2007, April 24th, Metropol Hotel Moscow Conference : ECR-RUS 3rd Annual Conference, organized by ECR

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3. 1/ Geographical Challenge
New scales of retail / From Points …
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4. 1/ Geographical Challenge
New scales of retail / From Points to Chains
Net increase of the Networks size through :
• Regional Expansion
• Merger & Acquisitions
• Alliances & Franchise
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5. 2/ Increasing competition pressure
The competitive pressure forces retailers to
– Be more competitive
– Perform better service
– Deliver right products at the right place & at the right time
– Work on their own differentiation
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6. 3/ New business shapes :
Multiformat Strategies
Windows of opportunity Analysis (Based on GRDI ranking for 1995 – 2006) 6

7. 4/ Formation of own image and identity:
Larger and stricter assortments
Enlargement of the product ranges in The consumer gets mature
modern retail formats :
• Requires a sophisticated product offer
• consumers begin to spend more on non-food • Compares the offer of stores
items
• Explosion of the quantity of SKU’s to manage => Category Management, Promos
⇒ Hypermarkets, …
For Logistics :
- high volumes to treat
- Every product is important (OOS)
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8. Impacts onto logitics
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9. 1. Capacity issues
• Necessary permanent increase of the
logistics capacity
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10. 2. New scales of retail / From Logistics Points … to Chains
Apparition of
network
problematics 10

11. 3. Multiformats chain greatly impact
requirements to supply chain
(+) Inventory
(-)
(-) (+)
Frequency of replenishment
Hypermarket Maxi Express Convenience Store
• 4 own-managed • 2 own-managed • 5 own-managed • 4 own-managed
stores, 1 franchise stores stores stores
• Trading area: • Trading area: • Trading area: • Trading area:
4,500-11,700 sqm 2,500-3,600sqm 1,000-1,800 sqm 80-400 sqm
• Up to 50,000 SKUs • Up to 25,000 SKUs • Up to 12,000 SKUs • Up to 2,500 SKUs
• 50% non-food • 40% non-food • 20% non-food • 10% non-food
• Moscow (4 stores) • Krasnodar • Chelyabinsk (4) • Moscow (4 stores)
• Tyumen • StPeterburg • Krasnodar
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12. What is cross docking ?
Flow-through distribution
Consolidation
X docking
Warehousing without inventory
“JIT in the distribution arena“ - Napolitano (2000)
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13. What is cross docking ?
Cross-docking is a practice in logistics of unloading
materials from an incoming transport unit and loading
these materials in outbound transport unit, with little or
no storage in between.
This may be done :
• to change type of conveyance,
• or to sort material intended for different destinations,
• or to combine material from different origins.
In purest form this is done directly, with minimal or no
warehousing.
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14. 14

15. Cross Docking principles
Supplier Store
Supplier Store
Supplier Store
Supplier Store
Supplier Store
Supplier Store
Supplier Store
Supplier Store
Supplier
Cross- Cross- Store Cross Docking and consolidation
Docking Docking center
Terminal Terminal
Supplier Store • greatly decreases the quantity
of transactions between
Supplier Store suppliers and stores
• Allows to ship far small
Supplier Store
quantities
Cross- Cross-
Supplier Docking Docking Store
Terminal Terminal
Supplier Store
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16. Cross Docking principles
Pure Cross Docking
Consolidation Cross Docking
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17. Typical applications
"Hub and spoke" arrangements, where materials are brought in to one central location and
then sorted for delivery to a variety of destinations
Store
Store Store
Cross-
Docking
Terminal
Store
Store
Store
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18. Typical applications
Consolidation arrangements, where a variety of smaller shipments are combined into
one larger shipment for economy of transport
Cross-
Docking
Terminal Store
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19. Typical applications
Deconsolidation arrangements, where large shipments (e.g. railcar lots) are broken down
into smaller lots for ease of delivery.
Store
Store
Store
Cross-
Store Docking
Terminal
Store
Store
Store
Store
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20. Typical applications
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21. What is at stake ?
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22. The ECR analysis : cost breakdown in retailer / supplier relationship
model
The adversarial mode ECR approach Result:
Price= 100 Price= 100 Grow the cake
Price= 96
Retailer
Interface costs: 17
Interface costs : 13
Manufacturer
Turnover Turnover Turnover
Source: ECR France / BCG, 1998
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23. Necessary Implementation Steps
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24. Product selection
For example, Home Depot chooses which
products go through its crossdocks after
carefully analyzing current inbound
transportation costs and ease of handling.
