On the Strategy of Supply Hubs for Cost Reduction and Responsiveness

A supply hub is a location generally close to a manufacturer’s facility where all or some of its supplies are warehoused with the agreement that the materials will be paid for only when consumed. Supply hub is an innovative strategy employed by especially the electronics industry to achieve cost reduction and improved responsiveness. After first tracing the developments leading to the establishment of supply hubs, the paper then describes the dynamics of the operation of supply hubs. Case examples are provided to highlight the current practices. Finally, some research issues are identified.