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The Application of Physical Internet in Saudi Arabia: Towards a Logistic Hub in 2030

As a way to diversify its non-oil economy, Saudi Arabia launched a prospective initiative called Vision 2030 to boost its ability as the most prominent middle eastern logistics hub. Given its strategic geographic position at the crossroads of important international trade routes, among three continents Asia, Europe and Africa, Saudi Arabia has predominant logistical access to the Arabian Peninsula and East Africa, as well as the Asia-Europe trade route. Thanks to the existing infrastructure and all mechanisms already in place in Saudi Arabia, we firmly believe that the Physical Internet presents the true empowerment to these mechanisms by offering improvements in delivery time, costs and environmental impacts.


Introduction
The economic program, Vision 2030, launched by the Saudi government in April 2016, aims to lift the country out of its historical dependence on oil and diversify its economy. This program is based in particular on a transition from the growth relay to the private sector and non-oil activities (Moser et al., 2015).
Crown Prince Mohammad Bin Salman drives Saudi Arabia's Vision for the future, which is an ambitious blueprint expressing the long-term goals of the country. The plan, Saudi Vision 2030, is structured around 12 operational programs (Moshashai et al., 2018) The 8th program, called the National Industrial Development and Logistics Program, is the one focused on logistics, which could benefit the most from the essential characteristics of the Physical Internet. Its objective is to develop the industrial potential of Saudi Arabia by encouraging the localization of manufacturing production in the country. Thus, the Kingdom would eventually become a major logistics hub between three continents. The development of industrial zones goes through the MODON (Saudi Industrial Property Authority), which currently manages 34 industrial cities and plans the development of 5 additional cities over the next five years.
In addition, Saudi Arabia is applying several mechanisms that proved to be successful in making a better logistics network, notably in customs paperwork, making any customs operation faster than ever before.
For example, the Saudi government has established four new economic cities, the largest of which is the King Abdullah Economic City (KAEC). It includes the largest port in the Red Sea region (Moser et al., 2015). To accompany this development plan and to be able to face the major challenges of globalization, the State is obliged to remain attentive to innovations. The Physical Internet in Saudi Arabia presented a revolution towards an efficient and sustainable logistics, which aims to significantly improve the economic, environmental and social efficiency and sustainability of the current organization (Alshuwaikhat et al., 2017).
This article attempts to bring the elements of the Physical Internet to the reality of the Saudi logistics sector. It highlights the concept and the research projects carried out on the subject, and looks at an overall presentation as well as a SWOT analysis of the logistics and transport sector in Saudi Arabia. This study aims to present the prospects for developing a Physical Internet Network in the Saudi context.

The Physical Internet
The evolution of current logistical performance must meet contradictory expectations. On the one hand, it has to respect the just-in-time philosophy favored by small and high-frequency shipments. On the other hand, there is the strong desire to improve environmental performance by reducing greenhouse gas emissions.
These goals cannot be achieved without limiting the fragmentation of freight flows. In this sense, increasing collaboration among different supply chains or networks is a way to exploit synergies and jointly improve their logistics performance, including transport activities. However, even though horizontal collaboration and bundling of merchandise flows are well-known concepts, only a few implementations are operational today and there is no evidence of widespread scaling up (Sarraj et al., 2013).
We believe that the definition proposed by  is exhaustive: "The physical internet is a global logistic system taking advantage of the interconnection of supply networks by a standardized set of collaboration protocols, modular containers and intelligent interfaces for increased efficiency and sustainability". The physical internet, which mimics the digital Internet's model, sets itself to follow the Open Systems Interconnection model (OSI). It falls under the OSI model, offering a more vibrant and rigorous presentation through its seven layers. For this reason, the Open Logistics Interconnection (OLI) Model is established for the Physical Internet. The purpose of this model is to specify a general framework for the creation of subsequent consistent standards. The model itself does not define a service, let alone a protocol.

Benchmark Case Studies
The MODULUSHCA Project in the EU Funded by the EU, the MODULUSHCA project (Modular Logistics Units in Shared Co-modal Networks) has not only explored the different methodological and functional components of a physical internet, but also developed and tested its first applications. By organizing different workshops with the experts from their industrial partners, the project members were able to finalize and develop a framework describing how the physical internet enabled the emergence of an interconnected logistics system for everyday consumer goods (FMCG, for Fast-Moving Consumer Goods). They also highlighted the potential barriers and successful parameters of such a system (Sallez et al., 2016).
The MODULUSHCA team has developed modular units for the consumer goods sector. One unit deals more specifically with the locking mechanism, and the other consists of panels. The team also selected and described the digital interconnectivity algorithms among different computer systems, a sensor-sensing approach for the communication of modular logistics units.
The researchers have developed a road map for this interconnected logistics of consumer goods, highlighting the next steps that will lead to the final implementation of this strategy in Europe around 2030 and its 4 The Application of Physical Internet in Saudi Arabia: Towards a Logistic Hub in 2030  Montreuil, et al., 2012) deployment to the entire industrial sector around 2050. The roadmap has been structured around the four essential interconnectivity dimensions of the physical internet: physical, digital, operational and commercial (Pan et al., 2017). An advisory committee composed of experts from 13 industrial and scientific institutions was initiated during the project. The MODULUSHCA project partners thus proposed a long-term vision of fully interconnected logistics networks, based on the progress of physical, digital, operational and commercial interconnectivity.

