ITOCHU Corporation has signed a memorandum of understanding with four partners that will pave the way for physical internet business. Specifically, these partners are KDDI Corporation, Toyota Industries Corporation, Mitsui Fudosan Co., Ltd., and Mitsubishi Estate Co., Ltd.

Accordingly, the companies agreed for the creation of a Physical Internet business by the end of FY2024. The five cross-industry partners will work together to drive logistics reforms. Moreover, they are aiming to achieve sustainable logistics, including a solution to Japan’s 2024 logistics problem.

Standardization of Logistics

Although logistics is the backbone supporting Japan’s economy, the environment surrounding the logistics industry is becoming more challenging by the day. Specifically, due to factors such as labor shortages amid population decline and tighter overtime regulations for truck drivers.

Moreover, there are issues on high prices of fuel and there are growing efforts to achieve carbon neutrality and high fuel and commodity prices.

If things continue as they are, it may become impossible to transport goods effectively in the future. Thus, to make logistics sustainable in the future, it will be essential for stakeholders to address current issues. Specifically, for shippers, operators, and consumers to implement next-generation solutions. Among them, logistics standardization, such as expanding use of pallets. Also, to improve efficiency through digital transformation (DX) and green transformation (GX).

Role of Physical Internet

There are high hopes for the Physical Internet as a next-generation solution for the future. The Physical Internet is a network that interconnects the warehouses, trucks and other assets of multiple companies across industries. That is, by visualizing cargoes, warehouses, and vehicle availability information through the application of digital technologies.

It is a new joint delivery system that will improve logistics efficiency by finding optimal transportation routes between arrival and departure points. Furthermore, it is an application of the same concept as the (Digital) Internet. Thus, enabling efficient transmission and receipt of information in the form of individual data packets—to logistics.

Japan’s Ministry of Economy, Trade and Industry (METI) has been encouraging various industrial sectors to make use of the Physical Internet concept since 2021. In fact, they have created a roadmap for its actualization in 2022*. Standardizing and streamlining of logistics operations using the Physical Internet can help to reduce the burden placed on logistics operators.

Moreover, the system will also enable more effective use of trucks and other logistics resources. Thus, reducing fuel consumption and contributing to the reduction of greenhouse gas emissions.

New Standards for Logistics

Based on the MOU, the five partner companies will move for specific discussions toward the establishment of a new company. Specifically, with a view to creating actual Physical Internet service business operations by the end of FY2024.

The partners will also work with shippers and logistics carriers to build a logistics transportation network. In the future, in addition to improving the efficiency of logistics operations by utilizing the Physical Internet, ITOCHU and its partners will aim to create a service format. Thus, will become a new standard for logistics, by establishing a system that enables shippers, logistics carriers, and other users to enjoy the cost advantages created by the service.

Going forward, the five companies will work together to drive logistics reforms that transcend conventional industry boundaries, aiming to solve the 2024 problem and actualize sustainable logistics.

25 July 2024