Logistics Response to the Industry 4.0: the Physical Internet

Open Eng. 2016; 6:511–517

Review Article Open Access

Marinko Maslarić*, Svetlana Nikoličić, and Dejan Mirčetić Logistics Response to the Industry 4.0: the Physical Internet

DOI 10.1515/eng-2016-0073 Received Jun 25, 2016; accepted Aug 01, 2016 1 Introduction

Abstract: Today’s mankind and all human activities are Maybe the key word of this century is digitalization. Dig- constantly changing and evolving in response to changes italization is present in all spheres of human activities. in technology, social and economic environments and cli- When it comes to business activities then digitalization mate. Those changes drive a “new” way of manufacturing is a personification of the concept Industry 4.0. That is, industry. That novelty could be described as the organiza- words such as mechanization, electrification and information of production processes based on technology and de- tization are key words for the first three industrial revolu- vices autonomously communicating with each other along tions respectively, so is digitalization, which includes the the value chain. Decision-makers have to address this nov- use of integrated Cyber-Physical Systems, the key word for elty (usually named as Industry 4.0) and try to develop the fourth industrial revolution or the Industry 4.0. The appropriate information systems, physical facilities, and term Industry 4.0 refers to a further developmental stage different kind of technologies capable of meeting thefu- in the organization and management of the entire value ture needs of economy. As a consequence, there is a need chain process involved in manufacturing industry [1–3]. for new paradigms of the way freight is move, store, real- The Industry 4.0 assumes the formation of global networks ize, and supply through the world (logistics system). One which shall include product and storage facilities in the of the proposed solutions is the Physical Internet, con- form of Cyber-Physical Systems which shall communicate cept of open global logistics system which completely re- independently, generate and control themselves. Thus im- defines current supply chain configuration, business mod- provements in design, production, distribution and ex- els, and value-creation patterns. However, further detailed ploitation shall be achieved. Every change in the produc- research on this topic is much needed. This paper aims to tion concept shall have an impact in the form of trans- provide a balanced review of the variety of views consid- formation of all goods, information and financial flows ered among professionals in the field of Physical Internet which represent the area of logistics. Logistics function with the final aim to identify the biggest challenges (tech- was present in all developing phases of industry and only nological, societal, business paradigm) of proposed new its purpose has changed (from firstly pure operative and logistics paradigm as a practical solution in supporting In- supportive role to the role of strategic tools) as well as dustry 4.0. modes of realization of its activities. Therefore, as industrial concept was under development so logistics concept Keywords: logistics efficiency; digitalization; logistics was also developing with the main characteristic of con- transformation; internet of things stant increase of complexity as the result of increase in requirements of producers for greater efficiency and cus- tomers for higher level of service. The current state of over- all logistics efficiency is not ideal, and a new concept for logistics organization that challenges current and future industrial practice is needed. The solution could be in a new *Corresponding Author: Marinko Maslarić: University of Novi operational, organizational and management paradigm – Sad, Faculty of Technical Sciences, Trg Dositeja Obradovica 6, 21000 Novi Sad, Serbia; Email: [email protected] the Physical Internet. This concept was first introduced by Svetlana Nikoličić: University of Novi Sad, Faculty of Technical Professor Benoit Montreuil of Laval University of Quebec, Sciences, Trg Dositeja Obradovica 6, 21000 Novi Sad, Serbia; Email: Canada, and central idea is as follows [4, 5]: why not or- [email protected] ganize logistics activities in an open and shared network Dejan Mirčetić: University of Novi Sad, Faculty of Technical Sci- rather than in dedicated and specialized networks in a new ences, Trg Dositeja Obradovica 6, 21000 Novi Sad, Serbia; Email: era of interconnected logistics? This paper aims to pro- [email protected]

