23/01/2019 risk management in cross-docking

23/01/2019 Risk management in Cross-docking

1 Kaviarasan PARAMASIVAM

Advanced Research Project Final Deliverable

RESEARCH PROPOSAL

Realized by : Kaviarasan PARAMASIVAM

Project Supervisor: Gülgün Alpan Project Guide: Marie-Anne le Dain

TITLE

Risk management in Cross-docking

ABSTRACT

Risk and failure in cross-docking can majorly impact the industries supply chain and logistics, that will leave

a great impact on the competitiveness of the firm. Hence, managing risks across supply chain activities such

as warehousing and cross docking units became a significant necessity. This research attempts to evaluate

the risks linked with cross-docking. As well as to propose a response for significant risks to eliminate and

mitigation their impact on the chain performance. Literature review method is used to collect all the relevant

risks and failure addressed in the previous research papers. Risk assessment methodology is proposed to find

the most prompting risk to be addressed. The result obtained by this risk assessment will be more likely the

significant risk that affects the cost. The study opens new opportunities for researchers for further investiga-

tion in risk management in the Cross-docking as a substantial unit in the supply chain.

KEY WORDS: Risk management, Cross-dock, Disruption, warehouse, scheduling

1. INTRODUCTION

Supply chain and logistics management has always been considered as a process in which raw materials are

converted into the end products, and then they are delivered to the end-consumer [1]. It is also defined as

the process of design, planning, execution, control and monitoring of supply chain activities.

The Foremost objectives of supply chain management are to improve the global organizational performance

and customer satisfaction by improving product and service delivery to customer which includes creating net

value, building a competitive infrastructure, leveraging worldwide logistics, synchronizing supply chain de-

mand, and measuring performance globally. There should be value creating activities in the supply chain that

transcends the activities of entities in the chain.

Supply Chain does not only include the manufacturer and suppliers, but also transporters, warehouses, re-

tailers, and customers themselves. Supply chain includes many activities and not limited to new product de-

velopment, marketing, operations, distribution, finance, and customer service [2] whereas the major part of

supply chain is mostly concerned by the warehouse, transportation and purchasing. The success and compe-

tency of any business which includes supply chain is mainly influences by its warehousing techniques [3]. To

be more efficient on warehousing, Wal-Mart introduced Crossdocking method for their warehouse.

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Cross-docking is the warehousing technique for unloading and loading the materials to an outbound truck or

any vehicle with very less or no storage time. Cross-docking helps in also reducing the handling time and the

transportation cost and number of vehicles. Cross docking center should not be regarded as a storage point

since products are stored for a short duration only for the consolidation process. Right after the consolida-

tion, products will be transmitted to their corresponding customers according to product destinations [4];

The figure 1, represents the functioning of a cross dock with truck.

Since cross-docking plays a major role in the competitiveness of the company. If there is any risk in the pro-

cess of cross docking, that will leave an impact on the personal and activities performance which will lead to

major disadvantage in supply chain.

Figure 1: Function of Cross-docking facility

In this research paper we will discuss about the possible risks in cross docking and the methods with which

those risks have been already addressed by other researchers whereas some also includes reliable methods

that can resolve this risk. The remainder of this paper are organized as follows: Section 2, explains the litera-

ture review, section 3 on the gap recognized from the literature review cross analysis and the formulation of

objective, section 4 on the research methodology, section 5 explains about the risk management process”,

section 6 comprise the result expected and the future research questions.

2. LITERATURE REVIEW

The literature review was conducted majorly focusing on finding the potential risks that are mentioned in

cross docking processes. To accomplish this process of finding cross-docking risk, several web sites and jour-

nals such as Elsevier, Science Direct, and google scholar have been used. The reviewed papers were mostly

published between 2009 since 2018. The keywords used in searching and reviewing were “Cross-docking””,

“risks”, “failure”, “assessing risks in warehouse”. The outcome of this process gave a clear insight that most

of the research papers focuses only on few risks.

Uncertainty in truck arrival time is one of the most frequently addressed issue in cross docking. In the re-

search paper by Mousavi et al. (2017) a similar problem is tackled where the truck arrival to the facility loca-

tion is uncertain, they also proposed a reliable linear programing to solve the issue with the least possible

time.

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Correspondingly, in the paper by Dincer Konur et al. (2016) the same problem of truck arrival time uncertainty

constrain is considered, whereas here the issue is outlined by heuristics method to find the optimal solution.

Xie et al. (2015) addressed the issue of disruption, which can completely or partly block the flow of materials

in the supply chains for a significant and uncertain amount of time [5]. The cause of disruption can be any

form of natural disaster like flood, plant fire, Diseases, epidemics, Earthquake or also can be any political

systems like war, terrorism, etc. The methodology used by Xie et al. is the Bi-level linear programming model

to find the optimal solution to assign the truck to the nearest cross docking facility considering the transpor-

tation cost.

