Physical Internet: First results and next challenges

Abstract

The Physical Internet paradigm opens a new way to describe and design how logistics organizations can work, with many managerial, engineering, and economical implications on supply chain performance, including sustainability and resilience. The Physical Internet, as its name suggests, builds on a metaphor from the network of computers networks: the (Digital) Internet. Described in several papers and book chapters (Montreuil 2011; Sarraj et al. 2012; Montreuil et al., 2013; Ballot et al. 2014), its core concept is the universal interconnection of logistics services and networks. To provide an introduction to this special topic forum, we first discuss the origin of the term Physical Internet. Second, we assess the current status of research and provide a literature review. Third, we showcase key PI issues and research challenges and we finish with a brief introduction of the papers that were selected for this special forum. The Physical Internet is inspired by the principles of the Digital Internet, so it is not a mere copy-and-paste of its constituents such as the transmission control and Internet protocols (TCP/IP). This is crucial as there are major differences between data packets on the digital side and parcels and freight on the physical side, and also major differences at the organization levels. The Physical Internet is also by definition different from the Internet of Things (IoT) defined by the connection of physical objects to the Digital Internet. This said, the IoT can be an enabler of the Physical Internet by increasing visibility and control of objects beyond a company’s information systems. The Physical Internet is about interconnecting the world’s logistic networks and is thus defining a new opportunity for supply chain design and operations, enabling seamless open asset sharing and flow consolidation, fulfilling society’s demand for physical objects with an order-of-magnitude better efficiency and sustainability, thanks to improved economies of scale and scope. Physical Internet success stems from interconnecting logistics actors on multiple layers, such as physical, digital, operational, transactional, and legal. Ultimately, the Physical Internet will enable universal interconnectivity with any organization, anytime and anywhere. This is a disruption of the mostly service or customer dedicated logistic networks. At supply chain design and management levels, the Physical Internet opens the way to completely new interconnected operations and business models with a clear goal to improve sustainability in a broad sense. For example, PI implies a redesign of freight transportation, with gradual shift to interconnected transportation. At the basic level, the PI interface will simplify switching between transport carriers (e.g., trailers, railcars) and transport containers. The containers will be moving in a quasi-continuous flow, without driving time limitations or vehicle recharging constraints, and with a continuous tracking of performance and liability to ensure the highest level of service and trust. The impact of the use of PI interfaces for transport containerization on handling and efficiency is well described (Levison, 2016). At a secondary level, PI redesign will improve shipment confidentiality and modular handling containers will improve intercarrier exchanges performed at multiparty sorting and crossdocking hubs, enabling a higher critical mass of flows between hubs, and therefore offer higher transport frequency and higher levels of services (Montreuil et al., 2016). Based on actual data from the consumer goods supply chain, an early simulation-based assessment study of the Physical Internet potential revealed that interconnected transportation enabled decrease of 15% in traveled km, an increase of 33% fill rate, and a decrease of 60% CO2 emissions (Sarraj et. al 2014). A similar transformational shift toward interconnected distribution is achievable by applying Physical Internet concepts to the dynamic smart deployment of goods in an open network of warehouses, distribution centers, and fulfillment centers. Early optimization and simulation-based assessment studies of interconnected distribution revealed significant improvement in efficiency (30% order of magnitude), responsiveness, resilience, and security, through a dynamic network approach securing supplies without duplication of safety stocks and fast fulfillment in line with market expectations (Sohrabi et al. 2016; Yang et al. 2017). The impact of COVID-19 has put a spotlight on such works for all sectors and not limited at the company level like previous analyses (Simchi-Levi et al., 2014). As a new paradigm, the Physical Internet induces changes in logistics organizations and in supply chain applications, but it is also evolving based on trends and supported by new and future research. The Digital Internet was also quite an original paradigm in organizations. Based on a set of protocols, not ISO standards, it was mainly developed by researchers with an associative, thus private governance and gradually adopted by the industry at large, toward its current extensive use across all societal and economic realms. The Digital Internet burst was a disruption compared with the