Downloaded from www.sciencemag.org on June 6, 2014
Shipshape. In a Physical Internet, standardized shipping containers like those crowding the deck of the Majestic Maersk would also take to land, simplifying the often chaotic last leg of delivery (opposite).
The information highway gets physical By Jeffrey Mervis
S
ergio Barbarino is still haunted by something he once saw in a Vietnamese airport: a long line of people waiting to pick up box after box of Pampers that had just rolled out of the belly of a Lufthansa plane from Germany. A chemical engineer who has spent his career in product development at Procter & Gamble (P&G), Barbarino was pleased that one of his company’s leading brands was so popular in this growing Asian nation. But as head of P&G’s global supply chain innovation center in Brussels, Barbarino was appalled that people were crowded around a baggage carousel to pluck diapers sent by relatives. Having customers who couldn’t easily get a product that they wanted to buy represents a serious breakdown in logistics for one of the world’s largest consumer goods companies, he realized. “My heart was bleeding, because our job is to make it easier for consumers to get their hands on our product.” 1104
Getting goods from here to there is one of humanity’s oldest—and sometimes most vexing—endeavors. Today, it has spawned a complex, $60-billion-a-year logistics industry that can, in a matter of days, move a fresh flower picked in a remote South American valley to a florist in Hong Kong. But the fundamentals of supply chain management have changed remarkably little since the first traders loaded their wares onto donkeys or carts and trundled to market. Indeed, analysts say the logistics industry is a laggard rather than a leader in adopting new technologies. That aversion to innovation has left the current global supply chain riddled with practices that waste space and energy, delay deliveries, endanger workers, increase road congestion, and pump out vast quantities of carbon dioxide. Those practices can also be bad for business, executives say—as the diaper dash in the Vietnamese airport attests. There is a much better way, argues a small, loose-knit group of researchers that is just finding its voice. They want the
world to create a “Physical Internet” that will move goods in much the same way as its digital namesake moves data. Like the cyber network, the Physical Internet would promote collaboration by developing standardized containers (think data packets), common protocols and tools (opensource software), and shared transport and technological assets (distributed computing). Manufacturers, shippers, retailers, regulators, and customers would be able to communicate seamlessly with each other and their goods. Advocates say it would also tap into underutilized capacity, improve working conditions for those in the logistics industry, relieve urban congestion, and reduce carbon emissions. “I see what [computer scientists] did for computing as an inspiration for what we are trying to achieve in logistics,” says Benoit Montreuil, an industrial engineer at Laval University in Quebec City, Canada, which last month hosted the field’s first international conference. By shifting from expensive mainframe computers to sciencemag.org SCIENCE
6 JUNE 2014 • VOL 344 ISSUE 6188
Published by AAAS
PHOTO: © NIELS QUIST PETERSEN/DEMOTIX/CORBIS
The Physical Internet would move goods the way its namesake moves data
personalized computing and the World Wide Web, he says, “they reinvented their field, and revolutionized society.” Montreuil concedes that there is resistance to the idea of upending a mature industry from all corners—the retailers and manufacturers, as well as those who move the goods. But he still hopes the Physical Internet can achieve a similar revolution in logistics by 2050, if not sooner.
