A Lean Approach to Cross Docking

By Robert L. Cook, Brian Gibson, and Douglas MacCurdy -- Supply Chain Management Review, 3/1/2005

Lean production requires a lean supply chain. But how can you reduce waste and increase speed in your supply chain? One answer is to replace traditional warehouses with cross-dock facilities.

The unrelenting pressure of global competition in the marketplace has spurred many manufacturers to adopt a lean production philosophy—and a lean supply chain that supports that philosophy. A critical element in the design of such supply chains is an effective cross-docking operation.

Cross docking is defined as: the packing of products on incoming shipments so that they can be easily sorted at intermediate warehouses or for outgoing shipments based on final destination. The items are carried from the incoming-vehicle docking point to the outgoing-vehicle docking point without being stored in inventory at the warehouse.¹ When cross docking replaces warehousing a number of benefits follow. These typically include: reductions in inventory investment, storage-space requirements, handling costs, and order-cycle times as well as faster inventory turnover and accelerated cash flow.² The benefits of cross docking therefore are well-aligned with the goals of lean supply chain management: smaller volumes of more visible inventories that are delivered faster and more frequently.

To maximize the benefits, however, the principles of lean must also be applied to the design and implementation of the cross-dock operation itself. This article explains how lean production principles—also known as the Toyota Production System (TPS)—can be applied to create a cross dock that supports the lean philosophy. A practical example from the Eastman Kodak Company shows how applying TPS to a cross-dock facility can have a powerful impact not only on the supply chain's efficiency but also its effectiveness.

The Toyota Production System consists of mutually reinforcing principles, culture, and operational structure. To emphasize that it is a system of production, Toyota depicts TPS as a house.

Exhibit 1 shows how this "Toyota House" can be applied to the supply chain. The goal, or "roof," of the supply chain is timely, consistent, level delivery of materials to production. It is achieved by reducing material order-cycle times, eliminating supply chain waste, and improving supply chain processes. The roof is supported by two pillars: just-in-time and quality. The just-in-time (JIT) pillar represents delivery of the right material in the right quantity at the right time to the right place. The quality pillar represents zero-defect pick-up, sorting, delivery, and operational support data. At the center of the house is a culture that demands excellence and employees who are flexible, capable, reliable, and motivated. Finally, the foundation of the house—operational stability—is built by standardizing supply chain processes and reducing the variability in these processes.³ This house provides a framework for introducing lean to the cross dock.

A Just-In-Time Cross Dock

In a lean system, a cross dock should focus on facilitating JIT delivery to the production sites. To accomplish this, the TPS principles of kanban, milk runs, and heijunka must be integrated into the operational design of the facility.

In a kanban or "pull" system, an electronic or physical signal (such as a card) is used to indicate that a product should be made or moved. To support JIT production, the kanban system must extend back to suppliers. In such a system, multiple production sites are pulling small lot sizes in standard containers from multiple suppliers. Integrating a lean cross dock into such a system can produce significant advantages. A lean cross dock would orchestrate pick-up, sorting, repacking, and delivery of the vast number of kanbans while reducing material order-cycle time. For example, in one week of operation, an 81,000-square-foot cross dock could process over 8,000 orders representing shipments from 100 suppliers to 34 production sites. The weekly inventory throughput could equal 275 53-foot truckloads, but none of the inventory would be held at the cross dock longer than a few hours.

At the same time, a kanban system would improve operations at the cross dock. Since kanbans pull inventory as needed, inventory and storage-space requirements are minimized at the cross dock and production sites. In addition, the use of standard containers facilitates material handling, material transport, and line-side storage-space planning.

A lean cross dock also supports JIT production by using "milk runs" to pick up materials and deliver them just-in-time and in a consolidated manner. Under this method, trucks use regular pickup routes to build mixed loads from several suppliers and return to the cross-dock. Then moving from the cross dock, trucks use regular routes to deliver mixed loads to multiple production sites. Having a cross dock that utilizes milk runs enables planners to realize transportation consolidation efficiencies. Milk runs also typically involve dedicated vehicles, which increases inbound-material visibility and control. These benefits, in turn, facilitate production scheduling efforts.

Finally, a lean cross dock follows the TPS principle of heijunka, which is the Japanese word for "to make level." In a cross dock, heijunka would involve leveling the load across operational hours in a manner that supports JIT operations. Heijunka is accomplished by scheduling and performing repeatable pickup and delivery routes at uniform time intervals throughout the day (for example, "pickup route 1" has scheduled departures of 8 a.m., 11 a.m., 2 p.m., and 5 p.m.). A master schedule ensures that the workload is leveled. All tasks have specific start and end times that are strictly met. The result is a level, uniform, rhythmic material flow through the cross dock as well as a level material-handling workload at manufacturing facilities, supplier locations, and the cross dock.

