FedEx Global Hub-and-Spoke Network: How It Works

Introduction to FedEx's Hub-and-Spoke System

FedEx uses a hub-and-spoke system to move freight around the world. Its main hub is in Memphis, which is the second-largest airport in the world for cargo movements (ACI, 2014). Several other FedEx hubs feature in the top cargo traffic rankings — Anchorage, Pudong, Dubai, and Miami. Approximately 65% of average daily package volume consists of domestic U.S. shipments, which is why Memphis is the main focal point of the system (2015 FedEx Annual Report, p. 21).

International operations are divided into two types — international domestic and international export — reflecting the destination of the shipment. International domestic would be, for example, a package going from Vancouver to Toronto. Export refers to anything that crosses a border. The breakdown of average daily volume for international shipments is international domestic at 58.8% and international export at 41.2% (2015 FedEx Annual Report, p. 21).

The international system is still based on the hub-and-spoke network. There are several international hubs around the world, including Pudong (Shanghai), Dubai, Guangzhou, Osaka, Paris, and Incheon (Won, 2016; FedEx, 2014). From these hubs, packages are gathered by the different stations in the region and then shipped to the hub, usually via air. In more established regions, this means using FedEx company planes, but partners are used to cover many of the world's outlying areas.

International Hubs and Regional Operations

In China, with two major hubs, flows are diverted to one or the other. The other major Asian hubs are located in the key markets of South Korea and Japan, allowing international domestic flows to remain within those countries. Flows between Asian countries where neither country is among the three largest are less common, but they do occur. Such shipments will typically flow through the main North Pacific hub in Osaka.

In other parts of the world, FedEx does not have the same market strength it has in Asia and North America, and thus everything is serviced through a handful of regional hubs, including Paris and Dubai. In the EU, there are no border restrictions, so a centralized main hub at Charles de Gaulle Airport is sufficient to meet the company's needs across the entire European Union. The short flight distances from Paris make shipping within Europe using these hubs relatively straightforward. As in the United States, smaller local hubs with dozens of routes are then used to service each metropolitan area. In Europe, trucks are likely to be used for any destination within a few hours of Paris.

The massive Dubai hub was built to service the growing Europe/Middle East/Africa/India region. FedEx was able to construct the hub within a free-trade zone to minimize the customs impact of routing all regional flows through this facility. All traffic in the region flows through Dubai. Even a shipment within a single country, such as India, passes through Dubai, as the company has the ability to process such shipments quickly, dispatching aircraft to major Indian hubs. This hub also serves to link the region with both Europe and Asia, and a large aircraft flies over the pole from Dubai to Memphis each night to connect the region with the United States as well (FedEx, 2012).

Canada's Unique East-West Routing Model

Canada represents a somewhat unique case within FedEx's network in that it does not follow a traditional hub-and-spoke model. There are smaller versions of the hub-and-spoke — for instance, all Alberta flows run through a small hub in Calgary — but the general pattern of traffic is east-west, with large aircraft making a Vancouver–Calgary–Toronto run each night, with Toronto serving as the main hub in the country. This arrangement allows packages sent within Western Canada or Eastern Canada to remain in those regions. It is comparable to how U.S. West Coast flows are handled through Oakland and Northeast flows through Newark, without either set of shipments ever passing through Memphis.