PHOTO: © XU XIAOLIN/CORBIS
YOU DON’T have to be FedEx, UPS, or DHL
to care about what the Physical Internet could accomplish. “Everybody is affected by logistics,” says J. Rod Franklin, a professor and head of executive education at Kühne Logistics University (KLU) in Hamburg, Germany. “It’s the most-used industry in the world. But it’s also the least visible.” For most people, he adds, logistics actually has a negative connotation: “It’s those guys who get in my way on the road.” One reason there are so many trucks on the road is the inefficient way in which they are deployed. One 2004 British study, for instance, studied a 24-hour cycle for 1000 food delivery trucks and found that they were actually transporting goods only 10% of the time. The rest was devoted to less productive tasks: One-quarter were offline, 16% were carrying empty loads (“shipping air” in the industry parlance), and 14% were
being loaded or unloaded. Such practices help explain why logistics now accounts, on average, for more than 10% of a finished product’s cost and about 15% of the world’s gross domestic product. Despite its economic importance, research on logistics has never been seen as a priority—and gets little respect within the industry. For instance, although DHL has a director of research who manages a 60-person “innovation team” outside Bonn, Germany, the company’s annual report notes that DHL is “a service provider.” As a result, it notes, DHL “does not engage in research and development activities … and therefore has no significant expenses to report.” That attitude may be changing, however, as governments start to pay attention. In the United States, the National Science Foundation (NSF) began funding an academia-industry consortium based at the University of Arkansas, Fayetteville, more than a decade ago. The Center for Excellence in Logistics and Distribution (CELDi) helps businesses solve logistics challenges and trains students in the field. And a few years ago, an NSF-funded study it conducted concluded that the Physical Internet initiative “represents a ‘win-win-win’ virtuous cycle” for raising profits and lowering pollution. The European Union feels the same way. Its research arm is backing a €5 million
SCIENCE sciencemag.org
project called Modulushca (Modular Logistics Units in Shared Co-modal Networks) that aims to develop a standardized, modular container for trucks and trains and the protocols needed for the container to “talk” to its handlers through radio tags and other technologies. Such a system will be essential to realizing the Physical Internet, which aims to put goods on the best possible routes from the factory to their final destination. The Physical Internet is not just about getting packages to the right place in the most efficient manner, however. Its advocates expect it would also improve working conditions and reduce high employee turnover in the logistics industry. With pooled warehouses and transport fleets, cross-country trips by half-empty trucks would be replaced by a series of short hauls that would allow drivers to return home at night. At the same time, dank and dirty warehouses could ultimately disappear as 24-hour communications between shipments and handlers allows for just-intime deliveries and does away with the need for intermediate storage. The Physical Internet could also reduce urban road congestion by rationalizing and downsizing the vast fleet owned by autonomous companies that now provide last-mile delivery to homes, stores, and offices. Fewer vehicles would also mean less 6 JUNE 2014 • VOL 344 ISSUE 6188
Published by AAAS
1105
R E T H I N K I N G T H E G L O B A L S U P P LY C H A I N
air pollution and lower carbon emissions, they note. In the last year, such potential benefits have helped the concept move out of the shadows. Last month, for example, some 200 researchers and industry officials gathered in Quebec City for the 1st International Physical Internet Conference, a 3-day opportunity to present new research, network, and spread the gospel. In the United States, White House officials have asked for a briefing on the concept from leading academics. And in April, a European working group that includes P&G and other major companies declared that “A Physical Internet Vision is possible!” TO MAKE IT a reality, however, most
companies will need to venture outside their current comfort zone. Kevin Gue, an associate professor of industrial engineering at Auburn University in Alabama and one of the keynote speakers at the Quebec City conference, tells industry executives that “it’s not about a better way of doing what you now do. It’s about doing things you’ve never thought of doing before.” One example: pooling assets, such as trucks and warehouses, that are often now locked into proprietary networks owned by individual logistics companies. Many of these players, Gue says, are reluctant to share information about customers, shipping routes, distribution networks, or markets, fearing competitors could gain an advantage. Some even consider having their own supply chain to be an integral part of their business strategy, Gue notes. “They think that, if I can lock you into my brand of material handling equipment, it’ll be harder for you to switch to another company.”
A few firms have formed an alliance with a competitor, says Eric Ballot, a professor of industrial management at MINES ParisTech and one of the founders of the initiative. But he reminds them that such an arrangement is not enough. “I have to say, ‘Excuse me, I don’t think you get it. Maybe you have a one-to-one agreement with another company. But the Physical Internet would be a network shared by many companies.’ ” Achieving the Physical Internet, KLU’s Franklin believes, will require companies to drop their emphasis on optimizing the use of existing assets. Instead, he says, the goal needs to be optimizing delivery of the product, using available assets regardless of who owns them. “With the Physical Internet, you wouldn’t care about the route,” he explains. “You care about the timeliness, the cost, and the quality of the service.” Similar challenges confront the Physical Internet’s vision of developing standardized, highly modular shipping containers. In the 1950s, such containers seemed like a no-brainer to U.S. transport entrepreneur Malcom McLean, who first deployed the now ubiquitous 12-meter containers piled on ships worldwide. But it took the Vietnam War—to be precise, the U.S. military’s need to transport massive amounts of material halfway around the world— to create the demand needed to realize McLean’s vision. Even then, it wasn’t until the 1980s that his container became the industry standard.
