Logistics Meets the Internet of Things

The holiday season makes us conscious of the growing load on the logistical systems from the boom in Internet retailing. Free shipping both ways has spread from Zappos to Amazon and nearly every other retailer on the web this year. I don’t care that the cost is built into pricing — I just like it. Things I’ve been ordering — basically, that means all my Christmas shopping — have shipped from vendors faster than ever. Internet stores and logistics partners email me notifications about shipping and delivery. At a click, tracking systems tell me where every shipment is, and when it arrives and leaves each location. I can even change destinations or delivery dates in transit. Not only that, efficient reverse logistics systems make returns a matter of slapping on a label and dropping a package off at UPS or the Post Office — or getting it picked up for a few extra bucks. Last-mile delivery is efficiently switched from one logistics company to another to optimize time and cost. Seeing the connectivity and standard protocols required to make this happen, people are beginning to think of all this motion as a Physical Internet.

Call it the Physical Internet?

 

The holiday season makes us conscious of the growing load on the logistical systems from the boom in Internet retailing. Free shipping both ways has spread from Zappos to Amazon and nearly every other retailer on the web this year. I don’t care that the cost is built into pricing — I just like it. Things I’ve been ordering — basically, that means all my Christmas shopping — have shipped from vendors faster than ever. Internet stores and logistics partners email me notifications about shipping and delivery. At a click, tracking systems tell me where every shipment is, and when it arrives and leaves each location. I can even change destinations or delivery dates in transit. Not only that, efficient reverse logistics systems make returns a matter of slapping on a label and dropping a package off at UPS or the Post Office — or getting it picked up for a few extra bucks. Last-mile delivery is efficiently switched from one logistics company to another to optimize time and cost. Seeing the connectivity and standard protocols required to make this happen, people are beginning to think of all this motion as a Physical Internet.

 

And as more goods move faster than ever before, what will 2025 look like? The newest U.S. Roadmap for Material Handling & Logistics that will be published in early 2014 is being developed by a partnership of supply chain industry, association, and publication leaders. This has a lot to say about the so-called Physical Internet (PI). Is the PI just a rebranded next new thing? Besides its buzzword quality, a Physical Internet may be a useful metaphor for the total network system of getting things from raw material source through every stop on the way to the end customer, through reverse loops, and even to recycling at the end of a product’s useful life.

 

The PI, as defined in the Roadmap, is an open global system where companies’ operations and supply chain systems connect with logistics partners’ scheduling and tracking systems in the cloud. It encompasses the physical conveyances that move objects from one place to another. The smart machines, products, and packaging units of so-called Internet of Things (IOT) communicate with open information systems for total global visibility in a supply chain network. The Roadmap authors look at the physical, digital, and operational connections that a true PI would require.

 

Developing something akin to the PI could produce some remarkable results. Recent research from the National Science Foundation (NSF) says that if 25% of the U.S. supply chain would use Physical Internet thinking in developing its capabilities, the result would be $100B more profit annually, 30% less greenhouse gas emissions, 75% less trucker turnover, and lower consumer prices. A European-Canadian study suggests that Physical Internet-enabled interconnected logistics of fast moving consumer goods could cut logistics’ costs by 30% and related greenhouse gas emissions by 60%.

 

The report’s contributors and authors came up with a number of ways to consider the PI in preparing for the 2025 MH&L landscape. Just two of the solutions worth thinking about are standardization and interconnectivity.

 

Standardization

 

Standardized equipment, interfaces, product/package unit characteristics, and processes, all leveraged by new technologies for handling, storage, and transportation would open up many opportunities for increased efficiency.

 

Smart, standardized cargo containers, pallets, and packages could be designed to optimize handling and transport. Already used in some supply chains, they would include several characteristics and opportunities:

 

    • Smart tags and unique identification would be attached to every item in storage or movement.

 

    • The smart tags would be connected with universal open tracking and communication systems.

 

    • Smart tags open up the possibility of self or remote control and routing.

 

    • Smart tagged products would talk to smart containers to ensure accurate routing, any required conditions like refrigeration, and integrity.

 

 

With standardized modular package and container sizes, loading would be simpler and more efficient. Algorithms would plan loading patterns to leave the least empty space in cargo carriers and warehouses. To make material flow even more efficient, product design goals would include logistics optimization: products designed with container fit in mind.

 

Connectivity

 

Connecting things, carriers, and logistics IT systems have digital, physical, and operational implications.

 

 

Digital

 

The live tracking in the PI would include measuring performance to optimize the entire system. With live tracking openly available, fact-based decision-making in individual companies, supply chains, and industry groups would stimulate continuous improvement. Any worldwide open information standards, however, would have to provide confidentiality of the data owned by individual partners.

 

Those standard smart containers and carriers, communicating with open tracking systems, would give supply chain partners the current location and operational status of all raw materials, parts, and products throughout their value streams.

 

Performance measurement of key indicators such as speed, service level, reliability, safety, and security would provide manufacturers with the ability to evaluate suppliers and processes to develop the strongest supply network possible. In the aggregate, it would provide the industry with information on system-wide problems both digital and physical.

 

Physical

 

Inside warehouses, cross-docking facilities, and manufacturing plants, material handling equipment establishes physical connections with goods on the move. Equipment and systems like sorters and conveyers handling the new standardized containers would have fewer functional requirements. With simplified tasks, they could be more highly automated, which would improve a facility’s throughput, capacity utilization, and storage density, at a lower cost.

 

Operational

 

The common data protocols and seamless interfaces across standardized smart containers, facilities, and systems should enable smoother and more efficient logistics processes. Basic operations like load breaking, transshipment, pooling, and modal transfer should be faster and cost less.

 

Missing pieces

 

The Roadmap gives manufacturers and their supply chain partners a lot to think about. Oddly though, its authors did not tackle another facet of our Physical Internet: the physical connections established by our crumbling infrastructure. In the U.S., roads, bridges, railbeds and tracks, port facilities, and air traffic control IT systems are scandalously short of capacity, out of date, and ready to fail. No matter how visionary industry leaders are about total connectivity through the cloud, smart containers, and delivery drones, building a robust Physical Internet will require much better highways, skyways, and waterways.

 

Karen Wilhelm has worked in the manufacturing industry for 25 years, and blogs at Lean Reflections, which has been named as one of the top ten lean blogs on the web.

 

    December 30, 2013

    Some opinions expressed in this article may be those of a contributing author and not necessarily Gray.

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