Volkswagen reduces supply chain sustainability risk with AI
With a mission to develop an intelligent sustainability radar for the supply chain, Volkswagen, Porsche and Audi together are using artificial intelligence (AI) to identify sustainability risks in the supply chain, risks such as environmental pollution, human rights abuses and corruption at an early stage.
“We are meeting our responsibility for ensuring a sustainable and fair supply chain – we established sustainability criteria for our suppliers on a contractual basis as long ago as 2014. Since 2019, we have checked compliance with our standards as part of the award process. By partnering with Prewave, we now have another tool to uncover and investigate potential violations, thereby contributing to improved social and environmental conditions at our suppliers’ production sites,” commented Ullrich Gereke, Head of Procurement Strategy for the Volkswagen Group.
An intelligent sustainability radar for the supply chain
The new monitoring system, developed by Prewave is based on an intelligent algorithm. The technology is capable of identifying and analysing supplier-related news from publicly available media and social networks in over 50 languages in 150 countries.
“Prewave enables us to manage risks in a targeted manner – even in the lower-level supply chains. For us, this is about transparency. Artificial Intelligence simplifies the complex analysis of data, allowing us to address partners directly and request improvements in sustainability. The goal is to achieve this in partnership with suppliers. In the event of escalation, however, termination of business relations is certainly also an option”, commented Markus Wagner, Head of Procurement Strategy and Sustainability at Porsche AG.
If the technology flags any indication of a sustainability risk in the supply chain the automotive manufacturers are identified, allowing their procurement functions to look at the facts and consider countermeasures. The technology provides an early warning system for breaches in sustainability requirements, supplementing traditional compliant channels.
The pilot project began in October 2020, since then over 5,000 keywords have been analysed to monitor more than 4,000 suppliers.
“The key advantage of AI is the speed at which it can recognise relevant news online and transmit this in bundled form. This enables us to find out about sustainability risks much earlier on, so we can respond more quickly. AI is an ideal example of how digitalisation can contribute to greater transparency in the supply chain,” added Marco Philippi, Head of Procurement Strategy at Audi.
The White House Launches Supply Chain Task Force
The Biden Administration has released its 100-day supply chain assessment for semiconductor manufacturing and advanced packaging, large-capacity batteries, critical minerals and materials, and pharmaceuticals. After a year in which supply chains throughout the nation were decimated by the pandemic, the new task force intends to get the country back on track.
These measures come just in time. Semiconductor shortages have crippled the nation’s automotive manufacturers, and the new Innovation and Competition Act will strain ties between the U.S. and China. The United States needs to invest in resilient and secure supply chains, as well as help its manufacturing companies survive the pandemic.
What’s Happened Already?
Since February, the administration’s COVID-19 response team has vaccinated 137 million Americans, worked with semiconductor manufacturers, expanded rare earth element mining outside of China, and addressed supply chain cyber vulnerabilities. “Unfair trade practices by competitor nations, private- and public-sector prioritisation of low-cost labour and a focus on short-term returns over long-term investment have hollowed out the U.S. industrial base”, said the White House.
To address risks and vulnerabilities, the administration will also prioritise the following steps:
- Commit US$60mn to develop novel platform technologies to boost API production
- Develop a domestic lithium battery supply chain to combat the climate crisis
- Support manufacturers of advanced battery cells and packs with US$17bn in loans
- Invest nearly US$75bn in semiconductor manufacturing
- Give US$100mn in grants to state-led supply chain apprenticeship programmes
In addition, the White House recommended that the nation should establish a Supply Chain Resilience Programme backed by US$50bn in domestic supply chain investments.
An International Effort
Although the United States has recently doubled down on hardline stances against foreign trade competition—one need only look at its recent Senate bill—the scale of its supply chain transformation programme requires partnership. “Even as the U.S. makes investments to expand domestic production capacity for some critical products, we must work with allies to secure supplies of critical goods that we will not make in sufficient quantities at home”, the White House stated.
In the coming months, the U.S. will work with international allies such as the Quad and the G7 in order to diversify its networks, ensure human rights compliance, and source critical minerals and materials. And though the nation is aggressively investing in R&D and competitive technology, it wants to maintain its global trade ties. “U.S. investments abroad must incentivise environmentally and socially responsible production”, the administration wrote. “We must engage our partners to promote global resilience”.