Crossdocking Insights from a Third Party Logistics Firm in Turkey

In the book “The Silk Road: Two Thousand Years in the Heart of Asia,” Wood (2002) remarkably suggests that “the very name of ‘Silk Road’ is somewhat misleading.” Wood explains as follows: “It [the name ‘Silk Road’] suggests a continuous journey, whereas goods were in fact transported by a series of routes, a series of agents, passing through many hands before they reached their ultimate destination.”

It’s striking to realize that the Silk Road was a complete “crossdocking” operation, executed on a geographically dispersed collection of hubs and routes. Products neither traveled on a single route nor were they stored on the way. Rather, they were staged for short periods at the hubs, and then were passed on towards the next hub on the route, typically by a new caravan or transportation mode.

Today, crossdocking is still very important and popular. Crossdocking has a great potential to bring great financial and time savings in logistics. For example, most of the logistics success of Wal-Mart, the world’s leading retailer, is attributed to crossdocking.

In this chapter, different types of crossdocking are reviewed, and the crossdocking applications of a 3rd party logistics firm based in Istanbul, Turkey is presented. Istanbul was one of the two final destinations on the Silk Road, together with Rome. Today, it is home to best practices of crossdocking by a multitude of logistics companies, including the company described in this chapter.

Crossdocking is a supply chain strategy that can accomplish significant reductions in total costs and in lead times in a supply chain. In this strategy, crossdock facilities (CFs) act as transfer points where inbound product flow is synchronized with outbound product flow to essentially eliminate storage of inventory. Two other strategies applied in distribution of products are traditional distribution with warehouses and direct shipment (Simchi-Levi et al., 2003).

In traditional distribution with warehouses, the warehouse typically houses activities of receiving, putaway, storage, replenishment, order picking, and shipping. Storage is well known to contribute greatly to costs due to inventory holding. Order picking is well known to contribute greatly to costs, due to labor requirements or the investments in costly automated equipment (Frazelle, 2001). In pure crossdocking, the activites carried out are receiving, staging, and shipping. Staging of products should last for a very limited time span, such as 24 hours, for the facility to be considered a CF.

Increased competition in almost every industry, especially retail and grocery industries, has been pushing companies to search for ways of reducing costs throughout the supply chain. For example, grocery retailers and distributors operate under profit margins of approximately 1.5% (Modern Materials Handling, 2003). Cooperating with supply chain partners to reduce the system-wide costs throughout the supply chain and sharing the benefits is a strategy followed by many companies. The Internet allows companies to communicate among each other in real time at costs significantly lower than the past, when establishing Electronic Data Interchange (EDI) systems was required for real time communication (Brockmann, 1999). These listed factors have increased the applicability of crossdocking as a supply chain strategy.

Crossdocking in various forms has been in use for a long time, especially by package delivery companies. However, its recent popularity can be attributed to its extensive use by Wal-Mart, which implemented this strategy successfully and eventually became the world’s largest retailer with more than 5,000 stores throughout the world (Stalk et al., 1992).

Napolitano (2000) provides practical guidelines to planning, designing, and implementing a crossdock operation. This paper firstly provides a brief tutorial on crossdocking through a review of literature, covering Napolitano (2000) and other sources. Then a case study that describes the crossdocking operations of Ekol Logistics, a leading 3rd party logistics firm in Turkey, is presented. The challenges faced by this firm in implementing crossdocking are listed, and insights are summarized.

Ertek, G., (2012) “Crossdocking Insights from a Third Party Logistics Firm in Turkey”, in Managing Supply Chains on the Silk Road: Strategy, Performance, and Risk,  Eds: Çağrı Haksöz, Sridhar Seshadri and Ananth V. Iyer.

Note: This is the final draft version of this paper. Please cite this paper (or this final draft) as above.

Crossdocking Insights from a Third Party Logistics Firm in Turkey

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