FedEx Blog

FedEx Blog

Why Use A Hub and Spoke System?

April 16, 2009

The FedEx Express business model is constructed as an international, overnight-delivery service provider. By purchasing our services, our customers elect to reduce carbon emissions by using our hub and spoke system. Though it may not be immediately obvious, our system actually reduces the environmental impact of shipping thousands of packages everyday when compared to the impact of shipping those same packages via multiple vehicles that would be underutilized /not filled to capacity. This is particularly true when looking at the parcel delivery from an individual package standpoint since it is difficult to visualize how the hub and spoke network actually produces less total carbon than other forms of shipping when considered in the aggregate. Basically our Express system can be equated to “carpooling for packages”.  Because of the tremendous volume that concentrates in our system, emissions are actually lower per package than would have been possible through a less efficient network. This is particularly true when considering the time-definite nature of our services.

Due to the enormous scale of our Express business, we have created a hub and spoke system that relies on the efficient pickup, consolidation, sorting, and delivery of thousands of parcels each day. When FedEx was formed in the early 70’s we developed a model which allowed us to deliver parcels overnight from coast to coast. Since we have always guaranteed service, the only way to do this effectively was via the hub and spoke system where we could congregate all incoming parcels, sort them, and then re-route them to their final destinations. Hence to look at a routing table for any specific parcel, one might first think that the routing through destinations such as Memphis to be wasteful, however, if by taking another step back one can get more perspective by taking into consideration the thousands of packages originating each night from a myriad of zip codes.

Its true that smaller companies can specialize in delivering to very specific geographical areas, but it is also safe to say that these companies cannot guarantee overnight deliver across the entire U.S. These companies do not deal with the scale of volume that we do in our Express business, nor can they deliver to many of destinations that fall under our service purview. Lastly, if the volume of parcels that we consolidate and deliver on a daily basis were instead delivered by a myriad of independent competitors, total CO2 emissions would increase significantly due to the scale of inefficiency that would result.


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