Physical Internet: a possible solution for logistical problems

Sustainable Transformation

VanBreedam.pngThe mobility sector is constantly evolving. Multiple factors play a role in deforming or reshaping traditional transport. Transport is constantly changing to adapt to the modern living conditions. The changing landscape - existing of e-commerce, the new way of shopping etc. – also involves some bleak consequences.  

What are those factors and how have they impacted the infrastructure of the modern transport sector? How will the current business models react to the new spectrum of logistical factors? And how will this affect the e-commerce and our society? What does “Physical Internet” entail and can it lead to a sustainable solution? For this and more, do read on!

The paradoxical decline in transport capacity

The transport sector is characterized by a lot of fragmentation with a great number of logistical actors that fight out a heavy competition every day. A 43% utilization degree of vehicles in road transportation [World Economic Forum, 2009] is a sad consequence of this.

Paradoxically, there is a possibility that a transport capacity deficiency will arise in the next few years. Because of the increase in congestions, the average speed on the European road has declined more than 15 km/h in the last 20 years. The increasing congestion also caused that in 20 years time, we will need 20% more transport capacity to transport the same volume!

Even though the transported volume is only slightly increasing every year, the number of shipments needed to transport this volume, is increasing. After all, companies and individuals order more frequently, but in dwindling amounts, mostly influenced by e-commerce.


Convenience shopping and its logistical consequences

The new way of shopping, the so-called “convenience shopping”, where the customer decides where and when he wants to receive his order – mostly for free and including a free return shipment, should he need it – gives the customer the impression that transport is free and unlimited. The risen speed of delivery (“next day” and “same day”) puts an enormous pressure on the logistical system and the needed transport capacity, causing upcoming shortages on the one hand and not optimizing the used transport space on the other.


An acute shortage of truck drivers

Socially, there is no safe-guard to unlimitedly expand transport capacity anymore. The capacity shortage might become even more acute, because of the upcoming shortage in truck drivers. After all, the average age of a European truck driver is 50. The unmanned truck is coming, but might not be in time to be the answer.


Transport costs – evolving or stagnating?

For the transporter himself not much seems to be changing. The real, fractured, direct cost will not change much under the influence of fragmentation and competition within the transport market. On the contrary, the hidden costs and the societal costs will rise substantially. The hidden costs entail all the costs that companies will have to make to be able to keep supplying the customer in conditions that keep worsening because of congestion and a decreasing accessibility of the customer. This includes the costs for reaching the customer too late, losing customers, higher safety requirements, etc.

The most important increase is expected in the cost of the caused societal nuisance, which is payed by the society itself. On a given moment, society will shift a part of that cost to the direct logistical cost of companies in the form of charges and taxes under the header: the user (pollutant) pays.

In whatever way things evolve, the current logistic business models, which are based on the accessibility of sufficient transport capacity, will fail in the future. After all, the transporter who wants to transport his goods, will not be able to reserve and demand transport capacity. Even further, capacity will have to be shared between transporters, or otherwise stated, transporters will have to consolidate and bundle their goods. 

Physical Internet – an alternative mechanism

Increasingly, the Physical Internet is represented as a target image for a smart, durable and fair logistic. The Physical Internet can be seen as an internet application, but for transport. The underlying network is TEN-T (Trans-European Network for Transport), which connects the European consumption and industrial centers via road, railway, and waterway of which Galileo is the control center. 

Conveying goods is similar to the process of sending an e-mail, whereby the various providers which are active in the junctions know how to pass the e-mail through the network until it reaches the addressee, thanks to the TCP/IP protocol. That way the transporter has to register his goods on the Physical Internet.

Thanks to the Internet of Things (IoT), the available capacity of all participating and certified transporters can be evaluated. Using algorithms, the available transport and storage capacity can be combined to an optimal route using the transport network. That way, for example, a transport from Spain to Belgium can take place in five stages, by five different tranporters, but the duration will be shorter than with a reserved truck and driver, because the drive times are defined by the driver.


Physical Internet as life-saving appliance

The concept of Physical Internet shows us how logistical capacity can be shared between various companies as a solution for capacity shortages. Right now, it is not clear which form the Physical Internet will take in 2050, the target date stated by the European Commission. Perhaps, in the following years some intermediate forms will be implemented, the so-called collaboration platforms. Those platforms are small horizontal partnerships for logistical activities between companies within a certain sector or a geographical cluster.

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