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SysSoc Gyaan Capsule-3

8. Spoke-hub distribution

Figure 1 Hub and spoke airline route structures. Los Angeles and Denver are used as hubs

The hub-and-spoke distribution paradigm (or model or network) is a system of connections

arranged like a chariot wheel, in which all traffic moves along spokes connected to the hub atthe center. The model is commonly used in industry, in particular in transport,

telecommunications and freight, as well as in distributed computing.

Benefits

For a network of n nodes, only n - 1 routes are necessary to connect all nodes; that is, the

upper bound is n - 1, and the complexity is O(n). This compares favorably to the \frac{n(n-

1)}{2} routes, or O(n2), that would be required to connect each node to every other node in apoint-to-point network. For example, in a system with 10 destinations, the spoke-hub system

requires only 9 routes to connect all destinations, while a true point-to-point system would

require 45 routes.

The small number of routes generally leads to more efficient use of transportation resources.

For example, aircraft are more likely to fly at full capacity, and can often fly routes more than

once a day.

Complicated operations, such as package sorting and accounting, can be carried out at the

hub, rather than at every node.


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Spokes are simple, and new ones can be created easily.

Customers may find the network more intuitive. Scheduling is convenient for them since thereare few routes, with frequent service.

Drawbacks

Because the model is centralized, day-to-day operations may be relatively inflexible.

Changes at the hub, or even in a single route, could have unexpected consequences

throughout the network. It may be difficult or impossible to handle occasional periods of

high demand between two spokes.

Route scheduling is complicated for the network operator. Scarce resources must be used

carefully to avoid starving the hub. Careful traffic analysis and precise timing are required

to keep the hub operating efficiently.

The hub constitutes a bottleneck or single point of failure in the network. Total cargo

capacity of the network is limited by the hub's capacity. Delays at the hub (caused, forexample, by bad weather conditions) can result in delays throughout the network. Delays

at a spoke (from mechanical problems with an airplane, for example) can also affect thenetwork.

Cargo must pass through the hub before reaching its destination, requiring longer journeys

than direct point-to-point trips. This trade-off may be desirable for freight, which canbenefit from sorting and consolidating operations at the hub, but not for time-critical cargo

and passengers.

Two flights are required to reach the most of the destinations. Landing on the hub and

spending some time there increases the duration of the journey (safety screening may be

necessary again before boarding the second plane). Miss of the connecting flight is

possible and may be more troublesome than just a flight delay.

Commercial aviation

In 1955 Delta Air Lines pioneered the hub and spoke system at its hub in Atlanta, Georgia [in

an effort to compete with Eastern Air Lines. In the mid-1970s FedEx adopted the hub and

spoke model for overnight package delivery, and after the airline industry was deregulated in

1978, Delta's hub and spoke paradigm was adopted by several other airlines.

Airlines have extended the hub-and-spoke model in various ways. One method is to createadditional hubs on a regional basis, and to create major routes between the hubs. This reducesthe need to travel long distances between nodes that are close together. Another method is to

use focus cities to implement point-to-point service for high traffic routes, bypassing the hub

entirely.


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Transportation

The spoke-hub model is applicable to other forms of transportation:

Sea transport, where feeder ships transport shipping containers from different ports to acentral container terminal to be loaded onto larger vessels.

Cargo airlines; for example, most UPS Airlines flights travel through its "Worldport" at

Louisville International Airport, and a significant portion of FedEx Express parcels areprocessed at its "SuperHub" at Memphis International Airport.

Freight rail transport, where cargo is hauled to a central exchange terminal. At the

terminal, shipping containers are loaded from one freight car to another, and classification

yards (marshalling yards) are used to sort freight cars into trains and divide themaccording to varying destinations.

Public transit utilizes various transport hubs to allow passengers to transfer between

different lines or transportation modes.

Industrial distribution

The hub-and-spoke model has also been used in economic geography theory to classify a

particular type of industrial district. Ann Markusen, an economic geographer, theorized aboutindustrial districts, where a number of key industrial firms and facilities act as a hub, with

associated businesses and suppliers benefiting from their presence and arranged around them

like the spokes of a wheel.

The chief characteristic of such hub-and-spoke industrial districts is the importance of one or

more large companies, usually in one industrial sector, surrounded by smaller, associated

businesses. Examples of cities with such districts include Seattle (where Boeing was founded),Silicon Valley (a high tech hub), and Toyota City, with Toyota.


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9. Classification of Inventory Control

Always Better Control (ABC) Analysis

This technique divides inventory into three categories A, B & C based on their annual

consumption value.

It is also known as Selective Inventory Control Method (SIM)

This method is a means of categorizing inventory items according to the potential

amount to be controlled.

ABC analysis has universal application for fields requiring selective control.

There is no fixed threshold for each class, different proportion can be applied based on

objective and criteria. ABC Analysis is similar to the Pareto principle in that the 'A' items will

typically account for a large proportion of the overall value but a small percentage of number

of items.

Example of ABC class is

A items20% of the items accounts for 70% of the annual consumption value of

the items.

B items - 30% of the items accounts for 25% of the annual consumption value of the

items.

