Introducing the Physical Internet, the logistics network of the future

The Physical Internet is associated with a paradigm shift in freight transport. The reorganization of transport will lead to a system of interconnected logistic networks where users and service providers will collaborate, share assets, transport routes and nodes to reach a higher efficiency. This concept will be developed step by step. It is a great opportunity for companies to organize their own logistics according to this new principle, as it ensures greater transparency and efficiency within the own company logistics network including better connectivity to customers and suppliers. In parallel, these corporate logistics networks will start to seamlessly interconnect to other logistics networks accessing or providing services, pooling assets, resources and flows creating systems of logistics networks. Like the internet, it then spans the world creating the Physical Internet.

Posted on 09.17.2020

Dr. Fernando Liesa is the Secretary General at ALICE. The European Technology Platform is set-up to develop a comprehensive strategy for research, innovation and market deployment of logistics and supply chain management innovation in Europe.

Physical Internet increase efficiency in goods transport. (Gettyimages)

The Physical Internet is probably the most ambitious concept towards efficiency and sustainability in transport logistics. It stands for a far-reaching reorganization of freight transport and logistics based on the internet. The reason being is that when data is exchanged via the internet, neither the sender nor the recipient is concerned about the path data packets take. Data finds a way without human intervention. This is ensured by both autonomous networks, which are interconnected, and technically standardized protocols.

It transfers the principles of the internet data exchange to goods transport in the real world in terms of automatic transport control. In this comparison, data are boxes, pallets or containers in the Physical Internet. The objective is to make an optimum use of vehicles, assets, and existing infrastructure through open logistics networks and flexible goods routing, making freight transport more efficient for companies but also for society by reducing energy and emissions.

The US company Amazon is already in the process of setting up a logistics infrastructure, capabilities and functionalities that could be similar to the ones envisioned by the Physical Internet. In this context, the business magazine Forbes recently reported on the “Battle for The Physical Internet”. It is key to for Europe to advance and develop these capabilities in an open, competitive, accessible and fair framework.

What do we mean by Physical Internet?

This concept is a further development of already existing approaches to increase efficiency in goods transport: increasing load factors, reducing empty trips, increasing the cargo/units delivered per stop or minimizing idle capacity in warehouses and terminals.

In today's logistics, most companies have their own or dedicated distribution centres and transport services. They use transport routes on their own account which often imply inefficiencies as the ones mentioned above. The Physical Internet’s objective is to open up the existing infrastructure, assets and services to make them more usable and exploitable for all logistics companies in a seamless and efficient way as well as to develop models for cargo owners and shippers to pool their goods in the network assets, similarly that they do in a container ship.

Existing transshipment and distribution centres, roads, railways, waterways and airways services are now also digitally connected to each other. Logistics companies register transports needs from A to B through their service provider, which then automatically access to the best route in the fully networked services infrastructure.

The Physical Internet is as open as the internet: it offers access to everyone, independent of content, goods or people involved. However, there is a minimum level of organization on the internet. Committees such as ISOC, IAB, W3C or DENIC deal with various aspects, while companies and service providers operate the infrastructure. This concept will follow the same principle.

The role of Ports as key enablers

Ports, as key logistics nodes, will play a crucial role in this paradigm as major consolidation and deconsolidation centers, aggregating a massive variety of transport and logistics services easily accessible for end users. The challenge is to develop automated, standardised and connected processes and procedures in nodes from the logistics network (the Physical Internet). ALICE’s Roadmap, developed by the H2020 SENSE project, envisions different milestones or conversion of logistics nodes in smart components of the Physical Internet.


The Physical Internet is as open as the internet: it offers access to everyone, independent of content, goods or people involved. (Gettyimages)

As a first step, nodes will evolve to increase their digitalization, gathering better information about inbound and outbound flows and leveraging opportunities for flows consolidation. They will also open new intermodal services and increase asset utilization, transport performance and infrastructure throughput.

Ports may act as trustees for the whole port ecosystem, facilitating collaboration to increase inbound/outbound transport load factors, decrease lead times, waiting times, manage traffic and reduce congestion around hubs supporting synchromodal services. Ports will become intelligent hubs that manage goods and flows in an extremely efficient way.

Ports are evolving their already well-developed Port Community Systems (PCS) and will soon provide a full visibility of all services provided by port community members in a digital manner, seamlessly accessible for their customers. Most of them are already creating their own Data Spaces beyond PCS to allow stakeholder interactions, like publishing capabilities and services for easy booking.

Companies and other organizations including port authorities will be interconnected and able to offer and share services and capabilities digitally, so smart transport and operative and transport routing decisions will be taken based on real-time traffic information and forecasting for all modes.

To achieve this, different developments need to be in place:

  • Further standardization: modular boxes fitting with transport load units and containers.
  • Standard processes and procedures for automated material and cargo handling/transhipment.
  • Full visibility, accessibility and usability of node services enabled by information sharing capabilities and connectivity.
  • Business and governance models supporting autonomous interactions and provision of nodal services facilitated by the ports.

Ports will play a crucial role in this paradigm as major consolidation and deconsolidation centers, aggregating a massive variety of transport and logistics services

The need for the Physical Internet

In response to the Paris Agreement, more and more governments, associations and businesses are setting bold climate targets. Europe has the ambition to become the first climate-neutral continent by 2050. This will be achieved with a two-step approach, designed to reduce CO2 emissions by 50%, if not 55%, by no later than 2030.

As things stand today, the deployment of greener and cleaner vehicles, trains, barges, ships and airplanes as well as other technologies for a more efficient transport network will be too slow to deliver on the climate change targets.

The short-term focus, therefore, is on leveraging and finding new opportunities for efficiency gains in freight transport and logistics enabled through collaboration between parties in transport and logistics. The concept of the Physical Internet shows a possible solution for accelerating decarbonisation at an affordable cost.

For years, traffic congestion has become increasingly problematic, as has the factor of empty runs with lorries. In a global logistics network, the transport of goods is organized in such a way that it becomes simpler and both more predictable and economical for companies. The highly complex Last Mile Logistics will be connected to the Physical Internet via interfaces and can follow similar principles.

ALICE, as one of the key players in the introduction of the Physical Internet, strives for net neutrality, meaning the equal treatment of transports and non-discriminatory access to infrastructure. ALICE has included the groundbreaking logistics concept as a strategic goal in their Roadmap 2030-2050 of European Logistics.

The time horizon for the full global network will be extended to the year 2040. Advanced pilot implementations of the Physical Internet concept are well functioning and extended in industry practice by 2030. They will be contributing to at least 30% reduction in congestion, emissions and energy consumption.

Activities performed in the frame of SENSE “Accelerating the Path Towards the Physical Internet”. The SENSE project has received funding from the European Union's Horizon 2020 research and innovation Programme under grant agreement No. 769967.