Papers

Current logistics research recommends the visions and concepts of "Physical Internet" (PI) to avoid waste of resources in sustainable supply chains. Based on cross-company collaborations and cooperation new principles of resource sharing shall be introduced. Therefore, higher-level coordination instances and new business standards are needed to increase the overall efficiency and to gain resulting reduction of traffic while increasing service levels.

In Austria, for example, regional material flows are quite well connected by the existing transport industry; however, because of the fragmented nature of individual deliveries, which are generated by a big amount of different medium-sized companies, and the special geographical and topological effects deliveries are poorly bundled. On the one hand innovations of the smart production initiative connect dislocated production sights to regional production clusters thus enabling high-quality planning and production control, but on the other hand optimized interfaces to connect enterprises via logistics and the integration to integral value networks with variable capacities are widely missing. Based on the practical case of an Austrian manufacturer in the automotive sector the scientific objective of the considered research project “Go2PI” was to evolve criteria and guidelines regarding aspects of technical infrastructure, information systems and operational processes to develop a provider neutral and open business model for the area of distribution logistics. These guidelines can be summarized and generalized to three main implementation steps, which become part of the developed roadmap to the Physical Internet:

Setting the vision for coopetition
On the basis of the PI-visions the initial step focuses on the definition of a fair benefit sharing model for the cooperation of competing forwarding service providers concerning assets and business information. Especially part loads and single unit loads - as mainly dealt with in the project Go2PI - include a large proportion of inefficient use of transport capacity because of the nature of their structure, volumes, volatility and the differences regarding weights, dimensions, dates and destinations. Even logistics systems focused on this part of logistics, like breakbulk agents, suffer from a lack in fill rates, empty runs and cost pressures in both modalities road and rail.
In the regard of the structure of the consignments there is high potential concerning a sharing model which helps as a superior authority to capture shipment and capacities and bundle these quantities in an open company-crossed system. Toward that there is the market where direct contact and relationships between senders and freight forwarding agencies prevalent which lead to longlasting customer loyalty. Therefore, some service providers developed to specialists in different industries and destinations with customized services and pricing models, which enable the highest service level as well as an easy operative processing for them. This rigid understanding of customer-forwarder relationship has to be softened in the first step in order to use the consolidation potential in the PI.

Standardisation of logististics operations
Building on the PI-coopetition model a concept for the standardization of information (data, formats and content), communication technology (electronic data transfer, data access and IT functionalities), logistics processes, products and mathematical optimization logics has to be created. This standardization is required in order to make the various products and services of the forwarders comparable and connectable. However, the risk exists that individual branch-specific solutions (specific unit loads, lead times, observance of specific time windows) cannot be implemented in a PI solution in the first phase and therefore continuing parallel to the PI-cooperation model on the market.
Therefore, not only the diversity of transport management systems and ERP-software but also the lack of consistent data structures in the background of these systems is a tremendous obstacle in the area of ICT. Thus, the integration of several partners to a central IT-system requires an elaborate and cost-intensive design of interfaces. Therefore, it is a great challenge to identify widespread data standards (eg. XML based) and data classes in order to define the required shipment information to achieve standardization. An early automated feeding of standardized shipment information of the various partners in the network into the system, gives the PI-hypersystem the necessary preliminary lead time to bundle cargo with different priorities according to predefined mathematical optimization logics including the capacity of the carriers. A remaining substantial barrier to implement these standards within the existing competitive market lays in the big market players who will definitely try to protect their huge investments in infrastructure and ICT made in recent years, which is interpreted as their competitive advantage.
One unsolved question identified by the project Go2PI is, if a standardized PI-container already shall be used in the first implementation phase (as postulated by PI-theory) or if it is more practical to create a standardized intelligent identification technology at first, which is can be applied to existing unit loads, too. Interviewed forwarders as well as senders were quite critical concerning the concept of standardized PI-containers. Therefore it seems to be a more acceptable and practical approach to create a communication module to interact with standardized identification tools at used hubs. Thus, PI-unit loads could be identified and handled within the network at each physical interface equipped with the corresponding hardware. Another important constraint to consider is the compatibility for this potentially new system to unit loads which are not equipped with these modules.
 
Standardisation of financial clearing models
An additional crucial implementation step for the PI is the definition of rules for fair and flexible pricing, sharing of profits, shareholder models for direct members and partner models for additional service provider. A specific economic incentive of the researched PI-concept is the option of getting flexible transport tariffs in comparison to existing rigid ones. This means that monetary improvements (operational savings) in future are fairly distributed not only among the system partners, but also among the clients in the sense of variable transparent rates. Such a principle generated for non-urgent freight additionally enables the possibility of using low-cost transport time windows and creates further optimization potential (according to the principle “non-urgent goods are transported, whenever remaining capacity is available”).
A main identified research objective for the near future is the design of a pioneering cooperation model for the cargo management, which plans, consolidates and controls the single unit loads of all partners cross-company-wide via a designed internet platform. Another main resulting question is, if the PI-hypersystem is “just” an integrative platform to bring supply and demand together, or if the PI-hypersystem is a proactive software tool, that not only integrates but also suggests qualified transport service providers for specific transport orders to optimize filling degrees, routes and costs. In the next step a qualification process for these so-called “Qualified Physical Internet Transport Service Providers” (qPITSP) will be developed and designed and finally the success of the PI will be dependent on how senders trust the system concerning the reliability of the carriers.