February 2011 | Commentary | 3PL Line

Benchmark Your Way to Successful Crossdocking

Tags: Supply Chain Management, Cross-Docking

Companies can benchmark their way to crossdocking success by following these five steps recommended by Andre Thornton, president and CEO, ASW Global LLC.

André Thornton is president and CEO of ASW Global LLC.
330-733-5533
athornton@aswglobal.com

Manufacturers are renewing their interest in crossdocking as a “new and improved” way to achieve cost-effective results. Crossdock operations offer a solution to companies focused on reducing inventory levels.

Crossdocking is the process of breaking down a large shipment into smaller shipments and/or combining shipments for delivery, ideally within 36 hours. The more typical supply chain model of “store and rack” holds inventory in the warehouse, then in transit, and finally on the store shelf. Assume this cycle takes 90 days. Imagine the efficiency and savings if you could reduce this cycle to 60, 30, or 22 days. The bottom line can improve dramatically.

Operations teams need to be aware of what to expect, however, as they redesign their supply chain approach. Attention to lean methodology and metrics is critical to the longer term sustainability of managing inventory at reduced costs.

To achieve consistent and reliable performance, identify and benchmark your metrics. Benchmarking can include comparison to other internal metrics to eliminate unintended consequences in performance from an improvement in another area. It also includes external comparisons to peer groups, competitors, and industry standards.

The following five steps allow supply chain directors to define and compare performance against some of the strongest operations in the country.

  1. Determine the right drivers. Focus on the two primary drivers that influence excellence: efficiency and quality.
  2. Measure and monitor over extended time frames. Good weeks or months do not indicate excellence. Quarter-over-quarter and, ultimately, year-over-year data is the only way to measure sustainable performance.
  3. Define efficiency. Select the most important factors that define operations efficiency, such as pallets per hour or case per hour. Avoid settling for more basic metrics— cost per pallet, for example. Many variables can skew cost-per-pallet results, so it is not the best indicator of operational excellence— although it is a popular piece of data among some managers.
  4. Categorize efficiency factors. Efficiency drivers include: product shipped within 48 hours of receipt; live unloads processed in less than two hours; percentage of loads processed within must-arrive-by date. Other factors in the efficiency quotient include availability to unload beyond commitments, and building capacities set correctly to match throughput demands. A word of caution: the longer the metrics list, the less emphasis placed on drivers. Focus on drivers.
  5. Define quality. Defining quality is more straightforward than defining efficiency. Most shippers and 3PL managers agree that there are two quality drivers: accuracy and damages. The concept of zero is the total focus: zero missed shipments, zero damages, and zero mislabeling. Stock shortages and inventory variances clearly indicate how well the inventory is being managed.

Associated advantages of managing a well-documented crossdocking operation include gainsharing with suppliers, legitimate incentive pay programs, managed transportation costs, and reduced footprint for unnecessary warehousing.

Finding the right logistics leaders who can manage at this level of sophistication can be a challenge, as shippers, distribution centers, and 3PLs embrace diverse approaches. Qualified partners do exist, however, and they make the supply chain infrastructure even stronger.