Cross docking rates, much like other parts of the shipping and logistics industry, have been affected by changing global circumstances. As businesses continue to seek creative solutions to stretch the dollar ever further, cross docking has become more popular. Learning how rates are calculated will allow you to make an informed decision on whether your business could benefit from cross docking services.
Cross docking rates are impacted by labor needs, transportation style, and package complexity. Loads that can be moved easily and with minimal handling will be less expensive. Any shipments that need sorting and require re-palletization are likely to incur further costs. Additional fees may be added on a case-by-case basis.
See how cross docking fees are determined and how they may prove beneficial for your business.
Calculations for cross docking services will vary depending on the type of services required. In its simplest form, cross docking rates can be calculated per pallet. In this case, a shipment on one truck just needs to be transferred to another, no special handling is required. This is referred to as a Ready Palletized Freight.
Cross docking is commonly combined with LTL (Less-than-Truckload) shipping, which carries packages for more than one client. To make material handling easier, those packages are often palletized. If you have three pallets on one truck and need them to be transferred to another for the last mile, you may pay per pallet.
|Number of Pallets||Cross Dock Fee per Pallet||Base Cross Dock Fee|
Depending on the carrier service, you may also be charged a delivery fee. If there is a waiting period between drop-off and loading, there may be a pallet out/pallet in charge. This is also true if pallets are heading to different destinations after unloading. While the above example is simplistic, it is the basis behind cross docking strategy.
The entire idea is to avoid needing warehouse space while keeping goods on the move. In theory, this will result in merchandise getting from its point of origin to its final destination faster.
Distribution and fulfillment logistics are often not that simple. A smooth cross dock transition relies on other factors, some of which will affect the rate you are charged.
In the short term, cross docking operations require people to be on-hand at all times to complete shipment transfers. If loads do need to be unpacked and re-palletized for final delivery, labor costs for that shipment may go up.
Different types of cross docking services may attach these labor costs as part of their quotes.
For these types of services, prices will change because further manual labor is required for sorting and repacking. Due to current labor shortages, increased handling may also extend the estimated delivery times.
Additionally, a transfer-only cross dock warehouse cannot be used. Any re-palletization requires some kind of production line that should be away from the main cross docking activity so as not to interfere with other load transfers. The same can be said for any items needing to be stored beyond the standard 24 hours sit time.
The more adjustments needed, the greater the cross dock rate. Additional fees may include:
In truth, effective cross docking services are less labor-intensive in the long term. The majority of shippers using cross docking aren’t keeping items in a warehouse and wish to avoid any re-packing. The amount paid for intense labor in the short term often proves less than the price of storing inventory long term.
As automated technologies continue to rise, manual labor costs may decrease.
Shipping fees may be quoted to you separate from cross docking fees. Depending on your chosen carrier service or partner 3PL, they may not get done by the same company.
There are cross docking terminals that operate independently. Carriers use them as transfer points and may have a direct contract with them already built into the price they quote you. If you happen to have your own trucks, that may be the case too.
If you are seeking cross docking from your 3PL partner, current transportation costs may factor into the fees.
Cross docking operations are now replacing drayage service for long-haul deliveries as well. With more drayage services remaining local, cross docking is becoming the preferred method to get specific goods to destinations further from the common ports.
Depending on your shipping needs and transportation management system, the above charges may already be worked into your budget. If that is the case, then transportation costs may have little impact on a shipment-by-shipment basis. For high-volume shippers, this can be analyzed on a quarterly or annual basis.
When well-managed, cross docking can almost eliminate the need for traditional warehousing. A cross dock facility is designed for speed. Products move in and out quickly through designated inbound and outbound docks.
From the start, you are eliminating a large part of your storage costs. By reducing your need for storage space, you reduce the need for extensive inventory management. You may still keep some merchandise as part of safety stock in a warehouse, but your overall needs are still less.
Let’s look at a basic breakdown of monthly and annual warehousing expenses. You are currently renting 6,000 square feet of space in a warehouse for Company ABC. Items arrive from the port and are stored until stores request additional inventory and rent is six dollars per square foot.
|Space Rented (ft.²)||Cost per ft.²||Monthly Expense||Annual Expense|
Storage in one warehouse for one year will cost you almost half a million dollars. If you are renting space in multiple warehouses, you have to budget for even more.
It may add insult to injury to know that you won’t even use all the space you are paying for all the time. Goods moving in and out may mean that some months you use 3,000 square feet instead of 6,000. You are still paying for the greater space.
If you were to apply cross docking, your fees would look very different. Assuming that you are shipping close to 6,000 ft.² of merchandise, that comes out to roughly 425 pallets per month.
|Number of pallets||Price per pallet||Monthly Expense||Annual Expense|
While the example is basic, it goes a long way toward showing the possibility of significant savings. On a month-to-month basis, you may have more or less pallets being cross docked; however, unlike renting warehouse space, you won’t pay for what you don’t ship. You may even be able to reduce the number of pallets you ship since you won’t be focused on maintaining a standing inventory.
Less time in a warehouse means fewer chances of damage due to mishandling or rearranging. If goods remain on pallets from point of origin to final delivery, you also have peace of mind in knowing that nothing is being left behind.
Using a cross docking system as your main fulfillment option is very possible. Once you have worked out a supply chain strategy that gets your merchandise directly into the hands of clients, there isn’t a need to go back to a traditional distribution center.
Due to congestion and product shortages, there may sometimes be issues with getting all of your products ready to ship at once. In that case, you can use cross docking long-term, but you may not want to make it your only fulfillment option.
Many cross docking facilities are willing to work with clients affected by congestion and personnel shortages. Incoming deliveries may be given up to three days of floor space at no charge before a daily rate is applied.
For businesses that are struggling with port storage fees, including container and chassis rental, these rates are often far more reasonable. To be clear, cross docking facilities are not meant for short term bulk storage. If you’re using cross docking to get your goods moved out of port, be sure you have the needed logistics to keep them moving.
Cross docking can be combined with other fulfillment services, such as transloading, to give your company the best combination of cost savings and efficiency possible.
Cross docking services are very specific and deal with freight in limited locations. The ease with which something can be cross docked is more dependent on how something is packaged than on what it is. With the possible exception of hazmat items, cross docking fees will not change based on pre-set commodity standards.
That being said, not every cross dock facility is equipped for all kinds of freight. Companies may also independently raise cross docking rates for items with high liabilities or which are easily breakable.
These may include:
Merchandise that is easily palletized and can be handled with reduced labor requirements may get you a less expensive rate.
At the end of the day, you want to use the services of a company that can get the job done quickly and correctly for the specific type of merchandise you need to move. Hunting around for the cheapest rates may cost you down the line when services cannot be completed as needed and goods get damaged.
Cross docking rates vary across the shipping industry and so does the quality of services provided. Work with the company that has been taking care of its customers for decades and let R+L Global Logistics help you and your business.
Our industry experts can guide you to the services best able to benefit your business. Depending on location, we can even offer cross docking services for late-night shipments needing immediate transport.
Get a rate quote today and get your goods going to where they need to be.