© 2016 M. Maslarić et al., published by De Gruyter Open. This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivs 3.0 License. 512 Ë M. Maslarić et al. vide a balanced review of the variety of views considered big data and cloud computing. It can be said that the In- among professionals in the field of Physical Internet with dustry 4.0 fits in both IoT and IoS, that is, that it repre- the final aim to identify the biggest challenges (technolog- sents their application both in production and service in- ical, societal, business paradigm) of proposed new logis- dustry as well as that it connects with other smart tech- tics paradigm as a practical solution in supporting Indus- nologies. Other terms which are often cited in the literature try 4.0. concerned with Industry 4.0 are [6]: • Industrial Internet, which refers that industrial and the internet revolution come together. The main dif- 2 Industry 4.0 ference between Industrial Internet and Industry 4.0 is that Industrial Internet goes beyond manufactur- 2.1 Definition of the term Industry 4.0 ing to cover the wider adoption of the web into other forms of activity. The term “Industry 4.0” was initially coined by the Ger- • Cyber-Physical Systems (CPS), which represent on- man government, and it describes the organization of pro- line networks of social machines that are organized duction processes based on technology and devices au- in a similar way to social networks (they link IT with tonomously communicating with each other along the mechanical and electronic components that then value chain [6]. The concept was derived from increase communicate with each other via network). RFID in production computerization where physical structures represents early form of this technology, as is stated are integrated into information networks and as such it in- in [1]. cludes both horizontal and vertical integration of a large • Smart Factory, term that exemplify some of the tech- number of systems at all levels which lead to “end-to- nical innovations such as integration of ICT in the end” solution (the solution with as less as possible inter- production process and how these could play out in mediary layers). Vertical integration includes connection practice. and networking of production systems with business pro- Hence, it could be concluded, like in [1], that all of those cesses of all connected participants, and horizontal inte- concepts together make an environment for Industry 4.0 gration assumes connection of information systems in dif- (Figure 1). ferent phases of production whether within one company or among different companies in a supply chain. These developments make the distinction between industry and 2.2 The characteristics of the Industry 4.0 services less relevant as digital technologies are connected with industrial products and services forming hybrid prod- As it is stated in [6] the main features of Industry 4.0 are: ucts which are neither goods nor services exclusively [6]. interoperability (CPS allow humans and smart factories The Industry 4.0 is not the only term that appears in the to connect and communicate with each other through IoT context of increased digitalization, first of all production one, then come the rest of business processes. In [1] it is stated that in the United States and the English-speaking world more generally, some authors also use the terms such as the ‘Internet of Things’, the ‘Internet of Every- thing’, the ‘Internet of Service’, or the ‘Industrial Internet’. They further state that all of these terms and concepts have in common the recognition that traditional manufacturing and production methods are in the throes of a digital transformation. According to [6] the Internet of Things (IoT) refers to information technology (IT) systems connected to all sub-systems, processes, internal and exter- nal objects, supplier and customer networks that communicate and cooperate with each other and with humans. The same authors assume the Internet of Services (IoS) as internal and cross-organizational services are offered and utilized by participants in the value chain and driven by Figure 1: The Industry 4.0 environment, adapted from [1]. Logistics Response to the Industry 4.0: the Physical Internet Ë 513 and IoS); virtualization (capability to connect physical sys- orities for the EU with a view to foster growth, competive- tems with virtual models and simulations); decentraliza- ness, investments and jobs. On that way, use of digital tion (decision making and management are performed in- technologies is therefore a priority task and a cross-cutting dependently and parallel in separate subsystems); real- policy covering all sectors of the economy [8]. time capability (adjustment with requirements in the real In logistics sector, vast amount of data and IT is avail- time is the key requirement for any kind of communica- able that could improve the use of existing resources. It tion, decision making and management of systems in the has been already shown in papers [9–12] that some of the real world); service orientation; modularity (systems of the benefits that could be achieved through the IT applica- Industry 4.0 should be maximally modular and capable tion in logistics are improved analyzing, communicating, for quick changes on the basis of automatic detection of designing, understanding, and optimizing. Digitalization a real situation). In the concept of the Industry 4.0 there of logistics processes leads to “logistics transformation” are significant changes in relation to traditional technolo- or to creation of “smart logistics” solutions. Impact and gies in the following elements: product (it comes to prod- the relationship between digitalization and logistics pro- uct personalization, local production, increase in flexibil- cesses is explained briefly below. Namely, the final result ity with low prices and use of additional technologies); the (product) of logistics system is a logistics service. In tra- process (the concept of networked production and forma- ditional logistics systems, basic parameters according to tion of clusters which lead to reduction of barriers regard- which logistics service is selected (from the aspect of end ing knowledge and investments and increase in availabil- users) are time and price (costs) [13]. However, due to all ity to both small and medium companies); business mod- present globalization, increased competition pressure in els (fragmentation of value chain occurs which makes pos- the context of environmental protection and energetic ef- sible for small players to become “global” players); compe- ficiency, and initiative for new form of manufacturing in- tition (wider borders of the system in every respect); skills dustry based on exponential development of modern IT, (essential is interdisciplinary view); globalization (decen- the end user does not pay attention any more to time and tralization occurs as well as increased flexibility in the cost only but also to sustainability of a logistics service sense of alternatives to the global presence). The main pre- (from environmental, economic and social aspect). There- conditions required for the successful implementation of fore, transformation of logistics includes changing of con- Industry 4.0 is given by [6], and they are: standardization text of a “product” of logistics industry from the aspect of (of systems, platforms, protocols, connections, etc.), work end users (Figure 2). Change of “product” context has im- organization; availability of products, new business mod- pact on changes of the way of realization of logistics pro- els, know-how protections, availability of skilled workers, cesses which are most frequently based on application of research, professional development, legal framework. contemporary IT (digitalization). On the basis of above stated it is inevitable that in the following period logistics transformation shall occur in the 3 Logistics transformation context of changing the way of realization of logistics processes in order to respond to requirements put forward to the logistics system by the new production context – the One of the main prerequisite for Industry 4.0 is digital transformation. Digitalization has been a major driver of changes throughout the value chain [6], and companies need to drive the digital transformation of their business to succeed in the new environment. According to [7], the five pillars will be critical for this transformation: companies’ ability to build digital capabilities; companies needs to enable collaboration in the ecosystem; managing data as a valuable business asset in the aim to secure crucial control points; companies needs to manage cyber security; and companies needs to implement a two-speed systems/data architecture to differentiate quick-release cycles from mission-critical applications with longer turnaround Figure 2: Transformation of context of logistics output (service), times [7]. The digital transformation and creation of con- developed by authors. nected digital single market is also one of the two first pri- 514 Ë M. Maslarić et al.