Unfortunately, that revolution never established a beachhead on land. It turned out that the container’s dimensions are incompatible with the way trucks are loaded and how goods are stored in warehouses. “So in spite of its tremendous success on the water, transport by containers remains primarily confined to the maritime sector and in an almost forced partnership with rail,” explain Ballot, Montreuil, and Russell Meller, former director of CELDi, in a new book, The Physical Internet: The Network of Logistics Networks.
A better way of getting from here to there What it would take to create the Physical Internet The problems
Products and shipping containers are not standard or modular.
1106
Transportation assets are fragmented and uncoordinated.
Inefcient use of storage and transfer centers.
Sub-optimal delivery routes.
sciencemag.org SCIENCE
6 JUNE 2014 • VOL 344 ISSUE 6188
Published by AAAS
PHOTO: © HORST OSSINGER/DPA/CORBIS ILLUSTRATION: C. SMITH/SCIENCE
SPECIAL SECTION
remaking a mature industry— that the pioneers of the digital Internet didn’t have to worry about. “Conceptually, the notion of embracing the standardization and interchangeability that’s part of the Web has real appeal,” says Ernest Nichols, director of the FedEx Center for Supply Chain Management at the University of Memphis in Tennessee. “But remember, you didn’t have to replace your old Internet. Everybody likes the idea of standardization, as long as you agree to use my standards.” WHAT WOULD it take to move
the world to adopt the needed standards? One step is to show industry that the Physical Internet is no utopian vision that is 35 years away—but something practical that could have an immediate impact. “If you talk to them about 2030 or 2050 Packages head out to the runway at they will stop listening,” Ballot says. a UPS freight center in Germany. “So I try to be more pragmatic.” A few years ago, Ballot and Montreuil ran a Physical Internet Europe’s Modulushca project hopes to simulation, using real logistical data change that by developing prototypes for provided by French retailers Carrefour modular, land-based containers. Having and Casino. It showed that the envisioned a small number of such containers would reforms could significantly increase make it much easier for goods to be rolled profits, lower prices, reduce pollution, and out of factories and onto trucks and trains. lead to less turnover among drivers. Now, Some researchers even envision containers the pair is taking the next step, conducting being shuttled right to a customer’s door— a pilot research project in southern France where they would be emptied, picked up, in which the two companies are using a and reintegrated into the supply chain. shared distribution and scheduling system The container and pooling challenges, to both receive supplies and ship products. however, highlight one huge challenge Such proof-of-concept efforts should facing proponents of the Physical Internet— help persuade companies that the Physical
Internet would allow them to compete on their core strengths, rather than get diverted by logistical issues. “P&G makes consumer goods, and that is what we should be concentrating on,” says the company’s Barbarino—not on how to get those goods to retailers and customers. Experts expect regulators will also play a major role in developing any standards, because the logistics industry is heavily regulated. But many would prefer that governments pave the way for change by funding research and acting as a referee —enforcing rules jointly developed by private-public partnerships—rather than simply decreeing change. Companies “are doing the best they can, considering the organization they have to work with,” Ballot says. “When people start talking about shipping air and running empty trucks, the implicit message to the company is, ‘You’re a dummy.’ Of course they would like to put more in the truck. But right now they just can’t.” Auburn’s Gue says he hopes to see evidence of the Physical Internet “in my lifetime—and I’m 50.” He doesn’t think the current logistics industry will disappear, but he does foresee major disruptions— just as the Internet is remaking the communications and publishing industries. And Montreuil says it’s worth recalling the early history of the Web, which is marking just its 25th anniversary this year. “Remember, at one time the metaphor for the digital Internet was building an information superhighway,” he says. “People said, ‘If we can do it for cars, why can’t we do it for bits and bytes?’ ” He and other Physical Internet advocates are trying to reverse engineer the analogy, with the goal of making logistics as sexy as the Web. ■
The solutions
Products and shipping containers become standardized and modular.
Transportation assets are pooled and interconnected.
Warehouse assets get more efciently utilized …
SCIENCE sciencemag.org
… leading to a more logical supply chain.