Mass Distribution in France
The mobility web in the French context is set to facilitate mass distribution through interconnecting several logistic networks, disserved by different third-party logistics (3PLs). As estimated by Ballot et al. (2010), the current logistic networks in France generate waste by the proliferation of untimely transport between production and storage sites, often dedicating to each organization and creating round trips and possible transformations into obsolescence and product waste. The reliance on service providers, which could improve the functioning of logistics, is a partial solution because of the difficulty for an atomized market to find Eric Ballot claims that after one-year experimentation, the following results were obtained (Ballot, 2019): • truck filling rate of up to 90% • average and target savings of around 30% to 50% on transport and storage

Global Synchronization of Logistic Networks between the USA and Canada
A study on routing optimization is carried out by Fazili et al. (2017) for the eastern Canadian region, comparing the efficiency of the conventional logistics systems, the Physical Internet, the hybrid model, and combinations of these systems. The cost performance of each of these logistic systems varies under various traffic and load selection scenarios. In the network featured by a low ratio of packing to the driving costs, the Physical Internet seems to be the superior logistics system followed by a hybrid system and the conventional system (Fazili et al., 2017). In addition, from an environmental point of view, the Physical Internet achieves a substantial reduction in the carbon footprint of the logistics system from driving and reduces truck traffic on the roads (Fazili et al., 2017).
Besides, the Physical Internet allows for the structuring of inter-city trips with PI-transits and PI-Hubs, which are strategically deployed by various service providers at key locations in the proximity to national borders, ports, airports, highway intersections and other major roads of the city. Figure 3 shows the Canadian links, with pi-nodes in red and the American nodes in blue. It presents double nodes at the borders, permitting safe passage between countries. Cargos are conveyed and vehicles do not need to cross borders (Montreuil, 2011).
Eric Ballot claims that after one-year experimentation, the following results were obtained (Ballot, 2019): • 10% reduction in CO2 emissions • record on-time delivery rate (99%) • truck filling rate of up to 90% • average and target savings of around 30% to 50% on transport and storage

Economic Situation in Saudi Arabia
Saudi To become a logistic hub, Saudi Arabia needs to be an investment hub first, and then turn its economy around towards the openness to foreign investments with more focus on its non-oil economy. On the macroeconomic front, Saudi Arabia has been facing a double deficit situation since 2015. The international rating agencies downgraded Saudi Arabia's sovereign rating (Fitch: A+, Moody's: A1), but put it on an outlook list due to its stable fiscal position, high levels of liquidity and large reserves of extractable oils at low cost.
On the banking and financial front, in 2015-2016, Saudi Arabia experienced an episode of liquidity crisis caused by the drop in its oil revenue, the freezing of government spending, significant payment arrears and debt issuance on the market. These measures taken by the authorities to resolve the current situation were expected to end the crisis. Nevertheless, the Saudi banking sector has been well regulated and sufficiently 8 The Application of Physical Internet in Saudi Arabia: Towards a Logistic Hub in 2030 capitalized to cope with this crisis in case that the profitability of the banks might be heavily impacted.
Thus, as the 7th program of Vision 2030, the Strategic Partnerships Program has been developed to deepen the economic partnerships with the countries considered as strategic and potential actors in the success of the scheme. Among these countries, we consider the following countries as major partners: United States, China, Japan, South Korea, Great Britain, France, Germany and Russia.
At the turn of the new millennium, Saudi Arabia also changed its attitude towards foreign investments which were not taken into account until 2004. The total figure reached a peak of 39.456 billion dollars in 2008. These investments are a major contributor to the development of the transport and logistics sectors.
However, they have declined since 2008 as shown in Fig. 4. Saudi Vision 2030 is one of the programs aiming to remediate this trend. Arabia because of the relatively long distances between major cities. Several major international airlines offer services inside and outside the country (Fig. 5-1, 5-2, 5-3).

Transition to PI-Hubs
The PI-Hub, shown in Fig. 4, is an automated cross-dock keeping the same inter-arrival time between incoming and outgoing trucks and the same level of incoming PI-Containers and requests. The characteristics used to describe the cross-dock facility are also the same as the first model (the surface, the distance and the number of incoming and outgoing docks). However, instead of using forklifts, automated loading and  unloading resources (PI-docks) connected to a sorting area (PI-sorters) by PI-conveyors are applied (Chargui et al., 2016).
The average speed adopted for the PI-conveyors is 2.77 m/s (10 km/h). In the PI-cross dock, manual forklifts for storing and retrieving products in the temporary warehouse are replaced by an Automated Storage and Retrieval System (AS/RS), which is connected directly to the sorting area with three storage and retrieval machines. When a truck arrives at an incoming dock, the PI-dock unloads the cargos automatically and the cargos will be moved to the PI-sorters by PI-conveyors. The trucks' orders are served in the PI-Hub.
The required PI-Containers are picked up by the AS/RS system. Then they come through the sorting area (PI-sorters) to the PI-dock through PI-conveyors. If there is no sufficient quantity to serve the trucks' orders, or if there is a truck being unloaded in an incoming PI-dock, then the PI-Containers go directly from that incoming PI-dock to the outgoing PI-dock where the PI-Container is requested (Chargui et al., 2016).