Industry 4.0. One of the proposals for direction of logistics (physical interconnectivity), and in protocols and proce- transformation is Physical Internet as a completely new dures (operative interconnectivity). The PI is to transform paradigm of planning, organizing, achieving and manag- logistics towards seamless and efficient universal inter- ing logistics processes. connection all logistics networks, enabling users to think and act in terms of open global mobility webs and supply webs [17]. 4 The Physical Internet Physical interconnectivity includes forming of appropriate modular units (π-containers), which shall have the characteristic of “smart” ones and which shall en- 4.1 Definition of the term Physical Internet able full usage of load and storage capacities. These load units shall optimally move across logistics networks due The concept of the Physical Internet (PI), introduced to their capability to communicate with each other and first by Professor Benoit Montreuil of Laval University of with resources for transfer located in the logistics hubs Quebec (Canada), is inspired on idea of transferring of (π-hubs), which is the result of digital interconnectivity. metaphor of the (digital) Internet in the way we move, Therefore, digital interconnectivity shall enable encapsu- store, handle, realize, supply and use physical objects all lation of goods in world standard „smart“ green modu- around the world. After professor Montreuil, this idea was lar containers with possibilities to communicate between accepted also by researchers from other institutions world- each other and with other elements in PI using all ad- wide (UQAM University Montreal, MINES Paris Tech, Geor- vantage of IoT (Figure 3). Operative interconnectivity in- ... gia Tech Atlanta, Virginia Tech, ), founding the group of cludes application of certain protocols and procedures for more than 20 members and whose work is available pub- defining domains and priorities when using information in licly on the web page http://physicalinternetinitiative.org. planning, realization and management of modular units The essence of the concept of PI, made as the result of load flows. that the current way physical objects are moved, handled, Therefore, the PI exploits as best as possible the ca- stored, realized, supplied and used throughout the world pabilities of smart π-containers connected to the Digital is not sustainable economically, environmentally and so- Internet and the World Wide Web, and of their embed- cially [14], is explained in two basic documents: Physi- ded smart objects, where each π-containers has a unique cal Internet Manifesto [15], and Physical Internet Princi- worldwide identifier and smart tag as an element ofthe ples [16]. IoT [18]. The PI will try to use as best as possible the IoT to What, in fact, PI represents is the most easily and enable the ubiquitous connectivity of its π-containers and shortly explained with the help of [14], where it is said other π-systems (such as π-movers, π-hubs, etc.). How- that PI includes interconnected logistics in the sense of ever, the PI is a complex vision which assumes and in- forming an efficient, sustainable, resistant, adaptable and volves the great technological changes. Because of that, flexible open global logistics web based on physical, digi- paper [18] stated importance of understanding that the tal and operational interconnectivity through world stan- widespread development and deployment of this concept dard encapsulation, interfaces and protocols. The main will not be achieved overnight in a Big-Bang logic, but PI building blocks are new modular load units (named π-containers), new supply chain interfaces: logistics centers (named π-nodes, π-hubs, π-stores, π-distribution centers) equipped with new handling and storage technologies (named π-movers and π-conveyors), and cooperative logistics networks. The general characteristics of all of those elements are “openness” (which means free of use by everyone). The key word of the PI concept is universal interconnectivity, which should ensure full cooperation among all participants in a supply chain, full compatibility of all ap- plied technical-technological resources and solutions and optimal realization of all operations. The key for establish- ing the universal interconnectivity is in the IT (digital inter- Figure 3: Universal digital and physical interconnectivity in PI, connectivity), then in modular load units and interfaces adapted from [14]. Logistics Response to the Industry 4.0: the Physical Internet Ë 515 rather in an ongoing logic of cohabitation and progressive issues to limit transaction costs by means of enhanced and deployment. standardized IT and planning approaches. The PI has some advantages, and requires answers and solutions for different topics. As the main advantage 