Layers of Logistics
An attempt as a framework for developing products.
Prologue
There were few concepts that stay with you long after you were first exposed to them. In my undergraduate course of electronics and communication engineering, OSI model was introduced to me. Most of the coursework that I did in my undergraduate was to pass-by but OSI model stayed with me and time to time I refer it to make sense of logistics field in which I operate.
The OSI Model can be seen as a universal language for computer networking. It’s based on the concept of splitting up a communication system into seven abstract layers, each one stacked upon the last.
OSI model registered with me because it provides a way to unpack the complexity of communication between two computers and examine the functionality of layer and how they impact the end protocol that interacts with the user's data.
The infograph and the definition was cited from this very good primer by cloudfare, What is the OSI Model?
Before we dive in , I have already written a post about my approach to logistics. You should read that as well to get a better understanding of my lens.
Digitisation of Supply Chain
All types of applications be it ERP, TMS, marketplaces or visibility software is built on top of the application layer of OSI model. One such protocol in the field of logistics is EDI. From a protocol perspective, the EDI shares the information between the shipper and buyer and helps the people fulfilling the transaction read the relevant data.
This information helps both entities collaborate without too much back and forth and each can customise software according to their needs. This protocol is still the dominant mode how trade takes place in global supply chains The benefit of using EDI is illustrated below. It makes the coordination easy between any entity. They only have to figure out how to send an EDI file.
This is the protocol level and a multiple developments are happening to turn this into an API economy. There are multiple limitation of EDI. API end points with better integration capabilities are similar to bringing cloud computing to mainframe market.
OSI in Logistics
We could break down the information across layers that is required to fulfil a transaction between a shipper(selling goods) and buyer(buying goods).
The OSI models is relevant for logistics as well in supply chains. By breaking down the components involved with logistics into layers, we get to understand the not just the information but the infrastructure as well required to move cargo.
As mentioned in the EDI example, it allows all the entities to co-ordinate on moving the cargo from one point to another by having data about each layer of the moment.
Layers of Logistics
We will start at the top. The layers are synonymous to the function that they define in the OSI model.
Data Sets
Application Layer covers the interoperable data that is required to coordinate with other stakeholders to move cargo from shipper's location to buyers' location.
The way data is shared can be a simple shipping bill or packing list that shipper created while dispatching goods or it can be an API that pushes the relevant information for others to fetch.
Another example is AWB(airway-bill) which is a unique code that every e-commerce shipment gets while moving through the supply chain.
These are typical set of stakeholder that are involved in global supply chains of containerised cargo. The application layer covers the complete data that is required for each stakeholder to participate in moving the goods from shipper to the buyer (consignee).
Cargo operations
Layer 6, Cargo operations captures the set of activities that invovle the packaged goods and how they are handled during the movement.
We can consider the example of electronic shipments and contrast it with cement commodity movement. In electronic goods, each cargo is handled delicately. Multiple equipment are used to not damage the goods on the way, pallet movers or forklifts. While in cement, the cargo can be moved in bags of 50Kgs tightly stuffed into a container.
The handling of commodity when it is getting stuffed into a vessel or container depends on the nature of the commodity and where the operation is taking place. This layer will define the set of activities we need to do to at respective facilities to make it happen.
Connection
Layer 5 is synonymous with the sessions layer. In the sessions layer we capture the data of ports that are open and connected to send and recieve data. Similarly, in logistics, we will be relaying the information of which facilities can be utilised to move a particular shipment.
Conceptually every type of similar operational facility like ports can move containers but are limited by the vessel calls to destination ports. The main customer to the port are not exporters or importers but actual liners(container vessel operators) who decide to birth their vessel at the port or not.
This also comes down to digitising the relationship of business, regulation and connectivity which form the trade norms between different facilities. Such information pivoting to operational facilities will be captured in this layer.
Layer 5 which involves where the operations takes place. This layer define the type of facilities that are required to move the cargo from shipper to buyer.
For e-commerce goods, the facility where the movement originates will be a warehouse where as for the cement cargo it will be the factory. Next, the number of facilities like ports(Gateway Ports), CFS(Container Freight Station), MMLP's(Multi Modal Logistics Parks) are all different types of facilities that play a part where certain steps of operations take place to move the cargo along to the destination.
Packaging
Layer 4 involves packaging. Most goods are moved in a standardised manner through packages. Similar to the transport layer that defines the standards of Data Transmission. I have written about the “Epic story of containerisation” where we cover how this one box changed the way global supply chains surged.
Network
In the Layer 3, we are defining the connections between different physical facilities that are connected. For example, a port is technically a gateway port. But which warehouse are accessible depends on the road connectivity and which rail terminals are connected by the rail to the port.
This defines the route across this network that you would take for a specific movement in a supply chain.
Equipment
In the Layer 2 , we define the equipment that moves cargo between two facilities of the network. Basing on the connectors we chose to move the cargo. The equipment that moves the cargo also changes. If it is road, we chose a truck or trailer. If it it is rail, it becomes a wagon or container. And if it is waterways, it will be a vessel or barge.
Like in the datalink layer this layer defines the format of movement. The format doesn’t change between two facilities of network. The interchange only happens at facilities of the network. This is called multimodal logistics.
Connectors
Finally, we arrive at Layer 1. The physical connectors are the road, rails and waterways that make movement of cargo happen. All layers above it help to you define different facets of movement but none of them are possible without these physical connectors that are underlying requirement of every cargo movement in a supply chain.
The other information that is captured is the factors of these connectors. Is it a 4 Lane expressway or a 2 lane highway. This defines the transmission duration and speed.
Stacking it all together
This layer wise breakdown of a theoretical model is to help build an understanding the nature of data, type of people and relevancy in the overall ecosystem for every intervention we want to make as product developers.
It’s been 7 years since I saw the relevancy of OSI model in my first job as a business development manager for a services IT company working in logistics sector. The layers have been determinant on designing Pipehaul. It also kind of helped me unpack my approach to logistics and kept me intellectually curious for 7 years.
Signing off till the next time,
Vivek V.S, Stacking up layers of life for the time being.