If you find it challenging to organize your business processes, the current business model you utilize might be the problem. Point-to-point business models are great for some industries, but not for all of them. So what is the alternate? Well, perhaps you need to adopt the hub and spoke model for your company!
The hub and spoke model is highly preferred in the sectors where headquarters maintains consistency. But what is this model exactly? What are its benefits? It is suitable for what type of sectors?
We will be answering all these questions in this blog. So without wasting any more time, let us get started. Stick Through and Read!
What is the Hub and Spoke Model? Why is it Helpful?
The concept of the hub and spoke model is not alien to the transportation industry. Instead, many companies have been using it for years. So the idea of the hub and spoke model is simple. The idea is that a business will have a central office(headquarter), which serves as the hub(connecting all other offices). While on the other hand, spokes are the vast network of offices distributed geographically according to the buyer’s needs. The hub is usually built in a central location(like in the center of a city). It must have sterling access to public transport.
The commercial aviation industry has been utilizing this business model to transport freight goods and passengers for many years rapidly. Further, the hub and spoke model is also getting eyeballs and popularity in the tech sector.
The reason for the popularity of this business model is entirely justified. It makes the process of delivering products from source to destination fast. Not to mention, it is also a very cost-effective method.
Now that we have familiarized ourselves with the hub and spoke model, it is time to get insight into its advantages.
Advantages of Hub and Spoke Model
Efficient management of resources
Compared to other models, the hub and spoke system manage resources much more efficiently. It includes making better use of trucks/trailers, sorting freights, delivery time, drivers, etc.
By establishing a hub or a central location for the drop-off and pick-up of freights, you will utilize the driver’s time and the truck more efficiently. Similarly, if you know when the freight trucks will reach the hub, you can schedule the delivery time with the receiver accordingly.
This way, it prevents drivers(who have to deliver products to the receiver) from bearing extra downtime waiting for another freight truck to reach the hub. So, in short, the hub and spoke model aids in better resource management.
Helps in reducing the liability of scale
Always keep in mind and never forget that your whole system, including accounts, back-end systems, inventory, websites, everything is digital.
Do you know what it means? It means that when you try to scale up your business, the tech management headache will also get bigger. But the good news is that the hub and spoke architecture has got you covered!
With this model’s help, you will minimize the liability that comes with expanding your business. This model maintains a consistent architecture that scales.
If you plan to add more systems to your business, all you need to do is provide a single connection to the hub. Further, the hub and spoke architecture also aids in reducing the financial costs that are involved with the expansion or growth of the business.
Increases business agility
Scaling or expanding your business is not all about investing in modern tech. The contemporary marketplace is constantly changing, and so are the standards. To stay relevant in the market, you need to race and match the pace. Because if you fail to do so, your competitors will take the lead, which is the last thing you would want.
But with the hub and spoke model, your business’s ability to adapt increases because it helps systematize the integration paradigm.
The process of adding new sales channels or marketplaces has become easier than ever before. Less investment of time, money is required now. And the risks have also been decreased. All of this combined makes it easier for you to move your business at a faster pace.
With time, as your brand evolves, the demands of your office will increase. Would it not be beneficial for you to change your business processes as per the ever-changing requirements? We bet it would!
So this architecture helps you achieve that agility.
This model is super helpful for the drivers as they can get some extra home time. With this model, the distance will become short, and the drivers can pick up fright and deliver it on time. Most of the time, in the majority hub and spoke systems, drivers stay within 200 to 300 miles of their main hub.
This action makes the life of a driver much more convenient as they can visit their home at night and on weekends based on their timetable. So, all in all, the hub and spoke model saves the driver’s time.
Maximizes freight efficiencies
As we have mentioned earlier, drivers stay within 200 to 300 miles of their main hub(central location).
Consider there are two drivers, driver A and driver B. Driver A is the one that is currently located in the hub, and driver B is bringing freights from the port, for instance. Driver A and B both meet at a switching point within the 200-300 miles radius. They switch trailers, and driver A comes back to the hub. This workflow keeps the freight in continuous motion.
Further, this efficient model also aids in reducing the transit time, enables drivers to act according to the rules of hours-of-service. And they are reducing lengths-of-haul, which resultantly helps in improving scheduling. It also helps in improving business performance by enhancing service levels and ensuring the prompt delivery of freight.
Some other benefits that this model provides are:
- Route consistency improvement
- Improved transit performance and dependability
- Higher tenure
- Improved safety
Makes shipment process easier
In the hub and spoke model, since all shipments should be picked up from a centralized location called the hub, the task of assigning delivery duties and planning daily dispatched becomes convenient. Also, it is much easier to maintain and inspect the correct levels of stock from a centralized location during the loading and unloading of goods.
Helps in increasing workforce productivity
Have you ever seen a delivery agent working? They spend quite a hectic day delivering multiple orders across diverse locations. And as we all know, delivering goods from one place to another is not easy, especially with traffic constraints and deadlines.
However, the hub and spoke model eases this process by enabling delivery agents to plan their delivery routes around one centralized location(hub). In short, through this model, workers can meet service levels efficiently.
Decreases logistical costs
This model can work wonders, especially for supply chain companies. It is cost-effective in several different ways. Firstly, efficient routing helps speed up the delivery process, which positively impacts fuel expense. Secondly, it helps decrease inventory management costs by limiting the number of distribution centers within a city. All in all, it is a great model that saves money.
The hub and spoke model has all the potential to take your business to the skies. But if you are not sure whether it is suitable for your type of business or not, consider conducting some research to see if this model has previously been applied to your industry or not.
However, if you can not find any prominent examples of companies that use this model in your niche, try to find a solution yourself. No wonder you end up bringing innovation to your industry!
We hope this blog has provided you with enough insight into the hub, spoke model’s benefits, and served your purpose.
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