In the airline industry, H&S networks allow airlines to offer a greater variety for service between city-to-city pairs, permit economies of scale in terms of passenger consolidation along frequently traveledspokes, and to a certain extent allow an airline to dominate market share in a particular region.
Pure Hub and Spoke – This can be found in parcel or shipping industries where there is only one, centrally located hub. All routes originally travel to the hubs, receive localized goods that have already been separated, and return to their origins. And of course, the hub location must be located strategically. Cost, traffic and efficiency factors should decide which system is best for any organization. Hybrid Hub and Spoke – Hybrid is typically found in the Airline industry where most all flights that originate at some spoke location connect through one of a few hub locations and on to their intended destination. Various airlines generally operate several hubs. At times, you can also find direct flights that do not connect through a hub. Direct flights are based upon demand and cost factors.
The key is consolidation. By having one (or a few) large center(s) (hubs), companies can bring in required parts from many locations into one load designated towards one common destination. The system does have advantages and disadvantages that will be discussed later. A hub and spoke is a combination of cross-docking and consolidation.
Presented by:Presented by:Group – 4 , Section - BGroup – 4 , Section - B( MBA IB 2011 ~ 2014)( MBA IB 2011 ~ 2014)Amit KumarAmit Kumar ( 56)( 56)Vijay KumarVijay Kumar ( 102)( 102)Vishal JawaVishal Jawa ( 104)( 104)Vivek MittalVivek Mittal ( 105)( 105)Satendra Singh (93)Revolutionizing global express deliveryA case presentation on
Introduction- FedEx Corporation1Objectives2Experimental3Results and discussion4Future plans5OverviewOverview
Founded in 1971 by Frederick W. Smith. First Investment-$ 84 Million ($4m-equity,$80m invst) 1980’s:– FedEx reached its maturing stage.– First US company to reach $1 billion inrevenues. FedEx handles 3.3 million packagesHistory
History Founded in 1971 by Frederick W. Smith. First Investment-$ 84 Million ($4m-equity,$80m invst) 1980’s:– FedEx reached its maturing stage.– First US company to reach $1 billion inrevenues. FedEx handles 3.3 million packages
Vision:100 % customer satisfaction after every interaction andtransaction 100 % service performance , ensuring that alldelivery are made within the time commitment for theservice selected by the customerFedEx is committed to our People-Service-Profit Philosophy. Wewill produce outstanding financial returns by providing totallyreliable, competitively superior, global, air-groundtransportation of high-priority goods and documents thatrequire rapid, time-certain delivery."mission:
Cost effective. Alternative for small packages. Distance and time are wider. When customers need it now. 24hrs. 7 days a week, including nights,weekends and holidays. Most familiar service. Handles millions of shipments. Delivers in 1 to 2 business days. Heavy weight shipments. Less than truck load (LTL) freight. 600 miles next day delivery. 1,600+ miles second day delivery. Custom brokerage. Electronic custom clearance. Speed shipments across the border.
Location DecisionsLocation DecisionsCountry DecisionCountry Decision Critical Success FactorsCritical Success Factors1.1. Political risks, government rules,Political risks, government rules,attitudes, incentivesattitudes, incentives2.2. Cultural and economic issuesCultural and economic issues3.3. Location of marketsLocation of markets4.4. Labor talent, attitudes, productivity,Labor talent, attitudes, productivity,costscosts5.5. Availability of supplies,Availability of supplies,communications, energycommunications, energy6.6. Site size and costSite size and cost7.7. Air, rail, highway, and waterwayAir, rail, highway, and waterwaysystemssystems
The Elements ofStrategyTime Horizon Short Term Intermediate Long TermEvaluation Cost Quality Profitability Customer satisfactionFocus Process Technology Market Issues Volume Quality TasksConsistency Professionalism Proliferation Changes in the task Explicit goals
FedEx- InnovationOvernight package delivery;Computerised Package Tracking System-(COSMOS)Hub-and-Spoke System;Just-in-timeBuild-to-OrderFusion of Technology: Use of Handheld;
FedEx- InnovationCentral hub conceptEnables service to more locations withfewer aircraftEnables matching of aircraft flightswith package loadsReduces mishandling and delay intransit because there is total control ofpackages from pickup to delivery
COSMOS[CUSTOMERS OPERATIONS AND SERVICE MASTER ONLINESYSTEM]PARCEL TRACKING SYSTEM-1979 PROOF OF DELIVERY INFORMATIONELECTRONICALLY REPRODUCED AIR BILL FORCUSTOMER.CENTRALIZED DATABASE- @MEMPHIS17
COSMOSDATA ABOUT PICK UPINVOICE AND DELIVERYBARCODE IS ATTACHED TO EVERY PACKET18
BENEFIT:FASTER MOVEMENTCUSTOMER WERE ABLE TO MANAGE THEIRINVENTRY COST MORE EFFICIENTLY REDUCED WRONG DELIVERY-97% correctdelivery * DELIVERY IN TIME-96 % in time*19Source *,#: FedEx Competitiveness through Efficient Logistics, KPMG 2010 report
Hub and Spoke NetworkH&S network involves a series of nodes (hubs),connected by arcs (spokes) that represent viabletransportation alternatives between two nodes.
