Smarter, cheaper & greener - the physical internet

The look of logistics in the year 2050

EVERYTHING IS NOTHING without logistics. Global just-in-time production has made sure that logistics itself has become a key economic factor. Disruptions in supply chains immediately have a global impact. Logistics is the most-used industry in the world and, with an approx. 15% share of the gross world product, it has significant value creation potential. But are our global logistics net- works at the highest possible state of the art? “No,” said Rod Franklin, professor for logistics. “We could be smarter, cheaper and greener. The key to this is the Physical Internet.” Franklin is convinced: “By 2050, the Physical Internet will be a reality.

Comprehensive interconnection, speed, and effectiveness: this is the world of the Internet. Results are delivered in real time with a few clicks – the route the information took and the servers involved are unimportant. Can’t this principle be applied to the physical world? A customer who wants to have a precision tool shipped from Munich to Texas doesn’t care about the stations along the way. He is only interested in its reliable, punctual arrival at the correct destination.

Supply chains today are highly optimized. “But they follow a way of thinking that accepts less than the full utilization of transport capacity and the higher energy costs that result,” noted Franklin. “If we know that only around 10 % of the logistics services is purely transport services and the rest is allocated to empty journeys (40% – 50%), idle time, and loading and unloading, we realize that we have found an area of significant potential savings.” But how can we tap this potential? “We must think about how goods can reach customers in a completely new way, a way that almost completely avoids wasting resources,” the logistics expert said.

The basic prerequisites would be open system software that could map entire supply chains and means of transport that the logistics sector could use jointly in order to move goods worldwide and deliver them to their destinations. Open system software like this would enable optimized shipments and therefore, avoid empty journeys. “It no longer matters who controls the logistics chain and who owns the means of transport. Instead, what counts is how intelligently they are interconnected and how efficient this makes them,” said Franklin. “And of course, the vision that the future of the logistics sector lies in this new form of cooperation is essential.” To him, the Physical Internet is the logical extension of green logistics because it will require less traffic. According to Franklin: “Companies will no longer need to develop their own, separate global logistics networks. Optimizing the means of transport alone will no longer suffice. We must completely rethink the way we transport – the only key factors are speed, cost, and the quality of the service.” Of course this goes hand in hand with fair price models that invoice each specific logistics service accordingly.

How would a supply chain based on the Physical Internet look? Prof. Franklin describes it like this: “Trucks will always be loaded to their maximum capacity, which means at top efficiency. This means that there are practically no more empty journeys. Open system software would ensure that only those goods that can be immediately distributed further by other logistics support points and providers along the route are transported. In this supply chain, it would not matter whether the goods are from manufacturer A, B or C, and who exactly is participating in the supply chain is also unimportant“. The advantages are obvious. Trucks would always be operating at top capacity. The initial drivers would only cover a specific route and return to their families in the evening: others would be responsible for trans- porting the cargo further once it has reached its first depot and they would be driving another truck full of other goods back to their starting point. “In sum, this would mean less traffic on the roads, lower emissions and costs, and better speed, quality and service,” said Franklin.

But there is one problem. The extremely successful standard containers used in maritime transport are only suitable for railroad transport on land. In order to implement the Physical Internet, smaller standard containers that facilitate one supply chain from the producer to the consumer must be developed. But why shouldn’t that be possible? After all, in the 1950s, nobody saw a great future for container shipping. But without it, we would not have the global economy that we know today.

The Physical Internet requires both rethinking and innovative thinking. We already have the technical and technological prerequisites. Industry 4.0, which is based on digitalization, interconnection, and automation, also requires global logistics 4.0 – and we are in the midst of the rethinking process. The key factors are: open, shared networks, dynamic routing, and a platform of services in the cloud. But Franklin also knows that: “Rethinking is the hardest part of all. Until now, logistics has functioned differently. One thing will remain the same: without logistics, everything will still be nothing in the future!

By Ulrich Vetter