Physical Internet

Operating in a fragmented industry with a multitude of players, logistics organizations are, on the one hand, often limited in terms of reach and capability by their partner network; some regions lack the services of certain providers as these would be too costly to support from the network’s distribution center or hub due to great distance or other barriers. On the other hand, logistics organizations in some other regions, especially metropolitan areas, are often supported by many providers offering very similar services, and this adds to urban congestion, inefficient delivery patterns, and low margins in a tightly competitive space.

The solution lies in the physical internet. Hubs and other facilities and pieces of the infrastructure would ideally be agnostic and shared by all players and partnership networks. In underserved regions, this would encourage more competitive logistics service offerings as each provider could use a closer facility, one that did not previously belong in their network. Meanwhile, in urban areas, agnostic hubs and locker stations would allow more experienced and specialized last-mile delivery players to make more efficient and coordinated deliveries by bundling multiple shipments, and this would alleviate last-mile burdens like congestion on middle-mile services.

In 2021, Singapore launched one of the world’s first open-access nationwide parcel locker networks with about 1,000 parcel lockers. The network is carrier-agnostic and will be progressively accessible to all logistics service providers and digital marketplace customers. With most residents able to access a locker within a 5 minutes’ walk of their home, the parcel locker network seeks to improve delivery companies’ fulfillment reliability and productivity. Meanwhile, in the Netherlands, the Goederen Hubs organization recently created a network of 20 logistics facilities around the country focusing on bundling freight flows for urban recipients. One of its newest hubs near Groningen was purposely built just outside the city near the highway and airport to help middle-mile truck shipments avoid city traffic and to provide last-mile delivery providers with easy access to the city.

In some ways, we can already see that steps have been taken towards the physical internet in supply chain transportation. Today, for example, it is not so uncommon for shippers to utilize digital logistics marketplaces and other means to combine several less-than-truckload (LTL) shipment orders from customers, reducing costs and optimizing shipment utilization.

However, the physical internet imagines an even higher level of coordination and synchronization across transportation modes and providers. Modularly sized, yet standardized, containers of shipments would be easily transferrable between airplanes, ships, trains, trucks, cargo bikes, scooters, and hand trucks with minimal effort needed. Like public transit systems, logistics vehicle routing would be calculated to intersect rather than follow siloed paths or territories, generating network benefits as intersections would act as potential shipment transfer points. To illustrate, an urban courier van with a mix of shipments could meet up with an outbound truck passing through the outskirts of a city, and shipments destined for an out-of-region address would be immediately transferred from the courier van to the truck without having to be delivered to a local hub. This would save time and, after the transfer, both vehicles would continue their delivery journeys.

As inter-operational communication between logistics providers is currently lacking, this optimization opportunity of the physical internet has yet to be fully explored by the industry. However, as partnerships and data sharing trends strengthen, we here at DHL anticipate seeing experiments with this use case in a few years.