Is the popular Hubs & Spokes System for Distribution the best solution for "Direct to End Customers' Door Distribution"?

Today, as people globally are becomming more and more, time and convenience sensitive, information is playing a key role in developing, what the world knows as E Commerce. However contrary to the development trends in the e tailing segment, logistics solutions that form an important part of the whole value chain, are still lagging behind. Consider this.... Do you have a service which will ensure "same day delivery" and that too in cheaper rates. The cheapest will be hiring a courier company but does that satisfy the expectations of your end customer?

Also because an e tailer, is usually a retailer only, hence forming your own distribution setup is perhaps the only available way, one can explore for achieving a long term competitive advantage. However what are the costs involved?

Is it too much that can only be justified by a courier company???

I have a Distribution System that is easy and quicker to operate and also has very little capital and operational costs involved when compared with the conventional Hubs and Spokes Model. The System is also far more scallable than the conventional Hubs and Spokes model.

People interested please voice your opinion.....

Tags: direct, distribution, door, ecommerce, hubs, innovation, spokes, to

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Hub and Spoke model of distribution is a centralized logistics system where the product flows from a single hub located strategically to spokes (customers) situated around it. Many industries are implementing this model to achieve logistics advantage. By this method of distribution, industries are able to reduce transportation costs, better order consolidation, improves cycle time. It also enables companies to control the flow of products across their businesses efficiently, with significant cost savings. However, since hub and spoke model is centralized, any changes at the hub, could affect the entire network. It may be difficult to handle demand surge at spokes and it also increases the journey time from the supplier to the end customer.

@CGN, Thanks and agree with you on the pros and cons shared.Few words but right on the head of the nail.

Now what if we apply whatever you have shared to a specific industry. Lets say the E Com industry. Now would you like to elaborate. I have been in the thick and thin in the Indian ECom industry mostly as a logistics guy and I can guess what you are about to say, as it is a reality here. i believe else where in other developed countries, there may be other examples worthy to note where there is a segment that needs fast and direct to door of customer deliveries (another example is Amway). I wonder how it is been done there? Do they have a better system other than hubs and spokes?

@Surjodoy: The example that you have considered is very genuine and there are solutions to deal with such situations. Faster and direct customer delivery through hub and spoke model in other countries are done by slightly improvising the conventional model. A spoke is generally considered as a retail outlet where materials are supplied from the warehouse hub. But for a faster direct delivery the spokes are made a secondary hub (intermediate cross docking stations) where orders are re-assembled, consolidated and shipped to the customers as individual shipments through a milk run (to avoid less than truck load). At the same time this mode could also bring the economies of scale achieved, but customers could be charged a premium for quick delivery.

@CGN, I admire your solution but have a question for you? 

What is the cost structure you are recommending?

How soon do you think will this system deliver 5000 plus shipments at the city level?

@Surjodoy: I assume that if products are required to be delivered faster, then less than truck load vehicles will be used. The loss encountered by LTL mode could be charged back to the customers (along with a margin) to break even the transportation cost.

To arrive at an approximate time required to deliver 5000 shipments, parameters like kind of product, average distance between delivery point, traffic conditions, fleet size and vehicle capacity are essential.

@CGN,

I like your solution however I believe that it will not only be expensive this way, it will also be extremely difficult to scale. Also let me point out that in ecom the majority of goods will be under 3 kgs by wt so LTL is out of question.... 

You have to either outsource to a courier player or you need to have very deep pockets to sustain quick deliveries that can be scaled as well. Your solution has probably crossed the minds of a lot of experts however logistics remain a concern for not only the Indian e com but also for other global markets :)

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