Transition to PI-Containers
The PI-Containers are easy to handle, store, transport, seal, snap to a structure, interlock together, load, unload, build and dismantle (Montreuil et al., 2015). The PI-Containers are efficiency for the following characteristics : • Coming in various modular sizes, from cargo container sizes down to tiny sizes.
• Made of environment-friendly materials, with minimal off-service footprint.
• Minimizing packaging materials requirements through the enabling of fixture-based protection and stabilization of their embedded products.
• Coming in various usage-adapted structural grades.
• Sealable for security purposes.

SWOT Analysis
The SWOT analysis of the main characteristics of the internal and external environments of the Saudi logistics sector, as shown in Table 1, makes it possible to identify multiple assets that have not been sufficiently exploited so far. The result indicates the logistics sector still suffers from several deficiencies that affect it at different levels: economic, technological, environmental, legislative and social. These problems find their way into the foundations of the Physical Internet.
Indeed, the Physical Internet envisages universal interconnectivity that will be concretized by a set of collaboration protocols, allowing all Saudi logistic actors to adjust their service to universal standards. This will have important repercussions on several elements: the improvement of the service quality, the human skills and the working conditions; reinforcement of the maturity of the principals and the transparency on the market; as well as the consolidation of the laws governing the sector. The standardization of the collaboration

Strengths Weaknesses
• A quarter of the world's oil reserves and OPEC's largest producer • Major economic and regional role • Economy in the process of diversification strengthened by the Saudi Vision 2030 program • Solid financial position due to low debt and considerable assets • Robustness of the banking system • High dependence on the hydrocarbon sector, low job creation, and increasing domestic demand for energy • High unemployment rate of nationals • Fragility of governance darkening the business climate • Unstable geopolitical environment Economy dependent on public expenditure

Opportunities Threats
• Saudi Arabia benefits from a strategic geographical position, within a conjuncture point of three continents: Asia, Europe and Africa • The creation of a Public Investment Fund: the new domestic assets under management of the Public Investment Fund are expected to reach 20% of the total portfolio by 2020 • Implementation of a privatization program: BOO (Build, Operate, Own,) and BOT (Build, Operate, Transfer) models will be generalized for infrastructure construction.
• Legislation protecting the interests of principals is distinguished by its fragility • Access to land is one of the main obstacles in the sector • The national economy is characterized by vulnerability to EU, asian and north american countries. • Competition from public logistics structures is tough • Human and financial investments in research and development are very limited protocols will also facilitate effective circulation of physical and moral entities to avoid ravaging the world.
The Physical Internet offers an efficient and resilient open global system that realizes a reliable distribution of encapsulated goods to a multitude of open Pi-Hubs around the world. This system adopts multimodal transfer, removes the detours at warehouses and lowers the transport costs and storage costs. Thus, a significant reduction in logistics costs is expected for the Saudi business market. In all, the homogeneity of intelligent technologies and the application of automation structure on a global scale, proposed by the Physical Internet, presage an optimization of the current logistical costs.

Simulation and Results
We simulate PI-Containers road-deliveries in a Physical Internet environment between several PI-Hubs, which are situated in major cities and industrial compounds, and next to seaports and airports as a hypothesis.
Generally speaking, road delivery system is the easiest to tweak yet they are the least optimized. We run our simulation on AnyLogic with the OpenStreetMap API following the PI-BGP routing algorithm (Gontara et al., 2018) and the PI-enabled mobility web (Hakimi et al., 2012).
We use the following estimates as parameters in our simulation (Wiki, 2015) • Delivery/pick-up per person per day; • Delivery/pick-up per economic activity per week; • Between 300 and 400 freight vehicle trips per 1,000 persons per day; • Between 30 and 50 tonnes per person per year.

Conclusion
In order to gain from the benefits of resource sharing, the Physical Internet must be adopted on a universal scale. Hence, the idea of studying development prospects in an emerging country such as Saudi Arabia will contribute to the global growth of the world in the related fields. The study of the internal and external environments of the Saudi logistics sector has shown that the Physical Internet will be a continuity in ambitions described in the national strategy of Saudi Arabia to enhance its logistics competitiveness.
Our single simulation reported above demonstrates the benefits of using the Physical Internet in Saudi Arabia for significan gains in delivery times through adoptiono of new routing protocols and shipping techniques. Other benefits, ranging from social to environmental levels, are also at hand and need to be measured The Saudi Vision 2030 of its 8th program proposes a constructive idea about the enhancement of its logistics sytem through the creation of the Physical Internet model. Presumably, it will become a competitior of the advanced logistics networks implemented in the European Union and provides the possibility to be integrated into the conceptual framework of the global logistics structure.