classical interconnection rules already in place between telecom companies in charge of communication in a highly regulated environment. In general companies, and especially the services providers and network infrastructure operators, found in digital Internet concepts, principles, and protocols, notably TCP/IP, the technical solutions needed to settle new businesses with models such as transit contracts and peering bilateral agreements. In short, the Digital Internet brought three main components: a set of protocols independent of technologies, a business framework, and a mostly state-independent governance body. Logistics organizations have different origins. Among these, one is very similar to telecom: the postal services already interconnected under the Universal Postal Union regulations since the end of the nineteen century (https://www.upu.int/en/Home/). This organization still operates but is highly dependent on state-owned operators, sometimes hostage to political stakes, and it has offered few innovations in the last few decades. The other activities remain in the hands of logistics service providers with limited regulations and a continuous flow of innovations in services. To illustrate what PI can provide to the logistic sector, it is useful to consider the same three main interconnection components as previously discussed. From a technical point of view, standardization of tools and processes are not well adopted in the logistics sector. Notable exceptions are the maritime containers on the physical level and incoterms on the transactional level. There is a set of standardized dimensions for cardboard boxes [ISO 3394:2012] yet major players use their own designs. Even for pallets, there exist many standardized sizes, not to mention materials and strengths. The same goes for electronic data exchange (EDI), as messages are standardized but all companies use them in different ways, with minimal intercompany compatibility. The lack of universally adopted tools and processes is a strong barrier against shared solutions and a more efficient logistics process. From a business point of view, a classical approach to develop a logistics business is the expansion of a company by acquiring or integrating competitors in other territories or with specific complementary services. This approach is still at play between logisticians (Carbone and Stone, 2005) and also in the e-commerce sector with companies seeking the integration of logistics companies to maximize their value chain. With the integration, the working methods, the tools, and the codes are defined for the integrating company’s organization which can thus potentially achieve a high degree of consistency, but which remains limited to each such company. Despite the advantages of integration provided by economies of scale and scope, it is limited by investment capacity and antitrust regulations. The second classical approach to develop a logistics business is through the market. Contracting or subcontracting is important in logistics markets, notably for storage, trucking, and last-mile delivery. In most cases, each contract specifies its own set of terms, conditions, tools, and processes. This approach is also very dynamic with the proliferation of marketplaces to ease subcontracting at a larger scale. Between market and integration, a third approach has grown in the last few years, based on collaborative solutions such as alliances, traffic exchange agreements, and pooling (Cruijssen et al. 2007). This approach is the most similar to the Physical Internet paradigm. It seeks to improve the performance beyond the classical boundaries of firms by sharing resources and operations, but with less uncertainties associated with pure market transactions. However, such collaborative organizations, despite some merits, are limited to a few participants and are quite hard to generalize so far. To avoid any misunderstanding, the interconnected approach should not be positioned between the classical organizational approaches to improve logistics performance. It is not a new collaborative organization that would fall between market and integration in a transaction cost framework (Coase 1937). It is a set of protocols, interfaces, and tools, enabling interconnectivity on massive scale and scope that could drastically change business relations in the logistic sector. From a governance point of view, the goal is making the universal interconnection between logistics networks not only technically feasible and economically profitable, but also acceptable by society and industry. One way to make this all acceptable is to demonstrate that the Physical Internet can work, first at a limited scale with experimentations and businesses, so as to build trust and consensus about its design. If collaboration is needed, it is at the design stage of Physical Internet protocols, interfaces, and tools, when researchers and industry innovators can propose solutions and a roadmap, like the EU SENSE project led by ALICE European Technology Platform [https://cordis.europa.eu/project/id/769967]. Concept proofing, pilot testing, experimentations, and improvements are leading the way toward wide scale adoption. At that point, governance of PI solutions will need to take place to define validated