In the Transportation and Logistics industry, choosing a location for a new facility can be challenging. Evaluating real estate, local talent pools for staffing, accessibility, lease options, sizing requirements, tax implications, and more may come into the decision-making process. But in the world of shipments and flows, density is king. This is why Hub Analytics are at the core of the decision-making process.
What are Hub Analytics?
There are plenty of arguments to be made for multiple approaches, but it all starts with density. Where can you capture the most density in the fewest number of locations within the logical flow of the shipments you move? If you start with density on a macro level, you can pare down the options to a logical few. You may transport goods to and from hundreds of different cities across your business. If you could capture 80 – 90% of those goods in a dozen different locations without incurring a lot of unproductive, empty miles, wouldn’t you want to know where those locations were?
Hub Analytics can help you evaluate your shipments and identify both hub and lane densities. These advanced analytics can identify Inbound-Outbound Hubs and Pass-Thru Hubs, as well as lane densities and flows. Density patterns are identified using data-driven approaches coupled with various algorithms to take large quantities of shipments and logically organize them into efficient groups, or hubs.
Inbound-Outbound and Pass-Thru Hubs
Inbound-Outbound Hubs capture origin and destination end-points and help you identify where you can capture the most density on either end of your movements. This is helpful when determining not only where to place a facility, but also how to right-size that facility. The capacity of the facility, based on density, can help determine staffing levels and equipment domiciles.
If your philosophy is to move a shipment from origin to destination without stopping, consolidating, or rerouting, then Inbound-Outbound Hubs can help you get there. This is particularly useful for truckload carriers who target higher percentages of single dispatch movements.
Pass-Through Hubs capture density flowing through a given location. If you are trying to capture shipments along a route while minimizing out of route miles, then Pass-Through Hubs are an effective way to go. Whether you are looking for an LTL consolidation point or a new shop to service passing equipment, this type of analysis helps to quantify your opportunities.
Often the best approach is evaluating both Inbound-Outbound and Pass-Thru Hubs together. This gives you the best of both worlds. If you can find a few locations that are high on both lists of top hubs, then you can be pretty confident you have a location that will be effectively utilized.
Visualizing Hub and Lane Densities
Converting large quantities of shipment data into logical hubs is extremely valuable, but a picture is worth a thousand words. Taking the Hub and Lane Density intelligence you generate using Hub Analytics and painting the picture can lead to insights easily overlooked in a list report or spreadsheet. Thematic maps are a great way to visualize density. For example:
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Hub Analytics not only help you determine where to capture more of your business but also help you quantify the capacity of a facility. Equipment capacities, driver capacities, staffing levels, and even location yard, office, and shop capacities can be derived from the density information produced during the analysis.
Shipment flows and densities tend to change over time. Shippers change locations, volumes, and lanes continuously. That means transportation providers and logistics management organizations need to regularly evaluate the changes in their freight flows, too. Those business pattern changes may dictate a shift in location staffing and capacity or even justify the entrance or exit of a given location entirely.
There are a myriad of factors in a facility location decision, but in the world of Transportation and Logistics, it usually starts with density. Using Hub Analytics to identify dense hubs, lanes, and flows can help you narrow down the possibilities for a macro level decision and give you objective confidence you are considering the right markets. Mining those Hub Analytics further can help you refine your search to a more specific location within a market.
Once you have determined the right market and narrowed down the more sensible locations, you can bring all the other factors such as real estate, taxes, talent pools, and regulatory requirements into play. Density is the key, and utilizing Hub Analytics can help you identify and evaluate density effectively. A facility location decision is typically a multi-million dollar investment, so get the analytics you need to make the right decision.
SOURCE: Hub Analytics for Facility Location Decisions and Right-Sizing
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