Why D2C brand must integrate the Hub & Spoke distribution model into their logistics

Posted on May 3rd, 2021
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Why D2C brand must integrate the Hub & Spoke distribution model into their logistics

Introduction

Efficient logistics is the key to gain a strategic advantage over the competitors in the supply chain industry and when it comes to supply chain operations while managing a warehouse, you always try to keep warehousing, inventory management and transportation costs minimum and at the same time try to serve the customers faster.

Therefore to stand out in the market, you need to optimize your network for cost-efficient and faster services. For many years now, supply chain enterprises are leveraging technology in logistics, which has given rise to multiple strategies like a hub and spoke network distribution model. Before jumping to advantages, you need to understand this model first.

Defining the hub and spoke model

In a point-to-point distribution model, there is no centralised distribution centre or warehouse. The movement of packages takes place between different points on the basis of inventory availability and delivery requirement. At times, the shortage of stock results in inefficient distributions and increased cost.

However, if a warehouse or a distribution centre is strategically placed within the city, it takes less time and transportation cost to reach the delivery locations. This is what the hub and spoke distribution model is all about.

The hub and spoke model refers to the warehousing and shipment system which is centralized and the structure of which resembles that of a bicycle wheel, where the hub is the wheel centre and the spokes represent different directions of delivery.

The advantage with the hub and spoke distribution system is that it allows greater flexibility and makes sure the connection system is efficient by consolidating both the efforts of drivers and delivery executives to a single dedicated centre. This is the reason for the growing popularity of the hub and spoke distribution model among the supply chain enterprises.

Advantages of the hub and spoke model

Route optimization

While planning the best possible route for faster delivery, there are many things to consider including the timing preferred by the customer, analyzing peak traffic hours and other ground restrictions. The spoke network ensures the most optimal route for the logistics while it is on the move along the spokes of the bicycle wheel and eventually the delivery operations are achieved at a much faster rate with great efficiency, resulting in customer satisfaction.

Cost reduction

Not only the faster delivery matters while you are managing a warehouse or a distribution centre, but the overall cost is also a primary concern. In that case, the hub and spoke provides a number of ways by which you can achieve your targets at a minimum cost. Apart from faster deliveries, it helps to save fuel costs as you have to travel lesser miles and it also limits the number of warehouses or distribution centre within a city, as a result, you are able to achieve cost reduction in inventory management as well.

Increase in productivity

It is a hectic job to cope with multiple orders especially when these are from different locations. Also, with ground constraints like time-based deliveries and traffic, it is not easy to run from one location to another. The hub and spoke model helps you to select routes around one hub and after finishing delivery in one location it directs you to another hub if there is any extra or on-demand delivery. As a result, the overall productivity increases and you are able to meet service demands effectively.

Effective shipment

On a daily basis, shipments are dispatched from a designated hub and it is essential to have a systematic approach for assigning responsibilities to different agents based on preferences and their knowledge of a particular area. The hub and spoke model helps to achieve this and with this model, you are able to send and receive shipments from a centralized hub and also maintain the exact number of stock for keeping the supply constant in a particular area.

Wrap up

There are many business units leveraging the concept of hub and spoke distribution model in their logistics for both intra-city and inter-city orders. But before going with this, you must know whether it matches your demands or not. It depends on the type of business you are in and if you are into E-commerce where you have to fulfil high-density orders in a particular region or you are into food delivery with orders in bulk within a fixed circle, then the hub and spoke model is the best solution to go with.

This model ensures a flexible and cost-efficient distribution by managing a smooth flow of goods and instead of going with a point-to-point model, the hub and spoke distribution model offers more opportunities on a daily basis and must be adopted if you are running a warehouse or a distribution system.

Schedule a free demo with Logibricks for achieving end-to-end route optimization and improve your logistics with our ERP products.


Why D2C brand must integrate the Hub & Spoke distribution model into their logistics
 

Category:
Best Practices

Posted on:
May 3rd, 2021