It’s undeniable about the different benefits between cross docking vs dropshipping businesses will receive. Both of these concepts are based on storage cost and time-saving goals, but not everyone is suitable for them.
The cost problem is essential for businesses to solve. It can save them thousands of dollars per year and maximize profits. Among corporate operations, inventory management is considered the most expensive. The larger the businesses’ scale is, the more they have to invest in warehouse space and personnel.
Fortunately, whatever your business is, you can save inventory costs with the right techniques.
In today’s article, we will guide you on two of the most popular ways: cross docking vs dropshipping. They have the purpose of not storing goods in common but, at the same time, they differ in concept, mode of operation, advantages, and more.
Without further ado, let’s start to utilize cross docking vs dropshipping.
Table of Contents
- Cross docking vs dropshipping definition
- How they work?
- Why you should choose cross docking instead of dropshipping
- Dropshipping’s advantages over cross docking
- Who suits them the most?
Cross docking vs dropshipping definition
Cross docking is a form of inventory management that does not require storage. Instead, the cargo will be unloaded inbound trucks upon arrival to a temporary warehouse and then sorted before being transported to other destinations or the customer’s hands. Among inventory management techniques, cross docking is widely used by businesses and import-export service providers. That’s because it gives the businessmen a lot of benefits in terms of time and cost.
Unlike cross docking, which is a popular inventory management technique, dropshipping is one of the favorite eCommerce forms.
What does this mean?
It covers everything from setting up an online store, uploading products, product descriptions, selling to shipping, and receiving feedback from users. The special thing about dropshipping compared to regular eCommerce stores is that your products are not yours. You just act as a middleman, finding sources of consumption for other stores’ goods that you feel have potential, then receive the price difference.
- As such, the biggest difference between cross docking vs dropshipping is how they work. Although both do not store goods, cross docking still requires inbound and outbound trucks and a cross docking facility to transport and sort goods. If you want to dropship, you won’t have to build anything other than your online store.
- The second difference is product ownership. Like we said, dropshipping people don’t own any of the items on their websites. They are just the middleman between the customer and the supplier. As a consequence, the ability to control the quality of goods with dropshipping will also be more limited.
- Finally, we are talking about where they work. cross docking operates at docks and ships goods to internal locations, retail stores, or consumer locations, while dropshipping largely takes place on the internet, except for shipping.
>> Read more: Cross docking warehouse: Definition, Advantages and Examples
How they work?
Both cross docking vs dropshipping are based on the purpose of saving storage costs. That is, there is no need for a warehouse to store the goods. That means your business will not have to pay any fees for warehouse space, insurance, or labor, etc.
Specifically, with cross docking, even though you do not need a warehouse like the traditional inventory management method, you will have to build a cross-dock and manage the schedule of inbound and outbound trucks so that the transportation time is shortest and most efficient.
The way cross docking works is described below.
Goods are docked. At this point, they will be unloaded to inbound trucks to be transported to a cross-dock. The cross-dock is a space that needs to be large enough for your staff to check, sort, and arrange goods according to each specific requirement of the orders. After that, the orders, once sorted, will be loaded onto outbound trucks waiting at the dock doors. Goods will be delivered to internal locations, such as factories (for components), retail stores, or shipped directly to customers.
>> Read more: 5 Types of Cross Docking Services with 7 Pros and Cons of it
The cross docking process is continuous and intense. Outbound trucks can only depart from the cross-dock door once the inbound trucks have arrived and goods have been sorted. Hence, you need to know how to schedule them so that the parking cost is minimal while ensuring they work together smoothly.
What about dropshipping?
First, you will need to find popular eCommerce marketplaces, such as eBay, Amazon, Alibaba, Taobao, etc., which offer large regular numbers of users as well as sellers. Then, you set up a small store there with all the necessary features of sales, advertising, payment, etc. In your booth, you will post products of other vendors at a price that you reasonably calculate. Your store’s products may come from more than one supplier, giving customers more options on each of their orders. For each paid order, you will send the value of the item to the supplier and keep the price difference.
So, in terms of how cross docking vs dropshipping works, dropshipping can be seen as much simpler. You just need to manage your online store, find products and customers, but not manage or ship products. In other words, with dropshipping, the use of physical facilities is not required.
However, each of these forms gives businesses many different values. The proof is that both are very popular in the world as ways to help businesses/sellers save a lot of money and time effectively.
Why you should choose cross docking instead of dropshipping
This comparison between cross docking vs dropshipping is a little lame because, after all, dropshipping is not just about how you manage your inventory but how you make a profit from selling online without stocking up. Therefore, if you are already in business as a company and selling products provided by suppliers, you should look for an economical and efficient way to manage inventory like cross docking. Here are the benefits of cross docking that will interest you.
Save money and time
Storage costs are very expensive. If you can skip this step, you will be able to maximize profits while ensuring customers are always satisfied with your service. Since products are consistently shipped after they arrive, your customers won’t have to wait for too long.
Earn more profits
Dropshipping is great when you don’t have a physical store or facility, but the profit it makes from the difference in price versus the suppliers’ isn’t too great unless you invest in long-term learning. Compared to benefiting from the wholesale pricing, dropshipping may not satisfy those who want to make more profits and lead the market.
Always ensure product quality…
Compared to selling other stores’ items to your customers, you will have full control over the quality of your products before delivering them to users. Additionally, cross docking, with easily perishable products with short lifespans, will eliminate the possibility of them being stored for longer than expected.
… as well as the quality of customer service
With cross docking, speed is key in customer service. The goods are transported continuously, so it will limit the customers from waiting long unless you have problems with the suppliers or on the shipping route. Conversely, when you are in a dropshipping business, not taking into account the difficulty to control product quality, in the shipping stage, you will still be dependent on a third party, which are the delivery service providers.
Dropshipping’s advantages over cross docking
Save startup costs
Despite its limitations, dropshipping is still very popular with many small businesses, especially start-ups. This is a great initial investment if you do not have too much capital or want to use the capital for advertising activities and sales while still owning a full-featured store.
Pay zero inventory costs
Similar to cross docking, you will not incur any space or labor costs associated with dropshipping inventory. These costs belong to the main supplier of your products.
Pay low fulfillment costs
To use a cross docking model, you will need to invest in the inbound and outbound trucks, cross docking facility, and distribution network of the model. When you do dropship business, you will bypass these costs because you do not have to manage the products. Thanks to that, you also do not have to spend too much money on labor compared to cross docking.
The costs associated with advertising are also optimized because the eCommerce platforms will often provide advertising features for free or at a low cost to their users.
Can focus on sales
When your store is full of features helping you post information, advertising, billing, managing automated messages, etc., you will be able to focus more on core activities and ignore the burden of goods management. Building store image, improving customer service, and selling effectively are the best choices for you to learn how to master dropshipping.
Who suits them the most?
cross docking is suitable for those dealing in frozen products, items with a short life, or being perishable, companies specializing in F&B, assemblies, necessities, etc.
Dropshipping, in contrast, is suitable for any type of product sold on eCommerce marketplaces. Those who favor dropshipping are small businesses, start-ups, people who have a lot of free time and see it as part-time jobs, such as students, moms, office workers, etc.
cross docking is how many businesses efficiently and inexpensively manage their inventories. While dropshipping is the same in some aspects, it is suitable for those who want a more optimal solution to start their online business journey. Hopefully, our cross docking vs dropshipping comparison will help your decisions. If you need further information, feel free to contact us. We promise to offer you some help. Don’t hesitate to like and share the article with others. Thank you.