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How do we sustainably shape supply chain networks?

Ecosystems combining data from all supply chain participants can increase flexibility across company borders

June 09 2022Dr. Christian Hort

If not now, when?

Let’s get straight to the point: As an OEM or supplier, can you respond proactively and promptly to disruptions along the supply chain? How do you fulfill the responsibilities on your company, and in particular your technical systems, resulting from e.g. the Supply Chain Due Diligence Act or carbon accounting requirements? It’s not a simple matter: when supply chains have hundreds of participants, it is difficult to get the information you need. In my opinion, this is where industry-wide data ecosystems are the key to unlocking clarity!

Supply chain setbacks

Two hands hold digital ball which represents the globe

For many industries, designing flexible and resilient supply chains is one of the greatest challenges. This is particularly the case in the automotive industry. Making the switch to the development and manufacturing of e-vehicles presents enormous challenges for the entire automotive industry – OEMs and suppliers alike. Now, geopolitical tensions are adding a further disruptive influence. Supply bottlenecks are leading to a fall in car sales. According to the European industry association ACEA, 20 percent fewer cars reached the road during March 2022 in the EU than one year earlier. As one of the most important components of a car, computer chips in particular are in short supply. More recently, there have also been shortages in other components, such as wiring harnesses or raw materials including nickel and neon. The result: According to the data and information service IHS Markit, supplier delivery times have never been as drawn out as they are now. Waiting times to buy some models have increased to 12 months, especially for electric vehicles.

When it comes to the pinch

When it comes to unexpected or short-term events causing supply bottlenecks, manufacturers’ previous supply chain strategy is reaching its limits. While closely synchronized, highly-efficient supply networks have reduced the cost of vehicle production, it had a disadvantage too: it drastically reduced flexibility. Stock is kept as low as possible, and production is limited to just-in-time and just-in-sequence. Suppliers produce some components in advance so an increase in orders at short notice does not lead to supply bottlenecks, but not enough to be fully resilient to unplanned events. Limited integration of local production facilities and regional diversification have also proved barely adequate for this kind of challenge. It is now time to bring greater transparency into our supply networks, so all participants who are dependent on one another are optimally informed of the current situation and are able to act accordingly in plenty of time.

Problems can never be solved using the same mindset that created them.

Albert Einstein

Transparency should be universal, not limited

Data transparency, supported by all participants in the supply chain, is key for finding a solution to the challenge. As we enter the age of data economy, it’s not only new business models that are created. The right data at the right time and location also allows existing business processes to be shaped more efficiently. Closely synchronized supply networks function best in the automotive industry if all involved are promptly and fully informed of processes and bottlenecks and are able to act proactively based on this knowledge. In my opinion, transparency is the magic word here. But exchange of data is currently limited: it often ends with the direct supplier and the next purchaser. Although complex supply chains have been managed with software for quite some time, the cross-organizational exchange of data is prevented by proprietary, non-compatible IT systems, from upstream Tier-X suppliers and downstream purchasers through to OEMs.

Catena-X is a network that stands for data sovereignty while maintaining provider and technology openness. T-Systems is an important technology partner for this secure data ecosystem.

Tim Höttges, CEO Deutsche Telekom

Do digital data ecosystems untie the knot?

Catena-X takes cooperation within the automotive supply chain to a new level; it can significantly improve access to data, for example. The aim of the network founded in 2021 is to create data and information flows along the entire automotive value chain. At T-Systems, we help to build trust and transparency with the latest technology, for example in data management – both crucial to achieve efficiencies for all partners along the supply chain, which current supply chain processes are not able to deliver. In addition to T-Systems as IT service provider, consultant, supplier and infrastructure provider, almost 100 companies are now participating in the network - from car manufacturers to their global partners, users and suppliers. This includes a range of major OEMs. Catena-X is the right model for the right time – and the number of membership requests confirms it. The global business network expects four-digit participants by the end of the year.

One for all...