Quality Through Visibility

Supply chain quality is maintained and improved at a lean cross dock through visibility, poka-yoke, and kaizen. Quality is achieved by making operations and problems visible through a four-step approach. First, all dock doors are labeled with a route number and times for unloading/loading. This allows anyone at any time to verify what truck is being serviced and ensures that trucks are serviced in the correct order within prescribed time limits. Second, a lean cross-dock floor is marked with kanban squares (the actual size of a truck floor), and overhead signs indicate delivery destination and times as well as truck height. This enables anyone to verify if shipments are being placed in the right lane at the right time and provides a visible check on truck cube utilization. Third, all containers entering a lean cross dock receive a ticket specifying contents, supplier, destination, and departure time. The ticket enables containers to be tracked internally. Fourth, dock employees use a box with designated slots for each ticket (or shipment) that is part of an outbound delivery. The box allows employees to quickly and visually verify that each shipment has been loaded on the truck. This visual control helps employees check loading accuracy.

Poka-yoke (or "mistake-proofing") is used to ensure zero-defect operations at a lean cross dock. The dock layout enhances failsafe operations by designating docks on one side of the building for all incoming shipments and docks on the opposite side for all outgoing shipments. Companies can further ensure error-proofing by creating check sheets for both inbound and outbound cross-dock processes. In addition, cross-dock employees can use kanban squares as trial trailers. These kanban squares allow them to build loads prior to actual loading, which prevents them from having to unload and reload poorly loaded trailers.

There are many opportunities to practice kaizen or "continuous improvement" at a lean cross dock. Because each cross-dock process (pickup, delivery, loading, and repacking) has a documented set of procedures to follow and is performed repeatedly over a short time horizon, the potential for learning a process and improving it is high. In fact, employees are expected to suggest process improvements. To facilitate these improvement efforts, employees track and visually report key performance indicators, such as total order-cycle time, on-time pickup and delivery, truck cube utilization, expediting costs, inventory-carrying costs, and storage-space usage.

Culture of Excellence

In order to ensure a lean supply chain, companies need to build a culture that enables employees to achieve excellence. The TPS principles that drive this culture of excellence include teamwork, empowerment, and respect for each worker.⁴ At a lean cross dock, most tasks are assigned to teams of four to six members rather than individuals. Teams are flexible and can prevent workload bottlenecks. They also can provide multiple checks on work performed, thus, improving process quality.

Lean cross docks also create an environment of empowerment by enabling any cross-dock employee to stop and seek help to fix problems. Employee training encourages empowerment by providing the rationale for why processes are performed in a specified manner. This not only enhances employee understanding of operations but also facilitates operational improvements.

Respect for the worker starts with worker safety. Employee safety is particularly critical at a cross dock because of the fast-paced, high-volume material flow. Respect for the worker is also communicated by seriously considering employee suggestions for improvement and reviewing them in a timely manner.

Operational Stability as the Base

Lean cross docks achieve operational stability by utilizing a number of TPS principles including standardized work, preventive maintenance, and supplier involvement. Standardized work is at the heart of lean cross-dock operational stability. For every process, the team knows what to do, how to do it the same way each time, where to do it, when to do it, how long it should take, and what the expected outcome is. Visually posting all process steps is one good technique for achieving standardization. Requiring a specific format, process, and procedure for all tasks enables employees to recognize operational error or variability instantly. Also, standardized work provides a benchmark that teams can use for process improvement.

Preventive maintenance of vehicles, material-handling equipment, and buildings also contributes to stability. By reducing process-disrupting breakdowns through preventive measures, the cross dock has less operational variability.

Operational stability not only requires internal commitment but also supplier involvement. For example, by jointly planning pick-up routes and sharing operational information with suppliers, the cross dock can further reduce operational variability. Timely, consistent, level delivery of materials to production is more likely when these types of techniques are applied.

Exhibit 2 summarizes how TPS principles are applied to a lean cross dock and the benefits of each application.

Many companies have seen the important role that a cross dock can play in creating a lean supply chain. One excellent example is Eastman Kodak Company, which decided to replace a warehouse operation with a lean cross-dock operation.

Eastman Kodak Company is primarily engaged in developing, manufacturing, and marketing imaging products and services for consumers and commercial customers. In 2003, the company identified an opportunity to improve the inbound-material flow from suppliers to its manufacturing facilities in Kodak Park, Rochester, New York. At that time, some of its inbound material was moving as less-than-truckload (LTL) shipments directly from suppliers to plants. Other materials moved as full truckload shipments from suppliers to a local area warehouse, where they were stored and then shipped by truck to the appropriate manufacturing facility.

A critical review revealed an inbound-material flow that was ineffective and inefficient. Five problems in particular were evident.

1. Each plant was managing material movement from common suppliers independently. As a result, material managers could not take advantage of transport-consolidation opportunities.
2. Because some suppliers selected the carriers and controlled inbound movement, Kodak had no control over these shipments. As a result, unscheduled material deliveries were being made at the warehouse and plants. This caused poor utilization of material-handling labor and floor space at all facilities.
3. Inventories were not visible in-transit, which made production scheduling much more challenging and, at times, negatively affected production operations.
4. Order-cycle times were long.
5. In some cases, suppliers held shipments until they had a full trailerload. Although this practice resulted in lower transport costs, it also increased leadtimes and inventories. Consequently, Kodak had high inventory levels at the warehouse and plants, which resulted in congested facilities and high inventory-carrying costs and storage costs.