What is a Hub and Spoke Distribution Model?
What is the Hub and Spoke Distribution Model?
Appropriately named, the hub and spoke is essentially a distribution model that resembles the spherical shape of a bicycle wheel. In the middle of a wire-spoked wheel is what is known as the hub. It is this hub that allows each of the spokes, sprawled out in all directions around the wheel, to meet at a centralized location at the center of the wheel.
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 larger airports, where an airline will use it as a distribution center to fly people across the globe. Essentially, this hub and spoke model of doing business and moving people and goods around is something that is almost ingrained in our economy.
How LTL Carriers Use the Hub and Spoke Model
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 Hub and Spoke 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 and it is rarely ever quite so simple.
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 hub and spoke model 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 in major metropolitan locations, including Denver, Chicago, Houston, and other larger cities. 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 as well as the customer.
For starters, 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 is 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 permits better customer service.
The modern supply chain is all about efficiency. But the hub and spoke distribution model has been utilized for more than 100 years and is still highly relevant in today’s landscape. As technology improves, this method of shipping will only continue to evolve, offering shippers and carriers additional flexibility, improved shipping delivery times, and more tailored customer service.
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