...and all for one. This is the main concern for Catena-X: simple, efficient, sovereign and secure exchange of data. To this end, the founding members of Catena-X have come to an agreement on implementing the IDSA (International Data Spaces Association) standards. The alliance also opts for the European Gaia-X project, which is setting up a secure and trustworthy data infrastructure and data sovereign cloud platform for Europe based on these IDSA standards. Catena-X draws particular attention to the active participation of SMEs, which are key to the success of the network. "SME-ready" solutions allow them fast access to Catena-X with minimal investment in IT infrastructure.

All eyes are on Catena-X

Is Catena-X a blueprint for other sectors? It’s a clear yes from me. Catena-X could solve many current supply chain challenges – not just in the automotive industry. The more companies of each size and each value chain stage participate, the better supply chains will fare in flexibility, transparency, proactive management and resilience. It is not about making all data visible or usable to all. Participants retain control of what data is provided by whom, and who gives access to others. Some data could also be made freely available according to the open data principle. Catena-X will definitely provide one thing: cost savings. Once plugged into the data network, participating companies save considerable costs on purchasing and operating software and setting up interfaces with the various systems other suppliers and customers use. This principle can be transferred to many other sectors with global supply networks, whether that be machine construction, IT and telecommunications hardware, or aviation.

Statutory evidence made easy

How transparent supply chains and Catena-X are specifically able to support companies is shown by two current legal provisions. The Supply Chain Due Diligence Act in Germany comes into force at the start of January 2023. And the EU Commission is planning to introduce a comparable due diligence act. The consequence is that companies will have to bear responsibility for production processes and work conditions for their suppliers. Right now, for end producers in the automotive industry in particular, this would mean laboriously collating the necessary data of all suppliers to prove that all requirements have been met. This will be significantly simplified by a data ecosystem such as Catena-X. If all participants in a supply chain feed all relevant data into the ecosystem, and the data has a uniform format, this will significantly reduce the effort involved in providing this evidence.

Incorporating the "eco" in data ecosystems

The EU is also working on a package of various legal proposals, which all have the same aim in mind: roughly halving the greenhouse gas emissions of 1990 by 2030. At the same time, the price of CO₂ emissions should be significantly increased. The automotive industry has already responded and, from development, production and sales to usage and disposal, it strives for CO₂ neutrality – including downstream production stages as well as logistics. Companies must provide evidence for and certify the carbon footprint of their products. It would be possible to automate evidence provision, to an extent, if all participating companies in the supply chain were to provide the relevant data in Catena-X. This would minimize the dreaded minutiae of individual measures for each company.  

T-Systems: pioneers of Gaia-X and Catena-X

As a founding partner of Gaia-X and one of the first IDSA supporters, T-Systems is a pioneer of these kinds of decentralized and federated data infrastructures. With Gaia-X, we are responsible for infrastructure and cloud / data sovereignty, and we incorporate end applications into Catena-X. Our Telekom Data Intelligence Hub focuses on the setup of core data spaces as well as the added-value data services built on top of this. This enables us to provide a secure exchange of data and data sovereignty, including access and user control as well as monitoring. We are also setting up infrastructure for digital twins. The virtual images allow processes to be simulated, controlled, and improved. Adapters for linking enterprise systems are also emerging. And we are developing the infrastructure for sovereign cloud services, so the automobile industry maintains sovereignty over its data at infrastructure level and is protected against attacks from third parties.

Roadmap to the digital supply chain

Consultants from our subsidiary Detecon Consulting are actively shaping the architecture of Gaia-X and Catena-X. They assist data network participants with a Catena-X Onboarding Advisory service, initially with strategic issues. What role does a company want to take in the network? To what extent does an organization want to use the new digital opportunities? Which Catena-X use cases should be implemented? How can Catena-X accelerate the digital transformation of the company and the future data centralization? Furthermore, the focus is on individual business cases or impacts on production and supply processes. Ultimately, technical IT issues are answered, and a schedule and roadmap is created for how the link to Catena-X should be formed.

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About the author
Dr. Christian Hort

Dr. Christian Hort

Senior Vice President Automotive, T-Systems International GmbH

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