Logistics hubs are designed to reduce the cost of logistics and streamline supply chains. But how do they do it? This article takes a closer look at the meaning of logistics hub, their characteristics and benefits.
Logistics hub: What does it mean?
A logistics hub acts as a central point for logistics operations. It has the capability of conducting various logistics activities such as collection, sorting, storage, distribution and dispatch. The sprawl over a huge area and feature multiple facilities such as warehouses, office building, distribution centres, material handling equipment, and so on.
Typically, it is strategically located keeping collection and distribution aspects in mind. If a logistics hub is well-connected to multiple modes of transport hub like airports, highways, railway terminals and ports, it is also called a multi modal logistics park (MMLP).
Here are some of the commonly available facilities established at a logistics hub:
- Warehouses including cold storage
- Distribution centres
- Cross-docking facilities
- Fulfillment centres
- Packaging and repacking facilities
- Processing centres such as food processing units
- Other facilities such as offices, IT parks, business centres, etc.
Characteristics of a logistics hub
Here are some of the key characteristics of a logistics hub:
As mentioned earlier one of the key characteristics of a logistics hub is a strategic location. It is usually located on the outskirts of cities. Sometimes they work on a hub and spoke model, wherein small-sized distribution centres established in city suburbs act as spokes.
What is a hub-and-spoke model?A logistics hub often operates on a hub-and-spoke model. A main logistics park acts as a hub while multiple distribution centres are established within the city boundaries for ease of distribution. Goods are sent from the hub to spokes (distribution centres). These distribution centres sort and consolidate goods further and deliver them to customers.
Logistics hubs are well equipped for handling various types of goods including bulk cargo, facilities to handle cold supply chains, packaging units, processing units, necessary IT support and so on.
As mentioned earlier, a logistics hub is usually located just outside the metropolitan city and usually has a port, airport and railway terminal within the vicinity.
Logistics hubs are established to handle enormous volumes of goods. Therefore, they can easily scale up their operations as per business requirements as they have the required infrastructure and connectivity.
Benefits of a logistics hub
Here are some of the key benefits of a logistics hub.
Logistics hubs improve the efficiency of transportation and logistics operations. It acts as a central point for transportation networks. It reduces transit times and congestion in the cities by limiting big sized vehicles on the outskirts in outskirts of the city.
Moreover, logistics hubs often adopt the latest technologies such as IoT, data analytics, tracking technologies, etc. This improves the efficiency of logistics operations to a great extent.
Optimised supply chains
One of the key advantages of a logistics hub is an optimised supply chain. Logistics hubs streamline the operations and optimise transportation routes, which results in optimized supply chains.
One can gain the advantage of economies of scale through logistics hubs. Businesses can take advantage of economies of scale thereby reducing cost. Factors such as shipment consolidation, optimised supply chains, etc. contribute to the reduction of logistics costs.
Since logistics hubs have better connectivity and enable optimised supply chains, they help save time in logistics. As a result, goods are delivered faster and that ultimately contributes to companies achieving customer satisfaction too. For example, due to efficient cross-docking facilities, goods are quickly sorted and transferred to outbound vehicles, which results in expediates delivery time.
Improving inventory management
Logistics hubs help companies improve inventory management and faster fulfilment. Therefore, companies can improve the inventory turnover ratio. This, in turn, has a significant impact on reducing inventory costs.
Facilitates global trades
All the requirements for global trade such as connectivity to the port or airports, freight forwarding services, etc., are available under one roof. This helps smaller companies achieve hassle-free export and import enabling the country’s global trade.
A logistic hub can contribute to the economic development of surrounding regions. It creates employment opportunities, helps businesses by enabling smoother global trades and improves access to domestic as well as global markets. Cumulatively, it helps in achieving economic development.
From a broader perspective, efficient logistics operations achieve optimised transport routes and modes. Lower energy consumption contributes to environmental and sustainability goals.
On a concluding note
In the highly globalised business environment, logistics hubs in India play a pivotal role. Apart from streamlining the logistics operations, they also enable smaller companies to enter new markets and stay competitive. From a broader perspective, logistics hubs help foster growth of MSMEs.