Physical Internet Initiative: Pipedream or Possibility?

Isn’t there a better way to do this?

That simple question has been the starting point for any number of innovations in the materials handling world. It was also the starting point for the Physical Internet Initiative, a major supply chain project that has the potential of changing the way we handle, store, package and transport goods across the supply chain.

Pi, as it’s also known, was the brainchild of Benoit Montreuil, a professor in the department of operations and decision systems at the Universite Laval in Quebec and a member of the College-Industry Council on Material Handling Education (CICMHE). Back in 2006, Montreuil 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. Since then, he has been joined by other researchers in the U.S. and abroad to explore that possibility.

So, just what is Pi? The short explanation is that the Physical Internet would mimic the way information is packaged, distributed and stored in the virtual world to improve processes.

The group has a manifesto: Transforming the way physical objects are handled, moved, stored, realized, supplied and used, aiming towards global logistics efficiency and sustainability.

That description, however, only goes so far in explaining how a Physical Internet might operate. The PowerPoint on Montreuil’s Web site (physicalinternetinitiative.org) runs 72 slides.

While at first it sounds a little far-fetched­—or a little like an academic exercise—the academics have been joined in their research by retailers Wal-mart and Walgreens; solution providers like RedPrairie and the American Truckers Institute; and the Material Handling Industry of America (MHIA). The project currently has funding from the National Science Foundation as well as nearly $60,000 in contributions from MHIA and CICMHE. Yes, it’s a big idea, but talk to Montreuil for a little while and it all sounds very possible.

Isn’t there a better way?
The idea for a Physical Internet took shape in June 2006, when Montreuil picked up a copy of The Economist magazine. The issue included a series of articles about contemporary logistics titled “The Physical Internet.”

“After that first reading, I lost sleep thinking about the idea of a Physical Internet,” Montreuil says. “I wondered what would it do that we can’t do now and why would we even need it?”

As he thought about the development of the Internet, a concept for logistics took shape. “If you think about the early days of computers, people loved using them, but they had no way to connect their computers to a community,” he says. “To get connectivity, we looked to transportation for a model and the information superhighway became the metaphor for the Internet.”

Montreuil wondered whether supply chain professionals could use the Internet as a metaphor for a new way to move physical objects through the supply chain.

“The Internet and the physical world are different,” he says. “Data moves at light speed. If you lose data, you can often retrieve it and there is no great incremental cost to ship more data.” In the physical world, on the other hand, “the equipment can only move so fast, it’s terrible if I lose a carton, and there’s an additional cost every time someone touches an object.”

The big picture
Despite those differences, Montreuil concluded there had to be an alternative to how things are done today. “The way we handle physical objects is no longer efficient or sustainable economically, environmentally or socially,” he says. To justify the need for a Physical Internet, he focused on a few key areas.

Economically, logistics accounts for 10% to 15% of the GDP for most countries in the world and it’s growing faster than the overall growth of world trade. “The cost to ship something from China is too high and it’s getting higher,” Montreuil says.

Environmentally, logistics and transportation are among the largest consumers of energy in the world. “Greenhouse gas emissions from logistics are climbing year after year at a time when the target of most countries in the world is to reduce them,” Montreuil says.

Socially, most companies are struggling to recruit and retain employees in their distribution and transportation operations. “Truck drivers don’t want to be away from their families for weeks at a time and in many distribution centers, employees speak languages other than English, which discourages Americans from working in those facilities,” says Montreuil. “Those are just facts the industry is dealing with.”

Last, but certainly not least, logistics and transportation as they are currently practiced are inefficient and wasteful. “Even with routing and scheduling software, there is a lot of empty travel,” Montreuil says. “Most storage and production facilities are underutilized most of the year and products are unnecessarily crisscrossing the world as part of the production process.” Norwegian salmon, for instance, is often shipped to China where it’s packed before it’s shipped to a border country like Finland for consumption.

There’s got to be a better way.

Enter the Physical Internet
After identifying the inefficiencies associated with distribution and logistics, Montreuil decided several lessons could be learned from the way digital information is packaged and moved across the Internet.

“We wanted an open, global logistics system that contrasts with the proprietary or closed systems that are common today,” he says. “It’s founded on the idea of physical, digital and operational interconnectivity enabled by encapsulation, protocols and smart interfaces for increased efficiency and sustainability.”

That sounds complex, but it can be boiled down to a few simple principles.

Interconnectivity: In the world of logistics today, many countries have unique standards. The 48 x 40-inch pallet may be ubiquitous in the U.S., but there are different standards in Europe or Asia. Similarly, one supplier’s conveyor may not connect with another supplier’s conveyor. “We’re aiming for universal connectivity,” Montreuil explains. “We think this container should click with that container, no matter what product is inside. It should go easily on the conveyor and easily on the lift. Handoffs throughout the supply chain should be easy.”

Encapsulation: The Physical Internet won’t deal with freight. It will only deal with packages of goods, much like ports only deal with containers. “When you get 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,” Montreuil says. “The Internet, on the other hand, only deals with packets of information that are formatted very precisely.”

Montreuil envisions a portfolio of standard size containers that will be used around the globe. They would begin with standards for maritime containers and truck trailers. Shipping containers and cartons would be sized to maximize the space inside those standard containers and trailers. Regardless of the size, they would be environmentally sustainable, trackable by bar codes or RFID, and modular. “We’ll talk with the rack and conveyor people to come up with containers that are easy to handle and designed for logistics,” says Montreuil.