Physical Internet solutions and guide their implementation, adoption and evolution. Physical Internet research is enhancing and extending the scientific foundations; assessing the performance improvement potentiality; bridging the capability gaps, notably through new models, protocols, and designs; and validating feasibility and implementation hurdles, particularly through monitoring pilot projects and analyzing case studies (Pan et al. 2017). Research and innovation in packaging, handling, and transport containerization (Landschützer et al. 2015; Montreuil et al. 2016; Sallez et al. 2016) are gradually leading the way toward designed-for-logistics, smart, connected, and ecofriendly Physical Internet containers (e.g., aeler.com, livingpackets.com, poneragroup.com), notably with high-impact industry and trade agreements facilitating their development and deployment (e.g., Leblanc, 2020). Business model innovations in line with Physical Internet concepts are making headway in the market and prospering, as expected from Montreuil et al. (2013b). Examples abound, such as on-demand warehousing (e.g., flexe.com), open-access fulfillment network services (darkstore.com, sell.amazon.com/fulfillment-by-amazon), open access delivery platforms (e.g., roadie.com), as well as freight and logistics marketplaces and apps (coyote.com, freightera.com, colivri, mixmove.io, uber.com/freight). Several large logistic players are currently investigating whether and how to evolve stepwise toward the Physical Internet for themselves. For example, logistics and delivery service providers such as Americold, SF Express, and UPS have engaged in major PI research projects with Georgia Tech’s Physical Internet Center. With multinational corporations, the first steps are usually started by aiming toward a Physical Intranet interconnecting their multiple internal networks and activities, and then gradually consider more open multiparty approaches. As an example, UPS has invested in Ware2Go, a technology company and platform to match merchant needs with flexible fulfillment, recruiting and certifying warehouses in strategic locations, enabling merchants to position products closer to their customers, leveraging the scope and scale of UPS’s network to provide an integrated delivery solution to improve management of the order-to-delivery experience (UPS, 2018). The growing piecemeal PI exploration and adoption by industry, from startups to established corporations, highlights why research and innovation projects with collaboration between industry and academia are so important in the current context. There have been several articles that provided a good systematic literature review of the latest published research in the Physical Internet such as Pan, Ballot, Huang, and Montreuil (2017), Sternberg and Norrman (2017), Matusiewicz et al. (2020) and Treiblmaier, Mirkovski, Lowry, and Zacharia (2020). The following review of recently published PI research provides an update and brief overview of the articles published in 2019 and 2020 that have not been previously reviewed. They also help to position the PI paradigm, identity enablers, and propose implementations with tools or in specific areas. The positioning of the Physical Internet as a new paradigm is still an active scientific debate with several new contributions since last year. Through their literature review, Fergani et al. 2019 propose a general taxonomy for PI, distinguishing between research areas that are not as well covered and providing avenues for further research. Two other papers chose to position PI in comparison with actual approaches. Cornejo et al. (2020) provide an overview of both PI and Lean to show the relationship between both paradigms, and they highlight the potential benefit of value stream mapping for contrasting current and Physical Internet solutions in terms of PI goals. Ambra et al. (2019) exposed the relationships between the concepts of synchromodal transport systems and the Physical Internet, as both were developed to improve socioeconomic conditions and environmental sustainability. Their research identifies potential synergies, future research directions, and critical questions to be considered. Another set of papers focuses on enablers such as the one proposed by Meyer et al. (2019). It develops a Blockchain-based 4-layered framework to overcome some of the barriers within PI associated with the exchange of value and physical assets in decentralized logistics networks. Betti et al. (2019a, 2019b) investigate the exploitation of Blockchain distributed ledgers and smart contracts in interconnected logistics and validate the potential by coupling an agent-oriented discrete-events simulation with a Blockchain platform. In the same vein, Tran-Dang et al. (2020) investigate the application of Internet of Things technologies, building blocks, and a service-oriented architecture to accelerate the implementation of PI. Propose an open network-model approach for providing infrastructural data sovereignty that will enable the sharing of sensitive operational data as required for realizing PI. From another perspective, Lafkihi et al. (2019) use gamification methodology to compare a centralized approach, based on a central authority that optimizes transport plans for all