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Innovation Impact on Logistics Facilities & Material Handling
Evolving towards a worldwide Physical Internet will enable the global efficiency and sustainability of physical object
movement, handling, storage, realization, supply & usage. More than a concept the Physical Internet Initiative is a
source of innovation for CEP companies.
Physical Internet Initiative
In 2006, Benoit Montreuil (professor in the department of operations and decision systems at the Universite Laval in
Quebec, member of the College-Industry Council on Material Handling Education), began wondering how distribution and
logistics would be improved if we applied some of the principles of the digital Internet to the physical movement of
goods. The Physical Internet project is a broader, international initiative with research and business teams from Canada,
USA, France, Germany and Switzerland.
The way physical objects are moved, handled, stored, realized, supplied and used throughout the world is neither
efficient nor sustainable economically, environmentally and socially. The logistics inefficiency and unsustainability
symptoms include: shipping air and packaging, empty travel is the norm rather than the exception, products mostly sit
idle, stored where unneeded, products unnecessarily move, fast & reliable multimodal transport is a dream, getting
products in and out of cities is a nightmare, networks are neither secure nor robust.
The Internet of Things is about enabling ubiquitous connection with physical objects equipped with smart connective
technology (RFID, GPS, Internet, …), making the objects ever smarter and enabling distributed self-control of objects
through networks. The Physical Internet Initiative is to exploit as best as possible the Internet of Things to enable the
ubiquitous connectivity of its containers and systems.
The Physical Internet will only deal with packages of goods, much like ports only deal with containers. Outside of the
ports, distribution centers and logistics providers are dealing with hundreds of different kinds of boxes and they’re not
easy to handle. The Internet, on the other hand, only deals with packets of information that are formatted very precisely.
Physical Internet Implementation
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. Another example is to imagine that a car
manufacturer will use standardized containers both for inbound supply purposes and outbound distribution purposes,
thus altering 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 or even to create new bundles of products-markets-services that
go beyond car manufacturing.
As digital Internet packets, the Physical Internet system is based
on standard containers that are routed according to their
Physical Internet address from their origin to their destination
using the most efficient combination of shared transport,
storage and handling means. 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. Through the development of protocols
and Physical Internet container standards, the aim is to gradually
replace a fragmented constraining organization by an open
distributed organization.
Strategy and Perspective
The Physical Internet is a key driver of business model innovation. While the former firm provides baseline infrastructural
tools such as containers, vehicles, services, and software, the latter firm exploits the potential value creation induced by
the Physical Internet to create value for the full range of stakeholders involved. In the Physical Internet the value is co-
created by firms that are in a position to leverage their asymmetries, notwithstanding their respective levels of
heterogeneity.
The Physical Internet is note a pipedream. As an early example Tri-Vizor (founded in Belgium in 2008) “the world’s first
supply chain orchestrator”, proactively designs and operates horizontal partnerships and collaborative communities
among shippers by bundling and synchronizing freight flows across multiple supply networks. On March 14th 2011, a
community for orchestrated horizontal collaboration in logistics became operational, between Tri-Vizor (initiator, project
manager, neutral referee and orchestrator), UCB & Baxter (healthcare companies), and H. Essers (responsible for the
correct physical execution and multimodal transport of the community). For UCB and Baxter, this project has resulted in
impressive logistics cost (-15%) and carbon footprint net savings (-50%) while increasing customer service levels.
Wal-mart (electronics online shopping) and Walgreens (America's online pharmacy) had already joined the Physical
Internet Initiative to establish the potential of the program.
Alexandra Lepercq, july 2012

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Physical internet initiative

  • 1. Innovation Impact on Logistics Facilities & Material Handling Evolving towards a worldwide Physical Internet will enable the global efficiency and sustainability of physical object movement, handling, storage, realization, supply & usage. More than a concept the Physical Internet Initiative is a source of innovation for CEP companies. Physical Internet Initiative In 2006, Benoit Montreuil (professor in the department of operations and decision systems at the Universite Laval in Quebec, member of the College-Industry Council on Material Handling Education), began wondering how distribution and logistics would be improved if we applied some of the principles of the digital Internet to the physical movement of goods. The Physical Internet project is a broader, international initiative with research and business teams from Canada, USA, France, Germany and Switzerland. The way physical objects are moved, handled, stored, realized, supplied and used throughout the world is neither efficient nor sustainable economically, environmentally and socially. The logistics inefficiency and unsustainability symptoms include: shipping air and packaging, empty travel is the norm rather than the exception, products mostly sit idle, stored where unneeded, products unnecessarily move, fast & reliable multimodal transport is a dream, getting products in and out of cities is a nightmare, networks are neither secure nor robust. The Internet of Things is about enabling ubiquitous connection with physical objects equipped with smart connective technology (RFID, GPS, Internet, …), making the objects ever smarter and enabling distributed self-control of objects through networks. The Physical Internet Initiative is to exploit as best as possible the Internet of Things to enable the ubiquitous connectivity of its containers and systems. The Physical Internet will only deal with packages of goods, much like ports only deal with containers. Outside of the ports, distribution centers and logistics providers are dealing with hundreds of different kinds of boxes and they’re not easy to handle. The Internet, on the other hand, only deals with packets of information that are formatted very precisely. Physical Internet Implementation 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. Another example is to imagine that a car manufacturer will use standardized containers both for inbound supply purposes and outbound distribution purposes, thus altering 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 or even to create new bundles of products-markets-services that go beyond car manufacturing. As digital Internet packets, the Physical Internet system is based on standard containers that are routed according to their Physical Internet address from their origin to their destination using the most efficient combination of shared transport, storage and handling means. 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. Through the development of protocols and Physical Internet container standards, the aim is to gradually replace a fragmented constraining organization by an open distributed organization. Strategy and Perspective The Physical Internet is a key driver of business model innovation. While the former firm provides baseline infrastructural tools such as containers, vehicles, services, and software, the latter firm exploits the potential value creation induced by the Physical Internet to create value for the full range of stakeholders involved. In the Physical Internet the value is co- created by firms that are in a position to leverage their asymmetries, notwithstanding their respective levels of heterogeneity.
  • 2. The Physical Internet is note a pipedream. As an early example Tri-Vizor (founded in Belgium in 2008) “the world’s first supply chain orchestrator”, proactively designs and operates horizontal partnerships and collaborative communities among shippers by bundling and synchronizing freight flows across multiple supply networks. On March 14th 2011, a community for orchestrated horizontal collaboration in logistics became operational, between Tri-Vizor (initiator, project manager, neutral referee and orchestrator), UCB & Baxter (healthcare companies), and H. Essers (responsible for the correct physical execution and multimodal transport of the community). For UCB and Baxter, this project has resulted in impressive logistics cost (-15%) and carbon footprint net savings (-50%) while increasing customer service levels. Wal-mart (electronics online shopping) and Walgreens (America's online pharmacy) had already joined the Physical Internet Initiative to establish the potential of the program. Alexandra Lepercq, july 2012