An exploration into the history and future of crossdocking: logistics providers and manufacturers are exploring ways that crossdocks can be made even more efficient, including the potential of sharing more space and freight with competitors.
To feed its three British vehicle assembly plants, Jaguar Land Rover (JLR) has developed an extensive continental European supply chain. Each week, some 40 carriers make around 1,100 collections from 480 suppliers in 17 countries, delivering them to seven consolidation crossdocks spread right across Europe
Operated by DHL, the company’s l ogistics partner, the crossdocks’ role is to consolidate incoming shipments for dispatch to the next link in the chain. “The crossdocks are highly flexible, operating with less-than-full truckloads on the inbound side, and aiming to maximise trailer fill and vehicle utilisation on the outbound side,” explains Al Jeory, JLR’s inbound logistics manager.
Depending on the crossdock’s proximity to the UK, and on the respective load factors involved, the outbound journey is either a shipment to another crossdock for further consolidation, or a direct shipment to one of the company’s two crossdocks in the UK – one on Merseyside, near Liverpool, feeding JLR’s Halewood assembly plant; and one at Hams Hall in the West Midlands, feeding the Solihull and Castle Bromwich plants.
Meanwhile, thousands of miles away at the Michigan global headquarters of tier one suppler Visteon, corporate logistics manager Bill Pfeiffer describes a complex logistics choreography that has strong echoes of JLR’s operation.
Originally, explains Pfeiffer, Visteon supplied its Mexican plants – located in Chihuahua and Juarez – with a combination of full truckloads from a consolidation provider in the midwest; some less-than-truckload shipments; and milkruns, originating in the northeast, taking full truckloads south to the border. Then, he says, in 2008 the company switched to logistics service provider ProTrans International.
“ProTrans could replace all three routes via a nationwide collection and consolidation process at multiple points around the country, consolidating our shipments with those of other ProTrans customers to ‘cube out’ trucks, giving us a lower cost of operation,” he notes.
Shipments, he explains, terminate at a ProTrans-operated crossdock facility in El Paso, Texas, and are then transhipped to a Visteon facility, also in El Paso, for onward shipment to the Mexican plants. The volumes and the nature of the loads are such that an element of consolidation is the norm for shipments to Juarez, but for shipments to Chihuahua the El Paso facility “oper ates pretty much as a true crossdock”.
Crossdocks are not new to logistics. Pioneered in the 1930s, they are a staple of less-than-truckload operations, and underpin the businesses of today’s s m a l l p a c k age and courier businesses. For a Fedex or a DHL, if a package isn’t moving, value isn’t being added – and the whole notion of a crossdock is to keep shipments moving by eliminating intermediate storage. As the term implies, shipments cross the dock from one truck to another, and are on their way again.
Automotive crossdocks started more recently, emerging in the 1980s and 1990s to reduce bloated pre-assembly inventories, inspired by just-in-time and lean manufacturing.
The problem was that small and frequent deliveries of parts led to lower levels of utilisation of trucks and trailers. It made no economic sense for suppliers to deliver to a plant six times a day, for instance, if their trucks weren’t full each time. Inventories were down, but transport costs were up.
dapting the practice of crossdocking offered a way to square the circle, explains Tom Kroswek, senior director of supply chain excellence at Ryder Logistics. By using crossdocks for straight-through shipments when appropriate, but also using them as an intermediate holding stage to facilitate consolidation, OEMs and their suppliers could get the best of both worlds.
The supplier would deliver to the crossdock once a day, while the crossdock would deliver to the plant six times a day. Inventories remained low, yet vehicles still ran fully laden – and they could run full into the crossdock as well as out of it.
The push for shared crossdocks In the aftermath of globalisation, recession, and competition caused by excess capacity, the automotive industry and its logistics partners are once again re-thinking crossdocking.
For example, experts are wondering whether facilities dedicated to a single manufacturer are the best option, or if crossdocks can be shared? In what circumstances are crossdocks best deployed? How should they be managed and monitored? And should they be leased, or owned?
Central to the whole debate is the issue of two or more automotive suppliers or carmakers operating out of the same crossdock. Once, the idea would have been anathema to a fiercely protective and secretive global automotive industry. Now, attitudes are more flexible, w ith the opportunities for eliminating costs outweighing concerns over any downsides arising from collaborating with competitors.
