Keeping inventory to a minimum at the same time as ensuring product is always on the store shelf or available to fulfil a customer’s online order has always proved to have been something of a Holy Grail for supply chain directors. Cross docking or flow-through, the practice of receiving goods at a warehouse and then shipping them out again without first storing them in the DC, is a technique aimed specifically at operations where maximum service levels and minimum inventory holdings are a top priority. It is not a new idea, but with the increasing availability of advanced technology and the relentless rise in consumer expectations, it is experiencing a new revival in popularity. An industry survey published last year by US logistics provider Saddle Creek revealed that over half of the 547 respondents were already using cross-docking, with a further 13% actively planning to do so.
For a company thinking of implementing a cross-docking strategy, the process can be perfectly straightforward once the right systems and processes are put in place. However, it is important to recognise that many of the necessary changes will rely on cooperation from suppliers. A cross dock will be just as useless if a supplier is unable to provide the goods on time as it will be if the outbound transportation provider is not in position and ready to receive the goods on the other side of the docking station. Speed is the essential factor, so suppliers need to be equipped to communicate electronically with their customer’s supply chain management system. Unless they are already operating at a high level of IT sophistication, this may necessitate some substantial changes to the way they do business.
It is not surprising then, that one of the first hurdles faced by some cross-docking projects is concern from suppliers. A manufacturer is naturally likely to be instinctively cautious about a requirement to alter their own working practices and IT equipment unless some clear benefits have been communicated properly. Major changes in business practice are never easy, and the fear of increased costs to a supplier’s business is always likely to be present. This article outlines a few strategies to help bring suppliers on board. Whether the project is a new cross-docking initiative, or simply a tighter integration of suppliers with the ongoing warehouse operation, the objective is to make effective changes which will bring benefits to both sides with a minimum of disruption all round.
A study by Cap Gemini from a few years ago entitled “Connectivity: Enabling Visibility in the Supply Chain”, revealed that 40% of suppliers used email as their primary method of communicating order status, with a further 28% relying predominately on telephone, fax or customer service representatives. While the past four years have brought about some changes, there are still many companies for whom integration with customers’ IT systems is simply an abstract concept. A supply chain initiative which requires the sending of Advance Shipment Notifications (ASNs) and compliant bar-coded shipping labels, therefore, may require some adjustment to the way they do business.
When deciding on the system you will use to manage your cross-docking operations, you need to take this into consideration. Make sure that you are developing or implementing a flexible system which will adapt to their technological capabilities as well as their business processes. Most retailers and wholesalers will find that there is a wide range of diversity in the technological capabilities of their suppliers. For example, if you are the manager of a chain of grocery retail stores, you may deal with suppliers ranging from a small mushroom farmer, whose IT “department” consists solely of a computer and a printer, to a large, sophisticated consumer packaged goods (CPG) provider, whose existing fully automated Enterprise Resource Planning (ERP) and warehouse management systems can handle the request for ASNs to be sent without batting an eyelid.
The CPG provider will probably need very little assistance from you in order to become compliant with your new requirements. You may want to offer them the ability to transmit data over the web and avoid the costs associated with using a private network, but even this is not essential. For the farmer, on the other hand, you will probably need to provide as many tools as possible to enable his organisation to communicate the information you need. There are now a range of Extended Enterprise Management solutions available in the marketplace which enable retailers and wholesalers to provide a virtual outbound warehouse management system to their smaller suppliers over the web. This removes the need for them to invest in an expensive ERP system and makes it easier for them to comply with your requirements.
While there are always those organisations that are hesitant to change, you will also find a number of your suppliers will be “early adopter” types, who automatically see the ways the structure and process the new system brings will actually drive efficiencies in and work in favour of their organisation. These suppliers are not only the ideal groups to use as pilot vendors for your supplier enablement projects - to help you iron out the wrinkles in the system – but if you record the results and outcomes which they gain by using the new system, you can use them as case study examples to sell the idea to the rest of your suppliers.
In today’s global economy, it is hard to imagine that any organisation could be lucky enough to have all of its suppliers in the same geographic region – let alone the same country! - so expecting your small suppliers to fly in from China, Romania or Argentina for system training can put unnecessary pressure on the relationship. Keep in mind that training via the internet is a very viable option these days if you select a system that is easy to use – and if you are running live web training sessions, try to run them at times which will suit different time zones. Similarly, keep your training manual simple, with plenty of screen shots and call outs, and if your solution provider doesn’t already offer it in multiple languages, arrange to have it translated into the languages you need – the investment will be worth it in the amount of time you won’t have to spend trying make sure your suppliers are using the system properly.
Likewise, if you are dealing with foreign companies, do not make the mistake of assuming that just because English is enough of a global language that warehouse workers in rural Thailand will be fluent readers of it! While translations into English, French and Spanish may be enough for a company to list “multiple languages” as a feature on their marketing collateral, keep in mind that if you are working extensively with China, they probably won’t help you much!
Despite all your best efforts, there are always going to be some organisations who are resistant to the changes advanced technology brings. The greatest boon you can grant yourself and your suppliers in implementing a change management programme is time. Communicate clearly from the outset what your plans are, and exactly what you expect from your suppliers. Allow adequate time for interface design for companies who want to make your system communicate directly with theirs. Allow suppliers time to make sure they have the infrastructure they need – if you’ve been receiving stock with hand-written consignment notes, the odds are that someone will have to invest in a printer. And accept feedback and suggestions for improvement where appropriate – listen to the concerns of your suppliers and address them as best you can.