{"id":10143,"date":"2023-11-08T10:00:00","date_gmt":"2023-11-08T10:00:00","guid":{"rendered":"https:\/\/www.shipbob.com\/au\/blog\/hub-spoke-distribution-model\/"},"modified":"2025-09-11T21:18:08","modified_gmt":"2025-09-11T21:18:08","slug":"hub-spoke-distribution-model","status":"publish","type":"blog","link":"https:\/\/www.shipbob.com\/au\/blog\/hub-spoke-distribution-model\/","title":{"rendered":"Expert Guide to The Hub and Spoke Distribution Model\u00a0"},"content":{"rendered":"\n

Table of Contents<\/p>

** Minutes<\/p><\/div><\/div>\n

What is the hub and spoke distribution model? <\/a><\/p>\n\n\n\n

The traditional fulfilment process had to go <\/a><\/p>\n\n\n\n

Benefits of the hub and spoke model <\/a><\/p>\n\n\n\n

ShipBob\u2019s new hub and spoke model specializes in swift & accurate inventory distribution <\/a><\/p>\n\n\n\n

Hub and spoke distribution model FAQs <\/a><\/p>\n<\/div>\n\n\n\n

Your ecommerce business is starting to grow. You’re getting more customers every day, you\u2019ve perfected the unboxing experience<\/a>, and you\u2019re re-investing heavily in inventory. <\/p>\n\n\n\n

But there\u2019s still one thing holding you back: delivery times. <\/p>\n\n\n\n

While you can ask your supplier to optimise their picking and packing<\/a> process to save some time before the products are shipped out, the real challenge likely lies in your distribution model. <\/p>\n\n\n\n

Experts in the ecommerce logistics industry know that placing inventory physically closer to customers is one of the most cost-effective ways to speed up delivery. To achieve this, top-tier logistics platforms often adopt the hub and spoke distribution model. <\/p>\n\n\n\n

In this article, we\u2019ll cover what the hub and spoke distribution model is, and how the benefits of hub and spoke counteract the drawbacks of traditional distribution models. <\/p>\n\n\n\n

What is the hub and spoke distribution model? <\/h2>\n\n\n\n

The hub and spoke distribution model is an approach to logistics management<\/a> in which a business uses a\u00a0centralised \u201chub\u201d location to manage and distribute freight to a series of \u201cspokes\u201d, or secondary distribution points.\u00a0<\/p>\n\n\n\n

Rather than a business sending inventory directly from one point to another in a linear fashion, this model has a business bring all goods to a central location. This hub is often better equipped with smart warehousing<\/a> technology to handle large amounts of incoming inventory.  <\/p>\n\n\n\n

From that hub, the business regionally distributes<\/a> the inventory, and then delivers the final product to customers via last-mile delivery services.  <\/p>\n\n\n\n

The primary objective of this model is to optimise the distribution process for cheaper and faster deliveries to end customers.  <\/p>\n\n\n\n

Point-to-point vs hub and spoke distribution model <\/h3>\n\n\n\n

In the hub and spoke distribution model, all inventory is sent to a centralised \u201chub\u201d location. While this may seem more complicated than the point-to-point model, consider the following example.\u00a0<\/p>\n\n\n\n

Say a business has 3 suppliers \u2013 A, B, and C in the example above (to the left). That same business has 5 fulfilment centres (D, E, F, G, and H), and uses the point-to-point inventory distribution method.  <\/p>\n\n\n\n

Getting inventory just one fulfilment centre (fulfilment centre D, for instance) requires only 3 distribution paths: A to D, B to D, and C to D. But as the business keeps adding fulfilment centres, the logistics of getting each supplier\u2019s inventory to every fulfilment centre and sending inventory from one location to another to balance stock levels becomes incredibly complicated.  <\/p>\n\n\n\n

Using the hub and spoke method (to the right), the suppliers only ever need to send inventory to one location, and that location then sends the inventory where it needs to go.  <\/p>\n\n\n\n

This is why the point-to-point approach can work for brands that are still fairly small, with simple supply chains, but isn\u2019t always right for growing, multichannel, or geographically dispersed brands. For more complex supply chains, the hub and spoke model can streamline logistics significantly.  <\/p>\n\n\n\n

Benefits of the hub and spoke model <\/h2>\n\n\n\n

The hub and spoke model represents more than just a streamlined logistical strategy\u2014it’s a powerful tool that enables businesses to optimise their resources, improve customer satisfaction, and foster scalable growth. Here\u2019s a deeper dive into the many benefits of the hub and spoke model. <\/p>\n\n\n\n

Wider network & market  <\/h3>\n\n\n\n

By consolidating inventory and major operations like receiving in central hubs before distributing to regional centres, businesses can extend their geographic footprint. This not only means greater access to various regional markets, but also the potential to penetrate new demographics and audiences that were previously out of reach.  <\/p>\n\n\n\n

This is especially useful for ecommerce businesses engaged in multichannel distribution<\/a> and translates into a broader customer base and increased sales opportunities. Retail-first supplement brand Peak and Valley, for example, is always looking to add retail partnerships \u2013 and by leveraging ShipBob\u2019s hub and spoke distribution model, it\u2019s now easy for them to distribute inventory to retailers in a region of the US they weren\u2019t in before.  <\/p>\n\n\n\n

