How Logistics sector will look like in 2050? — sharing the Physical Internet

source: http://www.economist.com/node/7032165

The challenges of today’s Logistics sector

Today the most important challenge of Logistics and Supply Chain companies is to look for optimization in many different operational dimensions such as: capacity, storage, resources optimization, fuel consumption and more. Optimization is key to reach sustainable business model and have control over costs.

Research confirms that often times companies ship „air and empty packaging”. The average utilization in 2012 for an American shipping company was at 42,6% with 25% of miles drove empty. (Russell D. Meller, Ph.D., The Impact of Standardized Physical Internet Containers on Shipping Volume)

Processes and tools that allow for optimization are highly in demand. Wherever there is a „pain point” many different solutions arise: processes, tools, technological systems for tracking and stock management, cost optimization applications.

The sharing economy paradigm that we entered since the introduction of the Internet, can offer more sustainable solution to address today’s issues of logistics.

What is Physical Internet?

The Physical Internet — a project launched by National Science Foundation has a potential to replace current logistic models. It is aimed to „transform the way physical objects are handled, moved, stored, realized, supplied and used aiming towards global Logistics efficiency.” (Montreuil, Benoit. “Physical Internet Manifesto, version 1.11.1”)

What does it mean? The PI (Physical Internet) is about shipping goods just like the information flows around web. We seldom wonder who owns the servers that proceeds our messages or which Internet providers are involved. We don’t have to because we rely on the Internet to do this. The same can happen within the network of the PI — the digital and physical interconnectivity that thanks to encapsulation, interfaces and protocol allows to ship goods in an operationally efficient way. Products moving within this open and interconnected network belong to many different participants (logistic companies).

The encapsulation introduces a form of streamlining shipment thanks for standardized containers that each of the logistics participant will be asked to use.

Just like the network of servers — there is a network of hubs for the PI. The PI can send and receive products. The good can pass several hubs before researching the destination. The delivery is realized from the hub within the closest proximity to the final destination.

Benefits of collaboration

Sharing the PI, first of all means reduction of costs and time of delivery for the participants. It means standardization of logistic processes and much better predictability and visibility over trucking goods. Accident on the road for one truck will no longer be a blocker to reach end destiny as the goods can be immediately delivered to the closest hub by other truck or different mean of transportation.

Another major benefit of the PI is the CO2 reduction. Thanks to streamlining most of the operations, the „empty miles” problem can be addressed.

Moreover, it also addresses today’s issues of the truck drivers moving them away from driving extensive distances for long hours, helping the send them home faster.

What it takes to get there?

Collaboration is the key in building the PI. The project requires tacking on many different digital, physical and operational connectivity issues. For now, this is just an idea but relevant technology is already available. It can be achieved by standardization: standardized containers, contracts and systems must be introduced by the regulators. The technology is already available not it takes convincing the industry leaders, with some like: Volvo, Boeing, HP and Walmart already onboard, to take upon this initiative and take a step towards sharing economy.

If you want to learn more on the idea. Visit the website of the project: http://www.physicalinternetinitiative.org/