The Hub-and-Spoke Structure of Parcel Carriers

The Hub-and-Spoke Structure of Parcel Carriers

The distribution strategy adopted by parcel carriers such as FedEx and UPS is an example of an intermodal transport chain. It is usually composed of three steps:

  • The first step is the pickup; specific routes are assigned and regular stops are planned according to a tight schedule. The package will inevitably be sent to the hub for consolidation. There is a complex hierarchy of hubs ranging from local hubs servicing a specific market to giant air hubs spanning a continent.
  • At the hub, packages are unloaded and sorted according to the geographical location where they are bound to. There is a hierarchy of hubs ranging from local (truck deliveries) to national (truck, rail, or air) and global (air transportation). Consequently, all the parcels are divided to be loaded in the courier leading to the specified destination. If the parcel is bound locally, then it will remain at the local hub to be sorted. If the parcel is bound to a destination further than the reach of a local hub, it will then sent to another hub that will either consolidate the loads into truck, rail or air depending on the destination.
  • The last step involves fragmentation into loads that are suitable for delivery that is made by cars trucks.