Items such as lumber and awkward
If demand is uncertain, industrial supplies are all taken directly to
crossdocking is difficult the stores, rather than being run through
because matching supply and the crossdock, because any savings in
demand is diffcult. transportation costs would be oset by
excessive handling costs.
Perishable products
that require immediate shipment
Easy
Highly
to handle
items that do not require extensive predictable
Product
quality checks during receipt Product
(high cubic
(low variance)
volume)
Product moving
from one retail store to another
High volume
Compatible products !!! products
(popularity)
demand for the product must be suffcient to
warrant frequent shipments. If demand is too low,
frequent shipments lead to excessive inbound
transportation costs, and the warehouse would be
better holding stock rather than crossdocking.
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25. Supplier selection.
Suppliers that have DCs
Infrastructure
Suppliers that configure
Suppliers that consistently products for efficient handling
provides the correct
quantity of the correct
High
Service X Value
Added
through the next point in the
supply chain, consistently
product at the precise time Level Services comply with customer mandates
it will be needed. for labeling, ticketing,
packaging, and product quality
Information
Sharing
Suppliers that effectively
and efficiently share
Unique supplier of information with their
unique product !!! customers.
(Private Label)
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26. Planning and Designing the Operation
because most cross-docking activity is concentrated at receiving and loading docks,
Dock-area • adequate number of dock doors (1 / 500m2)
layout and capacity • Where possible, eliminate racks to create more dock space.
• Make sure product can flow quickly and freely through the DC.
• Visible floor layouts, processes and systems.
• Well laid out visible floor areas to enable management by sight.
• Clear floor policy at end of shift periods.
to comply with the rigid schedules needed for cross docking,
Yard
Management • you may need a yard tractor and trained driver to move trailers around the yard.
• A yard manager must also be on hand to ensure that trucks are spotted at the right doors at the right
times, resolve equipment issues, and coordinate incoming and outgoing trucks so that delays can be
avoided.
Because it’s important to move large volumes of product in a short time.
Material Handling • Using double pallet jacks to transport pallets can double throughput.
Equipment
• Conveyors that are installed on the floor of truck trailers and connect to inbound and outbound pallet
conveyors within your facility can significantly speed up pallet transfer
• Where appropriate, powered extendibles can aid in loading and unloading cartons as well.
When it’s time to choose managers for a new cross-docking operation, remember that forward
thinking is a critical success factor.
Personnel • Cross docking cannot fully achieve its objectives without a good core of receiving/shipping
supervisors and logistical planners who can identify product that needs to be cross docked and redirect
personnel to make it happen. Supervisors must be able to recognize opportunities for pre-receiving or
pre-allocating receipts before the actual product arrives.
• Training at both the supplier and DC locations will be necessary. For the supplier, training on the
specific requirements (as noted in policies/procedures) of a customer must be developed.
• For the DC, training on how to handle cross-dock product versus standard receipt-to-storage product
will be necessary.
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27. Planning and Designing the Operation
Quality communication
– Clear inbound information flows of what is due to arrive.
– Clear outbound information flows of what, where and when goods need to be shipped.
– Clear product labelling and routing information on all pallet consignments.
Enabling communication technologies
– EDI
– Serial Shipping Container Code (SSCC)
- The benefits of the SSCC are:
» Logistics Units are identified with a worldwide unique number
» Provides a link with bar coded information on a logistics unit and the
information that is communicated between trading partners via
electronic business transactions.
» All numeric structure leads to faster data processing
real-time IS are preferred to paper-based systems
– RF (RFID??)
– it’s important to not only capture data in real time but to also utilize it right away.
- fill discrepancies in real time.
Cross Docking relies on continuous communication between Wal Mart’s suppliers, distribution
centers, and every point of sale system in each store.
For this purpose, Wal Mart operates their own satellite network that sends the point of sale
(POS) data directly to 4,000 vendors.
Centralize your
organization One strategy that retailers use is to have centralized buyers determine what gets shipped to stores,
instead of the stores themselves; that is, it is strictly a push distribution system and there is no need
to carry safety stock. The buyers have effectively taken all variance out of the demand (from the
retail outlets, not from the customer). Retailers like Wal-Mart and Ross Stores use this technique.
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28. Implementation and Maintenance
start with
a pilot program
That will allow you to study the effects of cross docking on a small scale and
resolve any weaknesses before rolling it out to an entire product line or network of
facilities.
