MERVYN’S CROSS-DOCKING KEY TO CUTTING COSTS
Byline: Denise Zimmerman
NEW YORK — Mervyn’s, which has already implemented cross-docking at four of its five distribution facilities, will bring the highly efficient distribution practice to its remaining center next year.
Mervyn’s expansion of cross-docking, which calls for shipments to be loaded directly onto trucks en route to stores instead of being warehoused, comes at a time when Dayton Hudson Corp., parent of Mervyn’s, is enhancing technology for sharing data across divisions.
At Mervyn’s, the reconfiguration of receiving docks at the Salt Lake City distribution center will enable the facility to accept shipments of cases and route them directly to stores without any processing or warehousing storage necessary.
The retailer already is using cross-docking at its two California distribution centers, its Texas facility and the firm’s import center south of the Port of Oakland. Approximately 24 to 30 percent of all products moving through Mervyn’s distribution facilities is cross-docked, according to Dennis Green, senior vice president of logistics.
Through cross-docking, retailers hope to attain speedier replenishments, lower labor and inventory storage costs and make fewer errors because distribution center handling is greatly reduced.
To effectively coordinate cross-docking, however, retailers and manufacturers must have adequate information systems technology in place to manage and share data in a timely manner.
Mervyn’s, a division of Dayton Hudson Corp., is among the retailers investing in technology to exploit the cost savings and efficiency rewards of cross-docking, along with other supply chain projects.
Beginning next year, for example, Mervyn’s and the entire Dayton Hudson organization will migrate toward a single value-added network for Electronic Data Interchange of documents such as purchase orders, invoices and advance shipment notices. Value-added networks, or VANs, are third-party providers that process a company’s EDI transactions over their own networks.
While most retailers rely on several value-added networks for this service, Dayton Hudson is consolidating with one: GE Information Services, Rockville, Md., in efforts to improve tracking of the data.
Green said software being developed internally in combination with GE’s services will enhance the company’s ability to track electronic information and more closely monitor progress of shipments through the supply chain.
Mervyn’s will also enhance tracking of shipments en route to its facilities through the implementation of a freight-management scheduling system, also provided by GE Information Services.
“It will all be EDI transactions, so when a vendor ships to us, we’ll know when the carrier has it. The system will allow us to track incoming freight, so from a scheduling standpoint, we will know when it’s been shipped and when it is estimated to arrive. We’ll be better able to flow [the merchandise] through the scheduling,” he said.
Improving the flow of goods at all points within the supply chain is key to squeezing out costs and gaining efficiency. Green said cross-docking has helped to reduce logistics costs for five years, ever since the practice was introduced. “Our total costs have consistently decreased, and cross-docking has been a part of that,” he said.
He cautioned, however, that the cross-docking is not appropriate for all products, and not all manufacturers are equipped to handle it. “Some people do cross-docking, and the goods end up in the store’s back room — and you end up losing more [money than was saved],” because handling merchandise in the store is more costly than handling it in the distribution center.
Essential to the success of cross-docking initiatives at Mervyn’s is the increasing volume of floor-ready shipments arriving at the distribution center, Green said. Floor-ready merchandise is prepared by the manufacturer in such as way as to speed its delivery to the store floor. For example, retailer-specific price tickets are applied, and garments are hung on hangers before they leave the manufacturer’s facility.
“When you have floor-ready goods, you are able to cross-dock. You then have the capability of moving a carton through your center in a matter of minutes,” Green said. “As we have been able to increase the amount of floor-ready product that comes into our center, we have been better able to utilize the cross-docking concept.”