Page 205 - DMGT523_LOGISTICS_AND_SUPPLY_CHAIN_MANAGEMENT

Logistics and Supply Chain Management

Notes plants destined to a specific customer on a single transportation shipment. The benefits are the
realization of the lowest possible transportation rate and reduced congestion at a customer’s
receiving dock. The warehouse allows both the inbound movement from the manufacturer to
the warehouse and the outbound movement from the warehouse to the customer to be
consolidated into larger shipments.
In order to provide effective consolidation, each manufacturing plant must use the warehouse as
a forward stock location or as a sorting and assembly facility.

The primary benefit of consolidation is that it combines the logistical flow of several small
shipments to a specific market area. Consolidation warehousing may be used by a single firm,
or a number of firms may join together and use a for-hire consolidation service. Through the use
of such a programme, each individual manufacturer or shipper can enjoy lower total distribution
cost than could be realized on a direct shipment basis individually.
Break Bulk and Cross Dock

Break bulk and cross-dock warehouse operations are similar to consolidation except that no
storage is performed. A break bulk operation receives combined customer orders from
manufacturers and ships them to individual customers Figure 9.1 illustrates the break bulk
flow. The break bulk warehouse or terminal sorts or splits individual orders and arranges for
local delivery. Because the long-distance transportation movement is a large shipment, transport
costs are lower and there is less difficulty in tracking.

Figure 9.1: Break Bulk Flow

Customer A
Break Bulk
Plant A Warehouse Customer B

Customer C

Source: Upendra Kachru, (2010), “Exploring the Supply Chain,” Excel Books

A cross-dock facility is similar except that it involves multiple manufacturers. Retail chains
make extensive use of cross-dock operations to replenish fast-moving store inventories, e.g.,
full trailerloads of product arrive from multiple manufacturers. As the product is received,
customer either sorts it if it is labelled or allocated to customers. If it has not been labelled, the
product is then literally moved “across the dock” to be loaded into the trailer destined for the
appropriate customer. The trailer is released for transport to the retail store once it has been
filled with mixed product from multiple manufacturers. The economic benefits of cross docking
include full trailer movements from manufacturers to the warehouse and from the warehouse
to retailers, reduced handling cost at the cross-dock facility since product is not stored, and more
effective use of dock facilities because all vehicles are fully loaded, thus maximizing loading
dock utilization.

Processing/Postponement

Warehouses can also be used to postpone, or delay, production by performing processing and
light manufacturing activities. A warehouse with packaging or labelling capability allows
postponement of final production until actual demand is known.

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