The idea behind crossdocking is quite simple. Keep the inventory moving. Don't let it sit in the DC any longer than absolutely necessary.

In an ideal crossdocking environment, product is not even removed from its original carton, but is simply given a new shipping label and passed on to outbound docks. Some DCs are adopting limited crossdocking, where very little, if any, product enters storage, but instead is allocated to orders, repacked and shipped within a day or two of arrival.

"Crossdocking originally dealt with large cube movers, but now smaller loads are also being crossdocked," says Art St. Onge, president of The St. Onge Company, a consulting firm in York, Pa. (717-840-8181, www.stonge.com). "Crossdocking also makes it possible to reduce inventories by 20–30%. If you have less inventory, then you can build smaller facilities. That is a significant savings just in capital."

Urban Outfitters recently began working with its software supplier (AL Systems, 973-586-8500, www.alsysinc.com) to develop a program of crossdocking merchandise at its facility in Gap, Pa. The specialty retailer operates 50 Urban Outfitters stores and another 44 Anthropologie stores. Both feature a mix of clothing and housewares.

"We are in our infancy stages of crossdocking now," says Ken McKinney, director of distribution. "We saw an opportunity to get product in, label it, and then ship it right away. For every 5% of units that we can crossdock, we will have a labor savings of one person and we will have less handling," he says.

Urban Outfitters ships different types of products on different days—men's apparel on one day, women's on another, for instance. The company coordinates with its vendors and inbound transportation to coordinate deliveries on days when that category of merchandise will be processed.

The vast majority of the other stock at Urban Outfitters also avoids storage, but does require repacking. These items are received and immediately allocated to stores by sending them to put-to-light stations where cartons are split for each store's orders. Once an order carton is filled, it is sent directly to shipping.

McKinney is also working with suppliers to try and have as much incoming stock as possible arrive with inner-packs to ease the crossdocking and re-packing burdens. He is not alone in making this request of his suppliers. Many are being asked to do more to make processing faster once product reaches the distribution facility. Major retailers, such as Wal-Mart, are leading the crossdock parade. They now require many lead suppliers to pack orders so that they can be crossdocked upon arrival at their DCs.

Coty, the fragrance and cosmetic firm, is one supplier that is making life easier for Wal-Mart and many of its other customers. About 70% of Coty customers are now receiving crossdock-ready product that can speed through the customer's DC.

"I am now picking orders of mixed SKUs [stock keeping units] packed for my customers' individual stores," says Mark Newberry, vice president of logistics for Coty. "Once it arrives at the DC, the product does not stop or go into storage, but keeps moving and is processed the same day."

Newberry says that while more effort is required to pick for crossdocking, his product gets to stores faster, improving customer service. In a sense, he has become the warehouse for his customers, as their safety stocks have been virtually eliminated. They instead rely on Coty to quickly ship them more when needed.

"If you can back up processing to the supplier and have him prepare store-ready loads, you reduce handling by half," adds St. Onge.

Tire maker Goodyear takes another approach to crossdocking. It bypasses distribution centers altogether for some of its tires. These items are manufactured at its Medicine Hat plant in Canada and then shipped directly to OEM (original equipment manufacturers) customers.

"We build to order there instead of building to stock for a DC," says Ted Augustine, director of logistics for Goodyear.