To ensure the efficiency in transportation services, there is a lot of debate on which overarching strategy is best to implement. Two methodologies of delivery, which are considered as the polar opposites on the connectively spectrum, are the hub and spoke and the point-to-point method, but which is the better strategy for roadways delivery?
On the other side of the spectrum, is the hub and spoke system. Here, in its pure form, every location is connected through one intermediary location called a ‘hub’. Referring to the example earlier, with a hub and spoke model, the 8 locations would now therefore have just 8 connections as opposed to 16. On the surface, the hub and spoke system may seem more straightforward but interestingly there are many advantages and disadvantages to both systems.
Before delving into the debate further, this would be a good opportunity to clarify the differences between these two approaches in strategy. A point-to-point system connects a set of locations directly with all locations interacting with each other, i.e. a simple pickup up and drop off system. For example, if there are 8 locations each connecting with each other directly, there would need to be 16 connections in total.
1. The Point-to-Point Model
Let’s elaborate more on the point-to-point approach in transportation strategy. As mentioned, this transportation system is where a vehicle travels directly from one location to the other, without passing through any sort of central or temporary hub. It directly connects the set of locations without any interruption of services even in cases where the route itself may not be direct.
Below is an evaluation of the advantages of the point-to-point model:
- Travelling Time is Faster: One major argument in favor for this strategy is that the travelling time is considered to be a lot quicker. As each location is connected directly, there is no requirement to stop or change direction, it is a continuous direct journey to the drop off point. This is possible as each location has the facilities and procedures to process deliveries individually from many sources.
- Delays are Less Impactful: During a point-to-point delivery, any delay would only affect that one single delivery. The danger with a hub and spoke system is that there is a risk where when one delay happens there is a knock-on effect within the central hub which results in a subsequent cascade of further delays. Being more independent, the point-to-point system is freer to accommodate and resolve any issues. Therefore, this strategy is considered to be less prone to delays.
In contrast the disadvantages of the point-to-point system are as follows:
- Expensive: In the introduction, an example was made of 8 locations and the consequential connections which would need to be created depending on each methodology. In the case of a point-to-point system, it would require more connections and to facilitate for more connections would inevitably lead to a higher running cost.
- Not Efficient: In a roadway system the point-to-point method requires more drivers to be employed in order to maintain the numerous connections. The concern is that the many drivers’ efforts are not being optimized as a lot of them are travelling in potentially similar directions where the loads can be shared. Unsurprisingly, the lack of efficiency also does end up leading to additional costs.
2. The Hub & Spoke Model
On the other end of the spectrum is the hub and spoke strategy. This methodology consolidates the transportation assets through a central location, aka a ‘hub’, and connects them to multiple locations within a network, aka the ‘spokes’. A delivery would therefore start in one of the locations and be taken to the central hub whereby it would either be stored or distributed directly to another location within the network.
In modern times, the hub and spoke system is used 99% of the time with worldwide deliveries. Larger organisations create layers of hub and spoke networks which interact with each other, on a global, national and regional level. A good example of this practice is seen by large transportation delivery organisations such as DHL, UPS, FedEX, among others.
Let’s look at the advantages of the hub and spoke model:
- Economies of Scale, Connections: With a more efficient connection system comes a higher frequency of services. For instance, instead of one service per day between any two pairs in a point-to-point network, four services per day could be possible.
- Economies of Scale, Hubs: As there is a higher quantity of traffic in one central area, efforts and resources to improve distribution efficiency can be focused.
- Economies of Scope: By simply sharing transportation facilities, the maintaining of connections, amount of staff required, and vehicles which are needed are all reduced. Funds can then be directed on improving the quality of a more concise infrastructure.
And lastly, what are the negatives of this methodology?
- Point-to-Point Services Reduced: With the lack of a direct link between locations, some connections may encounter delays and potential congestion due to the centralizing aspect of the hub and spoke system.
- Not Flexible: As everything is centralized and all connections within the network are required to be interconnected, there is a risk of a domino effect when something negative takes place. As a result, delivery times can sometimes be determined by other deliveries, and any problems will likely cause larger effects than a point-to-point system.
By being used by 99% of all deliveries worldwide, it is apparent that the hub and spoke methodology is by far the most popular choice of transportation strategy. However, both models do have an interesting history and are both still used today. While hub and spoke may be more popular, the point-to-point model has its own distinct advantages. In the end, compromise may reign supreme as it is not uncommon for organisations to tailor and create a model which factors in both strategies in order to get the most for their business. It may be best therefore to approach this decision on the transportation model on a case-by-case basis depending on the organization.