6 JUNE 2014 • VOL 344 ISSUE 6188
Published by AAAS
1107
Shipshape. In a Physical Internet, standardized shipping containers like those crowding the deck of the Majestic Maersk would also take to land, simplifying the often chaotic last leg of delivery (opposite).
The information highway gets physical By Jeffrey Mervis
S
ergio Barbarino is still haunted by something he once saw in a Vietnamese airport: a long line of people waiting to pick up box after box of Pampers that had just rolled out of the belly of a Lufthansa plane from Germany. A chemical engineer who has spent his career in product development at Procter & Gamble (P&G), Barbarino was pleased that one of his company’s leading brands was so popular in this growing Asian nation. But as head of P&G’s global supply chain innovation center in Brussels, Barbarino was appalled that people were crowded around a baggage carousel to pluck diapers sent by relatives. Having customers who couldn’t easily get a product that they wanted to buy represents a serious breakdown in logistics for one of the world’s largest consumer goods companies, he realized. “My heart was bleeding, because our job is to make it easier for consumers to get their hands on our product.” 1104
Getting goods from here to there is one of humanity’s oldest—and sometimes most vexing—endeavors. Today, it has spawned a complex, $60-billion-a-year logistics industry that can, in a matter of days, move a fresh flower picked in a remote South American valley to a florist in Hong Kong. But the fundamentals of supply chain management have changed remarkably little since the first traders loaded their wares onto donkeys or carts and trundled to market. Indeed, analysts say the logistics industry is a laggard rather than a leader in adopting new technologies. That aversion to innovation has left the current global supply chain riddled with practices that waste space and energy, delay deliveries, endanger workers, increase road congestion, and pump out vast quantities of carbon dioxide. Those practices can also be bad for business, executives say—as the diaper dash in the Vietnamese airport attests. There is a much better way, argues a small, loose-knit group of researchers that is just finding its voice. They want the
world to create a “Physical Internet” that will move goods in much the same way as its digital namesake moves data. Like the cyber network, the Physical Internet would promote collaboration by developing standardized containers (think data packets), common protocols and tools (opensource software), and shared transport and technological assets (distributed computing). Manufacturers, shippers, retailers, regulators, and customers would be able to communicate seamlessly with each other and their goods. Advocates say it would also tap into underutilized capacity, improve working conditions for those in the logistics industry, relieve urban congestion, and reduce carbon emissions. “I see what [computer scientists] did for computing as an inspiration for what we are trying to achieve in logistics,” says Benoit Montreuil, an industrial engineer at Laval University in Quebec City, Canada, which last month hosted the field’s first international conference. By shifting from expensive mainframe computers to sciencemag.org SCIENCE
6 JUNE 2014 • VOL 344 ISSUE 6188
Published by AAAS
PHOTO: © NIELS QUIST PETERSEN/DEMOTIX/CORBIS
The Physical Internet would move goods the way its namesake moves data
personalized computing and the World Wide Web, he says, “they reinvented their field, and revolutionized society.” Montreuil concedes that there is resistance to the idea of upending a mature industry from all corners—the retailers and manufacturers, as well as those who move the goods. But he still hopes the Physical Internet can achieve a similar revolution in logistics by 2050, if not sooner.
