What Is Hub and Spoke System? The Backbone of Modern Shipping

Posted on Dec 24, 2024 at 11:12 PM

Have you ever wondered how your favourite online store can get products shipped to you so quickly, even from across the globe? Have you asked what hub and spoke systems are? How will this system lead to better routed, shipping service?

Let's take a closer look at the Hub and Spoke system and see why it's so important for the shipping industry today.

What is a hub and spoke system? An Overview 

In definition, the hub and spoke system is a transportation and delivery system through which a central location, often called the hub, serves as the main distribution site. This hub is linked to smaller sites (the spokes), allowing for smooth inflow and outflow of products. Just like a bicycle wheel, where the spokes are the linkages that extend out, and the hub acts as the core.

A closer look reveals that this method isn't just used for shipment. It is used in the airline, telecommunications, and even healthcare sectors. However, it has in particular sparked a revolution in the shipping industry.

How It Compares to Traditional Shipping Systems

In the past, shipping routes were often direct. This means vessels would go in a single form, from point A to point B with little coordination in between. While simple, this older system was costly and inefficient.

In this model where a shipment is transported through a centralized network, shipping businesses can use the hub and spoke strategy to distribute products to multiple locations after consolidating them at central hubs. This modification minimizes needless journeys, maximizes available space, and shortens travel times. It's no surprise that the spoke–hub is now a worldwide standard! It's efficient, improves connectivity and allows more destinations to be served with fewer transport costs.

How did the hub and spoke system come to life?

The hub and spoke system didn’t start with shipping—it originated in the aviation industry during the mid-20th century. Airlines soon discovered that they could cut expenses and increase efficiency by arranging flights through important airports, instead of transporting passengers and goods from one airport to the other. As international trade grew over time, shipping corporations saw this system's potential and modified its structure to fit their needs.

When the hub and spoke system was integrated into the shipping industry, businesses were able to manage resources a lot more efficiently, create more connected networks and offer more services with lower costs. 

Massive volumes of cargo are transported by large ships to central ports, or hubs, from which smaller ships, or nodes, deliver the commodities to local locations. To make things easier, let's say the design of this spoke-hub system resembles a star, where traffic flows into the centre of the star to be then distributed to their specific destinations. 



Key Components of the Hub and Spoke System

So what is a hub and spoke system? No, what is it? How does the architecture of this system serve route planners?

The Hub: Centralised Points of Operation

At the heart of this system is the hub. It’s essentially a major port or distribution centre where goods are collected, sorted, and sent out again. This centre is located in the middle of everything, meaning it connects all the spokes. 

The Spokes: Connecting the Dots

The routes that connect the hub to smaller ports or sites are known as spokes. Consider them the vital connections that enable the flow of goods into and out of major centres. Even the most sophisticated hub would be useless without these connections. 

Technology Integration

Technology is a major factor in improving the hub and spoke paradigm in the shipping industry today. That's why this is a part of the curriculum of every maritime training academy. Software and automated systems make it easier to keep an eye on inventory, track shipments, and precisely manage company operations. That's why it's important to learn each of these components. 

Benefits and drawbacks 

Based on everything we've said about what is hub and spoke system is, do you think it's a good or bad addition to the supply chain? While it has some benefits, it can also have its drawbacks, let's examine both: 

Here are the biggest advantages of this hub and spoke system so unique:

• Increased Efficiency: The hub and spoke system reduces the complexity of managing direct routes between numerous destinations. Instead, shipping companies can focus on optimizing their hub locations to handle larger volumes of cargo with fewer resources.
• Cost reduction: Businesses can save money on labour, fuel, and other expenses related to running several routes by grouping cargo in a hub.
• Improved Route Management: With fewer routes, there is less chance of misunderstandings and shipments going awry.

What are the commonly experienced drawbacks of this system? Here are a few: 

• Bottlenecks at Hubs: The efficiency of the hub and spoke system relies heavily on the hub itself. If there’s a delay or problem at the hub, it can affect the entire network, causing widespread disruptions.
• Overreliance on Centralized Points: Hubs are great when they function correctly, but their importance also means that any issues at a hub, like bad weather or labor strikes, can throw off an entire logistics network.

In conclusion, what is the hub and spoke system? It's a game-changer for the shipping industry. By allowing for centralized hubs and organized routes, it optimizes both time and cost in global logistics.