Source: Adapted from Alexander Kuznetsov, Admiral Makarov State Maritime Academy, St. Petersburg, Russia.
Cost Structure of Point-to-Point and Hub-and-Spoke Networks
The network structure of a transport service is commonly linked with its cost structure. In a conventional point-to-point service, the total transport cost is simply a function of the transshipment and shipment costs. The above figure assumes ports of similar size located along two maritime facades as well as a similar demand for each port pair. 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 (for a total of 15,000).
The usage of a hub-and-spoke network structure reduces the total transport costs through a service reorganization. On this example one port becomes the hub of a facade, with the other ports acting as feeders. While the loading or unloading costs would remain the same, changes in transport distances and economies of scale for the single transoceanic link can significantly changes the cost structure (to 5,850 units). The ports that have become the hubs are now advantaged comparatively to the other ports, even if the total transport costs of every single service is lower.