The e-consumer is demanding and fast delivery is one of the factors that most influence your satisfaction with the store. On the other hand, e-commerce players perceive this trend and are increasingly engaged in logistics strategies. The Cross Docking methodology may be the ideal solution for this issue.
When prices, product quality and payment methods are similar, delivery will likely be an opportunity to be explored to stand out.
In this sense, Cross Docking can be an effective strategy to help develop competitive advantage. Implemented properly and under the right conditions, it can speed up logistics processes and deliver faster deliveries to your customers.
Are you interested? Know Now What It Is and How to Build a Cross Docking Strategy!
#What is Cross Docking?
Cross Docking is a logistics procedure where the shopkeeper does not necessarily have to store the products in his distribution center. When a request is made, it sends a purchase request to the supplier, who in turn will send the products to the merchant.
At the moment the tenant receives the products in their distribution center, the internal processes are simplified because there is no need for storage, since the items have already been sold.
The shopkeeper will need to conference at his entrance dock in order to identify possible disagreements and then the process directly jumps to the separation of the items for each order and normally follows the flow.
Now it is clear that cross docking means crossing the docks between your company and your supplier, seeking to reduce the operational and risk costs of your inventory.
Now let's look at the advantages and disadvantages of this model for e-commerce.
#What are the advantages of Cross Docking?
Some of the main advantages of Cross Docking are:
The retailer reduces the risk of having products that can be aggravated since the order to the supplier will only be made when the item is sold in the virtual store;
One of the big costs of e-commerce is with the cost of inventory, so when implementing the cross docking strategy, we can reduce or even eliminate these costs considerably;
Less inventory investment is necessary since in forecasting how much we are going to sell, we need to risk on some items;
- The space of the distribution center is significantly smaller, since we do not need space for storage;
Higher inventory turnover, since the products purchased are only those sold, generating revenue more quickly for the virtual store.
#How does Cross Docking work?
The Cross Docking methodology may seem like an ideal logistics system to meet the demands of virtual stores, but it involves complexities and tight integration across industries. This requires radical changes in the way you manage your inventory and purchase and sale systems.
It is in this aspect that many e-commerce owners sin, because the lack of a comprehensive knowledge and planning of the operations can put the whole strategy at risk, eliminating the advantages that it possesses.
Some barriers that hinder the proper functioning of this methodology are:
The need for a strong investment to realize integrations between the system of suppliers and those of the store;
Poor supplier controls that can lead to inventory write-offs and consequently harm the end customer;
Increase in the final delivery time for the customer, since it is necessary to wait for the items to arrive at the distribution center to begin the process;
Increase in the cost of delivery of the items to the shopkeeper, since during the month more deliveries will be made than the traditional model that concentrates hundreds of items in only one cut-off date;
Reduction of bargaining power, since with this model the shopkeeper transfers some responsibilities to the supplier;
Possibility of reducing the contribution margin of the store since each purchase has a smaller amount compared to a purchase only at a given time.
What we mean is that using the Cross Docking methodology can be very advantageous for the business, but it involves a change of thinking on the part of the managers. Manufacturers, distributors, virtual stores and logistics companies need to let go of differences and work together so that everyone can develop their business.
Therefore, you must understand if your segment allows adopting this strategy by asking the following questions:
In your segment, is the delivery time critical for the customer?
The product margins allow you to absorb higher cost of shipping the goods to your distribution center?
Will your supplier work together or will you be more of a buyer?
#How to Build a Cross Docking Strategy?
E-commerce is one of the segments that most uses the Cross Docking methodology, and although it presents several advantages for the company and clients, it comes loaded with obligations and care that must be taken care not to make the method a business villain.
So we've listed some key recommendations so that by adopting the strategy you can make the most of it. Check it:
Evaluate your ABC curve and identify potential items as well as vendors, which can be jobs like Cross Docking. If you opt for items in curve A, you will have a high potential for savings, but you will also need to be concerned about more details; after all, this curve should represent more than 70% of your sales;
Adopt deliveries of different shipping "speeds" as economic, normal and express. If the customer chooses an economical delivery, you can work these items within the methodology of Cross Docking;
Select suppliers that have better inventory controls and you already have previous relationships. If a problem occurs, you can rely on it to find a quick solution;
Review your internal processes to make possible adjustments when contemplating Cross Docking. It is essential that the whole operation work in harmony
One of the factors that can influence the success of a virtual store is the fast and quality delivery, as this process directly affects consumer satisfaction. In this way, the use of Cross Docking represents a very attractive alternative for e-commerce, mainly in Brazil. But remember: adopting it involves planning and thoughtful attitudes.
#Omnichannel and the Cross Docking?
We could not fail to mention the benefits of implementing this strategy within your own company. The benefits are numerous when we talk about stores with a lot of items, which is the case of supermarkets and pharmacies.
These two segments come to have more than hundreds of thousands of items and each of their stores can have different availabilities of each. When we implemented cross docking in-house, we were able to serve the customer with more products and inventory.
This methodology is called a delivery pocket. In it, a main store is selected to serve the customer of the region and the other smaller stores that are nearby complement the assortment.
So if a customer walks in buying a headache remedy, one for colds and one for coughing, the main store may have the cough remedy while two other nearby stores have the other medicines.
Implementing this strategy will allow you to see both sales increase and average order increase.