Hub-and-Spoke Concept Benefits in the Transportation Sector

In recent years, the hub-and-spoke concept has found wide usage in the various modes of transportation, which operate in increasingly competitive and market-oriented environments (Hsu & Hsieh, n.d.).

The hub-and-spoke concept basically denotes a system of connections and interconnections set in the same manner as the chariot wheel, whereby all traffic progresses along spokes attached to the hub at the center (Wei & Yanji, 2006). The present paper aims to describe and illuminate some of the advantages the hub-and-spoke concept brings to the various modes of transportation practiced in the United States and globally.

In the maritime mode of transportation, available literature demonstrates that hub-and-spoke structures have assisted greatly in reducing shipping costs as well as inventory costs due to increased efficiency. Major shipping lines using the hub-and-spoke concept have experienced the efficiency and competitiveness associated with a reduction of inventory cost, which undoubtedly represents opportunity cost or loss of value going by the fact that goods cannot be utilized or sold in the shipping process (Hsu & Hsieh, n.d.).

These authors also acknowledge that hub-and-spoke structures are associated with a reduction in waiting for time costs related to sailings frequency, implying that they are more profitable to use than direct structures.

In commercial passenger air transport, available scholarship demonstrates that hub-and-spoke structures “have been instrumental in helping to reduce the overall costs of air travel to the U.S. public and to increase the travel options that are available” (Wei & Yanji, 2006, p. 211).

Indeed, as demonstrated by Goudreau (n.d.), “the hub-and-spoke system has been the guiding operational framework for airlines in the United States since they began operations about 70 years ago” (p. 9). Commercial air flights using this model are able to provide their customers with a competitive choice of flight schedules and route prices, leading to a reduction in the overall costs of air travel.

In truck and rail transportation, it is documented in the literature that the hub-and-spoke concept provides the capacity to utilize larger vehicles or wagons, hence not only considerably minimizing costs per unit through bundling flows on a hub but also ensuring lower total network costs and stronger competitive advantages (Bontekoning, 2006).

Indeed, according to this author, the spoke-and-hub structures allow “intermodal operators and railway companies to focus on the reliable and time- and cost-effective point-to-point bundling concept” (p. 1).

Many hub-and-spoke structures all over the world provide transport and logistics companies with the capacity to organize road or track services as batches (groups) of trucks or trains with highly coordinated arrival and departure times for compact exchange operations at a hub, leading to significantly reduced operational costs and elevated customer satisfaction levels (Bontekoning, 2006).

In nearly all modes of transportation (e.g., maritime, air, truck, and rail), the spoke-and-hub concept has been closely associated with increased economic development owing to its capacity to facilitate the movement of goods and services (Wei & Yanji, 2006). It is a well-known fact that opportunities for economic development are enhanced when efficiency and competitiveness are introduced into the various modes of transportation using the hub-and-spoke method.

This paper has successfully described and illuminated the major advantages or benefits that the hub-and-spoke concept brings to the various modes of transportation not only in the United States but also globally. Overall, it has been demonstrated that hub-and-spoke structures are able to reduce operational costs significantly, inventory costs and waiting times, while at the same time enhancing competitive advantages, economic development, as well as customer satisfaction levels.

References

Bontekoning, Y.M. (2006). Hub exchange operations in intermodal hub-and-spoke networks: Comparison of the performance of four types of rail-rail exchange facilities. Web.

Goudreau, K. Hub and spoke system: A good idea…again. Web.

Hsu, C.I., & Hsieh, Y.P. Direct versus hub –and-spoke routing on a maritime container network. Web.

Wei, S., & Yanji, M.A. (2006). Hub-and-spoke system in air transportation and its implications to regional economic development. Chinese Geographical Science, 16(3), 211-216.