Imagine a world where logistics works like the digital internet. Instead of each company having its own dedicated infrastructure, resources would be shared and utilized on an as-needed basis. This is the vision of the Physical Internet. Positively, this is an initiative that has the potential to revolutionize the way goods are moved. It’s a compelling idea, but as with any major change, there are challenges to overcome. In this article, I’ll explore the concept of the Physical Internet, its potential advantages, and the hurdles that must be addressed in order to make it a reality. 

1. What is the Physical Internet (π) Initiative?

The Physical Internet is a concept of a shared logistics network inspired by the digital internet’s open access and shared-use model. Its aim is to revolutionize supply chain efficiency by promoting interoperability and seamless goods transfer across carriers and transport modes. The π initiative envisions a system of standardized, modular, intelligent containers (π-containers). This capability enables supply chain networks to route these interconnected containers like data packets to their destinations via optimized, shared transport, storage, and handling. Key components of this π initiative include:

Key Components of the Physical Internet

• π-Containers. These containers must be easy to handle, store, and transport. Further, they must be simple to seal, snap to a structure, interlock together, load, unload, build and dismantle.
• π-Movers. There are different types of movers within the Physical Internet that can transport, convey and handle containers within and between logistics nodes. 
• π-Nodes. The nodes correspond to geographic sites, facilities and physical systems of the Physical Internet.

Today, research and global pilot projects are actively prototyping and proving out various aspects of this Physical Internet initiative. Indeed, these proof-of-concept (POC) have the goal of improving supply chain performance, cutting costs, and reducing CO2 emissions. For more details on what the Physical Internet is, see this commentary, Physical Internet: A Shared Logistics Network Concept to Optimize Shipping Assets.

2. Eleven Advantages of Supply Chains Applying the Principles of the Physical Internet Initiative.

Supply chains that adopt the principles of the Physical Internet stand to gain a competitive edge through several significant advantages. In short, embracing the Physical Internet can lead to smarter, more sustainable, and cost-effective supply chain operations. This initiative aims to drastically enhance the way goods are moved, stored, supplied, and distributed across the globe. To help build a business case for implementing and moving your supply chain operations toward this concept of the Physical Internet, below are 11 advantages of the Physical Internet.

a. The Physical Internet Enhances Efficiency in the Movement of Goods.

By adopting standardized, modular containers, supply chains can streamline loading and unloading processes. As a result, this leads to more efficient movement of goods. For example, through modular packing systems, containers can be seamlessly transferred from a ship to a truck. Thus, this reduces the equipment needed and saves valuable time in cross-docking operations.

b. Reduction in Carbon Footprint.

The collaborative nature of the Physical Internet allows for the sharing of transportation assets. As a result, this reduces empty runs and leads to a significant decrease in greenhouse gas emissions as well as fuel consumption. For example, a consortium of pharmaceutical companies can share refrigerated trucks to make pickup and deliveries. Thus, this reduces the need for multiple trips by different companies.

c. Reduced Lead Times and Faster Delivery. 

Enhanced physical interconnectivity and shared resources result in quicker transit times. For instance, interlocking containers enables faster transfer of goods between different transportation modes such as between a truck and a cargo bike. Also, loading and unloading of cargo is faster. Hence, this ensures that products such as perishable goods reach their destination in an expedited manner. 

d. Increases Reliability for Improved Customer Satisfaction.

The interconnected and transparent nature of the Physical Internet provides for more consistent delivery schedules. As a result, this enhances trust and satisfaction among consumers. For example, a modular container not only moves faster through transportation nodes, but the supply chain system tracks the container in real-time. As a result, the entire logistics system is proactive in preventing slowdowns as well as taking advantage of capacity on multiple modes of transportation. Indeed, this Physical Internet capability increases the reliability of intermodal transportation such as rail-to-truck shipments. 

e. Better Storage and Distribution Resource Utilization.

Warehouses and distribution centers with interlocking containers can maximize space and resources. Thus, this leads to smarter, more efficient storage solutions. For instance, warehouses can efficiently store interlocking containers of different sizes like Lego blocks. As a result, forklifts and robots can then easily move multiple containers without having to use pallets. Also with a Physical Internet-enabled supply chain, there are many opportunities to reduce dunnage and even warehouse shelving as the containers can stack efficiently.

f. Greater Scalability and Adaptability of Physical Internet-Enabled Supply Chains.

The flexible framework of the Physical Internet means supply chains can easily scale up or down to meet changing demands. For example, a company can quickly adjust its shipping volume through shared transportation networks. Better yet, shippers and carriers can do this without the need for significant upfront capital investment in additional vehicles or facilities.

g. Cost Savings through Optimized and Autonomous Routing.

