Hub & Spoke Model: Definition, Benefits & Examples

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If you're struggling to organize and streamline your business so that it operates efficiently, the problem could be your current business model. Linear, point-to-point business models work well in some industries and drag down efficiency in others. Perhaps a hub and spoke model could work well for your company. Originating in the transportation industry, this model can be adapted to other industries with a little creativity.

What Is the Hub and Spoke Model?

The hub and spoke model refers to a distribution method in which a centralized "hub" exists. Everything either originates in the hub or is sent to the hub for distribution to consumers. From the hub, goods travel outward to smaller locations owned by the company, called spokes, for further processing and distribution.

Hub and Spoke Model vs. Point-to-Point

There are many benefits of the hub and spoke model, and it's perhaps easiest to understand these by comparing the hub and spoke model to the model it was intended to replace: the point-to-point model. The exact opposite of the hub and spoke model, the point-to-point model has goods and services go directly from Point A to Point B without going to a centralized distribution hub.

In the point-to-point model, transportation costs can actually be higher than in a hub and spoke model. This happens because more routes are created in a point-to-point model, whereas products can be grouped and efficiently shipped following set routes in a hub and spoke model.

A hub and spoke model also makes it possible for transport drivers to travel shorter distances and stay in a more centralized area. That's because drivers can switch at the hub. In a point-to-point system, there's no company space for drivers to easily meet and switch.

Hub and Spoke Model Airlines Example

The airline industry revolutionized the hub and spoke model. Airlines operate out of a centralized hub and use regional airports as the spokes from which they offer flights. Aviation experts acknowledge that the hub and spoke model resulted in the rapid increase of the airline industry thanks to an increase in the efficient use of relatively scarce air transit resources (only a certain number of airports exist, for example).

The smaller regional airports (the "spokes") transport passengers to one of the larger centralized hub airports. From there, a connecting flight can take them to another regional airport. This is more efficient than having numerous direct routes ("point to point") from regional airport to regional airport. The disadvantage of this model is felt primarily by the passengers, who might experience delayed flights and increased transit time by getting on two different flights rather than one direct flight.

Congestion at centralized hub airports can also cause dissatisfaction among travelers. Although many large airlines believe the advantages of the hub and spoke model outweigh the disadvantages, some smaller airlines are capitalizing on the service gap of offering regional point-to-point flights.

Other Adaptations of the Hub and Spoke Model

Describing the hub and spoke model in terms of transportation and distribution makes the most sense because of its origin in aviation. However, with a little creativity, it can be applied to other types of businesses too. For example, you can use the hub and spoke model to streamline social media content distribution and manage projects. It could even be used in your industry already, without you realizing it had a particular name.

Social Media Application

Social media management tools act as centralized hubs where you can draft a single post and then schedule it for publication on sites like Facebook, LinkedIn, Twitter, Instagram, etc. In contrast, you would be using a point-to-point method if you logged into each social media site separately to draft and schedule the same post. You can see how having a central hub creates a more efficient process in this way, and you can do the same with other marketing or project management tasks. It's just a matter of finding the right tool or "hub."

But distribution is just one advantage offered by a social media management hub. These tools also allow you to monitor and respond to your notifications, track brand mentions and view analytics in a central location. Think about the reduced amount of clicks you'd have to make to find crucial strategic information and the amount of time that you'd save in navigation alone.

The more you can do in a single management platform, the more efficient you can become with your social media strategy. However, the platform has to have an intuitive design to support streamlining your day-to-day tasks, so it's important to try out different ones to find a good fit for your workflow.

Online Project Management Application

For example, project management tools allow you to create and assign tasks in a centralized area. Team members automatically receive notifications and can access the "hub" for their own tasks. Therefore, team members represent the spokes and the tasks are the "goods" being distributed.

A project manager can keep an overview of what's happening inside the hub, and team members can deliver their final drafts through the management tool for approval by the project manager. This represents the ebb and flow of information that the hub and spoke model is made for. However, just like airplane passengers can congest the central airport hub during busy times, project managers need to take care to stagger due dates in order to avoid creating a bottleneck.

Advantages and Disadvantages of Hub and Spoke Model

The hub and spoke model was designed to increase the efficient use of resources. Whether we're talking about airplanes flying set routes from large airports to regional airports to collect passengers or social media posts being distributed to multiple channels with a single click, it's easy to see how a hub and spoke approach benefits companies in terms of time and resources.

However, as with any business model, the hub and spoke approach is not perfect. There's the issue of hub congestion, which can create bottlenecks. Focusing too much on the central hub can cause you to unintentionally ignore other resources available. In the social media example, if you're not careful to use a social media management tool that gives you absolutely everything you need, you can miss out on conversations or opportunities to engage with followers by not logging into the platform directly.

Fortunately, additional planning and strategy can smooth out these issues in most cases. The disadvantages represent problems, but not insurmountable ones. You may find that the advantages far outweigh the possible disadvantages, as the airline industry did.

Is It Right for Your Business?

No matter your industry, if you're looking to find a more efficient solution for your daily workflow, do some research to see if the hub and spoke model has already been applied to your industry. What business model do industry leaders use? How about your competitors?

If you can't glean any insight about the hub and spoke model in your niche, do some brainstorming to see if you can come up with the solution yourself. You might have an opportunity to bring innovation to your industry!

References

About the Author

Cathy Habas specializes in marketing, customer experiences, and behind-the-scenes management. Cathy has contributed to sites like Business and Finance, Business 2 Community, and Inside Small Business. She served as the managing editor for a small content marketing agency before continuing with her writing career.