Source: Adapted from Alexander Kuznetsov, Admiral Makarov State Maritime
Academy, St. Petersburg, Russia.
Cost Structure of Point-to-Point and Hub-and-Spoke Networks
In a conventional service, the total transport cost is simply a function
of the transshipment and shipment costs. The above figure, for simplification
purposes, assumes ports of similar size located along two maritime facades
as well as a similar demand for each pair of ports. In a point-to-point
service, each chain would have a similar transport cost. Thus the total
transport costs from one port to the other (3,000 units) would be the
summation of loading costs at the port of origin, the shipment
costs across the ocean and the unloading costs at the port of destination.
The usage of a hub-and-spoke network structure reduces the total transport
costs through a services reorganization. While the loading or
costs would remain the same, changes in transport distances and economies
of scale for the single transoceanic link significantly changes
the cost structure. The ports that have become the hubs are now advantaged
comparatively to others, even if the total transport costs of every
single service is lower.