Cross-docking, is a logistics method of having goods enter and exit the facility without ever being put in storage. Whilst this method removes loading and pick up operations from warehousing staff, it does so at the expense of the flexibility offered by having the goods stored at the warehouse. Not holding stock certainly comes with many attractive advantages, but also drawbacks such as worse deals with suppliers and a reduction of service to the customers.
The major advantage with cross-docking is that customers shopping on e-commerce sites can be served their physical goods without the companies they buy from holding any inventory risk. In addition, the costs such as warehousing, capital, insurance, hardware, manpower are drastically reduced. Handling goods is also reduced, which would be especially beneficial for fragile or perishable items.
However, there are significant advantages to placing large bulk orders to suppliers as most have MOQ, MOV and price breaks. Suppliers are often granting discounts and lower prices per unit when certain volumes are reached. It is much harder to reach MOQs or price breaks where cross-docking is involved. In addition, by holding your own stock, you can deliver products to your customer faster, unlimited by the quality of service from your suppliers.
It is necessary to weigh the pros and cons of cross-docking depending on the context, the type of products and available suppliers in order to choose the right logistics method. The answer will depend a lot on customers and suppliers’ geography, on the costs related to carrying inventory and the complexity of the products sold.