In standard supply chains, the manufacturer does not move products directly to its final destination in retail stores. Instead, the goods first move to distribution centers where they may undergo processing or storage. This process usually includes services related to packaging, such as labeling which brings the products into a state where they are fully ready for sale. DC (distribution center) bypass is a technique wherein a manufacturer or importer cuts out the use of a distribution center in its supply chain and instead opts to move its commodities straight to its final destination. Why do this, though? We’ll describe the advantages of DC bypass services to answer this question.
Today’s transportation costs continue to rise across all modes given capacity constraints and high shipping volumes. DC bypass allows a business to forego distribution centers to streamline transportation and retail logistics management. In essence, there are fewer moving parts to worry about in the supply chain. A manufacturer or vendor will no longer need to control and adjust transportation to and from a distribution center when they look at the broader picture of getting the product to stores, weighing the cost, time, and transportation mode more carefully.
Supply chain optimization strategies give manufacturers and brands greater flexibility in transportation routing decisions. Even greater value can be added to a DC bypass program with quick-turn transloading and complex cross-docking Transloading transfers entire cargo container shipments from one mode of transportation to another, while cross-docks refer to the cargo’s induction, equipment, conveyors, and storage that make transloading possible. Transloading gives manufacturers, as importers, and their logistics providers the flexibility to postpone the choice of destinations and adjust the mode of transportation to cost-effectively position stock in the optimum location.
In service to their retailer customers, manufacturers can thus direct merchandise to where and when it’s needed, whether to meet regional demand or divert shipments away from slower sales in another region. In many cases with transloading, a manufacturer which imports goods from Asia, for example, may completely bypass their own U.S. DC and break down and process store-level shipments on the West Coast and build full truckloads for transit to their retailer customer’s DC, or direct to stores.
Such strategies, given the global delays of COVID-19 and tight capacity, are to be carefully considered. When done right, transloading allows manufacturers to reduce their transit time, decrease their costs to move goods across the country and back again, to deliver product faster.
In addition to reduced transportation costs and better stock positioning, standard procedures such as labeling and printing, which the distribution center would normally perform may move to the manufacturer’s facility or another nearby facility. Thus, there are less chances for errors to occur, as separate steps in product preparation take in close proximity.
Without a distribution center to travel to, the processing time of goods is drastically reduced as well. Often, the distribution center is located in areas that are considerable distances from their ultimate retail-store destination. By utilizing a DC bypass strategy, businesses can speed up their supply chains. This is especially true in instances where the distribution center is far removed from both the manufacturer and the store. For example, a manufacturer’s imports goods from Asia. These arrive on the West Coast, then may travel to the Midwest or central U.S., where many distribution centers are in this kind of path doesn’t make sense and slows down the supply chain. DC bypass eliminates such clunky steps.
Lower handling costs make up an additional advantage of DC bypass services. This makes sense because products don’t need to travel as far when they go directly from the manufacturer to the retail store. The reduced transit offered with transloading and postponement strategies equals less money spent on transportation.
In addition, the cost of labor for loading, unloading, and sorting items at a distribution center all dissipate. Since fewer people handle the goods, DC bypass also reduces the potential for damage to inventory. Therefore, the risk of losses from pilferage and accidents, for example, is likely reduced. The savings from reduced operating costs accumulate over time from this supply chain simplification, adding up to substantial gains in profitability.
Port Logistics Group operates transload centers near our nation’s busiest ports including the Ports of Los Angeles/Long Beach, New York/New Jersey, Savannah, and Seattle. If you are interested in learning more about transloading and cross-docking capabilities, please contact us today to speak with an expert.