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Consumer packaged goods and cross-docking

Supply chains are increasingly utilizing cross-docking, and packaging has an important role to play.
Cross-docking takes place in a warehouse or a distribution center (DC) where incoming goods become outgoing goods without intervening storage. Cross-docking is predicated on throughput, and whereas goods don't always go directly from the receiving dock to the shipping dock, the interval typically is no longer than a day. The practice is gaining favor in a wide variety of industries, but none more so than in retail, where Wal-mart has converted it into a source of competitive advantage. Other major retailers are increasing their use of the practice, in expectation of similar results.  Consumer packaged goods (CPG) companies, therefore, should strategize for the reality that cross-docking is a major and growing component of the supply chain.

CPG companies, in addition to facilitating the cross-docking operations of their retailer clients, can implement the practice upstream in their own operations. The number of companies doing that is increasing, some having a
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stable of major brands, but smaller companies also are in the mix. Then, too, there are third-party logistics (3PL) providers for those companies that choose to outsource the management of their cross-docking operations. Regardless of such location and management issues, the cost and efficiency of cross-docking are influenced by how the goods are packaged.
 
Benefits, challenges, and drivers

Since cross-docking is performed in lieu of storage, inherent benefits include savings of labor and other costs that otherwise would accrue from placing goods into storage, maintaining them there, and eventually retrieving them for shipment. An associated benefit is a reduction in damage to the packaging and its contents, thanks to reduced material handling and reduced compression-under-load.
 
Those benefits have their requirements, in the form of challenges, to any member of the supply chain that seeks to implement cross-docking. Whereas specifics can differ, reflecting industry variables, there are challenges common to all situations.

One is the necessity for information technology (IT) software to balance supply and demand, which is a prime utility of a supply chain. A warehouse management system (WMS) configured to include that capability is the cornerstone for coordinating the information necessary for effective cross-docking.
 
Another challenge is that the design and layout of the facility should facilitate cross-docking, so that operations are performed smoothly, with a minimum of backtracking and obstructed paths. A warehouse or DC that was not originally built with cross-docking in mind might require costly reconfiguring for the desired flow and throughput.
 
Yet another challenge──one arguably more knotty than the preceding two──concerns the relationships among supply chain members. Those relationships should be closely intertwined and of high quality. An example to the contrary is a member that can't reliably (in terms of speed and accuracy) input and process information from other members, reducing the performance of the entire supply chain. A contract packager that lacks the resources for adequate computerization would fit into that category.

The drivers propelling cross-docking form a list of modest length but all have to do with recognition that cost-effective, operationally-efficient supply chain management can be a source of competitive advantage. For a CPG company, high on that list is the driver that the retail industry is increasingly demanding that goods from suppliers be packaged and unitized specifically to facilitate cross-docking. Some CPG companies regard that driver too narrowly, equating it with having to supply bar-codes and RFID (radio-frequency identification) tags at the case and pallet levels. Although facilitation does entail such technology, there's more that a CPG company should take into account, as will be exampled subsequently.

But first, additions to the list of drivers include the need to: shorten speed-to-market; accommodate growth without necessarily having to expand storage space; increase the flexibility in which geographic areas can be entered (and exited); and improve responses to market fluctuations and forecasts.

Not your father's warehousing

The cost-slimming and performance-enhancing effects that packaging can exert on conventional warehousing are well-documented; for how goods are packaged and unitized affects all the core activities of warehousing operations. Hence it's easy to misleadingly conclude that packaging suited for conventional warehousing readily becomes suited for cross-docking with the addition of bar-codes and RFID tags.

But that degree of generalization can blind a company to certain possibilities; for example, is it possible that packaging that's fit for conventional warehousing might constitute overpackaging for cross-docking? As previously mentioned, cross-docking involves less material handling and less compressive loading. Furthermore, in a scenario wherein a CPG company ships presold goods (whether first to its own DC or directly to a retailer's DC), the overall time that the packaging must protect is shortened. That doesn't automatically mean that the amount of packaging should be reduced; however, the possibility should not be dismissed out of hand, given these environmentally-conscientious times.

Additionally, reduced (yet adequate) packaging can make it easier to determine the condition of a unitized load. Unlike conventional warehousing in which loads are staged and inspected before being loaded onto the means of transportation, cross-docking relies on inspection-on-the-fly.
  
Cross-docking stirs cross-currents

Regardless of a CPG company's current involvement in cross-docking, the company should recognize that it's faced with strategic decisions, starting with the determination of the degree to which cross-docking is practiced within the supply chain (even if the determining company is not one of those practitioners). From there, projections can be made on which to base decisions on the company's future in cross-docking and what that future mandates in terms of investment. And so on and so on goes the strategic process, too intricate to detail herein.
 
But here's the point: the strategic plan should include inputs from all affected disciplines and by that philosophy packaging has to be included. And whoever at the table represents packaging should be able to articulate from an informed perspective. At the very least, that should involve arriving with a fundamental understanding of cross-docking. Accordingly, it's advisable to have visited a cross-docking facility.

Think of the role as a take on the old punch line, modified to ask, why did the package cross the dock? The packaging representative should be able to supply specifics to the answer, to get to the side of greater competitiveness.

Sterling Anthony is a consultant, specializing in the strategic use of marketing, logistics, and packaging.  His contact information is: 100 Renaissance Center-176, Detroit, MI 48243; 313-531-1875 office; 313-531-1972 fax; [email protected].

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