Ever wondered how online orders zip from warehouses to your doorstep? The hub and spoke model might be the secret sauce. Imagine a bicycle wheel: the central hub is a giant storage facility, and the spokes are smaller delivery centres.
Goods arrive at the hub, then get sorted and sent to the closest spoke for final delivery. This system consolidates inventory, optimizes routes, and keeps things moving efficiently. But like any system, it has trade-offs. Let’s dive into the Hub and Spoke Model in logistics or “Spoke-Hub Distribution Paradigm” to understand how it shapes modern logistics.
What is the Hub and Spoke Model in Logistics?
As the name implies, the Hub and Spoke model functions as a centralised warehousing and shipment system designed similarly to a bicycle wheel. At the centre of this system is the hub, or distribution centre, from which each spike extends outwards representing a route for delivery in a specific direction.
Here is a diagrammatic representation of the Hub and Spoke Model in logistics:
In this model, warehouses or distribution centres are strategic locations, making reaching multiple delivery locations possible with the most optimal travel distance and time.
There’s no centralised warehouse that can cause inefficient distributions. So, let’s why companies should use this Hub and Spoke Model in logistics in detail.
Why Choose the Spoke Hub Distribution Paradigm?
This model offers flexibility that comes with less cost in logistics and supply chain systems. For small or local businesses, they simplify the supply chain, as they can work with one truck of MT to load and deliver the goods. However, as businesses expand their operations and scale them to different locations, the supply chain is not going to be simple.
So, that;’s why the Hub and Spoke Model in logistics exists. It aims to simplify the supply chain. With it, you can work with fewer warehouses and don’t need a large fleet of transport units. This means faster delivery at a low cost with 100% customer satisfaction.
With logistics and competitive strategy, companies can achieve competitive advantage through service enhancement and cost reduction. Let’s see how the Hub and Spoke Model in logistics is helping the supply chain.
5 Benefits of the Hub and Spoke Model in Logistics
This model allows businesses to speed up their order deliveries. And, to do that they need not have a heavy investment in warehousing, transportation and inventory management. Here’s how it helps the supply chain flow:
Boost Workforce Productivity
The hub-and-spoke distribution model allows for planning and optimising delivery routes around the hub linking to different locations. It improves the workforce and also reduces delivery times in comparison to the point-to-point model.
The product is ready for shipment at one location and delivered to multiple locations within the preferred time. It reduces driving time and increases productivity.
Optimise Planning Routes for Faster Delivery
In this model, delivery workers carry out delivery through the most optimised routes. This allows them to achieve last-mile delivery to customers. Doing so requires planning and brainstorming to identify which route is the shortest, the traffic pattern, rush hours and other conditions. This is what results in a fast and efficient route, leading to customer satisfaction.
Simplifying and Reducing Logistical Expenses
In the hub and spoke model, since there is one focal point where all products are packed and transported, it’s usually cost-effective for eCommerce business-related distribution.
You need fewer warehouses foir inventory management, reducing the costs for rental and leasing. The transportation cost is also low, as fewer carriers can deliver the products from points “X” to A, B, C, D and more. This saves fuel, labour costs and more.
Makes Shipment Easy
Since the delivery party picks up all the items from a designated hub in one day, it’s easy for logistics managers to plan daily dispatches effectively. They can also assign delivery duties to agents in a more systematic manner depending on their geographical knowledge and preferences.
It’s also easy to load and unload shipments from the centralised point and maintain the right levels of stock to ensure constant supplies within a particular territory.
Less Logistical Costs
The Hub and Spoke model is cost-effective for supply chain enterprises in several ways. Choosing the most efficient routine not only speeds up last-mile deliveries but also saves fuel costs dramatically due to fewer miles travelled.
The hub and spoke system also limits the number of distribution centres within a city, which leads to reduced costs of inventory management.
So, all of this development of integrated logistics strategy in supply chains may have you wondering, is this system suited for my business needs? Let’s see.
Can Hub and Spoke Model in Logistics Benefit Your Supply Chain?
Many companies are adopting the “Hub and Spoke Model” for inter and intracity order fulfilment. However, when it comes to making decisions in logistics, you need to understand whether it’s an ideal match for your supply chain or not.
The decision completely depends on the nature of your business and the scale of your operation. For example, it works best for e-Commerce or 3PL companies that have high-density orders in specific regions. Hub and spoke networks are also best-suited for companies in the hyperlocal delivery market or food delivery market, that get bulk orders within a fixed radius.
On the whole, this model is quite flexible and profitable. It ensures a smooth flow of goods and is a great option for supply chain enterprises with sizable shipments and full-off deliveries daily.
Does the Hub and Spoke Model in logistics Have Supply Chain Security
Supply chain security is a multifaceted ongoing process that requires constant updates. Retail companies everywhere use it when it comes to securing their supply chains from the logistics end. For that, they must consider three parts:
- Involved Infrastructure (warehouses and management systems)
- Available resources (transportation, personnel, technology)
- Materials that need to be transported
It’s for the best that these parts are integrated and efficient. It strengthens the supply chain security. Companies also look for carriers who can promise such security.
Hub and Spoke Logistics can help this situation by building integrity and maintaining it for all three parts. This led to the establishment of a secure supply chain. This model works best for LtL carriers.
In the LTL transportation model, the parcels and shipments of multiple companies can be on the same truck. The operators need the latest technology that allows them to scan all the packages. In that manner, they can identify and sort them and then load them onto a truck, headed for a single location.
FAQs: Decoding Hub and Spoke Model in Logistics
What are some strategies to reduce logistics costs?
You can adopt strategies like streamlining inventory levels, ensuring faster shipping networks, providing better processes and also encouraging a better relationship between the suppliers and third parties.
How flexible is the Spoke-Hub model when it comes to changes in supply and demand?
The Spokes-Hub model is quite flexible when it comes to shifts in supply and demand. With its centralised hub, it allows businesses to quickly reallocate inventory to different spokes depending on their needs. This allows them to adapt to market changes without putting pressure on one single distribution point.
How does the Spoke-Hub model impact customer delivery time?
The hub and spoke model usually results in quicker customer delivery times. Usually streamlining distribution routes through the hub, the warehouse employees can dispatch them more efficiently to their regional centres and ultimately final destinations.
What is the difference between the Hub and Spoke and Point-to-Point distribution model?
The hub and spoke logistics network is quite different from the point-to-point distribution model. Here the packages usually move between points A to B, C, D or E depending on delivery requirements and available inventory at the given time. On the other hand, the Hub and Spoke Model has a centralise distribution plan. Firstly they send the goods to the main hub. Then from there, they redistribute it to various “spokes” or ends.
Conclusion
For businesses that want streamlined logistics and enhanced supply chain efficiency, the Hub and Spoke Model in logistics offers a strategic advantage. Consolidating inventories and optimising delivery routes, this model ensures faster, cost-effective operations.
Embrace Qodenext’s expertise in implementing the Hub and Spoke Model to elevate your supply chain performance today.
