Hub-and-Spoke Network and the Environment

Hub-and-Spoke Network and Externalities

The hub-and-spoke structure has characterized the reorganization of transportation networks, notably for air, rail, and maritime transportation. It has reduced costs and improved efficiency by consolidating freight and passengers at hubs (or gateways). Despite cost savings, the flows, modes, and terminals used by pursuing logistical integration tend to be less sustainable and environmentally friendly. The hub-and-spoke structure concentrates traffic at a relatively small number of terminals. This concentration exacerbates local environmental problems, such as noise, air pollution, and traffic congestion. Thus, even if overall a hub-and-spoke network has a lower level of total externalities than a point-to-point network [E(A) < E(B)], a large share of the environmental externalities are assumed by a single node; the hub.