communicate truckload information to distributors in a precise manner, product arriving at warehouses will require extra handling and storage. Communication is also essential for wholesalers and retailers, who must transmit inventory needs on a nearly real-time basis to prevent product overshipping or out-of-stock situations.

"MIS has got to be the part that is put in place. The physical part of cross-docking is not anything magical. The key to the success of the program and how fast you can do it is having the data management information," Bi-Lo's Cooke said.

Bi-Lo's recent expansions to its Mauldin warehouse has allowed the retailer to increase its cross-docking capabilities, for the most part with direct-store-delivery vendors. "That's where the information technology has to take over, because the sheer product volume will overwhelm us," Cooke added.

Some overhaul also will be required in the areas of store invoicing and receiving, which were designed to handle traditional inventory-based activity, other distributors said.

"Much of the industry's systems are geared to billing product out of inventory and shipping by single cases from floor stock," Fleming's Capshaw said. "We don't have an easy billing system to move the product from one truck to the other."

Edgar Poore, executive vice president and chief operating officer at Richfood, Mechanicsville, Va., said the high degree of coordination needed for cross-docking mandates an equally sophisticated level of information technology. "There's an awful lot of coordination and planning that needs to go into cross-docking," he said. "Because of the amount of planning and information needed, it has to practically become an automatic program."

Richfood currently ships less than 1% of its sales volume through cross-docking, but is hoping to expand that number substantially, especially with high-volume items.

Upgraded technology is the only way cross-docking can expand, added Spartan's Wagar. "You can do some limited cross-docking with a clerk and a pad and pencil, but you're not going to be able to go far with it unless you have systems that support it."

Bi-Lo's Cooke agreed: If truckload information is not sent to the warehouse beforehand, cross-docking becomes an exercise in futility. "We've got to be able to capture the data so we can plan our outbound loads before the dock transfer product arrives here. If product arrives and you have to go through it, you're too late," he said.

"You need to know tomorrow morning that vendor XYZ is going to send 20 pallets to each of 10 stores, along with the weight and cube on them. That information must be downloaded into the system and load-planned so that when the shipment comes in tomorrow, you can just rainbow it out," he added.

The information must also be shared with retailers, who need to know precisely how much merchandise is going to arrive on their loading docks.

"We need to automate the process," said an official at a Midwest retailer that cross-docks about 8% of its product volume. "We need to make sure we don't overload the stores with product just because we want to cut down on our handling at the distribution level.

"Right now we're keeping the level of cross-dock to what we can handle, because we still have to do our tracking and billing on a manual basis," said the retailer, who asked not to be named.

Reconstruction

To make widespread cross-docking feasible, many warehouses will have to be redesigned to include expanded dock space and more doors to accommodate a greater number of trucks at any one time.

For some distributors intent on implementing extensive cross-docking programs, the choice will come down to building a separate distribution center, as Meijer Inc., Grand Rapids, Mich., has done, or thoroughly revamping existing warehouse facilities, at considerable expense.

"Reconstructing warehouses could be a deterrent, because if you're not already doing [cross-docking], it's hard to determine exactly what the return will be," said Spartan's Wagar. "That's where people struggle. They want to know 'How much can I do, how much do I save and, when I factor those two estimates together, is there enough there to justify the cost of changing my facility?'

"I think the answer to that question in the long term will be yes, but it's going to take a lot of analysis to get there. That's what's holding things back," he said.

George Williams, vice president of distribution at Spartan, said the wholesaler is considering expanding some present facilities to allow for more cross-docking.

"Maybe in our grocery building, which is 600,000 square feet, we'll remove a considerable amount of rack and open up the floor space so we can do more cross-docking. I think the space is there. It's just a matter of how do we better utilize it as we look at cross-docking?"

"Most warehouses are geared for shipping from floor stock, and the docks aren't big enough for cross-docking," said Fleming's Capshaw. "If you have the space, the cost to convert isn't that great."

Bi-Lo, for its part, is making a sizable investment in cross-docking by expanding the dock of its Mauldin distribution center by about 20 feet and adding 13 more doors.

Is it worth it?

Some advocates said enacting extensive cross-docking programs is crucial to fighting back against competitors, such as mass merchandisers, which are often viewed as having a more efficient distribution process in place.

Another force driving retailers to seriously consider moving to cross-docking is the threat of third-party alternative distributors, such as Non-Stop Logistics, San Francisco, that propose creating an enhanced flow-through network to boost efficiency.

But Bi-Lo's Cooke contends that mass merchants who heavily cross-dock do not carry the amount or variety of products that a typical supermarket does. Therefore, the comparison with the mass merchandise class-of-trade is not completely accurate.

"The mass merchandisers don't carry nearly the number of product lines that we do, so they can [more easily] bring in large quantities of each item and blow it out to the stores. Customers expect a lot more product variety from a grocery store, and that slows down the movement," Cooke said.

"When you're down to two or three cases an order, it may never make sense to cross-dock it," he added. "If you're giving them a choice of 30,000 items in the store," added Richfood's Poore, "there just isn't the knowledge in the industry [to cross-dock them]. It wouldn't be efficient to do [every item] that way. Cross-docking is going to be limited primarily to high-volume items, and a limited number of those based on cube.

"That's the only way it's going to be used, other than cross-docking things like health and beauty care from slow-moving warehouse operations -- items that generally move one case a week or less."

Despite the limitations, retailers stressed that cross-docking is a key initiative for the industry because it reduces inventory and storage costs.

"We have to be able to move product more quickly through and get out of the idea that we run warehouses and start talking about distribution centers instead," said Spartan's Williams.

"It's also an important way of moving cost out of a building as well," he added. "Because if you're not moving the product around as much, each step less that you move the product is savings you've made in your own organization."