Be prepared
for contingencies
This may include keeping a small inventory of cross-docked product in your
facility.
Standard operating
procedures
Standard operating procedures should also be in place so orders are not delayed
and product can still be cross docked even when fewer units than expected are
received (perhaps due to miscounts or damage).
Continuous
Improvement
Once your cross-docking operation is up and running smoothly, don’t sit back and
assume that your job is done. Supply and demand conditions change constantly,
so periodically monitor cross-docked products to determine their sustainability in
your program.
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29. Cross Docking effects
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30. Reduction of the Bullwhip Effect
Consumer Sales at Retailer Retailer's Orders to Wholesaler
1000 1000
900 900
Consumer demand
800 800
Retailer Order
700 700
600 600
500 500
400 400
300 300
200 200
100 100
0 23 0
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Wholesaler's Orders to Manufacturer Manufacturer's Orders with Supplier
1000 1000
Manufacturer Order
900
Wholesaler Order
900
800 800
700 700
600 600
500 500
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31. When cross docking replaces warehousing,
a number of benefits follow
OPEX CAPEX
• reductions in storage-space requirements,
Handling cost / simplify receiving at the retail • less equipment required for handling and storing the
outlets. products.
• By consolidating deliveries for one destination,
the drop size for this destination can be greatly
enhanced, CASH FLOW
• The cost of unloading and handling is therefore • reductions in inventory investment
reduced. • reductions in order-cycle times as well as faster
inventory turnover and accelerated cash flow.
Outbound transport costs decrease • sale space is increased in stores => more sales
• Consolidation of several delivery destinations
bound to the same geographical area that may
be served by the same delivery tour results in a CUSTOMER SERVICE
higher stop density. • High reactivity - Might improve based on the ability
• Due to consolidation additional drop points can to avoid some stockouts.
be scheduled, therefore the distances between • No constraints concerning expiry dates
the stops are reduced. • Less excess inventory generates reduced product
• High transport frequency (small lead times) damages and product obsolescence.
• All stated benefits should allow to increase, margins,
Crossdocking consolidate shipments to achieve dcreases prices, increase competitiveness and sales
inbound truckload quantities.
• a retailer can consolidate orders from a very big
quantity of retail outlets to each and have the BUSINESS PROCESS
uppliers ship full truckload quantities to a • Less transactioins between suppliers and
crossdock, rather than sending LTL shipments retailers
directly to the outlets. • more visible inventories
• Reduction of queues and delays
Warehousing costs dramatically decreases
storage and order picking are typically the most costly
functions of warehousing, beside receiving and shipping
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32. General Figures
McCain Foods USA Inc
Cross-docking enables Wal-Mart to achieve the “We saved 20% to 30% in total warehouse costs by not
economies that come with purchasing full truckloads sending product into storage. And that’s with just one
of goods while avoiding the usual inventory and percent of our total SKUs (stock-keeping units) being
handling costs.
cross docked,”
– Wal-Mart runs a full 85% of its goods
through its warehouse system -- as Director of Warehousing Timothy Egan
opposed to only 50% for Kmart. How to be a lean, mean cross-docking machine
– Goods are crossed from one loading dock By Maida Napolitano
to another in 48 hours or less This 2007
enables them to be in the store and ready
to be sold For Carrefour :
This reduces Wal-Mart's costs of sales by 2% to • Average 20% of reduction of DC inventory level
3% compared with the industry average.
(France)
• 50% decrease of out-of-stocks (Poland)
• 100% detention rate (Colombia)
Carrefour CIES Conference
Geneva 12 October 2006
Pooling / Consolidation - One year after
Xavier HUA
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33. Cross Docking Challenges in
Russian Environment
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34. Challenges to consider
Defining Cross Docking areas, consider the following :
– A. Lead Times and Security Stocks should not become so high that
» Time to market is lost
» Security Stocks become to high
Otherwise Cross Docking becomes Pointless
– B. Sub Regions should be defined
- 1 Cross Docking area for all Russia seems difficult
- C. Cross Docking should not be the security net of the buying
departments
- “If we can’t source locally – we’ll cross dock” is not always
the best algorithm
- “If we can’t produce locally – we’ll cross dock” is not always
the best algorithm
- D. With important regional development, cross docking centers may
- move on the map (to east, to south)
- Become more numerous
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35. Designing Cross Dock areas
?????