carriers, versus a decentralized approach where carriers optimize their own transport plans, as found in simple PI implementations. Results indicate centralization outperforms in terms of global efficiency and effectiveness; while decentralization is better for individual incentives. The last proposed set of papers focuses on solutions for existing problems or new problems raised by new types of operations. Osmólski et al. (2019) present dedicated PI solutions to logistic processes such as modular transport units and real-time planning and information exchange, as well as properly designed communication infrastructure. Puskás et al. (2019) explore the use of interconnected autonomous vehicles and platooning systems for modeling an existing freight holding problem in a PI system, leading to a dynamic real-time reconfiguration for platoons. Qiao et al. (2019) introduce a PI-based optimization model that can be used for multi-leg dynamic pricing and request selection within the LTL industry. Chargui et al. (2019) focuses on optimizing operations occurring in a Rail–Road PI-Hub cross-docking terminal. They formulated the problem as a Multi-Objective Mixed-Integer Programming model (MO-MIP), solved with CPLEX solver using Lexicographic Goal Programming, and validated through an ANOVA analysis. Lemmens et al. (2019) demonstrate, using a simulation study, that synchronized intermodality (employing multiple modes in a flexible dynamic way) can induce a modal shift toward low carbon transport modes that are useful in PI. Puskás et al. (2019) suggest a key part of the Physical Internet is the need for interconnected autonomous vehicles that utilize a platooning system, and they determined that a reinforcement learning-based model performs better for high incoming vehicle numbers and a heuristics-based model performs better for low vehicle numbers. From a wide-angle perspective, Jaziri et al. (2020) exemplify the interest in leveraging PI as a strategic socio-politico-economic development vision and pathway, by proposing a PI-based strategic vision for Saudi Arabia to ensure its place as the most prominent middle eastern logistics hub by 2030. There were 18 papers submitted to the original special topic forum call for papers. Each paper was reviewed by a minimum of three reviewers at each round, with some papers going through four rounds, before final acceptance leading to four papers accepted as discussed below. The purpose of this special topic forum as noted earlier on the Physical Internet was threefold. First, it provided an opportunity for researchers to submit the latest innovations, technologies, applications, and methodologies related to the Physical Internet. Second, it aimed to identify critical issues and challenges for future research and development in the broad field of Physical Internet and related field of interconnection and interoperability of logistics networks and supply chains. Third, it aimed to stimulate further logistics research exploiting the new Physical Internet paradigm. We believe the three papers selected for this special issue meet these goals. The first paper from Chuanwen Dong and Rod Franklin, entitled “From the Digital Internet to the Physical Internet: A conceptual framework with a stylized network model” (Dong and Franklin 2021) explores the parallel between Digital Internet and the Physical Internet. This paper proposes a conceptual framework for PI based on the Digital Internet (DI), with the aim of solving both the reachability and optimality problems. It reviews the structure of DI and discusses the complexity of PI in comparison with DI. In addition, the authors propose a stylized network model using graph theory to support the implementation of the PI. Furthermore, the authors develop an algorithm to solve the model and demonstrate how it can be used to operationalize the PI in a case study. The second paper from Michael Plasch, Sarah Pfoser, Markus Gerschberger, Regina Gattringer, and Oliver Schauer, is entitled “Why collaborate in a Physical Internet Network? – Motives and Success Factors” (Plasch et al. 2021). It empirically investigates the motives and success factors associated with collaborating in a PI network using both resource-based view theory and resource orchestration theory. They use a case-based research approach, studying four shippers and three logistics service providers (LSPs) in a multi-industry setting to demonstrate that central and neutral orchestration of resources is a critical, substantial, and multifaceted issue in PI, especially with continuous PI collaboration. The third paper from Henrik Sternberg and Meltem Denizel, entitled “Towards the Physical Internet – Logistics service modularity and design implications,” (Sternberg and Denizel 2021) explores a key component of the PI. The role of PI containers is the focus of this paper as it looks at the design and characteristics that will determine the containers’ flows in a domestic network context. They utilize a linear programming model that minimizes flow imbalances to investigate PI-container compatibility. The analysis reveals that PI-container compatibility in terms of forward and reverse flows determines whether PI presents increased or decreased empty runs compared with the existing conventional