PHOTO: © XU XIAOLIN/CORBIS
YOU DON’T have to be FedEx, UPS, or DHL
to care about what the Physical Internet could accomplish. “Everybody is affected by logistics,” says J. Rod Franklin, a professor and head of executive education at Kühne Logistics University (KLU) in Hamburg, Germany. “It’s the most-used industry in the world. But it’s also the least visible.” For most people, he adds, logistics actually has a negative connotation: “It’s those guys who get in my way on the road.” One reason there are so many trucks on the road is the inefficient way in which they are deployed. One 2004 British study, for instance, studied a 24-hour cycle for 1000 food delivery trucks and found that they were actually transporting goods only 10% of the time. The rest was devoted to less productive tasks: One-quarter were offline, 16% were carrying empty loads (“shipping air” in the industry parlance), and 14% were
being loaded or unloaded. Such practices help explain why logistics now accounts, on average, for more than 10% of a finished product’s cost and about 15% of the world’s gross domestic product. Despite its economic importance, research on logistics has never been seen as a priority—and gets little respect within the industry. For instance, although DHL has a director of research who manages a 60-person “innovation team” outside Bonn, Germany, the company’s annual report notes that DHL is “a service provider.” As a result, it notes, DHL “does not engage in research and development activities … and therefore has no significant expenses to report.” That attitude may be changing, however, as governments start to pay attention. In the United States, the National Science Foundation (NSF) began funding an academia-industry consortium based at the University of Arkansas, Fayetteville, more than a decade ago. The Center for Excellence in Logistics and Distribution (CELDi) helps businesses solve logistics challenges and trains students in the field. And a few years ago, an NSF-funded study it conducted concluded that the Physical Internet initiative “represents a ‘win-win-win’ virtuous cycle” for raising profits and lowering pollution. The European Union feels the same way. Its research arm is backing a €5 million
SCIENCE sciencemag.org
project called Modulushca (Modular Logistics Units in Shared Co-modal Networks) that aims to develop a standardized, modular container for trucks and trains and the protocols needed for the container to “talk” to its handlers through radio tags and other technologies. Such a system will be essential to realizing the Physical Internet, which aims to put goods on the best possible routes from the factory to their final destination. The Physical Internet is not just about getting packages to the right place in the most efficient manner, however. Its advocates expect it would also improve working conditions and reduce high employee turnover in the logistics industry. With pooled warehouses and transport fleets, cross-country trips by half-empty trucks would be replaced by a series of short hauls that would allow drivers to return home at night. At the same time, dank and dirty warehouses could ultimately disappear as 24-hour communications between shipments and handlers allows for just-intime deliveries and does away with the need for intermediate storage. The Physical Internet could also reduce urban road congestion by rationalizing and downsizing the vast fleet owned by autonomous companies that now provide last-mile delivery to homes, stores, and offices. Fewer vehicles would also mean less 6 JUNE 2014 • VOL 344 ISSUE 6188
Published by AAAS
1105
R E T H I N K I N G T H E G L O B A L S U P P LY C H A I N
air pollution and lower carbon emissions, they note. In the last year, such potential benefits have helped the concept move out of the shadows. Last month, for example, some 200 researchers and industry officials gathered in Quebec City for the 1st International Physical Internet Conference, a 3-day opportunity to present new research, network, and spread the gospel. In the United States, White House officials have asked for a briefing on the concept from leading academics. And in April, a European working group that includes P&G and other major companies declared that “A Physical Internet Vision is possible!” TO MAKE IT a reality, however, most
companies will need to venture outside their current comfort zone. Kevin Gue, an associate professor of industrial engineering at Auburn University in Alabama and one of the keynote speakers at the Quebec City conference, tells industry executives that “it’s not about a better way of doing what you now do. It’s about doing things you’ve never thought of doing before.” One example: pooling assets, such as trucks and warehouses, that are often now locked into proprietary networks owned by individual logistics companies. Many of these players, Gue says, are reluctant to share information about customers, shipping routes, distribution networks, or markets, fearing competitors could gain an advantage. Some even consider having their own supply chain to be an integral part of their business strategy, Gue notes. “They think that, if I can lock you into my brand of material handling equipment, it’ll be harder for you to switch to another company.”
A few firms have formed an alliance with a competitor, says Eric Ballot, a professor of industrial management at MINES ParisTech and one of the founders of the initiative. But he reminds them that such an arrangement is not enough. “I have to say, ‘Excuse me, I don’t think you get it. Maybe you have a one-to-one agreement with another company. But the Physical Internet would be a network shared by many companies.’ ” Achieving the Physical Internet, KLU’s Franklin believes, will require companies to drop their emphasis on optimizing the use of existing assets. Instead, he says, the goal needs to be optimizing delivery of the product, using available assets regardless of who owns them. “With the Physical Internet, you wouldn’t care about the route,” he explains. “You care about the timeliness, the cost, and the quality of the service.” Similar challenges confront the Physical Internet’s vision of developing standardized, highly modular shipping containers. In the 1950s, such containers seemed like a no-brainer to U.S. transport entrepreneur Malcom McLean, who first deployed the now ubiquitous 12-meter containers piled on ships worldwide. But it took the Vietnam War—to be precise, the U.S. military’s need to transport massive amounts of material halfway around the world— to create the demand needed to realize McLean’s vision. Even then, it wasn’t until the 1980s that his container became the industry standard.
