Unraveling Cross Docking: Operations Performance, Demand Uncertainty and Fulfillment Mechanism

41 Pages Posted: 21 Mar 2016 Last revised: 21 Aug 2020

See all articles by Yongrui Duan

Yongrui Duan

Tong Ji University

Yuliang Oliver Yao

Lehigh University

Xingyue Luna Zhang

University of Washington Tacoma

Jiazhen Huo

Tong Ji University

Date Written: August 21, 2020

Abstract

Problem definition: We develop econometric models to evaluate operations performance of cross docking (CD).

Academic/practical relevance: Most studies on CD have used analytical modeling under various assumptions, but they have not reached a consensus on CD’s benefits. Our study is among the first attempt to study CD empirically.

Methodology: We collect a large-scale, product-level dataset from a large supermarket chain. We examine CD’s operations performance in terms of its effects on inventory and stockouts at the store, DC, and the system.

Results: We find that the benefits of CD are more nuanced than we thought. On average, CD does not affect inventories but increases stockouts at the stores compared to traditional warehousing (TW). The effects differ in product’s demand characteristics. CD products with lower demand or higher demand uncertainty have lower inventories, while CD products with higher demand or lower demand uncertainty have higher inventories than TW products. At the DC and in the system, CD reduces the inventories by as much as 65.10% and 23.99% on average, respectively. Our results show that CD not only reduces the total inventory in the system but also re-distributes the inventory from the DC to the stores for some products. On average, in terms of stockouts, CD products have higher stockouts than TW products at the stores, but the effects are weaker when demand level and demand uncertainty are high. Our findings, supported by our interviews with store managers, suggest that increased fulfillment uncertainty resulting from imperfect order consolidation and synchronization in CD may in part be the sources of performance degradation.

Managerial implications: The effectiveness of CD depends on the demand characteristics of products. A tailored distribution strategy for different products may bring positive net benefits. Even if CD is effective, store managers may need to trade off between inventories and stockouts.

Keywords: Cross Docking; Inventory; Stockouts; Empirical Analysis

Suggested Citation

Duan, Yongrui and Yao, Yuliang and Zhang, Xingyue and Huo, Jiazhen, Unraveling Cross Docking: Operations Performance, Demand Uncertainty and Fulfillment Mechanism (August 21, 2020). Available at SSRN: https://ssrn.com/abstract=2752083 or http://dx.doi.org/10.2139/ssrn.2752083

Yongrui Duan

Tong Ji University ( email )

1239 Siping Road
Shanghai, 200092
China

Yuliang Yao (Contact Author)

Lehigh University ( email )

621 Taylor Street
Bethlehem, PA 18015
United States

Xingyue Zhang

University of Washington Tacoma ( email )

1900 Commerce St
Tacoma, WA 18015
United States

Jiazhen Huo

Tong Ji University ( email )

1239 Siping Road
Shanghai, 200092
China

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
134
Abstract Views
729
rank
241,050
PlumX Metrics