C items - 50% of the items accounts for 5% of the annual consumption value of theItems

Advantages of ABC Analysis

Helps to exercise selective control

Gives rewarding results quickly

Helps to point out obsolete stocks easily.

In case of A items careful attention can be paid at every step such as estimate of

requirements, purchase, safety stock, receipts, inspections, issues, etc. & close controlis maintained.

In case of C items, recording & follow up, etc. may be dispensed with or combined.

Helps better planning of inventory control


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Provides sound basis for allocation of funds & human resources.

Disadvantages of ABC Analysis

Proper standardization & codification of inventory items needed.

Considers only money value of items & neglects the importance of items for the

production process or assembly or functioning.

Periodic review becomes difficult if only ABC analysis is recalled.

When other important factors make it obligatory to concentrate on C items more,

the purpose of ABC analysis is defeated

VED ClassificationVED: Vital, Essential & Desirable classification

VED classification is based on the criticality of the inventories.

Vital itemsIts shortage may cause havoc & stop the work in organization. They are

stocked adequately to ensure smooth operation.

Essential items - Here, reasonable risk can be taken. If not available, the plant does

not stop; but the efficiency of operations is adversely affected due to expediting

expenses. They should be sufficiently stocked to ensure regular flow of work.Desirable itemsIts non availability does not stop the work because they can be

easily purchased from the market as & when needed. They may be stocked very low

or not stocked.

It is useful in capital intensive industries, transport industries, etc.

VED analysis can be better used with ABC analysis in the following pattern:

Category V items E items D items

A items Constant

control &

regular

follow up

Moderate

Stocks

Nil stocks

B items Moderate

Stocks

Moderate

Stocks

Low stocks

C items High stocks Moderate

Stocks

Very low

stocks


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FSN Analysis

FSN: Fast moving, slow moving & non moving

Classification is based on the pattern of issues from stores & is useful in controlling

obsolescence.

Date of receipt or last date of issue, whichever is later, is taken to determine the no. of

months which have lapsed since the last transaction.

The items are usually grouped in periods of 12 months.

It helps to avoid investments in non moving or slow items. It is also useful in

facilitating timely control.

For analysis, the issues of items in past two or three years are considered.

If there are no issues of an item during the period, it is N item.

Then up to certain limit, say 10-15 issues in the period, the item is S item

The items exceeding such limit of no. of issues during the period are F items.

The period of consideration & the limiting number of issues vary from organization to

organization.


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10. Green Supply Chain

What is the Green Supply Chain?

From product design to manufacturing to logistics management to product recovery, anorganizations supply chain has a major environmental impact. However it is not enough for aGreen Supply Chain strategy to simply attempt to mitigate these effects. To be accepted and

successful, it has to be seen to drive value creation through the organisation.

The wider goal may be CO2 reduction but for the organisation the real benefits are measuredin terms of better utilization of assets, less waste production, faster times to market, greater

product innovation and increased profitability.

"Direct interaction with supply chain partners can enable a company to reduce total inventorylevels, decrease product obsolescence, lower transaction costs, react more quickly to changes

in the market, and respond more promptly to customer requests.

US Environmental Protection Agency

Key to the success of any sustained Green Supply Chain initiative is how an organisation

changes the way it works with upstream and downstream trading partners. Taking a lifecycle

approachfrom initial raw material extraction to eventual product disposalrequires a much

greater degree of collaboration, transparency and integration of supply chain processes andsystems between trading partners than there has previously been.

Underpinning these new working practices is intelligent supply chain management and B2B

ecommerce that enables the low cost creation of global trading communities that use

automation to improve their business performance while achieving significant environmental

results.

Benefits of a Green Supply Chain

Let's start by discussing the top line benefits. Of course we have to comply with all theenvironmental regulations and legislation. For any international organisation, with breadth

and pace of new regulation it can be daunting in itself. But that's a given. It's something we

have to do if we want to continue business. The issue is to create a flexible and adaptablesupply chain that can react quickly and with a minimum of effort as the regulatory landscape

changes.

Next there's the importance of green credentials for customers and employees. Especially in

the retail and automotive industries, consumers have become much more proactive in

including green criteria within their product selection process. Greening all parts of an

organisation will help drive the value in its brandand the supply chain has its role to play inthat. But, if we're to be honest, only the enlightened few of company boards are going to OK

a major supply chain programme based on top line benefits. There has to be a positive impact


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of the bottom line.Improved supply chain automation increases deal size by 35%

GXS research

The results from early adopters of Green Supply Chain Management are showing just howimpressive these benefits can be:

A large international consumer electronics supplier automated its transactions and

communication between itself, its suppliers and its customers. It has eliminated 1143

metric tons of paper, reduced energy consumption by 47,271 million BTU and savedhundreds of thousands of pounds annually

A global automotive manufacturer reduced disposal costs by over 7 million by

establishing a reusable container programme

A utilities company saved over 1 million by streamlining its inventory process to

reduce product obsolescence and disposal

A manufacturer changed its logistics management process enabling it to save over

100,000 a year in a single distribution centre

An electronics company has stated that it will grow its revenue stream from

environmentally friendly products to over 10 billion by 2010

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