Unfortunately, that revolution never established a beachhead on land. It turned out that the container’s dimensions are incompatible with the way trucks are loaded and how goods are stored in warehouses. “So in spite of its tremendous success on the water, transport by containers remains primarily confined to the maritime sector and in an almost forced partnership with rail,” explain Ballot, Montreuil, and Russell Meller, former director of CELDi, in a new book, The Physical Internet: The Network of Logistics Networks.
A better way of getting from here to there What it would take to create the Physical Internet The problems
Products and shipping containers are not standard or modular.
1106
Transportation assets are fragmented and uncoordinated.
Inefcient use of storage and transfer centers.
Sub-optimal delivery routes.
sciencemag.org SCIENCE
6 JUNE 2014 • VOL 344 ISSUE 6188
Published by AAAS
PHOTO: © HORST OSSINGER/DPA/CORBIS ILLUSTRATION: C. SMITH/SCIENCE
SPECIAL SECTION
remaking a mature industry— that the pioneers of the digital Internet didn’t have to worry about. “Conceptually, the notion of embracing the standardization and interchangeability that’s part of the Web has real appeal,” says Ernest Nichols, director of the FedEx Center for Supply Chain Management at the University of Memphis in Tennessee. “But remember, you didn’t have to replace your old Internet. Everybody likes the idea of standardization, as long as you agree to use my standards.” WHAT WOULD it take to move
the world to adopt the needed standards? One step is to show industry that the Physical Internet is no utopian vision that is 35 years away—but something practical that could have an immediate impact. “If you talk to them about 2030 or 2050 Packages head out to the runway at they will stop listening,” Ballot says. a UPS freight center in Germany. “So I try to be more pragmatic.” A few years ago, Ballot and Montreuil ran a Physical Internet Europe’s Modulushca project hopes to simulation, using real logistical data change that by developing prototypes for provided by French retailers Carrefour modular, land-based containers. Having and Casino. It showed that the envisioned a small number of such containers would reforms could significantly increase make it much easier for goods to be rolled profits, lower prices, reduce pollution, and out of factories and onto trucks and trains. lead to less turnover among drivers. Now, Some researchers even envision containers the pair is taking the next step, conducting being shuttled right to a customer’s door— a pilot research project in southern France where they would be emptied, picked up, in which the two companies are using a and reintegrated into the supply chain. shared distribution and scheduling system The container and pooling challenges, to both receive supplies and ship products. however, highlight one huge challenge Such proof-of-concept efforts should facing proponents of the Physical Internet— help persuade companies that the Physical
Internet would allow them to compete on their core strengths, rather than get diverted by logistical issues. “P&G makes consumer goods, and that is what we should be concentrating on,” says the company’s Barbarino—not on how to get those goods to retailers and customers. Experts expect regulators will also play a major role in developing any standards, because the logistics industry is heavily regulated. But many would prefer that governments pave the way for change by funding research and acting as a referee —enforcing rules jointly developed by private-public partnerships—rather than simply decreeing change. Companies “are doing the best they can, considering the organization they have to work with,” Ballot says. “When people start talking about shipping air and running empty trucks, the implicit message to the company is, ‘You’re a dummy.’ Of course they would like to put more in the truck. But right now they just can’t.” Auburn’s Gue says he hopes to see evidence of the Physical Internet “in my lifetime—and I’m 50.” He doesn’t think the current logistics industry will disappear, but he does foresee major disruptions— just as the Internet is remaking the communications and publishing industries. And Montreuil says it’s worth recalling the early history of the Web, which is marking just its 25th anniversary this year. “Remember, at one time the metaphor for the digital Internet was building an information superhighway,” he says. “People said, ‘If we can do it for cars, why can’t we do it for bits and bytes?’ ” He and other Physical Internet advocates are trying to reverse engineer the analogy, with the goal of making logistics as sexy as the Web. ■
The solutions
Products and shipping containers become standardized and modular.
Transportation assets are pooled and interconnected.
Warehouse assets get more efciently utilized …
SCIENCE sciencemag.org
… leading to a more logical supply chain.
6 JUNE 2014 • VOL 344 ISSUE 6188
Published by AAAS
1107