4.2 A short review of theoretical and of the proposed concept of PI could be creation and exis- practical approaches, and main tence of an comprehensive framework which enables the challenges great possibilities in connecting current research activities with the PI goals. It means that all logistics project In text bellow a short review of papers and practical ap- could be more effective and efficient in situation thatall proaches to implementation of PI concepts is given. After of them have one main final aim-creating the PI. Hence, that, and according performed review, a main challenge the PI could be a framework for enabling more consistent in further development and implementation of the PI con- approaches for solving logistics issues. The biggest chal- cepts is identified. lenge of the PI concept could be awareness of “transfer of In order to collect articles published in conference pro- metaphor of Digital Internet”. Every characteristic of the PI ceedings, journals and respected books and dissertation needs to be further researched [18], and those researches on the topic of the PI the short literature review has been could be divided on three levels: conducted. After performing searching activities, about 40 • Physical level – due to the reason that major changes papers were identified and for most of them full text ver- are expected to be in physical infrastructure, solving sion was collected. The biggest part of collected papers is this kind of problem is first challenge. One of the is- published in proceedings and monographs regard several sues which have to be solved is the problem of sizing conferences. Only several papers are published in peer- and designing elements of physical infrastructures: reviewed journals which can be explained by novelty of π-containers, π-movers, π-nodes. the PI concepts. The main topics explored in identified pa- • Information level – the main challenge is how to pers are connected with the main building blocks of the PI make physical object smart at most efficient way. Fu- concepts: π-containers, π-hubs and logistics web. The key ture research should be focused on the strategic role enabler of the PI - π-containers is research topic in papers of communications and information technology and such as [2, 18, 19], and [20]. In all of those papers the key its alignment with new business models. challenges regards π-containers are: sizing, design (from • Business level – the PI redefines supply chain con- physical and information aspects) and problem of loading. figuration, business models, and value-creation pat- The work of defining the precise sizes is to be of utmost terns, so the first step will be solving the problem importance [2]. Next key research issue is π-hubs, which is with creations of new business models. Also, one of explored in detail in papers such as [21–24]. Logistics web the questions could be how to measure performance as an interconnected open logistics network is researched of proposed new business models for the PI? in detail in papers such as [17, 25], and [26]. Generally, all of those papers explore how supply chain might work in a Probably the first challenge will be the final solu- Physical Internet with standardized containers and a shar- tion for standard size and design of π-containers, because ing of trailers and other resources across a network of fa- there are a lot misalignments with the current system cilities. The implementation of the PI concept can’t hap- of load units such as pallets and ISO containers. What pen over the night. As it have already stated in [18], there could be problematic is current logic used for defining π- needs to be a smooth gradual transition starting with more containers. In analysis performed in reviewed papers, the strategic decision and planning phases, then moving to- starting position for defining standard size of π-containers ward more intensive and transformative phases. The PI is size of items (products). Maybe, the more logical solu- can constitute itself progressively through the multi-level tion will be to start from some bigger transport unit, such certification of: protocols, containers, handling and stor- as ISO container or trailer? age technologies, distribution centers and hubs, information systems, urban zones and regions, and inter-country borders [18]. From more practical point of view, project 5 Conclusion MODULUSHA works on development a conceptual model for interconnected logistics. Key ideas will be the integra- The mission of this paper is initiation of wider research tion of the ISO modular logistics units into existing han- engagement on topic of the PI and its connection to the dling processes. In addition, this project addresses several 516 Ë M. Maslarić et al. concept of Industry 4.0. 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