logistics system. The results also show the importance of keeping synergistic specificity low, and on understanding what characteristics affect the urgency of technology use, which are all important for future research on PI-container repositioning, routing, and packaging design. The fourth paper from Tomas Ambra, An Caris, and Cathy Macharis entitled "Do You See What I See? A Simulation Analysis of Order Bundling within a Transparent User Network in Geographic Space" (Ambra, Caris and Macharis 2021) explores the concept of an open network that users can access to place orders for shipments that will automatically adjust vehicles in existing fixed routes to pick up freight. Using a novel agent-based simulation model, the authors were able to demonstrate the benefits of introducing PI-hubs closer to consumers leading to reduction in private car journeys and instead using existing service providers with only minor increases in delays to existing freight customers. The results show more realistic routing strategies, more efficient utilization of equipment leading to a more holistic perspective to manage the service-driven company’s fleet. By definition, the Physical Internet offers a paradigm for analyzing logistics operations that appears particularly suited to the needs of reducing the environmental footprint and improving agility, robustness, and resilience. It therefore appears paradoxical that companies do not rush to deploy the associated concepts. Even if the first signs of implementation appear, we remain far from universal interconnection, including when technical solutions are identified with associated economic gain, for example modular handling containers [https://cordis.europa.eu/project/id/314468]. Several arguments, which are not mutually exclusive, can be put forward, which constitute the many avenues of research that are essential to get closer to a broader implementation of the Physical Internet. There is a need for more operational demonstrations of PI, both on a larger scale and more open to others in the research community. While some companies use concepts close to the Physical Internet, in Physical Intranet mode, the limited communication on this subject makes the dissemination of these practices still difficult. The open-access sharing of resources and flow consolidation, in the broad sense, between logistic companies should therefore continue to be the subject of research to better identify the factors associated with their performance and the conditions for their success. The complexity of these operations is such that recourse to modeling and games will also be necessary to prove the gains for each of the operators, as shown by Lafkihi et al. (2020). The distribution of a logistic service among several actors, including those not known at the start and beyond traditional subcontracting, is a strong point but undoubtedly raises the question of trust and mechanisms for monitoring performance. These points clearly reinforce the needs for shared codes, traceability, and contractual commitment allowing a shipper or a carrier to transfer a shipment to a third party with a confidence equivalent to that of operations entrusted to a single provider. The history of the maritime container (Levison 2016) shows the difficulty of designing a logistics system but above all of deploying it on a global scale. Beyond the necessary experiments and local successes and failures, it is necessary to reach coordination in decisions between the players in order to achieve a shared system (size, twist-lock, etc.). What was initially patented (e.g., twist-lock) has been modified and opened to all, giving a real new start to sea containers without benefiting any particular company. But the design of the sea container remains an "isolated" object and reflects in a limited way the issues at hand here. How to coordinate a large and fragmented sector in a complex transition to logistics efficiency with the objective of its sustainable development? This is the challenge taken up by the European association ALICE-ETP, which produces a regularly updated roadmap with industry to this end. In this regard, it may also be useful to draw inspiration from other sectors such as semiconductors and its association “International Technology Roadmap for Semiconductors” See http://www.itrs2.net/uploads/4/9/7/7/49775221/irc-itrs-mtm-v2_3.pdf. For nearly 50 years, this sector has been coordinated around Moore's "law" and more than Moore, which is not a physical law but a business model! Thus, in the field of logistics a recurring objective of progress in efficiency set by leaders could make it possible to promote technical solutions. As shown, the paradigm of the Physical Internet poses many ambitious and difficult but worthy research questions and we are hopeful that this special issue will allow significant progress to be made on the Physical Internet through the research it will inspire. We are deeply appreciative of all the authors who submitted their manuscripts, the reviewers who helped reduce the 18 submissions to the 4 accepted articles found in this special issue and especially the Journal of Business Logistics former Co-Editors—Thomas Goldsby and Walter Zinn—for their support and providing us with the opportunity to develop this STF.