How it WorksPure Hub and Spoke vs. Hybrid Hub and SpokeHubs and Super hub are created on the basis of center of gravity method
Center-of-Gravity Method Finds location of distribution centerFinds location of distribution centerthat minimizes distribution coststhat minimizes distribution costs ConsidersConsiders Location of marketsLocation of markets Volume of goods shipped to thoseVolume of goods shipped to thosemarketsmarkets Shipping cost (or distance)Shipping cost (or distance)
Center-of-Gravity Method Place existing locations on aPlace existing locations on acoordinate gridcoordinate grid Grid origin and scale is arbitraryGrid origin and scale is arbitrary Maintain relative distancesMaintain relative distances Calculate X and Y coordinates forCalculate X and Y coordinates for‘center of gravity’‘center of gravity’ Assumes cost is directly proportionalAssumes cost is directly proportionalto distance and volume shippedto distance and volume shipped
Center-of-Gravity Methodx - coordinate =x - coordinate =∑∑ddixixQQii∑∑QQiiiiii∑∑ddiyiyQQii∑∑QQiiiiiiy - coordinate =y - coordinate =wherewhere ddixix == x-coordinate of location ix-coordinate of location iddiyiy == y-coordinate of location iy-coordinate of location iQQii == Quantity of goods movedQuantity of goods movedto or from location ito or from location i
Worldwide Distribution ofVolkswagens and Parts
Companies centralize large distributioncenters which essentially do three things– receive goods/information coming from manysuppliers– consolidate goods/information according to thelocation where they are to be shipped– ship them individually to their final destination.
Role of TerminalsA terminal may be defined as any facilitywhere freight and passengers are assembledor dispersedTerminals may also be points of interchangeinvolving the same mode of transportTerminals may also be points of interchangebetween different modes of transportation
Cost Comparison of H&S & P2P Point to point H&SNo of routes 32 16cost 10000 10000Total Cost 320000 160000Save 160000
Super Hub- Memphis International airport Asia pacific: Guangzhou Baiyun Int. airport Canada: Torontopearson Int.airport Central Eastern airport: cologneBonn airport Europe/Middle East Africa: Paris de Gualle airport Latin America/Caribbean: Miami Int. airport United states: Fort worth, Indianapolis,Newark Liberty, Oakland,Ted StevensAnchorage,
Pros and Cons of H&SPros ConsSpokes are simple, and new ones canbe created easily.Inflexible, changes at the hub, or even in asingle route affects the whole network.Scheduling is convenient since thereare few routes, with frequent service.The hub constitutes a bottleneck in thenetwork.Complicated operations can becarried out at the hub, rather than atevery node.Delays at a spoke can also affect the wholenetwork.Small number of routes generallyleads to more efficient use oftransportation resources.Cargo must pass through the hub beforereaching its destination, results in longerjourney.
GOC :Global operations control CenterTracking of shipment in real timeTracking real time movement & position oftrucks and flight.Monitor wether conditionCosmos & GOC work in tandem.
Fedex GIS TrackInGOperaTIOnS To meet delivery deadlines.The information age. Customers want anddemand informationThe navigation tool connects wirelessly toArcGIS® Server.Weather, traffic and other factors affectingthe routeAccessed online and included in the routecomputation.
The entire system depends on TEAMWORKand meticulous timing. Tiffins areCollected from homes & taken to nearestRailway Station. Then they are sortedout for area-wise distributiuon, so that asingle tiffin could change hands 3 to 4Times in the course of its daily journey.
The Flow LogicGrant Road(12)Churchgate(1-10)Lower Parel(14)237456Zones for destinationDistributionBy Carriersat lunchtimeTo officesPoint ofAggregationAnd SortingCDBA ECollection from home1
Coding SystemVLP : Vile Parle (suburb inMumbai)9EX12 : Code for Dabbawalasat DestinationEX : Express Towers(building name)12 : Floor no.E : Code for Dabbawalaat residential station3 : Code for destinationStation eg. ChurchgateStation (Nariman Point)D’souza
Zero % fuel Zero % investmentZero % modern technology Zero % Disputes99.9999% performance 100 % Customer SatisfactionSIX SIGMA IN SERVICE SECTOR
Working of NMTBSAError Rate : 1 in 16 million transactions Six Sigma performance (99.999999) Technological Backup : Nil. Cost of service - Rs. 300/month ($ 6.00/month) Standard price for all (Weight, Distance, Space) Rs. 36 Cr. Turnover approx.[6000*12*5000=360000000 i.e Rs. 36 crore p.a.] “No strike” record as each one a share holder Earnings -5000 to 6000 p.m. Diwali bonus: one month’s from customers.SIX SIGMA IN SERVICE SECTOR