From the Digital to the Physical Internet: towards open transportation networks for material goods

Excerpted from an article by Benoit Montreuil, Jean-François Rougès et al. for TIM Review:

The Physical Internet constitutes a path-breaking solution to the inefficiencies of traditional proprietary models (Montreuil, 2011a). It represents an open, global, interconnected, and sustainable logistics system. This system is based on standard containers that are easily transported through various transport means (e.g., planes, trucks, and also private cars). The containers move though distributed, multimodal transportation networks in which transit sites aggregate containers from diverse origins to optimize the loading on the next segments. Open warehouses and open logistics facilities are part of the network, enabling a global Logistics Web. As such, in order to clearly differentiate it from classical logistical activities, it is said to be ?-enabled as the Physical Internet goes beyond the development of agile networks known in the literature (Montreuil et al., 2000; Lee, 2004).

The Physical Internet spans four layers (Montreuil, 2011a; 2011b), as shown in Figure 1. At the first layer lies a Realization Web for open distributed conception and manufacturing of objects. At the second layer is embedded a Distribution Web that serves to openly deploy encapsulated objects across territories and markets. The third layer involves seamlessly moving encapsulated objects though an open multimodal Mobility Web. Through these layered webs, the Physical-Internet-enabled Logistics Web can infinitely (re)combine, thus creating yet-unheard-of possibilities for business model innovation. To put the Physical Internet into a current, real–life context, consider the UPS logistics network – including trucks, planes, hubs and factories – as a closed, proprietary form of the Physical Internet.”

The Physical Internet

Discussion on the Business Impplications of a Physical Internet:

“The introduction of the Physical Internet will force firms to innovate. Enabler firms provide the necessary physical and material infrastructure, including a full range of services. The standardization that this suggests for the Physical Internet to be efficient (e.g., containers, vehicles, equipment) will transform current providers.

For example, one can imagine that car manufacturers will use standardized containers both for inbound supply purposes and outbound distribution purposes, thus altering (Renewal) their business model, which is highly dependent on trucking, in North America at least. This may lead them to adopt or devise radically different logistical solutions (Extension) or even to create new bundles of products-markets-services that go beyond car manufacturing (Journey).

By the same token, infrastructure providers will be strongly impacted. The Mobility and Distribution Webs discussed earlier mean that transit centres, hubs, distribution centres, and warehouses will be flexible nodes of an elaborate and flexible network that will transform the way cargo, storage, and routing will be done. Last-mile operations are then to be better customized for rural and urban deliveries that will prove less dependent on traffic patterns and population density. This may be done using a mix of public/private means, whether proprietary or not.

In turn, customs agents, insurers, logisticians, and information systems developers will be impacted as new services will become profitable despite a change in intermediation relationships that will provide for real-time optimization. As an early example Tri-Vizor introduces itself as “the world’s first supply chain orchestrator”. It “proactively designs and operates horizontal partnerships and collaborative communities among shippers by bundling and synchronizing freight flows across multiple supply networks”.

Introducing a new infrastructure such as the Physical Internet generates an intense wave of innovative change in business models. Firms are now in a position to leverage their asymmetries in order to push further value creation (Cimon, 2004). Electricity and the Digital Internet were game changers just as the Physical Internet will be.

Thus, the Physical Internet will instil a change of several orders of magnitude as this infrastructure and business models will continue to influence one another. We face a revolution as radical as the Internet Revolution. “Brick and Mortar Firms” will seize on the occasion to improve on a spectrum that spans from improving on current business model to radically altering them, and a vast room of opportunities is opening for “start-up” entrepreneurs that are able to invent new ways to create value through the Physical Internet.”

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