Efficiency of the Spoke-Hub Distribution Model in LTL Freight Shipping
If you’ve ever taken a small local plane to a large airport only to take a larger plane to your end destination, you’ve experienced the brilliance of the spoke-hub distribution model. Designed for efficiency, cost-savings, and convenience, this distribution model is used today in LTL freight shipping. But how does it work, and how does it save shippers money? Keep reading to find out.
What is the Spoke-Hub Distribution Model?
Visualize a hand-drawn bicycle wheel by which you draw several lines in different directions all through a common center point and a circle all the way around. The center of the wheel is the “hub.” Each of the lines from the center hub out to the circle is a “spoke.”
The “spokes” are common shipping routes that all lead back to one central hub location. In order to get shipments across long distances that cross the entire circle, shipping companies can bundle smaller shipments into full-freight shipments to get to the hub then use LTL shipping to get the bundles to their individual locations from the hub. This saves money and time for both the shipper and shipping company, who then pass the savings along to the shipper.
Here’s why: If you have three LTL shipments going from a manufacturer in Maryland to several distribution centers across the state of California, it makes little sense to pay for each shipment to make the full journey. By using a central “hub” in Central California, the shipper receives the cost-savings of a full-freight shipment for the long 3000+ mile journey and pays the LTL shipment price for the local journey that’s only 100 or so miles.
Why the Spoke-Hub Distribution Model Works for LTL
For LTL shipping, in particular, the spoke-hub distribution model is exceptional. Many LTL shippers don’t use full-freight shipping because they simply don’t have enough product to fill a full shipment.
However, LTL shipping is more expensive per parcel or product than the bundled full-freight shipping cost. To benefit from the savings of freight shipping, LTL shippers can bundle several shipments with other LTL shipments into a single full-freight shipment and save money. The shipper doesn’t have to arrange any of this, and it’s usually taken care of by a third-party logistics provider who works to lower costs for shippers by taking advantage of savings such as this.
How to Choose the Perfect Hub
Cleveland, Ohio, is located within 500 miles of 80% of America’s population. The city has water access, train access, international air access, and regular highway access. Because of that, it’s one of the country’s most viable domestic and foreign export markets.
Amware is a full-service freight and logistics provider located in Cleveland, Ohio. We provide a complete end-to-end distribution system for your products. Contact our team today to get a free shipping quote and discover why Amware is loved by entrepreneurial startups, Fortune 500s, and everyone in between, or sign up for a 30-day free trial of Amrate, one of the industry’s leading LTL software products.