Secure: Whatever their size and design, containers in the Physical Internet will be sealable for security in the same way as a shipping container is sealed today.

Say so long to pallets: In Montreuil’s vision, pallets as we know them would no longer exist. Nor would it be necessary to stretch or shrink wrap a load. The shipping platform would be the container. It may have wheels, which would make it easy to load and unload. Or, it may work with a clamp truck.

Forget about storage as we know it: Eliminate the pallet, and Montreuil believes that you could also eliminate a lot of storage rack by stacking containers in a DC the way containers are stacked in the port. Or, they might snap onto a grid. “We could reinvent materials handling technologies so they could be adapted to a world standard container,” he says.

Nodes on the supply chain: In the Physical Internet, the role of the DC will change. A facility may have a portion of the warehouse that is off-line and used for reserve storage or order fulfillment. But the portion of the facility set aside for shipping and receiving would no longer be dedicated to just one customer. Instead, it would serve as a hub, transit point or gateway to deal with containers moving through the supply chain.

“A DC will be open to receive and crossdock containers from other companies just like a port,” says Montreuil. “Our goal is that freight will no longer be stuck in a yard for a few days or weeks. Within an hour or so of arrival, a container will be on another truck and moving in another direction.”

Keep it moving
Keeping product in motion is one of the biggest benefits of the Physical Internet. To illustrate his point, Montreuil describes the way a truckload of product moves from Quebec City to Los Angeles.

In today’s world, it takes about 120 hours for a driver to pick up and deliver a load by truck. Like a marathon runner, the driver probably completes the trip alone. Meanwhile, the driver will be away from home for a week or more and may return empty for at least a portion of the trip back from Los Angeles.

In the Physical Internet, the delivery process would resemble a relay race. Each driver would hand off a load at a transit hub every 250 miles. There, another driver would pick up the load within an hour or so and move it another 250 miles on its journey. Meanwhile, the original driver would pick up a back haul and return home in time for dinner. Or, the load may get shuttled onto and off of a multi-modal rail car. Instead of 120 hours, Montreuil calculates the delivery could be made in 60 hours.

Similarly, LTL shipments could be reconfigured with other shipments at transit hubs to maximize trailer loads. Since all of the containers would be the same size, just like maritime containers in a port, the contents of a container would be irrelevant.

Making this model work would rely on all of those components described earlier along with open and connected data collection and software systems. “Everything from the warehouse management system (WMS) to the routing, slotting and asset tracking systems will be open and connected, like the Internet,” says Montreuil. It also requires more collaboration than happens in the supply chain today.

Pipedream or possibility?
As the Physical Internet began to take shape, Montreuil shared the idea with colleagues at other institutions. “Ben had this epiphany that he’d talk about over dinner at CICHME meetings,” says Russell Meller, a professor at the University of Arkansas and the director of the Center for Excellence in Logistics and Distribution (CELDi) at the university. “He was the inspirational leader, but he also realized that he’d need other people and ideas to make it happen.” CELDi is a consortium of nine universities and 30 organizations funded by the National Science Foundation focused on research in logistics and distribution.

Along with Meller, Montreuil recruited several other researchers here and abroad, including Kimberly Ellis, an associate professor and the site director for CELDi at Virginia Tech.

To get the project off the ground, Meller says, they realized they would need grants. Meller and another researcher already had a nearly $200,000 grant from the National Science Foundation to develop a virtual organization using digital Internet technology that would allow engineers to work collaboratively on a big project. The catch: They needed a big project. The Physical Internet Initiative seemed to fit the bill.

In addition, Meller and Ellis received a $197,000 grant from the National Science Foundation to use CELDi as a resource to take real world numbers from leading shippers like Wal-mart and Walgreens to establish the potential of the Physical Internet.

That project is now underway. The CELDi team is taking real-world facilities, and network and shipping data to model how the supply chain is working now and how it might work in a Physical Internet with standardized containers and a sharing of trailers and other resources across a network of facilities. “We have weekly teleconferences with the participating organizations and they’re guiding us with the scenarios they want us to model and the questions they want to answer,” says Meller.

Those include questions such as how much fuller would trailers be—how much air would be removed—using the Physical Internet model? Is there a negative impact from using standardized modular containers? Would the number of times a product is handled change as it moves through the system? If your shipments resemble a relay race, how quickly do you need to crossdock a container through a facility so that you don’t increase the amount of time for a shipment?

While CELDi is answering those questions, Virginia Tech’s Ellis says the next step is to define what type of containers and materials handling systems are required for the Physical Internet. “What it might look like is an open question,” she says. “Ben certainly has ideas. We have submitted another research proposal that would allow us to work on the design of containers.”

So, is the Physical Internet a pipedream or is it a possibility? According to Montreuil, the technology is “a piece of cake. There’s no science fiction and nothing to invent in terms of software and data collection.” He believes the companies within MHIA could come up with the handling innovations to make this happen very quickly. In Montreuil’s definition, quickly is about a decade.

The real challenge, he says, is overcoming the reservation of businesses to collaborate with one another to make the Physical Internet work. “Companies will need to come up with new business models,” he says.

The other challenge is convincing a group of shippers to do it now, rather than later. While it may take a decade to get a global Physical Internet up and running, Montreuil believes that a consortium of companies, or even an entire industry, could do it now.

“I think the biggest hurdle is the reluctance of companies to do this until everything is in place to operate on a global scale,” he says. “I see it as something that can be phased in now and grow incrementally.”

That could be the industry that is asking the question: Isn’t there a better way?