Point-to-point and hub-and-spoke networks are at opposite ends of the connectivity spectrum. A point-to-point network connects directly to a set of locations without any interruption of services (e.g. pick up or drop off) even if the route itself may not be direct. A (pure) hub-and-spoke network connects every location through a single intermediary location called a hub. As a network structure, hub-and-spoke allows for greater flexibility within the transport system through a concentration of flows.
In the above figure, a point-to-point network involves 16 independent connections, each serviced by conveyances (cars, trucks, planes, trains, ships) and infrastructures. By using a hub-and-spoke structure, only 8 connections are required. The main advantages of the hubs are:
- Economies of scale on connections by offering a high frequency of services. For instance, instead of one service per day between any two pairs in a point-to-point network, four services per day could be possible.
- Economies of scale at the hubs enable the potential development of an efficient distribution system since the hubs handle larger quantities of traffic.
- Economies of scope in the use of shared transshipment facilities. This can take several dimensions, such as lower costs for the users as well as higher quality infrastructures.
Many transportation services have adapted to include a hub-and-spoke structure. The most common examples involve air passenger and freight services, which have developed global, national, and regional hubs, such as those used by parcel carriers such as UPS, FedEx, and DHL. However, potential disadvantages may also occur, such as additional transshipment as fewer point-to-point services are offered, which for some connections may involve delays and potential congestion as the hub becomes the major point of transshipment. As the demand and the network load grow, more point-to-point services become feasible. Thus, hub-and-spoke networks are an intermediate stage in network development as the service preference remains direct connections.