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36. Challenges to consider
1. Responsibility 6. Work load balance among gates
• Divided between the parties, therefore further
clarification is needed
2. High control culture
• Control vs efficiency
• Is an obstacle to Cross Docking, SSCC, etc.
Control Efficiency
3. Far small stores can not receive too
“Consolidated” volumes
• For instance 20t truck to convenience store !
4. Bulk and weighted products
• Make a decision between average case estimated 12% reduction
in labor costs due to travel
weight and exact case weight (Fruits and and waiting.
vegetables for instance)
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37. Challenges to consider
MON TUE WED THU FRI SAT SUN
?
After 1500 – 2000 km
Train is more cost effective
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38. Challenges to consider
Take into account the (poor) logistics infrastructure
Capgemini Logistics Map of Russia 2007
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39. Mosmart and Cross Docking
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40. MOSMART in 2007
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41. MOSMART’s Operations
Operations : 2007-2008 projects considered :
• In house operations • Opening of deconsolidation areas in regions
• Hub in Moscow • Partial outsourcing
• Consolidation + Merge in transit • Cross Docking for Fresh Products
• Started in 2006 • Cross Docking on Rolls for convenience
stores (Reverse logistics as a foreseen
Enabling technologies : challenge)
• Radio Frequency Technologies
• EDI Key learnings :
• Electronic Order Consolidation System used • Staff forecast is critical big sensitivity to
(Cross Docking Module of “Meti” store fluctuations
management system) • Important learning curve and productivity
gains
Figures : • Real possibility for Mosmart to guarantee its
• Delivery consolidation : 60 orders in 1 truck assortment matrix in the regions (Private
• 20%+ of regional volumes cross docked labels for instance)
• 1,5 days of stock only in average • Real wins on minimal orders
• 200+ suppliers cross docked • CD much more economic than traditional DC
• Stores opening destabilize flows
Geography :
• More than 4 regional destinations today
• At least 1 new regional destination per month
• Moscow destinations (Convenience Stores)
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42. Conclusion
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43. Cross Docking is one of the answers to the new retail
challenges in Russia
• Moving growing ranges of volumes,
– quickly,
– across a large country (continent),
• Gaining in competitiveness
• Gaining in customer service level
• Decreasing the inventory pressure all along the Supply Chain
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44. Golden Rules / Changes in traditional philosophy
COLLABORATING extensive coordination between the distributor and its
suppliers and customers
• Implementing a cross-docking operation often means that channel partners may
experience at least a few headaches along the way.
RELYING increased requirement for quality in receiving.
• there is no time to inspect quality on the receiving dock. Ideally, this would
eliminate counting as well, although this level of confidence is rare.
COMMUNICATING Increased communications between channel partners
• important challenge of the extended supply chains on the side of I+C is that
information flow must be assured through passing company limits.
RECONSIDERING costs along the supply chain
• channel partners may experience increased costs
• But the savings associated with crossdocking must always overcome these extra
costs for the system to be viable.
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45. Perspectives & Trends
Initiative coming for the logistics community
(3PLs, supliers, retailers)
• Increase of the length of trailers
– Problematics : Too many trucks on roads
– Proposal : Reduce the number of trucks by
Initiative to come from 3PLs increasing the capacity of transportation of each
- Cross Docking services as a perspective range of truck : towards an approval to 44T trucks,
service demanded for example by trade-unions to the
- Specialised warehouses european commission
– Multi-Retailers’ warehouses ?
– Multi-Suppliers’ warehouses (Pooling) • More Productivity : Equip delivery points of
double fork forklifts
– Problematics : Today, only single pallets
deliveries can be done to hypermarkets and/or
retailers’ warehouses.
– Proposal : Equip delivery points of double forks
Initiative to come from suppliers and forlklifts : enabling 90% of higher density /
retailers volume of deliveries.
- More visibility :
- VMI : helped to transfer order-management costs • RFID
on producers, and generated 30% stock
reductions while keeping an availibility of stock of • New Softwares Generations, on the edge of ERP
99,5%(B.Viallon CPV Associés). and WMS : opportunistic (unplanned) Cross-Docking
- CPFR algorithms :
- POS data sharing – Detecting opportunities for cross docking in a
dynamic environment, the system generates a
cross-docking decision during the process of
transfer order creation ( after the arrival of the
incoming stock or release of the outgoing
document).
– Cross-docking streamlines warehouse processes
and eliminates unnecessary material handling.
