Adaptability and scalability have long been the name of the game for the supply chain industry but more so now than ever before. The hub and spoke distribution model offers many benefits that can streamline the entire shipping and transportation process for companies of all sizes. Understanding the inner workings of this model and how to maximize its full potential can provide a competitive advantage that opens doors to continued growth and success.
The Hub and Spoke Distribution Model Defined
As the name implies, the hub and spoke method of distribution management resembles a bicycle wheel and spokes. The central hub has distribution lanes going out in all directions to represent transportation lanes and modes. Multiple lines and methods of shipping, converging on one centralized location or distribution center, remains one of the most commonly used distribution modes today. This concept is demonstrated clearly in the food and beverage industry, where perishables ship out from one primary packaging location to various grocery stores, restaurants, and food banks. Moving people and goods around in this manner represents an essential and virtually ingrained process for today's economy. When shipping speed matters, hub and spoke transportation often proves the most efficient method available.
Challenges of Hub and Spoke Distribution
While it is the most common organization and distribution method used today, some inherent challenges arise when using the hub and spoke management approach. According to Parcel Industry, hub and spoke methods account for 99% of all deliveries worldwide. When the goal of speeding up deliveries and reducing costs dominates logistical planning, this distribution model often falls into place. However, the biggest downside to hub and spoke is the lack of flexibility that comes with the setup. In an e-commerce and omnichannel world, there is continual pressure on the hub and spoke distribution to stay flexible, scalable, and adaptable.
Benefits of the Hub and Spoke in Drayage and Beyond
Despite the concerns over flexibility and similar supply chain hurdles, hub and spoke distribution offers numerous benefits, including:
- Continuous movement for loads, thanks to centralized distribution centers and handoffs.
- Reduced lengths of haul, improving final mile management, ETA projections, actual delivery success rates, and carrier performance.
- Consistent performance, ensuring products arrive in the right place at the right time.
- Improved driver relations gives drivers more control, offers better schedules, and higher pay.
- Lower carbon footprint, resulting from fewer empty miles driven, less fuel waste, and lower emissions and pollution.
- Consistent pricing, which alleviates the risk of third-party carrier rate and fee instabilities.
Tips to Improve This Method of Network Distribution
Like everything in shipping and transportation today, there is always room for improvement. For this method of network distribution, the following tips can streamline the entire process and improve the overall success of hub and spoke distribution:
- As many companies shifted their focus toward e-commerce and omnichannel, the popularity of and necessity for a hub and spoke strategy to handle last-mile deliveries will continue to grow.
- Retailers can work to incorporate a point-to-point strategy into their last-mile strategy to bring together the fragmented and diverse final-mile distribution that currently exists.
- Vendors can add more local and regional distribution hubs to their list of last-mile providers to maintain capacity and make final-mile distribution faster and easier with smaller spokes.
- Real-time technology and automated processes help to streamline the entire process and give logistics management teams a clearer picture of the overall supply chain process and development.
Maximizing the benefits of hub and spoke management and distribution relies heavily on embracing the latest innovations and maintaining strong communication and collaboration throughout the supply chain network.
Choose Port City Logistics to Maximize the Efficiency of this Distribution Model
The distribution model known as hub and spoke offers many benefits for supply chain managers and retailers alike. This transportation method can streamline the entire shipping and transportation process and allow companies of all sizes access to proven distribution and management processes. Contact Port City Logistics today to learn more and to get started with hub and spoke distribution.