“These days, when we’re talking to automakers, the word of the moment is definitely collaboration,” says John Pursey, automotive business unit director at NYK-owned Yusen Logistics. “To drive costs out, they’re b e coming more relaxed about sharing their operations with others.”
Visteon’s Pfeiffer agrees, pointing to operational efficiencies and cost amortisation as objectives. “Given the choice, I definitely like the option of sharing: there’s the opportunity to flex your capacity footprint, and also to share freight lanes with another manufacturer. It’s undoubtedly more advantageous,” he notes.
However, beyond the natural sharing involved with the ProTrans contract, no other Visteon facilities are shared – although El Paso has space and offers would be considered.
It’s often those shared freight lanes to which Pfeiffer refers that could be the main impetus for a shared crossdock. Sharing a single facility, goes the logic, is a pleasant bonus, but the real gains come from sharing the transport network that delivers to that facility.
“Being able to share the crossdock in terms of the building itself is something that these days almost everyone wants to do,” says Bill Scroggie, senior vice-president of operations at Penske Logistics. “The challenge is in sharing the inbound routes: automakers have optimised their own freight networks, so the issue they must address is how to move beyond that. In that context, shared networks make a lot of sense.”
“Combining ‘like-for-like’ networks is the key to maximising the benefit derived from what is normally a large space without racking,” agrees Robert Naylor, vice-president at DHL, responsible for Jaguar Land Rover. “Parts are collected from common suppliers and then crossdocked to their end destinations, thereby reducing empty running and sharing the operating platform costs.”
Indeed, Naylor adds, this is exactly what happens with the continental European shipments handled on behalf of JLR, with the carmaker’s parts collected from suppliers alongside components for other OEMs, and then crossdocked to their respective final destinations.
“We are happy to join other companies’ networks, and they are welcome to join ours,” affirms JLR’s Jeory. “We share with other automotive manufacturers, and indeed other non-automotive manufacturers. The extent of the sharing isn’t huge, but when it makes sense, and where the networks are common, we do it.”
Logistics providers must be the glue
The role played by the logistic provider in acting as a stimulus to sharing – of both crossdocks and the inbound routes to them – is becoming increasingly pivotal. For OEMs looking to evaluate the potential for sharing, in short, the first door to knock on is that of a logistics provider.
“We encourage our service providers to suggest opportunities to share facilities, and both of our current providers have brought to the table some potential opportunities,” says Dana McBrien, associate chief advisor for North American logistics at Honda of America Manufacturing. “Since these companies have the ability to see multiple automotive manufacturers’ networks, it gives them the opportunity to see supplier and network overlap, and create mutually beneficial proposals that involve multiple manufacturers and their own company assets.”
"We are happy to join other companies' networks, and they are welcome to join ours... the extent of the sharing isn't huge, but when it makes sense, and where the networks are common, we do it. " - Al Jeory, Jaguar Land Rover
Increasingly, the result is a self-reinforcing ‘virtuous circle’, with logistics providers who already serve automotive customers well placed to gain further business, thanks to those customers’ perceptions of the opportunities for sharing. “A s a u t o m o t i v e parts from the same suppliers are often delivered to different car manufacturers, customers appreciate a logistics services provider which already has some carmakers in its portfolio,” says Katarzyna Jaeger, key account manager at logistics provider Raben Group. “This is because it offers further possibilities of optimisation, such as the consolidation of products from suppliers on trucks which supply shared crossdocks."
McBrien adds that negotiating through the auspices of a provider also serves as a mechanism to preserve confidentiality between OEMs. “I’ve suggested in multiple forums that this may be the only way in which these types of discussion can take place without either manufacturer having to disclose information that we would not be willing to share,” he explains.
However, Honda’s actual crossdock sharing practice currently lags behind its willingness to share. To date, only a Dallas crossdock is shared, in this instance with consumer goods manufacturers (arranged again through a logistics provider). “Currently, we have not been able to implement any shared solutions involving Honda and another vehicle manufacturer just yet,” says McBrien. “Discussions were ongoing when we all experienced the effects of the terrible natural disasters in Asia, and we broke off communication to tend to the conditions at hand and the subsequent recovery of production. But we’re certainly open to pursuing opportunities as our service providers bring them forward, as long as the other vehicle manufacturers are willing to participate.”
Share with everyone, including yourself
Not every example of crossdock sharing, however, involves sharing facilities with external third parties. BMW, for instance, has found that crossdock sharing makes sense within the organisation, too.
