The Logistics Internet

Whenever a new technology, machine or tool emerges on the scene, it needs to be given a name. Often, that name is derived from something older, more familiar, and which is reckoned to share some similarities with the new-fangled thing. For example, when engines were invented that could provide people with transport that did not require horses, that mode of transport was given the name of ‘horseless carriage’, later abbreviated to ‘car’. Not all names catch on like ‘car’ did. Failures include ‘Iron Horse’ (train) ‘Picture Radio’ (television) and ‘Aero-Motive Engine’ (airplane).
The concept of an interconnected network of computers also required a name. Before we settled on the now-familiar Internet, names like ‘I-Way’, ‘Infobahn’ and ‘Information Superhighway’ were suggested. Again, we see something familiar being used to describe something new, in this case interconnected highway systems that enabled cars to travel coast to coast without encountering a stop light serving as a metaphor for information transmitted over a distributed network of information/communication technologies.
Now, in the 21st century, we are developing technologies that could enable us to expand the Internet to become something that could substantially improve logistics. A ‘Logistics Internet’, if you will.
So, what is logistics and why does the Internet need to expand to include it?
Logistics refers to “the flow of things between point of origin and point of consumption in order to meet requirements of customers or corporations”. In other words, it encompasses the many ways in which products and services are stored and eventually delivered to customers.
The reason why logistics needs to become part of an expanded Internet is because such a move may help eradicate many deficiencies within current logistics operations that are resulting in unnecessary cost and waste.
The deficiencies of current logistics came about because of the strength and limitations of 19th and 20th century technologies. As pointed out by Jeremy Rifkin in his book ‘Zero Marginal Cost Society’, the first industrial revolution favoured factories and logistics networks clustered in and around major cities, relying on rail links to “bring in energy and materials from suppliers upstream and deliver finished products to wholesalers and retailers downstream”. Being an employee meant living within walking distance of such a factory, or having access to a commuter train. In the second industrial revolution, nationwide interstate highway systems allowed production to migrate from dense urban centres to the suburbs, with truck transport overtaking rail, and workers often travelling greater distances to and from their place of employment via cars.
As with most 19th and 20th century industrial capitalist practices, businesses favoured internal, top-down, centralised command over logistics as a way of providing private firms with more control over their production, storage, and distribution channels. But that control comes at the cost of lost efficiencies and productivity and increased waste.
Let’s start with inefficiencies. In the United States alone, trailer trucks are on average only sixty percent full when on the road, because, while they often leave their docks fully loaded, after each drop they become less full and often return empty. On a global scale transport is even less efficient, achieving around ten percent efficiency.
Not only that, but the reliance on giant, centralised warehouses and distribution centres serving large terrains means products often cannot be transported by the fastest routes but must take more circuitous routes instead.
Those warehouses and distribution centres create yet more waste and inefficiency. The seasonal nature of the product lines means there are periods of the year in which warehouses are under-used, while at other times they are overextended. Products are often stored in warehouses for long periods of time, and at high cost (US business inventories were estimated at $1.6 trillion in 2013). In the case of time-sensitive products like food, many such products go unsold because logistical inefficiencies mean they cannot be transported in a timely manner.
Most of these inefficiencies are the result of having a logistics system dominated by hundreds of private carriers and a dearth of common standards and protocols that would encourage greater collaboration and more efficient sharing of logistics resources.
Not surprisingly, then, there are those who are looking to the Internet to rethink how we do logistics on a national and global scale. As mentioned previously, interstate highways originally provided the metaphor of an ‘information superhighway, conceptualised as an interconnected communications system that allowed information to travel without effort across a distributed network. As Rifkin explained, “a packet of information transmitted over the Internet contains information on both its identity and routing to its destination. The data packet is structured independently from the equipment, allowing the packet to be processed through different systems and networks, including copper wires, fibre-optic wires, routers, local-area networks, wide-area networks, etc”.
Similarly, it is hoped that, by using the latest IT and Internet technology applications, firms could collaborate with each other and share logistical resources in ways that would increase efficiencies and productivity and lower costs. The idea is to create a ‘logistics Internet’ in which warehouses and distribution centres are connected in “an open supply web managed by sophisticated analytics and algorithms” that would enable companies to “store items and route shipments in the most efficient manner at any given time”.
So what technologies are making the development of a logistics Internet possible? Amazon is a good company to examine for clues, as it is as much a logistics company as a virtual retailer. In an effort to reduce inefficient manual labour, the company has added robots, automated storage systems and intelligent automated guided vehicles. As has been pointed out in many a news report recently, driverless vehicles will be operational in the future. As they could potentially operate at near-zero marginal labour cost, there is obviously plenty of opportunity to make savings in the cost of moving products around.
It’s not exclusively about robots, but also our increasing ability to collect, share, and analyse data, made possible by ever cheaper, convenient and capable networked sensors. UPS has sensors embedded in their vehicles that monitor individual parts, thereby flagging up potential malfunctions before they result in costly breakdowns. There are sensors that enable households to monitor moment-to-moment electricity usage by various domestic appliances, providing information that can help households reduce wasteful consumption. There are sensors that keep track of availability to raw resources and current inventories in warehouses, and which monitor production lines for any signs of inefficiency.
We are developing the technological capability to automate much of the “planning, execution, and control of the movement of goods” that defines logistics, as well as increasing our ability to monitor the logistics value chain for signs of avoidable waste. But what is really needed is universal standards and protocols. Benoit Montrueil of the University Research Centre on Enterprise Networks, Logistics and Transport in Montreal, Canada, explained how the various components (sensors, robots, data-mining algorithms etc) need to be connected into a single, transparent, open system. Physical products should ideally be embedded in standardised modular containers and equipped with non-proprietary sensors for identification and sorting, and everything along the supply chain should operate by the same standard technical protocols.
The result of all this modularisation, standardisation and intelligent monitoring would be “an open supply web managed by sophisticated analytics and algorithms” that companies could use to “store items and route shipments in the most efficient manner possible at any given moment in time”.
This would enable conventional logistics, which relies on point-to-point and hub-and-spoke transport, to give way to a more efficient distributed, multi-segment system. Whereas today one driver may be responsible for taking a load from the production centre to drop off before heading somewhere else to pick up a shipment for delivery on the homeward journey, in the distributed system one driver might deliver a shipment to a nearby hub where they would pick up another trailer and head home. Meanwhile, the first trailer they brought to the hub would be collected by a second driver who would deliver it to the next truck port, airport or whatever hub is next in line. All the while, Internet tracking of the containers would work to ensure minimal delays in handover at every distribution point. According to Montreuil, a logistics system based on distributed, laterally-scaled open-systems architecture and Commons-style management could deliver goods to their destinations in half the time taken by less efficient point-to-point systems.
The Logistics Internet is just one aspect of a future integrated global network that increases efficiencies in not just value supply chains and the gathering and sharing of information, but in virtually every aspect of economic and social life. This is a future in which every node in the network- be it a business, a home, a vehicle, an item of inventory- will be uploading data to advanced analytics that constantly monitor local, national and global activity for ways to increase efficiency, reduce waste, and lower the marginal cost of producing and delivering goods and services. In so doing, the old scarcity-based market system will in time be superseded by a laterally-scaled, collaborative, commons-management network designed to bring sustainable abundance to the people of the world.

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