The end state of the Physical Internet is shared facilities, processes, transportation, and interlocking containers. Thus, just like the digital internet with the movement of data packets, the movement of goods becomes more self-directed. So, increasingly advanced routing algorithms augment the supply system to determine the most efficient routes for standardized containers. For instance, autonomous trucks can choose the most fuel-efficient routes and cross docks automatically redirect containers from Less-Than-Truckload (LTL) to boat or cargo van depending on availability..

h. More Proactive Due to Enhanced Supply Chain Visibility. 

Real-time tracking and predictive analytics enable supply chains to anticipate issues and make proactive decisions. For example, Internet of Things (IoT) sensors on π-containers provide real-time data on cargo conditions. Thus, this allows supply chains to proactively address issues like temperature deviations before they impact product quality.

i. Physical Internet Reduces Friction in Intermodal Interconnectivity.

Seamless transitions between transportation modes can both reduce transit times and complexity (and the chance of things going wrong). Thus, this frictionless logistics network smoothes the path from origin to destination. For example, standardized, interlocking containers of different sizes mean that goods can be automatically transferred from ocean freight to any mode of transportation. For instance, these intermodal modes can include rail systems, autonomous railcars, trucks, or smaller ships. Indeed, whatever “mover” is available. Thus, this minimizes intermodal handling time and risks of damage.

j. Strengthened Resilience from Unforeseen Events and Disasters.

Decentralized networks and multiple pathways inherent in the Physical Internet provide redundancy against disruptions. For instance, take the case when unexpected circumstances occur such as a major fire at a Less-Than-Truckload (LTL) terminal. With the Physical Internet, supply chains have more options than having to apologize to their customers or blame the carrier for their shipment being late. Indeed with a Physical Internet-enabled supply chain, shipments can be seamlessly rerouted using modular containers, shared transportation and collaborative logistic nodes. Thus, this collectively increases supply chain resilience.

k. Improved Urban Logistics, Reduced Road Congestion.

Collaborative shipment and delivery strategies minimize traffic congestion, particularly in urban areas. This is done by optimizing delivery routes as a well as using shared transportation and more sustainable transportation modes such as cargo bikes. Additionally, a shared logistics network provides more opportunities to synchronize delivery schedules among multiple carriers. Thus, cities can see a reduction in the number of delivery vehicles during peak traffic hours, easing urban congestion.

For more discussions on the benefits of supply chains implementing the Physical Internet, see Milos Milenkovic’s article, Physical Internet: disruptive innovation for a sustainable supply chain.

3. The Challenges with Applying the Principles of the Physical Internet to Real-World Logistics.

However, while the Physical Internet is an exciting idea, it’s not without its challenges. One of the biggest hurdles is the need for standardization. Indeed, this will require collaborative business models and agreements on specifications for shared, interlocking containers  Additionally, businesses would need to agree on data interoperability standards and digital information exchange between systems. Lastly, the costs and collaboration efforts will be enormous without policy and regulatory support. Governments can help with incentives, funding proof-of-concepts (POC), and facilitating cooperation between businesses. In order for assets to be shared seamlessly, they need to be standardized. For more detailed discussion of these Physical Internet challenges and possible solutions, see below:

a. Lack of Collaborative Business Models and Unified Infrastructure Facilities.

Implementing the Physical Internet requires a shift from siloed, competitive operations to collaborative models where companies share resources for greater efficiency. This includes unified facilities where shipments from various companies are consolidated and optimized, much like internet packets are routed through shared nodes. However, logistics companies often resist collaboration due to competitive concerns and differences in their operating systems. For instance, rival parcel carriers might be hesitant to share sorting facilities, despite potential efficiencies.

At least one way to overcome these challenges is with proof-of-concepts (POC) that help validate the feasibility of collaborative business models and unified infrastructure facilities. For instance, Alliance for Logistics Innovation through Collaboration ( ALICE) in Europe has a comprehensive plan working with industry and conducting POCs to realize the benefits of the Physical Internet. For more details, see their ROADMAP TO THE PHYSICAL INTERNET. Specifically, this document details a 5-phase approach where they specify the advanced development of collaborative business models to achieve their Physical Internet objectives by 2040.

b. Lack of Standardized π-Containers that Are Interlockable, Secured, and Digitally Connected.

The Physical Internet envisions the use of modular, standardized containers (π-containers) that can be easily secured, monitored, and rerouted like internet packets. However, adoption of these smart containers has been slow due to their high cost, issues with interoperability, and resistance to change. For example, a π-container optimized for pharmaceuticals might not be the best fit for perishable groceries. Moreover, companies may be reluctant to invest in multiple types of specialized containers.