From February this year, a newly-expanded 95,000-square-metre Kuehne + Nagel logistics centre in the Bavarian town of Wörth an der Isar is acting as a crossdock hub for BMW’s three assembly plants of Dingolfing, Munich and Regensburg. The logic to the hub is that there is a concentration of suppliers in the Bavarian region with many feeding all three plants, explains Patrick Thom, BMW project leader for network strategy. “A bundling and control of inbound transportation reduces costs and supports the timely supply of production plants,” says Thom. “For overall network optimisation, the implementation of a central crossdock for the Bavarian plants became necessary.”
Another successful model for crossdock sharing involves not just a commitment to sharing, but sharing extensively across industries – and across the 24-hour cycle. The goal would be to build and operate highly flexible physical facilities where a freight door might be used for feeding assembly plants during daylight hours and aftermarket inventory replenishment at night.
The model in question is Gefco’s pan-European network of 150 or so crossdocks, handling requirements as diverse as those of PSA Peugeot Citroën, Toyota, Renault and tier one fuel system supplier Inergy.
“Our crossdocks have always been shared,” says Emmanuel Arnaud, Gefco sales director. “Sharing crossdocks – not just between automakers and tier ones, but with manufacturers and distributors from any industry – makes sense, because adding value and sharing the network improves productivity and utilisation.”
The trick, he adds, is to design flexibility into the crossdock. Routinely, a crossdock will work a 24-hour cycle, with each door and each square metre of space serving several customers or freight lanes across that cycle. Arnaud stresses that this utilisation and multiplicity of users must be compatible with even the highest quality standards.
“Toyota, for whom we crossdock cargo across several of our facilities, is one of the more demanding automakers in terms of operator training and process management,” he notes. “We have allocated 12-hour, dedicated spaces and 24-hour dedicated spaces to Toyota, each staffed with people fully trained in the Toyota quality system, and also fully trained in the procedures of the plant they are feeding.”
Which is why a good set of crossdock KPIs is vital, says Edwin van Woudenberg, European business development manager for automotive at Vos Logistics.
“It’s important that goods are on the floor for as short a time as possible – so you must measure that time,” he insists. “Measure the time taken loading and unloading. Measure dwell time at the crossdock. And make sure that the physical flow from the incoming arrival to the outgoing departure is as efficient as it can be made.”
To maximise the crossdock’s responsiveness, don’t forget to measure plant-side operations, either, says JLR’s Al Jeory. “Aim to minimise offloading time and dwell time at the plant,” he urges. “You don’t want trucks to spend their time waiting to unload two boxes at a dock before driving off to wait at the next dock to unload another two boxes.”
Crossdocks should not be ‘boilerplate’
Persuasive though the arguments for crossdock sharing are, sharing isn’t right in every circumstance, say industry insiders. Freight density, for instance, turns out to have a major impact on the economics of sharing.
“Sharing makes tremendous sense when you don’t have density,” s ays Ryder Logistics’ Kroswek. “In the Detroit area, sharing a crossdock makes little sense [because of the concentration of manufacturers]. But in other geographic areas – such as the southeast, the Atlantic coast, and the west – crossdock sharing can make all the sense in the world, as the densities are so different.”
The key thing, he emphasises, is that crossdocks must meet a known logistics need and not be a ‘boilerplate’ deployment rolled out because conventional thinking regards crossdocks as part of a standard automotive solution.
“It’s important to make sure that the crossdock adds value,” Kroswek stresses. “You’re adding more touches, and so you’ll want to make sure that in terms of its location and its operation, the value added by the crossdock outweighs the incremental costs involved, which include real estate, labour, technology cost and so on.”
Be aware, too, that crossdock sharing can involve an element of compromise, warns Penske’s Scroggie. In economic terms, the advantages on offer may be comparative, not absolute. “Facilities that meet the needs of one manufacturer aren’t guaranteed to meet the needs of another,” he notes. “There might be a cost reduction for one, but a cost penalty for another. It isn’t an automatic ‘win-win’, and careful evaluation can be required.”
What’s more, adds Yusen Logistics’ Pursey, shared crossdocks, by definition, are more complex to manage than facilities dedicated to a single carmaker. The challenge is making sure that the benefits obtained through sharing crossdocks aren’t dissipated through the management that is involved in ensuring they remain functional.
“In theory, shared crossdocks and networks are the way of the future,” Pursey says. “But crossdock operators need to be able to deal with the additional complexity cost effectively, while still delivering parts to lineside on time.”