Hub and Spoke SystemSurendran 12MB36 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 The hub-and-spoke model was born.Hub and Spoke . As technology has developed. the logistics sector has found faster and more cost-effective ways of shipping freight. the transportation and distribution industry was guided by the principles: Point-to-point or Direct-route operations.Past In the past. . Point-to-point or Direct-route operations. . when the FedEx company took advantage of the concept. the hub and spoke model was popular from 1970s. revolutionizing the way airlines were run. . that the method really took hold.Hub and Spoke Delta Airlines pioneered the method in 1955 But. Hub and Spoke Operational Model . . The concept is used in many different industries.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. traffic and efficiency factors should decide which system is best for any organization. All routes originally travel to the hubs. and return to their origins. receive localized goods that have already been separated. Cost. . the hub location must be located strategically.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. And of course. At times. .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. Direct flights are based upon demand and cost factors. you can also find direct flights that do not connect through a hub. Various airlines generally operate several hubs. . An Inter-hub would exist in a model designed as a hybrid system.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. .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. These factors are those such as climate. government regulations. population. 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 Design methods – various models Weighted factor analysis measures qualitative factors in deciding where to locate a hub. 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 . By using these coordinates and the volume of goods being shipped between locations (v).How it Works The centroid method equation: Your existing locations are identified by (x.y) coordinates. 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 . items. therefore giving you maximum capacity use on each transit. or technology that come from the same origin but have different destination.Benefits: Why us a Hub and Spoke System Efficiency and effectiveness Now. can be allocated to one load. Having a hub and spoke can decrease the complexity of distribution. people. . Benefits: Why use a Hub and Spoke System Economies of scale By having larger loads. Economies of scope is attained and the economies of scale achieved can lead to market share advantages. . It becomes cheaper to run routes everyday to and from a given location and therefore can lead to more frequent turnover. 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. you take advantage of lower per unit costs Also. The same idea applies to all other hub and spoke models in any industry.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. . and possible regulatory costs. holding costs. • Management costs Management specialists generally focus on one location for distribution logistics The model also increases the security of the corporations. Spread across an area of 18. 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.000 sq ft. Over 200 employees have . Based on the success of that model.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. the new 300 seat BPO facility in Trichy will increase Capgemini’s BPO strength in India where more than 6500 full time staff are now employed. Management Assurance. like most of Capgemini’s BPO services in India.a testimony to the region’s ability to empower women and the quality of talent.Future of hub and spoke Example Already been recruited. In India. Two thirds of Capgemini’s current employees in Trichy are women . All operations at the Trichy center. Procurement Services and Human Resources outsourcing services to more than 25 large international clients across its centers in Bangalore. will be non-voice based. Kolkata. Chennai. Mumbai . Engineering Services. Salem and now Trichy. Capgemini’s BPO unit delivers Finance & Accounting. Gurgaon. Research & Advisory. Content Management. Supply Chain Management. . most of whom are fresh graduates. Apollo Hospitals Group (eastern region) CEO Rupali Basu told PTI . . 2014. Sunday. 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. a remote ICU monitoring system in Chennai and Hyderabad hospitals. Apollo Hospitals has introduced eICU. November 9.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. 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." Basu said. we will expand rapidly in the eastern region by the hub and spoke model.Future of hub and spoke Example "We have 28 telemedicine centers in the eastern region and once the eICU system is installed at Kolkata. . that is Modi and Jaitley. will function in a hub and spoke model. All the economic ministries will coordinate with the Finance Ministry under Arun Jaitley's leadership and report to the Prime Minister's Office. and key economic ministers along with the bureaucracy does not shy away from making bold policy moves.Future of hub and spoke Example The new NDA government. Modi-Jaitley duo while finalizing the Council of Ministers chose those that would not be "difficult. and the rigid sorts to sit on files. will ensure there is swift decision making. On the contrary all these ministers are open to mentoring." . The idea is the ‘hub’. in signature Narendra Modi style. Thanks for Listening The End .