For examples on how we can move forward with π-type containers, see DHL’s article, Physical Internet: Trend Overview. In this article, they have some ideas on the use of smart technology and the implementation of standardized sets of modular, interlocking boxes. Also, see European Commission (EU) Horizon Magazine’s article, How the ‘physical internet’ could revolutionise the way goods are moved. This article highlights several initiatives where Physical Internet concepts were implemented to include the use of six different sized modular boxes that would cover about 85% of cargo sizes. 

c. Lack of a Robust, Unified Data Interoperability Framework That Enables Real-Time Shared Visibility and Seamless Execution.

Logistics Data Interoperability: Advice To Make It Understandable, Usable, Secure.

The Physical Internet demands actionable information that is secure, real-time, and provides end-to-end visibility across the supply chain. This is akin to the transparent data tracking and routing inherent within the digital Internet TCP/IP framework. However, logistics data often resides in silos, with different companies and systems using incompatible formats and data transfer protocols. For instance, a shipper’s TMS might not seamlessly connect with a carrier’s system. Hence, this leads to manual workarounds and potential errors that disrupt the smooth flow of goods.

This data interoperability problem is not just a challenge just for Physical Internet-enabled supply chains, but for all supply chains. Now, it is true that most supply chains can transfer data between systems and devices. The real challenge is that the data “gets lost in translation”, resulting in data exchange that is not actionable. Further, our supply chains are adding more and more systems, users, devices, and software agents to their networks, but they are not effectively leveraging digital identity technologies. For more detailed discussion on this lack of data interoperability and possible solutions, see my article, Logistics Data Interoperability: Advice To Make It Understandable, Usable, Secure.

d. Need to Enhance Supply Chain Automation to Leverage Shared π-Containers, Transport, Nodes, and Data.

The Way of Digital Transformation: A Business First, High Tech Reinvention 0f Processes and Culture

Again, this challenge to leverage automation is not just a Physical Internet logistics problem, but a problem for all supply chains. Indeed, today most supply chains are going through a digital transformation attempting to leverage advanced technologies such as AI and robotics. So specifically, any Physical Internet initiative will need advanced, collaborative automation as well to fully leverage shared containers, transport, nodes, and data. Additionally, Software as a Services (SaaS) applications and microservices will need to leverage Physical Internet data interoperability standards to enable seamless information flows.

Now, a π pilot project will go a long way toward identifying the best way to enhance both existing systems and leveraging emerging technologies. For example, Imec’s Physical Internet Living Lab (PILL), a Flemish strategic fundamental research project, is actively prototyping a software stack to support a π-enabled supply chain. So, proof-of-concept initiatives like this helps supply chain leadership realize the tangible benefits of a shared, decentralized Physical Internet. For tips on digital transformation, see my article, The Way of Digital Transformation: A Business First, High Tech Reinvention 0f Processes and Culture.

e. The Physical Internet Initiative Needs Policy and Regulatory Support.

Now, widespread adoption of the Physical Internet will require supportive policy and regulatory frameworks. Specifically, supply chains will face many challenges implementing the tenets of the Physical Internet without Governments and international bodies support. Indeed, these institutions are critical for establishing policies that encourage standardization and the interoperability required for sharing of logistics assets. 

For instance, a Government policy that incentivizes the use of π-containers and shared infrastructure would go a long way toward fostering an open and accessible logistics network for all stakeholders. Also, there are organizations like ALICE that are actively making recommendations to policy makers to encourage the adoption of Physical Internet principles within supply chains.

Conclusion.

So, the vision of the Physical Internet is a compelling idea, but as with any major change, there are challenges to overcome. In this article, I have laid out the many advantages of the Physical Internet that opens the way for better supply chain collaboration and interoperability. Indeed, this is something we sorely need in our supply chains. What’s more, even small steps towards adopting the principles of the Physical Internet will help to cut costs, reduce CO2 emissions, and enhance supply chain performance. On the other hand, there are several risks and challenges to overcome to realize the full benefits of the Physical Internet.

For a more detailed discussion of the Physical Internet Initiative, see my article, The Way Of The Physical Internet: Innovative Logistics To Under Cut Costs, CO2 Emissions, And More? This article includes more examples of pilot projects ongoing. Additionally, it includes resources on how to get started to realizing the benefits of the Physical Internet.

The Way Of The Physical Internet: Innovative Logistics To Under Cut Costs, CO2 Emissions, And More?

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