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\u201cIf we started shipping through a retail grocer with a distribution hub on the West Coast, for example, all we would have to do is distribute stock to one of ShipBob\u2019s West Coast fulfilment centres. It\u2019s fantastic to have that option of scaling so easily, while expanding with ShipBob.\u201d<\/em><\/p>\n\n\n\n

Nadine Joseph, Founder & CEO of Peak and Valley<\/a> <\/p>\n<\/blockquote>\n\n\n\n

Accurate & efficient order fulfilment <\/h3>\n\n\n\n

The hub and spoke model promotes a more organised, streamlined chain of custody for inventory and orders.  <\/p>\n\n\n\n

With a centralised distribution hub, businesses can maintain better oversight of their inventory during the receiving process, and incoming inventory is better accounted for.  <\/p>\n\n\n\n

This results in more accurate order processing, minimised picking errors, and a reduction in costly order returns or reshipments<\/a>. When a system is organised, fulfilling customer orders becomes a much more seamless process. <\/p>\n\n\n\n

Smart resource deployment <\/h3>\n\n\n\n

Resources \u2013 whether it’s inventory, labour, or transportation \u2013 are valuable assets. The hub and spoke model helps ensure that these resources are used as wisely as possible.  <\/p>\n\n\n\n

For instance, distributing inventory from one central hub to each regional spoke location based on demand helps a business satisfy customers without wasting inventory. If a brand sends the same slate of inventory to each regional location to cover their bases, some of it will end up collecting dust on shelves. A hub location can help direct inventory to where it\u2019s needed most, reducing wasted stock and maximising sales. <\/p>\n\n\n\n

Brands also save time and labour hours by conducting receiving operations in one hub facility, rather than in every regional location. That way, only one team must perform receiving tasks (such as counting and inspecting inventory), and the teams at spoke locations have more time to devote to fulfilment.  <\/p>\n\n\n\n

And when it comes to transportation, it\u2019s much more efficient for a supplier to send inventory to a single hub location in one trip, versus making seven trips to seven regional locations. This not only cuts down on transportation costs and times, but is also more environmentally-friendly.  <\/p>\n\n\n\n

Shorter time-in-transit <\/h3>\n\n\n\n

One of the core advantages of the hub and spoke model is how it optimises distribution routes.  <\/p>\n\n\n\n

Depending on how accessible a regional spoke location is, it may take suppliers a long time to ship there. Hubs, on the other hand, are often intentionally located by major metropolises to make it easier for suppliers to reach, which streamlines and speeds up the transit process.  <\/p>\n\n\n\n

Moving goods through a central hub to a regional distribution centre also helps eliminate unnecessary detours or holding periods. This ensures that products reach customers in the shortest time possible \u2013 a critical factor in a world of 2-day fulfilment<\/a> expectations. <\/p>\n\n\n\n

Adjustable scalability <\/h3>\n\n\n\n

The hub and spoke model is a much more scalable distribution model. It allows growing businesses to scale up or down with ease, adding more spoke locations or even secondary hubs over time without overhauling the entire distribution system (or incurring massive costs).  <\/p>\n\n\n\n

This scalability ensures that businesses are always poised for growth without being held back by warehousing and distribution<\/a>. <\/p>\n\n\n\n

Cost-savings in spades  <\/h3>\n\n\n\n

Coordinating and paying for inventory distribution across several regional locations can be expensive. As women\u2019s wellness brand Semaine Health discovered, it\u2019s often not only cheaper, but easier to send inventory to a single hub location and distribute it regionally from there.  <\/p>\n\n\n\n

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\u201cI ran the numbers to see what it would cost to ship pallets directly to different fulfilment centres, and it\u2019s so much more expensive than sending it to one hub and letting ShipBob distribute it for us. The Inventory Placement Program\u2019s model is much cheaper, and we don\u2019t have to think about distribution. It\u2019s saved us so many headaches, and now we just arrange one pickup from a manufacturer and one delivery. It’s so cheap, and so easy.\u201d<\/em><\/p>\n\n\n\n

Matt Crane, Co-Founder and Chief Science Officer at Semaine Health<\/a> <\/p>\n<\/blockquote>\n\n\n\n

Why the traditional fulfilment process had to go<\/h2>\n\n\n\n

The traditional ecommerce fulfilment process<\/a> is called point-to-point. While it is often a simpler model than hub and spoke (at least in theory), it is not always more efficient \u2013 particularly in the modern ecommerce logistics landscape.  <\/p>\n\n\n\n

At its core, the point-to-point model is elementary: goods are dispatched from a supplier (Point A) and sent directly to the customer or retailer (Point B). On the surface, it seems like a direct, fuss-free approach. <\/p>\n\n\n\n

However, with the rapid growth and globalisation of the ecommerce market, this linear model has begun to show its limitations. As businesses continue to offer broader and broader ranges of products, source from more diverse locations, and cater to a global customer base, the logistics web grows tangled.  <\/p>\n\n\n\n

A few pain points that have become increasingly evident in point-to-point distribution systems, including: <\/p>\n\n\n\n