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46. Cross Docking is a Formula One
in logistics
Where every victory …
… is the fruit of a well orchestrated team work
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47. Questions ?
47

48. Thank You for
attention!
Feel free to contact
s_rivet@mosmart.ru
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50. References
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51. Key References
ECR Blue Book
• The transport optimization report
• March 2000 - ECR Europe
ECR Europe Transport challenges and proposals
• FM Logistic Presentation
• on ECR Europe sustainable transport workshop
• Prague - 9 March 2007
Making the Move to Cross Docking.
• Napolitano, M. (2000)
• Warehousing Education and Research Council.
(WERC)
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52. General References
Bartholdi, J. J., Gue, K. R., and Kang, K. Crossdocking: Just-In-Time for
(2001). Throughput Models for Unit-Load Distribution
Kevin R. Gue
Crossdocking. In review. Graduate School of Business & Public
Policy
Schaer, B. (1997). Implementing a Naval Postgraduate School
Crossdocking Operation. IIE Solutions, Monterey, CA 93943
kevin.gue@nps.navy.mil
pages 34-36. 2001
Stalk, G., Evans, P., and Shulman, L. E. CROSS-DOCKING IN THE SALES
(1992). Competing on Capabilities: The SUPPLY CHAIN: INTEGRATION OF
INFORMATION AND COMMUNICATION
New Rules of Corporate Strategy. (I+C) RELATIONSHIPS
Harvard Business Review, pages 57-69. Tamás BABICS
Department of Transport Technology
"A Lean Approach to Cross Docking," Faculty of Transportation Engineering
Budapest University of Technology and
Robert L. Cook, Brain Gibson, and Economics
Douglas MacCurdy babics@radiant.tvnet.hu
2004
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53. Specific references
for Cross Docking Layouts
Reducing Labor Costs in an LTL Cross-docking Terminal Powell, W. B., Jaillet, P., and Odoni, A. (1995).
John J. Bartholdi, III - School of Industrial & Systems Stochastic and Dynamic Networks and Routing.
Engineering - Georgia Institute of Technology - In Ball, M., Magnanti, T., Monma, C., and
Atlanta, GA 30332 - Kevin R. Gue - Department Nemhauser,
of Systems Management - Naval Postgraduate
School - Monterey, CA 93943 - February 25, G., editors, Handbooks in Operations Research
1999 and Management Science, Volume 8: Network
Routing, chapter 3, pages 141{295. Elsevier
Bihr, R. A. (1990). A Conceptual Solution to the Aircraft Science.
Gate Assignment Problem Using 0,1 Linear
Programming. Computers & Industrial Engineering,
19:280{284. Powell, W. B. and She, Y. (1989). Design and
Implementation of an Interactive Optimization
Gue, K. R. (1995). Freight Terminal Layout and System for Network Design in the Motor Carrier
Operations. PhD thesis, Georgia Institute of Technology. Industry. Operations Research, 37(1):12{29.
Gue, K. R. (1998). The Eects of Trailer Scheduling on the
Layout of Freight Terminals. Transportation Science. Roy, J. and Delorme, L. (1989). NETPLAN: A
forthcoming. Network Optimization Model for Tactical Planning
in the Less-Than-Truckload Motor-Carrier
Mangoubi, R. S. and Mathaisel, D. F. X. (1985). Optimizing Industry. INFOR Journal, 27(1):22{35.
Gate Assignments at Airport Terminals. Transportation
Science, 19(2):173{188. Su, Y. Y. and Srihari, K. (1993). A knowledge
Mathaisel, D. F. X. (1996). Decision support for airline based aircraft-gate assignment advisor.
system operations control and irregular operations. Computers & Industrial Engineering, 25:123{126.
Computers & Operations Research, 23:1083{1098.
Tsui, L. Y. and Chang, C.-H. (1990). A
Peck, K. E. (1983). Operational Analysis of Freight Microcomputer Based Decision Support Tool for
Terminals Handling Less Than Container Load Assigning Dock Doors in Freight Yards.
Shipments. PhD thesis, University of Illinois at Urbana
Champaign. Computers in Industrial Engineering, 19:309{312.
Tsui, L. Y. and Chang, C.-H. (1992). Optimal
Solution to a Dock Door Assignment Problem.
Computers & Industrial Engineering, 23:283{286.
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54. References
Main references materials will be available on
Eastern _ Europe _ Logistics _ Community Yahoo!Group
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