Hub and Spoke System

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What is a Hub and Spoke model?

Logistics term used to
describe a transportation
network
of
routes
connecting
origins
to
destinations
Its name is derived from the
hub and spoke model of a
wheel

Hub and Spoke - Past

In the past, the transportation and distribution industry was

guided by the principles:
Point-to-point or
Direct-route operations.

As technology has developed, the logistics sector has found

faster and more cost-effective ways of shipping freight. The
hub-and-spoke model was born.

Point-to-point or Direct-route operations.

Hub and Spoke

Delta Airlines pioneered the method in 1955

But, the hub and spoke model was popular from 1970s,
when the FedEx company took advantage of the concept,
that the method really took hold, revolutionizing the way
airlines were run.

Hub and Spoke Operational Model

Evolution of Hub an Spoke Model

The Hub and Spoke Model:
The Hub and Spoke system is a model arranged the way its name
denotes; in any capacity, it is a process that flows along a set of
given paths called spokes which connect to central locations
called hubs as it passes through or returns to its end
destination.
The concept is used in many different industries.

Evolution of Hub an Spoke Model

Pure Hub and Spoke This can be
found in parcel or shipping industries
where there is only one, centrally
located hub. All routes originally
travel to the hubs, receive localized
goods that have already been
separated, and return to their origins.
And of course, the hub location must
be located strategically. Cost, traffic
and efficiency factors should decide
which system is best for any
organization.

Evolution of Hub an Spoke Model

Hybrid Hub and Spoke Hybrid is
typically found in the Airline industry
where most all flights that originate at
some spoke location connect through
one of a few hub locations and on to
their intended destination. Various
airlines generally operate several hubs.
At times, you can also find direct flights
that do not connect through a hub.
Direct flights are based upon demand
and cost factors.

How it Works

The hubs and spokes acts as a primary routes and secondary

routes through which the transportation happens.
Inter-hub (primary routes)
Inter-hub routes are considered primary routes because they
are routes that connect between hubs. An Inter-hub would
exist in a model designed as a hybrid system.

How it Works
Spokes (secondary routes)
Spokes are all the other routes between hubs and their non-hub
origins.
After understanding how the system would best work in an
organization, there are important quantitative implications
which must be considered with knowing where to locate your
hub and the best routing of traffic.

How it Works

Design methods various models

Weighted factor analysis measures qualitative factors in

deciding where to locate a hub. These factors are those such
as climate, population, government regulations, etc. in the
areas of consideration
Linear programming is a calculation that is designed to
either minimize cost or maximize profit in shipping any
amount of units to any given location.

How it Works
The centroid method equation:
Your existing locations are identified by (x,y) coordinates. By
using these coordinates and the volume of goods being
shipped between locations (v), your goal is solve for the best
location (Cx,Cy) for your distribution center by using the
Equation:
Cx= sum(Axi*Vi) / sum Vi
Cy= sum(Ayi*Vi) / sum Vi

How it Works

p-hub median : the p-hub problems is as follows: given a set

of spokes with various traffic demands, choose x amount of
spokes to locate hubs and route the traffic of all those
spokes through these hubs at minimum transportation cost.

Benefits: Why use a Hub and Spoke System

A hub and spoke distribution has several advantages

that fall under these general areas
efficiency/ effectiveness
economies of scale
cost reduction

Benefits: Why us a Hub and Spoke System

Efficiency and effectiveness

Now, people, items, or technology that come from the same
origin but have different destination, can be allocated to
one load, therefore giving you maximum capacity use on
each transit.

Having a hub and spoke can decrease the complexity of

distribution.

Benefits: Why use a Hub and Spoke System

Economies of scale
By having larger loads, you take advantage of lower per unit costs
Also, with hubs being the focus, inventory slack is taken off the
shoulders of local operations and allows them to receive
goods/services on an as-needs basis.
It becomes cheaper to run routes everyday to and from a given
location and therefore can lead to more frequent turnover.
Economies of scope is attained and the economies of scale
achieved can lead to market share advantages.

Benefits: Why use a Hub and Spoke System?

Transportation cost reduced

There is less time spent in transport which directly reduces the cost of
the activity
These cost-saving advantages take place in the form of fuel costs, labor
costs, holding costs, and possible regulatory costs.

Management costs
Management specialists generally focus on one location for distribution
logistics
The model also increases the security of the corporations. The same
idea applies to all other hub and spoke models in any industry.

Future of hub and spoke Example

Capgemini pioneered a hub-and-spoke delivery network model
in India when it opened a spoke location in Salem in 2008.
Based on the success of that model, Capgemini has now
expanded its delivery network with the opening of a new
center in Trichy that will serve as another spoke location for the
hubs in Bangalore and Chennai.
Spread across an area of 18,000 sq ft, the new 300 seat BPO
facility in Trichy will increase Capgeminis BPO strength in India
where more than 6500 full time staff are now employed. Over
200 employees have

Future of hub and spoke Example

Already been recruited, most of whom are fresh graduates. Two
thirds of Capgeminis current employees in Trichy are women - a
testimony to the regions ability to empower women and the
quality of talent. All operations at the Trichy center, like most of
Capgeminis BPO services in India, will be non-voice based.
In India, Capgeminis BPO unit delivers Finance & Accounting,
Management Assurance, Engineering Services, Content
Management, Research & Advisory, Supply Chain Management,
Procurement Services and Human Resources outsourcing
services to more than 25 large international clients across its
centers in Bangalore, Chennai, Kolkata, Gurgaon, Mumbai ,
Salem and now Trichy.

Future of hub and spoke Example

Apollo Hospitals Ltd is actively looking at expansion with the
hub and spoke model and harnessing the telemedicine
technology.
Apollo Hospitals has introduced eICU, a remote ICU monitoring
system in Chennai and Hyderabad hospitals.

Sunday, November 9, 2014, Rupali Basu CEO Apollo Hospitals

Group (eastern region) in Business Standard They were
planning to introduce the same in Kolkata which will allow us to
expand in smaller towns and cities of eastern region, Apollo
Hospitals Group (eastern region) CEO Rupali Basu told PTI .

Future of hub and spoke Example

"We have 28 telemedicine centers in the eastern region and
once the eICU system is installed at Kolkata, we will expand
rapidly in the eastern region by the hub and spoke model,"
Basu said. The eICU technology allows a remote intensi-vist to
interact with a patient at ICU and part of the care team with a
high definition camera, medical data monitoring system and an
Audi-Visual module for discussion with the bedside staff.

Future of hub and spoke Example

The new NDA government, in signature Narendra Modi style,
will function in a hub and spoke model.
The idea is the hub, that is Modi and Jaitley, will ensure there is
swift decision making, and key economic ministers along with
the bureaucracy does not shy away from making bold policy
moves.
All the economic ministries will coordinate with the Finance
Ministry under Arun Jaitley's leadership and report to the Prime
Minister's Office. Modi-Jaitley duo while finalizing the Council of
Ministers chose those that would not be "difficult, and the rigid
sorts to sit on files. On the contrary all these ministers are open
to mentoring."

Thanks for Listening

The End