Similarly, in the research paper by Amir et al. (2016), the disruption issue is again begin deemed in this re-

search my realizing a reliable method to minimize the overall cost of cross docking at such occurrences. Like-

wise, Ahmadi-Javid et al. (2015) also solved the location routing problem for truck scheduling in cross-docking

under disruption using mathematical linear programming model. Form the insight of the preliminary litera-

ture review, it is very evident that the previous researches only focus on disruption and truck arrival uncer-

tainty concerning the cross-docking risk.

After realising the narrowness of results from literature review, the focus was also changed to identifying the

possible risks in warehouse that could be linked to cross docking. In the paper by Harrison et al. (2008), Delay

risk related to warehouse are specified in this paper. The cause of this delays is mentioned as excessive hand-

ing, port capacity and congestion. According to Tang, C.S et al. (2012) paper inventory risk is one the major

risk that could affect the cost of warehousing, we would like to consider this risk as the cross-dock facility

center also has some inventory and the sited cause for this risk can be realized in cross dock too.

In the paper by McCormack, et al. (2007), the risk which are related to human resources are mentioned such

as employee malfeasance, work stoppage and accidents are discussed.

The below table represents the list of risk which are addressed in the research papers, their reason, effect

and whether the same risk is possible in cross-docking in detailed:

Table 1: Different categories of Warehouse Risks

Risk Category Risk reason Effect Cross Docking Reference

Disruption Risk

– Natural disaster

– Terrorism & war

– Labor strike

– Losing the facility location

– Truck many not arrive to the fa-

cility

Yes [6] [7]

Human Disasters – Health issues

– Accidents

– Death

– Employee malfeasance

– Collusion

– Work stoppage

Yes [8] [9]

Available capacity – Capacity cost

– Financial capacity

– Supplier bankruptcy

– Structural capacity

No [10]

Information system – IS break-down

– Distorted infor-

mation

– Viruses/bugs/hackers

– Integration No [10]

Transportation risks – Paperwork and

scheduling risks

– Port strikes

– Delay at ports

due to port ca-

pacity

– Late deliveries

– Higher costs of transportation

– Depends on transportation

mode chosen

Yes

[5] [11]

[12] [13]

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3. OBJECTIVE

The main objective of this research paper is to “highlight the different substantial risks in Cross-docking that

could cause a failure” a new research proposal concerning the risk in cross-docking.

The importance of this research proposal is enormous, since most of the industries are seeking to increase

their supply chain effectiveness and efficiency through minimizing the potential risks that could happen in

crossdocking [14]. When a breakdown happens in facility center, a higher transportation cost and time may

expect to be wasted, since customers must be restructured from their original facilities to the adjacent func-

tioning facility, which can more distant than the actual. Based on the literature review, we listed the possible

risks that could affect the ware house and we also check whether these risks could be considered for cross-

docking.

4. RESEARCH METHODOLOGY

This research is a mixture of qualitative and quantitative research question. The proposed research method-

ology is expressed in the figure 2. The step 1, 2 & 3 are done in the previous section with the help of literature

review, step 4 and 5 are explained sections 5 and 6 respectively.

Figure 2: Proposed Research methodology Framework

5. RISK MANAGEMENT PROCESS

According to [15] Risk Management is an act or practice of dealing with risk. It includes planning for risk”,

identifying risks, analysis risks, developing risks response strategies, and monitoring and controlling risks to

determine how they have changed. Stanleigh (2010) defined risk management as the process of Identifying”,

analyzing and responding to risks reasons during all the lifecycle of the project. Based on Standards Australia

and Standards New Zealand (2004) [16], the risk assessment sheet can be created focusing the wide range

of risk following the steps mentioned in the figure 3. In order to investigate the risk quantitatively, the likeli-

hood of an occurrence of the risks and the seriousness of risks can be estimated using scale 1-5 (1 is for the

lowest chance and seriousness and 5 is for highest chance and seriousness). Then multiplying these two values

r gives a score that reflects the impact of the risk as follows [15]

Risk = {Likelihood of a risky event occurring} X {Consequences or the seriousness of risks}.

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Figure 3: Risk Assessment Process (Standards Australia and Standards New Zealand, 2004)

The value of seriousness and the probability of each risk can be evaluated be the managers and labors of

certain number of cross-docking facility by survey method.

6. RESULTS EXPECTED / RESEARCH CONTRIBUTION

After accumulating the data based on the risk assessment process, the value can be analyzed based on both

consequences and the likelihood of the risk, the risks which have more values are the more significant and a

high concentration need to be given to those risks in the facilities. If the result is about the operational risk

in cross-dock facility, instructions in the material safety data sheet can be a possible solution of storing and

handling.

Also, the future research direction can be generating a reliable scheduling problem the most effective risk as

one of the constraints. Also, Case studies can be conducted on the same to have more insights.

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