The Hub and Spoke Distribution Model and Why it Works for LTL
If you know it or not – it’s quite possible that you’ve experienced the hub and spoke distribution model in daily life. Whether you’re shopping at your local grocery store or traveling at a larger airport, this method of moving ‘people and products’ have been proven to be efficient, cost-savings, and flexible. This is a major reason why this method of distribution works exceptionally well for LTL carriers.
There are several reasons why the hub and spoke distribution model works well for LTL – so let’s review the facts about this concept, how it works, and why specifically it works for LTL.
What is the Spoke and Hub Distribution Model?
Appropriately named, the spoke and hub is essentially a distribution methodology that resembles the spherical shape of a bicycle wheel. In the middle of a wire-spoked wheel is a hub – which allows each spoke heading in different directions to meet at a central location. We see this concept used in multiple industries, such as grocery – where food and consumer products are often loaded into a single truck at a distribution hub, then sent to individual satellite stores.
It’s also common at a larger airport – where an airline will use it as a distribution center to fly people across the globe. For example, if you’ve flown Southwest Airlines before, it’s quite possible that you’ve flown to Phoenix, Chicago Midway, or Baltimore to connect to a flight. This is because these locations are ‘hubs’.
How LTL Carriers Use the Spoke and Hub
The purpose of a less than truckload shipment is to transport smaller shipments in a larger truck to a destination. However, it’s not always possible to ship a single pallet from California to Florida via one-way transportation. To make shipping efficient, an LTL carrier will set up or utilize a series of shipping distribution centers or hubs – where smaller shipments can be bundled together in a single truck heading to a specific destination. This method not only saves the LTL carrier and the shipper a ton of money but expedites the transit of commodities, while improving delivery efficiency.
Why the Spoke and Hub Distribution Model Works for LTL Carriers
In a perfect world, a shipper would manage their logistics programs with a single truckload heading to a single destination – then fill that truck with supplies and bring it back to them. However, the supply chain is anything but a perfect world. The hub system was designed to simplify the process of shipping commodities that don’t fit this perfect world scenario. Since most LTL shippers simply can’t use full-freight shippers for their logistics needs – the LTL mode gives them the flexibility they need.
Here is why it’s so beneficial for LTL carriers.
A central hub is designed to receive, route, load, and launch multiple shipments to individual destinations. A carrier will typically pick a hub distribution location that is centrally located within their network. Most primary hubs are built or centrally-located in a major metropolitan location, including Denver, Chicago, Dallas, and other central states. Beyond central hubs are regional-based hubs, such as Los Angeles for the Western US, Kansas for central states, Atlanta for the South Eastern US, and Indianapolis. This system offers multiple benefits for the LTL carrier and thus the customer.
A hub-based system is designed for maximum efficiency across the board. But the number one savings is financially-based. A hub can receive multiple LTL shipments each day (with most hubs having more than 100 individual loading docks). The freight can be stored until a route heading to the destination if full and ready to go. This saves the LTL carrier a lot of money on wasted fuel, payroll, and more. The spoke and hub method also permit better customer service. Most of today’s LTL carriers feature advanced freight tracking capability, which allows the shipper to know exactly where their freight is located.
The modern supply chain is all about efficiency. But the hub and spoke distribution model has been utilized for more than 100 years. As technology improves, this method of shipping will continue to evolve, offering shippers and carriers additional flexibility, improve shipping delivery times, and better customer service.