The Physical Internet (PI) concept gets more and more traction within the logistics community.
There is a strong belief that similar to the internet we know today, the Physical Internet will become a core element of our day to day lives in the future. Additionally, the physical supply chains lag far behind regarding the desired improvements needed to meet the required sustainability targets, indicating that something has to change.
1. Flexible access to new transportation networks: The current transportation networks are rather robust. A change in partners or volumes are cumbersome and take time and efforts.
2. Dynamic alternations of flows: Current transportation networks typically uses a fixed set of carriers, linehauls, hubs and brick and mortar facilities. Hardly any optimisation takes place based on the daily changing volumes or service requirements.
3. Cost effectiveness: Transportation costs usually vary between 3% and 10% of the cost of goods sold, which is a huge cost. But despite of this, the transportation resources are not used effectively. Loading levels of 30-40% have been the normality for the last decades and no structural improvements can be noted. Similar to the regular internet, the Physical Internet is believed to be much more cost effective compared to the current networks.
4. Capacity flexibility: Today, when a supply chain is setup, there is limited flexibility to cope with changing volumes or change in customer expectations. The constraints are often appearing in the warehouses (storage-, floorspace- and manpower constraints) and in the transportation networks (hubs, modes, drivers, etc).
There are, however, some distinct differences between the “data” internet and the “physical” internet.
The regular internet is appearing to be “free of charge” while in the Physical Internet the different services will be have to be paid for. However, logistics stakeholders are used to pay for services and with more streamlined operations and better utilisation of resources both cost and environmental profile would be improved.
The messages sent on the the networks today are assumed to have an operational value and do not directly represent capitalisation. The flows sent over the Physical Internet represent important assets of the participating companies and “valuation and accounting rules” will have to be applied.
In its simplest form, one could imagine such a PI network as the “Fullfilment service of Amazon” but then: