How digital solutions increase efficiency in warehouse management

In the evolving landscape of modern business, the significance of robust maintenance, repair and operations (MRO) systems cannot be overstated. Efficient warehouse management helps businesses to operate seamlessly, ensure precision and drive productivity to new heights. In our increasingly digital world, bar coding stands out as a cornerstone technology, revolutionizing warehouses by enabling meticulous data tracking and streamlined workflows.

With this knowledge, A3J Group is focused on using IBM Maximo Application Suite and the Red Hat® Marketplace to help bring inventory solutions to a wider audience. This collaboration brings significant advancements to warehouse management, setting a new standard for efficiency and innovation.

To achieve the maintenance goals of the modern MRO program, these inventory management and tracking solutions address critical facets of inventory management by way of bar code technology.

Bar coding technology in warehouse management

Bar coding plays a critical role in modern warehouse operations.Bar coding technology provides an efficient way to track inventory, manage assets and streamline workflows, while providing resiliency and adaptability. Bar coding provides essential enhancements inkey areas such as:

Accuracy of data: Accurate data is the backbone of effective warehouse management. With barcoding, every item can be tracked meticulously, reducing errors and improving inventory management. This precision is crucial for maintaining stock levels, fulfilling orders and minimizing discrepancies.

Efficiency of data and workers: Barcoding enhances data accuracy and boosts worker efficiency. By automating data capture, workers can process items faster and more accurately. This efficiency translates to quicker turnaround times and higher productivity, ultimately improving the bottom line.

Visibility into who, where, and when of the assets: Visibility is key in warehouse management. Knowing the who, where and when of assets helps ensure accountability and control. Enhanced visibility allows managers to track the movement of items, monitor workflows and optimize resource allocation, leading to better decision-making and operational efficiency.

Auditing and compliance: Traditional systems often lack robust auditing capabilities. Modern solutions provide comprehensive auditing features that enhance control and accountability. With these capabilities, every transaction can be recorded, making it easier to identify issues, conduct audits and maintain compliance.

Implementing digital solutions to minimize disruption

Implementing advanced warehouse management solutions can significantly ease operations during stressful times, such as equipment outages or unexpected order surges. When systems are down or demand spikes, having a robust management system in place helps leaders continue operations with minimal disruption.

During equipment outages, quick decision-making and efficient processes are critical. Advanced solutions help leaders manage these scenarios by providing accurate data, efficient workflows and visibility into inventory levels, which enables swift and informed decisions.

Implementing software accelerators to address warehouse needs

Current trends in warehouse management focus on automation, real-time data tracking and enhanced visibility. By adopting these trends, warehouses can remain competitive, efficient and capable of meeting increasing demands.

IBM and A3J Group offer integrated solutions that address the unique challenges of warehouse management. Available on IBM Red Hat Marketplace, these solutions provide comprehensive features to enhance efficiency, accuracy and visibility.

IBM Maximo Application Suite

IBM® Maximo® Manage offers robust functionality for managing assets, work orders and inventory. Its integration with A3J Group’s solutions enhances its capabilities, providing a comprehensive toolkit for warehouse management.

A3J Group accelerators

A3J Group offers several accelerators that integrate seamlessly with IBM Maximo, providing enhanced functionality tailored to warehouse management needs.

MxPickup

MxPickup is a material pickup solution designed for the busy warehouse manager or employee. It is ideal for projects, special orders and nonstocked items. MxPickup enhances the Maximo receiving process with superior tracking and issuing controls, making it easier to receive large quantities of items and materials.

Unlike traditional systems that force materials to be stored in specific locations, MxPickup allows flexibility in placing and tracking materials anywhere, including warehouse locations, bins, any Maximo location, and freeform staging and delivery locations. Warehouse experts can choose to place or issue a portion or all of the received items, with a complete history of who placed the material and when.

MxPickup also enables mass issue of items, allowing warehouse experts to select records from the application list screen and issue materials directly, streamlining the process and saving valuable time.

A3J Automated Label Printing

The Automated Label Printing solution is designed to notify warehouse personnel proactively when items or materials are received through a printed label report. This report includes information about the received items with bar coded fields for easier scanning. Labels can be automatically fixed to received parts or materials, containing all the necessary information for warehouse operations staff to fulfill requests. The bar codes facilitate quick inventory transactions by using mobile applications, enhancing efficiency and accuracy.

Bringing innovative solutions to warehouse management

The collaboration between IBM and A3J Group on Red Hat Marketplace brings innovative solutions to warehouse management. By using advanced bar coding, data accuracy, efficiency and visibility, warehouses can achieve superior operational performance. Implementing these solutions addresses current challenges and prepares warehouses for future demands, supporting long-term success and competitiveness in the market.

Source: ibm.com

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Optimizing finished vehicle logistics with blockchain solutions

When a customer orders a product on an ecommerce site, through quick commerce or through a traditional courier service, they receive an update of each action taken to deliver that product. This includes basic status updates such as shipped, in transit, reached destination, out for delivery and delivered.

Service providers manually update some of these statuses, and some updates are enabled through technology by using devices such as GPS trackers, RFIDs and sensors.

But with all the technological advances in the transportation of goods, one area that lags behind is the automotive logistics industry.

Challenges of finished vehicle logistics

Finished vehicle logistics in the automotive industry typically involves moving vehicles from the assembly plant to the National Sales Organization (NSO), then to dealerships or to large fleet operators. The multimodal transportation is done via road, rail and sea. Several stakeholders and processes are involved as vehicles move from the original equipment manufacturers (OEMs) factory or compound to their customer’s destinations, resulting in a plethora of challenges as listed after this:

• Limited customer visibility of Estimated time of Arrival (ETA): Unlike e-commerce, automotive end customers generally lack visibility into the delivery process after placing an order with the dealer. Customers usually rely on verbal confirmation from the dealer regarding the probable delivery date.
• Lack of route optimization: Delivering vehicles within stipulated timelines while keeping logistics costs low requires route optimization. Logistics service providers (LSPs) do not always take the most optimized route, and unexpected events (such as the Suez Canal blockage and weather impacts) can complicate matters further. Route intelligence is crucial for deciding the best possible route or mode of transportation based on delivery timelines.
• Damage during transit: Many vehicles are damaged during transit each year. Identifying the stakeholder responsible for a particular damage leads to accountability and timely resolution. Indirect implications include extra logistics and handling costs to manage the damaged vehicles. 
• Insurance claims management: OEMs must file insurance claims in case of damages, which involves providing relevant documentation and capturing evidence of activities as the vehicle changes custody among stakeholders.
• Liability for damages: Identifying the party responsible for any damage during transit is important to fix liability.
• Delivery delays: Transit damages can delay delivery to customers. Proper evaluation of the vehicle’s condition is necessary to decide whether it can be delivered or if a new vehicle must be ordered.
• OEM losses: OEMs suffer both reputational and monetary losses due to damages during transit.

Building collaborative stakeholder networks for digital transformation

A blockchain-based automotive logistics platform can address the issues associated with finished vehicle logistics. Stakeholders on the blockchain platform can collaborate to track and trace where a vehicle is located at any specific point in time. They can also connect any relevant document to a vehicle, and upload or retrieve documentation and events of the vehicle throughout its journey in the supply chain.

The solution can provide near real-time actionable supply chain information for all contributors in the network (including OEMs, LSPs, warehouse operators, compounds, dealers and insurers). These network contributors collectively generate value by analyzing various factors, such as production locations and target markets and determine the most efficient and cost-effective routes.

Real-time actionable insights can include vehicle registration, creation of transport orders, warehouse orders, instructions that LSPs provide to sub-contractors among others. They can also encompass consignment notes, SalesOrder and events related to transport such as pickup or drop off. Further aspects include warehouse events such as gate-in, gate-out, ready for pickup, commercial events and damage events like submission of damage events, damage reports or cost estimates for damage.

Using insights to optimize, track and protect the transportation process

Stakeholders can tie these insights to documents associated with the shipping, such as contractual documents, bill of lading, inspection reports and various other evidence to fix liabilities in case of damage. Digitizing customs documents and tying them to a single source (such as a vehicle) expedites the custom clearance process and can reduce the delivery timelines.

The blockchain-based solution makes it possible to calculate ETA with real-time actionable insights from multiple stakeholders. This can be done by factoring in vehicle location, traffic, historical data, weather conditions, vehicle and driver performance, distance and speed calculations, and any other available. Vehicle tracking is possible through various technologies such as GPS, IoT sensors and RFID and telematics.

OEMs and LSPs can optimize the transportation process by planning the movement of the vehicles from manufacturing plants to various markets to meet delivery schedules and cost requirements.

LSPs can adjust the routes based on the trade lanes and the associated transportation legs in the case of any route deviations due to external factors. These external factors include adverse weather conditions, traffic conditions, political or social unrest, infrastructure issues or any other supply chain disruptions. Pre-defined trade lanes can help in identifying the next best route that is available from the current location in case of disruptions.

LSPs can inform truck drivers and other personnel of their responsibility to inspect and report the vehicle status before loading, during transit and upon delivery. Inspection reports document the condition of the vehicle to identify when and where damages occurred.

They can provide photographic evidence in case of any damage in real time. Users can store and publish evidence over a blockchain network for transparency across all involved stakeholders. This gives the insurer solid, accurate evidence.

Bringing the blockchain solution to life

Blockchain satisfies the key requirements of transparency and data sharing among stakeholders. Blockchain’s distributed ledger technology allows network participants to create a single source of truth for everything that happens to a vehicle throughout the supply chain, and that data is immutable.

Car buyers know exactly where their car is in the delivery cycle. OEMs can assess progress and act in case of any financial or operational challenge. Meanwhile, LSPs optimize routes, reduce customs clearance times, and increase efficiency and accuracy. Dealers plan vehicle inventories to meet customer needs, and insurers accurately assess claims and the extent of damage, leading to faster settlement and a reduction in fraudulent claims.

The blockchain solution builds an ecosystem that is accessible to all the players in the finished vehicles logistics space. Because of the integrity and security that blockchain provides, partners can work collectively to provide end-to-end visibility to the automotive logistics industry.

Source: ibm.com

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Blueprint for 15%+ higher wrench time: Superior integration of EAM, mobility and procurement in operations and maintenance

During conversations with senior leadership who worked for global aerospace companies to Fortune 100 manufacturers, they shared firsthand how inadequate asset management and cumbersome procurement processes led to significant inefficiencies and hindered organizational performance.

One story, during peak production, involved a Computer Numerical Control machine failure, that disrupted manufacturing (not dissimilar in impact from a telecom base station or utility transformer failure). Diagnosing the problem on-site and digging through paper maintenance logs took forever. Obtaining a replacement part involved manual entries and approvals in a separate procurement system, further dragging out the process.

Recalling situations like that, they wish they had today’s modern mobile enterprise asset management (EAM) solutions and best practices for procurement integration.

Here’s the blueprint that smart manufacturing, telecom, utility, and government contracting leaders use to increase wrench time by 15%+ for operations, maintenance, and facilities techs:

Embrace real-time technician mobility and asset data accessibility

• Digital field processes with mobility: Eliminate inefficient steps, travel, dual entry and wait time associated with paper-based processes.
• Immediate information: Technicians can access maintenance histories, manuals and schematics directly on mobile devices, slashing downtime and expediting responses.
• Seamless integration: Real-time procurement data and status updates are integrated into EAM systems, ensuring that crucial information is available at all times.

Integrate EAM with procurement processes

• Automated triggers: When a machine fails, an integrated EAM automatically initiates the procurement process for needed parts, eliminating delays caused by manual processes.
• Efficiency in procurement: The procurement process is fully automated, from requisition to order placement, reducing time and administrative burdens.

Implement advanced workflow automation

• Streamlined issue logging: Automating the logging of issues, alerting technicians and tracking resolutions within EAM ensures that no steps are missed and progress is continuous.
• Faster procurement: Automated workflows reduce manual entry errors and speed up the parts ordering process, crucial during unexpected downtimes.

Leverage decision support through data

• Informed decisions: EAM systems provide analytics and historical data on machine performance, aiding technicians in making quick, informed decisions.
• Simplified ordering: Detailed parts diagrams and itemized pick lists help technicians quickly identify and order necessary parts.

Enhance support with remote diagnostics

• Remote assistance: Modern EAM includes remote diagnostics and augmented reality (AR) support to guide technicians through complex repairs remotely.
• Efficient delivery: Procurement practices must ensure quick and efficient delivery of required parts by aligning closely with suppliers.

Blueprint in action

With 1,400 employees across 25 service locations, Skookum Contract Service faced inefficiencies in its work, asset and parts procurement process. This resulted in over 3,000 hours of lost productivity annually at one location alone. By adopting best practices and processes for seamless integration between its asset management and procurement functions, Skookum transformed its operations.

• Implemented a digital workflow through EAM and mobility that streamlined and digitized asset, work and logistics processes, improving tech wrench time by 15%.
• Created an integrated process and technology solution that led to a paperless work order environment.
• Streamlined part searches and procurement workflows, reducing the number of steps from 15 to a single seamless digital workflow.
• Enabled technicians to quickly and easily access parts using mobile devices.

The result: Skookum maintained on-time, on-budget project delivery, enhancing overall efficiency and productivity. They achieved these results by integrating advanced procurement and mobile EAM technologies.

Technology enablers: IBM Maximo Mobile and Varis purchasing platform

Skookum transformed by integrating Varis and IBM Maximo. Varis streamlined procurement with a user-friendly digital marketplace. IBM Maximo’s mobile features offered real-time access to asset data, maintenance histories and remote diagnostics. This integration allowed technicians to manage and procure parts efficiently, reducing downtime and boosting productivity.

Integrating modern EAM solutions with advanced asset, work and procurement processes significantly boosts wrench time and reduces technician downtime. Embracing real-time asset data, automating procurement, streamlining workflows, leveraging data-driven support and using remote diagnostics lead to notable efficiency gains. Skookum Contract Services exemplifies these benefits, showing how tools like Varis and IBM Maximo drive operational improvements, ensuring projects finish on time and within budget.

Source: ibm.com

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Ahead of the curve: How generative AI is revolutionizing the content supply chain

The global adoption of generative AI is upon us, and it’s essential for marketing organizations to understand and play in this space to stay competitive. With content demands expected to grow in the next few years, organizations need to create more content at a faster pace to meet customer expectations and business needs. Knowing how to manifest these improvements is not always clear: Enter generative AI and the content supply chain.

A content supply chain brings together people, processes, and technology to effectively plan, create, produce, launch, measure, and manage content. It encompasses an end-to-end content journey—a journey that can create faster time to value. We know that infusing generative AI into the content supply chain will enable companies to produce more personalized content faster and more efficiently. So, what is stopping companies from delivering content with generative AI across their content supply chain?

Leadership and the content supply chain

The advent of generative AI is raising several questions and concerns for leaders. In recent years organizations have been concerned with their ability to create and deliver content fast enough to meet customer expectations, and now that generative AI could address those issues, another question comes to the fore: Can we trust AI tools and technology to augment employees. Leaders across the world are experiencing a mix of emotions when it comes to implementing and embracing generative AI. There is excitement, curiosity, and a bit of angst—sometimes felt simultaneously. Most of us are familiar with the term “FOMO”, or fear of missing out. But people are also feeling “FOGI”, fear of getting in, with generative AI.

The FOMO these organizations face relates to not being able to create content fast enough to keep up with expectations or wasting money on tools that may not turn out to be as efficient as once thought. The FOGI concern revolves around trust, and whether they can trust the AI tools and technology to augment employees. Will the outputs deliver content that will resonate with their customers? Can they trust the AI will operate in a secure way? Can they trust that the AI will reward the initial individual creator? Can they trust that what’s created isn’t going to break any brand guidelines?

This blog and the IBM Institute for Business Value study The Revolutionary Content Supply Chain aim to answer these questions to help  executives and their employees to better understand the changing landscape in content creation and embrace the power of generative AI models when it comes to optimizing their content supply chains.

A new way to create and manage content

Any new concept or major change comes with some hesitancy and push back. Change isn’t linear; it requires strategic change management to deal with the transition. Employees and executives alike struggle to take on a new way of thinking or working when they’ve been operating the same way for years. Modernizing a workflow to introduce a content supply chain means disruption and uncertainty. But it also means creating an end-to-end content journey that is fast and accurate and, ultimately, meets customers at the level of their expectations. 

Change management is a crucial part of adopting a new content supply chain and trusting the process. These new technologies can garner a lot of power and a level of uncertainty. However, the adoption of generative AI and a content supply chain can be a massive opportunity for your organization.

Respondents to the study are “keenly aware” of where their content processes need improvement. 88% said they need an easier way to access approved assets for activation across applications and 79% want to experiment with content, audience, and experience variation to drive customer engagement and the customer experience.

As described in the IBM Institute for Business Value study, an ad hoc “Frankenstein” like system that engages a variety of platforms and tools, can turn to a consolidated system and operating model to meet the increasing demand for more and more data integration, content generation, and intelligent automation.

Separately, the findings from the study show that while most respondents are already engaging with generative AI, a very small number—just 2%—are optimizing the technology. Organizations are seeking out new approaches to managing their content supply chain and generative AI embedded in platforms, such as Adobe Firefly, could be the most impactful. 

Understanding the potential of generative AI

Generative AI isn’t just for one area of a business. Instead, it can help content creators across many functions, such as marketing, customer support, product development, operations, and more. The study found 95% of respondents agree that generative AI will be a game changer. And nearly all CMOs surveyed believe that generative AI will free up marketing teams from mundane tasks so they can focus on more creative endeavors.

Content supply chains and generative AI are still very much in the early days, but it’s important to power your ecosystem prior to engagement. For these new technologies to be successful, it means bringing together different business units and stakeholders to align on a shared vision. More than 80% respondents report already engaging with generative AI. Additionally, almost three in four (74%) report that they’re still in a pilot mode, while just a quarter have gone beyond pilots to start implementation.

In addition to internal ecosystems, it’s also important to power your external ecosystem so that external parties—such as Adobe, IBM and AWS—can work together to enable generative AI to supercharge a content supply chain. Specifically, the study points out, many organizations are taking a hybrid approach to AI by blending their proprietary models with best-in-class SaaS platforms infused with AI and public and open-source models. It’s no surprise that adoption of AI has been so popular given its wide swathe of activities across the full content supply chain journey.

To deliver the most value from generative AI, taking the time to set a solid foundation is key. It is clear there is still a lot of work to be done, with only 5% of respondents saying they have an organization-wide approach for generative AI best practices and governance, and half of organizations still in the process of establishing these measures.

Setting a solid foundation for generative AI

We’ve established the benefits that generative AI has to offer and the potential it can bring to transform the content supply chain. But with major transformations such as these come potential risks and any organization interested in generative AI should be taking steps to mitigate said risks.

The IBM Institute for Business Value study found 43% of survey respondents confess their organizations have not set up an AI ethics council. Beyond ethics risks, the study points out, there are also cost risks to consider. Organizations must weigh the impact that a content supply chain expansion fueled by generative AI will have on their back-end technologies. If organizations are aiming to produce more content, then more high-performance computing is required and could in turn increase on-premises computing costs.

These risks must be assessed in the context of benefits and trusting the generative AI tool your organization chooses to implement. The end-to-end makeup of an enterprise content supply chain is one of its biggest advantages, but is also one of its biggest challenges, with ownership being one of the main areas of contention. The respondents’ answers varied widely when it came to who was the primary owner of their content supply chain.

Therefore, it’s no surprise that many respondents surveyed said they are worried about the potential for organizational silos, complex stakeholders and competing agendas. The lack of change management strategy for new processes and tools is apparent across organizations and needs to be addressed in order content supply chain to set up the content supply chain for success. Instead of moving quickly to demonstrate positive outcomes and ultimately shortchanging this long-game effort, organizations need to take preliminary action at the requirements-gathering stage. By doing so, it enables trust from employees who then help to navigate the transformation within their teams and across the organization.

Revolutionizing the content supply chain

The disruptive nature of generative AI can feel overwhelming, but through long-term change management and trust, organizations can transform their content supply chain and be the catalyst for a needed organizational culture shift.

The study highlights the advantages of content supply chain. It provides readers and clients a better understanding of how generative AI can enhance outcomes and overcome some of the operational challenges suppressing progress. 

Content supply chain transformation touches many functions and requires cooperation across executives. The study provides a detailed breakdown of practical actions for key C-suite executives, including CMOs, CTOs, and CFOs, to help prepare them for content supply chain enhancements.

Generative AI is changing the world and now is the time to establish your organization as a leader in your industry. Get started by embracing the technology and ensuring your organization has the right internal and external ecosystems to manage the transformation. Breaking down silos is not easy and won’t be fast, but organizations taking the more calculated route will lay the groundwork for innovation that can keep up with the pace of change brought to bear by generative AI. This is only the beginning.  

Source: ibm.com

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MRO spare parts optimization

Many managers in asset-intensive industries like energy, utilities or process manufacturing, perform a delicate high-wire act when managing inventory. Finding the right balance becomes crucial for helping ensure the success of maintenance, repair and operations (MRO) initiatives, specifically the spare parts that support them.

What’s at stake?

Whether MRO processes address preventive maintenance, service failures or shutdown overhauls, the wanted results are the same: deliver increased service levels, function safely and sustainably, operate efficiently and reduce unplanned and costly downtime.

Read More: C1000-140: IBM Security QRadar SIEM V7.4.3 Deployment

A recent report shows a significant increase in the cost of manufacturing downtime from 2021 to 2022, with Fortune Global 500 companies now losing 11% of their yearly turnover which amounts to nearly USD 1.5 trillion, up from USD 864 billion in 2019 to 2020.

Another study revealed:

The swinging pendulum

The MRO spare parts inventory varies depending on the industry and equipment, ranging from specific items to encompassing more basic supplies. These supplies include everything from large infrastructure items such as turbines, generators, transformers and heating, ventilation and air conditioning systems to smaller items like gears, grease and mops. Many asset-intensive businesses are prioritizing inventory optimization due to the pressures of complying with growing industry 4.0 regulations, undergoing digital transformation and the need for cost-cutting.

Over time, inventory managers have tested different approaches to determine the best fit for their organizations.

For many years, businesses favored just-in-time operations as the most logical approach for managing inventory and minimizing holding costs. However, recent disruptions in the global supply chain, due to the pandemic and geo-specific issues, have caught many off guard.

If Operations needed a spare part that wasn’t readily available, it often resulted in equipment downtime or costly stockouts. Even in the past, this method frequently led to additional expenses for expediting or shipping, along with concerns about the quality of parts.

Considering that IDC surveyed 37% of companies that manage spare parts inventory by using spreadsheets, email, shared folders or an uncertain approach, it becomes evident that this practice carries more risk than it might seem. Unless your demand forecasting is accurate, adopting a reactive approach might prove less efficient.

Now, consider the just-in-case approach. Some managers choose to stock excess spare parts due to past encounters with delays and other negative consequences. Maintaining safety stock is beneficial but excessive inventory incurs costs and demands significant time for management. When assets lack criticality and priority assignments, there is a risk of accumulating unnecessary parts that might become obsolete on the shelves. This, in turn, initiates a continuous cycle of spending on inventory reduction efforts.

The benefits of finding the right balance

So, when considering the drawbacks of both just-in-time and just-in-case approaches, the goal becomes finding the ideal balance that helps ensure you have the right materials to sustain business operations while providing your teams with what they need at the right time.

This isn’t purely theoretical. There are quantifiable benefits to balancing the dynamics of MRO spares and material demand. Many organizations lack the in-house resources or knowledge to run these necessary procedures but those capable of doing so report:

• A 50% reduction in unplanned downtime associated with parts.
• A 40% reduction in inventory costs.
• A 35% decrease in maintenance budgets.
• A 25% increase in service levels.

How to achieve the right balance

The short answer: collect, analyze and act on data in real-time to unlock immediate value across your operations. Is it easier said than done? It can be if you rely on a spreadsheet, physical asset counts or solely on condition monitoring.

Consider these questions:

1. Do you have a platform that combines statistical analyses, prescriptive analytics and optimization algorithms?
2. Can you segment data from all your systems like enterprise asset management, enterprise resource planning (ERP), customer relationship management and sensor technology, by using key parameters like cost, criticality, usage, actual lead times and more?
3. If you rely on transactional ERP systems, are you missing the critical analytics and reporting capabilities you need and recognized gaps in SAP for asset-intensive industries?
4. Can you review historical data modules?
5. Do you perform baseline analyses that look at inventory value based on average price, inherited items and other criteria?
6. Can you conduct what-if scenarios to visualize your options?
7. Do you have purpose-built algorithms to improve intermittent and variable demand forecasting?
8. Can you group and prioritize work by using work queues and monitor progress by organizational areas and data sets?

While artificial intelligence (AI) already factors into many inventory managers’ plans, it’s worth keeping an eye on the latest iteration of the technology. Generative AI has the potential to deliver powerful support in key data areas:

• Master data cleansing to reduce duplications and flag outliers.
• Master data enrichment to enhance categorization and materials attributes.
• Master data quality to improve scoring, prioritization and automated validation of data.

Explore optimization

IBM MRO Inventory Optimization can help optimize your MRO inventory by providing an accurate, detailed picture of performance. The flexible, scalable solution is a fully managed cloud inventory platform designed to collect, store and analyze vast amounts of MRO inventory stock data by using an array of advanced algorithms and analytics to intelligently optimize MRO inventories.

IBM supply chain consulting services can also strengthen supply chain management, helping clients build resilient, agile and sustainable end-to-end supply chains for the future.

Source: ibm.com

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The Orion blockchain database: Empowering multi-party data governance

Blockchain databases were designed to enhance trust in centralized ecosystems by incorporating tamper-evidence features into traditional databases. They are easier to use and can reduce operational and development costs compared to decentralized ledger technologies. However, existing blockchain databases lack efficient tools for multiple parties to control shared data on the ledger.

Orion is an open source blockchain database that provides unique capabilities, such as multi-signature and proof functionalities, along with extensive key-level access control. These features empower parties to jointly control and validate values written to the database. Orion combines these capabilities with other blockchain properties, offering tamper evidence, provenance, data lineage, authenticity and non-repudiation, all while utilizing a standard data model and transactional APIs. Orion’s technology is highly valuable in enhancing system integrity and reducing errors, disputes and fraud.

In this post, we explore trust requirements across various business environments, identify existing trust gaps and outline how Orion can effectively bridge those gaps. We delve into the key features of Orion and explore its potential applications across diverse domains.

Importance of trust in business ecosystems

Trust is essential for the growth and success of business ecosystems. However, establishing trust in complex environments, such as global supply chains, poses significant challenges due to the involvement of diverse parties. For instance, in response to sustainability trends, product manufacturers may need to prove the carbon footprint of their products to regulators and clients. Thus, ensuring transparency and integrity in calculating the carbon consumption of all components across the entire supply chain becomes imperative. The adoption of mutually trusted technology can assist businesses, customers, partners and government authorities in verifying the existence, authenticity and integrity of interactions among parties. By doing so, it not only serves as a safeguard against potential disputes and fraudulent activities, but also fosters an environment of trust and reliability.

Understanding trust requirements

Different business ecosystems exhibit varying levels of trust among participants, which influences their specific trust requirements. In highly trusted ecosystems, it may be enough to ensure independent, consistent and crash-tolerant recording of the data, while in limited-trust environments we may also want to verify the correctness of the recorded data, ensure authenticity and provide tamper evidence and data lineage. Finally, in low-trust environments we may need to control the transaction execution by supporting multi-party approval and parallel execution of smart contracts, and even reaching a consensus in the presence of malicious parties.

From a topological standpoint, ecosystems can be classified into centralized and decentralized ecosystems. In centralized ecosystems, there is usually at least one party that enjoys a certain level of trust from all participants, whereas decentralized ecosystems lack a single entity that is trusted by all. Currently, the majority of business ecosystems operate under a centralized trust assumption. In such ecosystems, a trusted party (such as a cloud provider, government organization or other influential player) plays a significant role, while other participants within the ecosystem are not required to trust each other directly. For example, organizations typically rely on trust in the cloud provider, expecting them to refrain from intentionally blocking client access to services, despite having the capability to do so.

However, the presence of a trusted party does not imply blind trust from other participants. Our experience highlights significant room for enhancing trust within centralized ecosystems. Transparency throughout the data lifecycle and the ability to demonstrate data integrity and consistency are critical factors for improvement. These elements play a vital role in streamlining the auditing process, particularly in highly regulated environments. Ensuring the authenticity of data is crucial in preventing potential disputes over authorship in multi-party interactions. Furthermore, even trusted parties often seek to restrict the power of their privileged users to mitigate the risks associated with mistakes and fraud. By addressing these trust gaps, centralized ecosystems can be further strengthened, fostering increased confidence and reliability in business interactions.

Technological choices to address the trust gaps

There are three major types of technologies that can help close the trust gap in business ecosystems. Classical databases with basic recording features are usually sufficient for the proper operation of highly trusted centralized ecosystems. On the other hand, blockchain databases, which extend classical database capabilities with verifications and proofs, are the best choice for limited trust centralized ecosystems. Finally, decentralized ledger technologies typically provide a full stack of trust features and are commonly used in low-trust decentralized environments. It is worth noting that the support of advanced trust features usually leads to higher complexity and may impact the performance and increase the operational cost of the solution. Consequently, it is important to match the needs of the ecosystem with the most suitable technology available. Figure 1 illustrates the topography of trust in the business ecosystems.

Figure 1: Topology of trust

While the use of existing blockchain database technologies can address some of the trust gaps in centralized environments, they fall short in enabling efficient control of shared data among multiple parties. Decentralized blockchain ledger technologies provide these capabilities and can be used in centralized systems, but that’s often inefficient and fails to justify increased costs and complexity. This is where Orion, our novel open-source blockchain database, comes into play. Orion differentiates itself from other centralized blockchain databases by offering a comprehensive set of blockchain properties while empowering multiple parties to govern access to shared data. It achieves this by introducing broad key-level read/write access control and multi-signature capabilities, ensuring that database transactions are approved only when jointly signed by designated parties.

Meet Orion: A centralized blockchain database with multi-party data access control

Orion is an advanced open-source blockchain database that combines the power of blockchain technology with the reliability of traditional database features. It provides a comprehensive solution for secure, transparent and trustworthy data management. By integrating a cryptography-based layer on top of a classical database, Orion offers a wide range of blockchain functionalities, including a highly available, secure, and replicated distributed database with an immutable tamper-proof ledger. The ledger delivers tamper evidence, enabling the detection of any modifications made to the data, even if carried out by privileged users. This additional layer of security ensures data integrity, while reinforcing trust and reliability. Figure 2 illustrates the blockchain functionalities that Orion offers.

Figure 2: Key Orion features

A key distinguishing aspect of Orion is its support for multi-signature (multi-sig) transactions, achieved through a unique read-write key-level access control mechanism. This functionality is crucial for facilitating trusted interactions among multiple parties. Transactions are committed only when signed by several designated participants, ensuring a secure and reliable environment for multi-party engagements.

One of Orion’s most notable features is its ability to facilitate provenance and data lineage. It records every transformation that the data undergoes, enabling history queries to extract information on when, how and by whom the data was modified. By utilizing a graph-DB-based provenance engine, Orion can provide valuable insights into the history and origin of the data, promoting transparency and accountability.

Orion empowers users with authenticity and non-repudiation features, providing solid evidence that the received data matches precisely what was sent by the original source. All transactions are signed, and the server generates a digital receipt that can be used to verify the data’s integrity. This capability prevents disputes regarding authorship and further enhances trust.

Furthermore, Orion seamlessly integrates classical database functionalities alongside its blockchain capabilities. It offers efficient queries, robust resilience and scalability. With a standard key-value JSON store and transactional APIs, Orion guarantees the execution of a set of read/write operations as an atomic transaction, preserving consistency and data integrity. Figure 3 illustrates how Orion’s architecture provides transparent insights that ensure accountability.

Figure 3: Orion architecture

Key applications lead to valuable solutions

Orion caters to a wide range of key applications that address various industry needs and provide valuable solutions for businesses and organizations. One notable application is within the supply chain domain. Orion can serve as a robust repository for storing the carbon footprint data of all product components, provided by part manufacturers. Additionally, it can store the contracting terms between buyers and sellers of these parts, signed by both parties. Furthermore, Orion enables the inclusion of the formula used to compute the carbon footprint of the product, along with links to the carbon consumption data of its individual parts, which can be updated by the product owner. By leveraging Orion, organizations can ensure the authenticity, non-repudiation and integrity of this critical data. Moreover, key-level access control mechanisms guarantee data privacy between the involved parties. If necessary, privacy-preserving techniques like zero-knowledge proofs can be employed to conceal sensitive details, even from the central party. In such cases, Orion can retain only the necessary metadata required to demonstrate the accuracy of the records, which can be kept outside the system for third-party auditors.

In addition to the supply chain application, Orion offers numerous highly beneficial use cases that our clients have identified. For instance, within the financial sector and regulated domains, Orion can facilitate auditing processes by providing proof of authenticity, data integrity and tamper evidence for company records. Our multi-signature capabilities enable the automation of various business contracting processes and support notary services across different domains. Furthermore, Orion can be used for maintaining the authenticity and integrity of evidence collected through insurance claims processes. It can simplify the management of licenses, certificates, educational records and property ownership rights for government organizations. Orion can also serve as a secure digital platform for managing vaccination processes, records and statuses while ensuring trustworthiness. Moreover, it enables the establishment of provenance for goods and compliance with maintenance requirements in supply chains. Additionally, Orion can serve as an off-chain store for decentralized ledger ecosystems, ensuring data integrity across hybrid environments.

Orion has already been successfully deployed as a blockchain platform in several EU-funded projects. In the C4IIoT project, Orion enhanced the level of trust in an IoT cybersecurity platform by providing traceability, provenance and non-repudiation features to track changes in machine and production line configurations. In the COPA EUROPE project, Orion is being utilized to track the production and lifecycle of media assets, facilitating trusted and secure trading of sport videos, rights and participant incentivization. In the i4Q project, Orion is employed to safeguard the integrity of industrial IoT data, including device access policies and critical location information, supporting smart manufacturing use cases. These projects demonstrate the versatility and reliability of Orion as a blockchain database technology in real-world scenarios.

The Orion server, its documentation and client SDK are available on Hyperledger Labs. To delve deeper into Orion’s capabilities, read our paper “Orion: A Centralized Blockchain Database with Multi-Party Data Access Control,” which we presented and published at ICBC 2023

The Orion blockchain database offers a robust solution that enhances transparency, authenticity and integrity across business ecosystems. Orion sets itself apart from other centralized blockchain databases by empowering numerous parties to govern access to shared data. Its broad key-level read/write access control and multi-signature capabilities allow organizations to exercise fine-grained control over data governance and ensure trust in multi-party interactions.

Source: ibm.com

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How data, automation and AI are transforming Business Process Outsourcing into a competitive advantage

When IBM Consulting’s Neeraj Manik spoke recently with a large pharmaceutical client about how to streamline and improve its front-office and back-office financial processes, he pointed to a web of interconnected business challenges the organization was facing: “too many invoices, too many suppliers, too much money being paid to suppliers,” as Manik put it.

Manik, VP and senior partner for IBM Consulting, outlined a massive opportunity to strategically redesign the client’s finance operations and payment processing by leveraging AI, data analytics, metrics and automation. Ultimately, modernizing these processes could save hundreds of millions of dollars, improve the employee experience and make the company more agile and competitive, he says. Manik sees leveraging this technology as a fundamental change from years past, when a company might outsource business processes to save as little as 30% without considering how outsourcing might affect organizational efficiencies, job accuracy, and employee and client experience.

Technologies such as AI and automation have transformed the outsourcing market and BPO services, giving companies the ability to create efficiencies while also modernizing processes rather than relying on offshore outsourcing.

Labor arbitrage, or outsourcing labor to the lowest-cost workforce, has been the central strategy associated with business process outsourcing (BPO) for years. It often meant sourcing customer support, information technology and other office operations from countries with lower costs of labor. Today, though, technologies such as AI and automation have transformed the outsourcing market and BPO services, giving companies the ability to create efficiencies while also modernizing processes rather than relying on offshore outsourcing.

Technology-enabled business process operations, the new BPO, can significantly create new value, improve data quality, free precious employee resources, and deliver higher customer satisfaction, but it requires a holistic approach. Tapping into AI and automation helps businesses streamline and strengthen their operations, while providing rich information that helps enterprises quickly predict and respond to trends and threats alike.

Not only do companies that work with IBM Consulting get IBM’s experience in process design and business strategy; they also get the added bonus of IBM’s deep partnerships with companies like ServiceNow, Celonis and Salesforce. Ultimately, instead of being forced to focus on a single solution or technology, organizations can partner with IBM Consulting to invest in broad, transformational business initiatives and outcomes.

The new BPO is no longer just about cutting operational costs. When done right, it can make a business flexible, smarter and able to quickly scale to meet shifting market conditions. “Modern BPO is a creator of growth, differentiation and competitive advantage,” Manik says.

Spotting hidden opportunities

At a time of rising costs, talent constraints and economic uncertainty, technologically enabled BPO offers an opportunity for companies to build intelligent workflows and leaner processes across finance, human resources, procurement, supply chain and customer operations. According to organizational consulting firm Korn Ferry, more than 85 million jobs could go unfilled by 2030 because there aren’t enough skilled workers to take them. The new BPO enables companies to quickly access more expert, technical, functional and industry specific talent than they can assemble in-house, driving new levels of efficiency across their business functions.

When working with clients, Manik looks for business opportunities that might be hidden under the surface: How can an organization’s BPO capabilities and methods enable a larger business transformation?

“What we can see is sometimes just the tip of the iceberg. There’s so much underneath this that can be unlocked in terms of business value.” Neeraj Manik

“It is our role as IBM Consulting to say, ‘how do we help you connect the dots?’” Manik says. “‘What we can see is sometimes just the tip of the iceberg. There’s so much underneath this that can be unlocked in terms of business value, that can improve how you go to market, how efficiently you run your supply chains, and how you can raise your margin profile.’”

For IBM Consulting, it’s not only about producing a list of recommendations for action, Manik says, but about following through and helping companies implement process automation and manage change, ensure adoption and get results.

The results can be apparent quickly. In the case of insurance giant Generali, for example, IBM Consulting rolled out two new AI assistants in France—one that helped upskill employees and another that interfaced directly with customers. Generali also became one of the first insurance companies to use AI to tackle the complex task of escheatment, or returning unclaimed assets and property. The new tools augmented the work of thousands of insurance agents, saving $1million in the first year of deployment, and increasing productivity by 5%. The program’s success in France led Generali to scale AI solutions internationally.

Seeing the bigger picture

As companies plot their investments in various transformation projects, Manik has one central piece of advice: “Make sure every decision you make about technology starts with and has a clear and direct link to business outcomes,” he says. “It sounds obvious, but it’s something that many C-suite leaders tend to forget as they get excited about new technology or a specific upgrade,” Manik says. It’s his role to help leaders take a step back and look at the big picture: “Don’t focus solely on what to adopt next,” he says, “but ask yourself why you need it in your operating model.”

One car manufacturer, for example, opened up a conversation by asking about an upgrade to its data servers. Manik reframed the question. “Hang on — we recognize your need to modernize, but to what end?” he told them. “How will this technology decision deliver the business impact you need?”

That question sparked a conversation about the carmaker’s larger goals, including its push to produce more autonomous vehicles. “Once we really understood that they are trying to change how quickly they can produce cars and different types of vehicles, we realized they needed a different supply chain design,” Manik says. “We are now on a path with them around supply chain transformation.

“Many times the conversation starts with technology, but migrates somewhere else,” Manik says. “Ultimately, it’s not about adopting new technology for technology’s sake, it’s about rethinking business processes and core competencies to uncover new business opportunities and areas to optimize — sometimes in ways that customers aren’t expecting.”

Source: ibm.com

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Reshoring: The risks of swinging the pendulum too far

From the decades before the turn of the century until the global pandemic, great economic growth spread across the world, driving historic demand in commodities and consumer goods. But this economic growth, coupled with stringent labor laws, drove up labor costs.

By sourcing materials and labor from countries with lower labor and manufacturing costs, businesses were able to capitalize on the economic boom, produce more goods and services, and minimize their costs. Today, businesses continue to look for ways to reduce costs and increase efficiency, and offshore suppliers still minimize costs in most instances for North American and European companies.

However, now we see how brittle these global supply chains are. A perfect storm of disease, war, technological innovation, overspecialization, unchecked climate change and geopolitical tensions have shattered global supply chains and had a significant impact on the global economy.

The total cost of the current supply chain issues caused by the pandemic, labor shortages and the war in Ukraine is difficult to estimate, as the situation is constantly evolving. However, a 2022 report by the World Bank estimated that the global economy could lose up to USD 1.2 trillion in 2023 because of these disruptions. The report also found that disruptions to the global supply chain are likely to have a significant impact on developing countries, as these countries are more reliant on imported goods and services. The report estimates that developing countries could lose up to USD 426 billion in 2023 because of these disruptions.

Deglobalization can build a more resilient supply chain

Deglobalization is an idea gaining traction among organizations worldwide as they cope with disruption. A deglobalized supply chain relies on manufacturing, labor and industries that are either local to the business or in a neighboring state or country.

With a local supply chain, organizations have better control and shorter lead times. Companies can manufacture products closer to the consumer, reducing the risk of disruption caused by natural disasters and geopolitical instability. Deglobalization also offers better transparency into where and how goods are being made and expedites the transportation of good to customers.

Investment into local infrastructure strengthens national economies, and when everything is done within the same legal jurisdiction, it reduces the risk of legal disputes and improves regulatory compliance.

Organizations like Apple, Nike and Tesla have been working to deglobalize their supply chains to gain more control and transparency and to reduce reliance on distant suppliers. Governments are passing legislation to incentivize local production as well.

In 2022, the United States Congress passed the CHIPS Act, which provides roughly USD 280 billion in new funding to boost domestic research and manufacturing of semiconductors in the United States. The European Union and China are investing trillions in their economies to rebuild local industries and create a less risk-prone supply chain.

A new model embraces local and global suppliers

Many industries have almost disappeared from North America and Europe, due to the inability to compete with the low cost of offshore suppliers. As companies look to source their product locally, they are finding that many products are not available or cannot be made without significant capital investments. In general, deglobalization will lead to higher costs for businesses in these geographies because it requires them or their suppliers to invest in processing and manufacturing facilities and pay higher wages to local workers. That cost passes to the consumer and will be reflected in a higher price of goods, so it is likely that only products with low price elasticity will be able to sustain local supply chains. And the quality of goods might suffer as local businesses learn what distant counterparts learned through trial and error long ago.

It’s likely the model that will win out will be a supply chain that contains built-in redundancies, using both local and global suppliers in concert with one another. In this model, if there’s danger of global goods being delayed or unavailable, businesses can reach out to their local suppliers for product. A hybrid supply chain provides flexibility and agility, allowing businesses to quickly adapt to changing market conditions and customer demands. By striking the balance between local and global suppliers, companies can achieve a renewed resilience, effective cost optimization and enhanced customer satisfaction, which ensures the stability and sustainability of their supply chain in the long run.

Source: ibm.com

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Understanding IBM Supply Chain Sustainability: What It Is and Why It Matters

Introduction

In today's world, businesses are increasingly aware of their impact on the environment, society, and the economy. One way that companies can address these concerns is by adopting sustainable practices in their supply chains. IBM, a global technology company, is leading the way in this regard with its commitment to supply chain sustainability.

But what exactly is IBM supply chain sustainability, and why is it important? In this article, we will explore the answers to these questions and more.

What Is IBM Supply Chain Sustainability?

IBM supply chain sustainability refers to the company's efforts to promote sustainable practices throughout its supply chain. This includes reducing its environmental footprint, improving social responsibility, and promoting ethical business practices.

To achieve these goals, IBM has developed a comprehensive program that focuses on several key areas:

◉ Environmental Sustainability: IBM is committed to reducing its carbon footprint and promoting energy efficiency throughout its supply chain. This includes using renewable energy sources, reducing waste and emissions, and promoting sustainable transportation practices.

◉ Social Responsibility: IBM works to ensure that its suppliers adhere to high ethical and social standards, including labor rights, human rights, and health and safety standards.

◉ Ethical Business Practices: IBM has a strict code of conduct that all suppliers must follow. This includes prohibiting the use of child labor and forced labor, promoting fair competition, and adhering to anti-corruption laws.

Why Is IBM Supply Chain Sustainability Important?

IBM supply chain sustainability is important for several reasons:

◉ Environmental Impact: By promoting sustainable practices throughout its supply chain, IBM is helping to reduce its environmental impact. This includes reducing greenhouse gas emissions, conserving natural resources, and reducing waste.

◉ Social Responsibility: IBM's commitment to social responsibility helps ensure that its suppliers are treating their employees fairly and ethically. This can help prevent labor abuses and human rights violations.

◉ Competitive Advantage: Companies that adopt sustainable practices in their supply chains can gain a competitive advantage by appealing to customers who are concerned about the environment and social responsibility.

◉ Risk Management: By promoting sustainable practices in its supply chain, IBM is helping to mitigate the risks associated with climate change, resource scarcity, and other environmental and social issues.

How Does IBM Promote Supply Chain Sustainability?

IBM promotes supply chain sustainability through a variety of initiatives, including:

◉ Supplier Standards: IBM has a strict code of conduct that all suppliers must adhere to. This includes requirements related to environmental sustainability, social responsibility, and ethical business practices.

◉ Supplier Engagement: IBM works closely with its suppliers to promote sustainable practices throughout the supply chain. This includes providing training and resources, and collaborating on sustainability initiatives.

◉ Data Collection and Analysis: IBM collects data on its suppliers' sustainability performance and uses this information to identify areas for improvement and track progress over time.

◉ Transparency and Reporting: IBM publicly reports on its sustainability performance and encourages its suppliers to do the same. This helps promote transparency and accountability throughout the supply chain.

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Three keys to maximize the impact of supply chain business process operations

Achieving transformational business outcomes is about applying the deepest capabilities and talents. Enterprises almost always look to external partners for consulting and technology acumen to accelerate and de-risk supply chain transformation journeys. But too often transformations fail to deliver on their full vision and business case. Frequently that’s because the “last mile” of the transformation—business process operations—didn’t get fully activated. To address this, sophisticated transformation leaders are picking consulting partners who can deliver from advisory to operations, bringing deep operational expertise and capacity to truly forge a trusted partnership for the journey.

Consumers today expect a global supply chain to operate seamlessly, transparently and without fail. Supply chain leaders are yearning for real-time insights and a skilled workforce to design, build and run processes that automate and scale their operations and improve customer satisfaction.

However, the human capital in supply chain talent is both disrupted and scarce. A generational shift is under way. Senior leaders are retiring at an accelerated pace. A new generation of early professional hires seeks to work with data and AI, best-in-class SaaS solutions—not Excel and transactional ERP systems. It’s never been a more challenging time to attract and retain the best talent.

It’s time to stop looking at supply chain BPO providers as lower-cost FTE capacity, and instead look to them as strategic sources of diverse talent needed to navigate an increasingly complex operating environment. Supply chains can be more than a cost to minimize; they now offer an opportunity to fuel strategic reinvention. The next generation of supply chains will do more than efficiently move material from one place to another; they’ll model and underpin resilient, agile and sustainable business operations.

Here are three keys to maximize the impact of supply chain business process operations:

1. Don’t try to excel at operating both the “old” and the “new” supply chains

Excellence in supply chain execution is all about the discipline of staying focused on the operations and metrics that drive the right outcomes. However, one of the biggest challenges in today’s complex world is the immense number of business model pivots that directly impact supply chains.

As an example, most auto makers currently need to grow and manage their internal combustion vehicle supply chains, while simultaneously standing up a whole new supply chain and supplier network for battery electric vehicles.

Additionally, many companies who previously built and shipped products as a one-time sale are now shifting to a product-as-a-service model, which requires a supply chain built to fulfill, maintain, upgrade, repair and redeploy products over a long lifecycle.

It’s nearly impossible for most supply chain organizations to excel at the “new” and the “old” at the same time. Leveraging external partners to provide capacity to accelerate the new, or to automate and take cost out of legacy operations, is essential to success. External partners can provide a better understanding of real-time operations, helping you prevent problems and respond with agility while supporting new business models.

2. Rethink the skills, capabilities, and sources of talent for supply chain success

Supply chain leaders face talent and human capacity challenges in just about every area of the business today. A recent IBM survey of chief supply chain officers (CSCOs) highlighted sentiment that as much as 20% of workforce capacity has “vanished” during pandemic disruptions. Automation used to be viewed as a threat to supply chain workforces. Now most CSCOs view the creation of intelligent workflows and automation as essential to closing the labor gap.

Bringing these new solutions to life will require enormously different skillsets, including facility with data science, visualizations, predictive analytics, machine learning and AI. Forward-thinking supply chain leaders are looking to BPO partners not only for transactional excellence, but also these next-generation skills and acumen combined with new levels of diversity and inclusiveness to co-create the talent bases needed to win in a new world.

3. De-risk your success by committing an operating partner to your outcomes

If there’s one critical mindset change emerging from the recent years of disruptions, it’s that the remit of supply chain goes beyond cost and is critical to delivering enterprise business outcomes and a differentiated customer experience that powers growth. When you couple those new imperatives with the continuing day-to-day challenges reverberating through supply chains, even the best supply chain leaders find themselves requiring more parties who share a commitment to their priorities and objectives. The right Supply Chain BPO partners will become part of the fabric of your business and measure their success by the outcomes they help achieve along the way.

Unlock a powerful partnership for the journey with IBM. Our practitioners bring the latest technology in AI, automation, hybrid cloud and digitization, along with experience unraveling the kind of digital change that crosses lines of business and transforms an enterprise.

Source: ibm.com

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Risk is not static: Exploring the implications of the German Supply Chain Due Diligence Act

Across the globe, there are increasing regulatory requirements in place to address environmental, social and governance (ESG) actions needed to create a more sustainable world. While modern environmental regulations have been around for over half a century, we see increasing government actions addressing forced labor, unfair working conditions and modern slavery. These efforts reflect concerns over human rights in modern supply chains, as depicted by the International Labor Organization (ILO) 2021 report. The report stated that 50 million people globally are in conditions of modern slavery, including forced labor. That figure was up by 10 million people from the ILO’s report 5 years prior.

Environmental concerns, modern slavery, and forced labor require a global response—from the adoption of Sustainable Development Goals (SGDs), such as Goal 8 on Decent Work and Economic Growth and Goal 13 on Climate Action, to country-specific regulations, such as the UK Modern Slavery Act and the California Transparency in Supply Chain Act. In June 2021, Germany responded by passing their Supply Chain Due Diligence Act, Lieferkettensorgfaltspflichtengesetz (LkSG).

LkSG requirements and considerations

Starting January 1, 2023, companies based in Germany or German-registered branches of foreign companies with over 3,000 employees must create/update business processes to identify, assess, remediate, prevent, and report on both human rights and environmental risks and related actions of not only their own area of business and direct suppliers, but also their indirect suppliers. Failure to comply with LkSG can result in fines of up to 2% of annual turnover, and/or exclusions from being awarded public contracts.

In response to the requirements of LkSG, we believe there are three important points a company should consider:

◉ Risk is a variable, and should therefore not be addressed as a static, once-a-year check exercise. Finding a holistic way to address dynamic environmental, social and governance risks proactively must be a priority.

◉ Companies across a supply chain desire to be efficient in achieving regulatory compliance. Suppliers often respond to multiple questionnaires from their clients and the time and human resources required to respond to questionnaires can be significant. It is important to find solutions that minimize the burden on the supplier.

◉ Regulatory requirements are on the rise globally, including those applicable to ESG practices, Companies can improve their operational efficiency by implementing compliance solutions that are responsive to evolving regulatory requirements and that can scale to meet their business needs.

To address these issues, IBM and FRDM have partnered to provide a human rights and environmental risk sensing and management solution. The solution uses big data and AI to generate real-time risk signals, up to the supply chain third tier, and provides a team with the ability to respond to these signals and connect suppliers to mitigate risks. It enables companies to detect issues in a timely and dynamic manner. To minimize the cost of compliance to suppliers, there is no cost to sign up to the platform. And the solution is expandable to address changing regulations.

Addressing risk proactively and dynamically

LkSG requires companies to establish a risk management system, perform regular risk analysis, lay down preventive measures for own area of business and multiple tiers of suppliers, and take remedial action. Its scope is broad and extends beyond the companies’ tier 1 suppliers. The main challenge with risk is that it isn’t static. Self-assessment, survey-based tools in the market can only provide a snapshot of a company’s business and supply chain risks, and administering surveys and processing results can be time consuming and resource intensive. These tools are also usually unverifiable, and companies need to trust the accuracy of responses. To address risk proactively and dynamically, it would be desirable to implement a solution that can constantly update and keep abreast of changes in the supply chain and risk levels, while ensuring the information is current.

The IBM FRDM solution leverages big data to generate insights on supply chain environmental, social, and governance (ESG) risk from tier one suppliers to tier 3 suppliers. This platform leverages a company’s spend data and third-party data (including news sources, trade databases, and sanctions databases) to map supply chains and commercial relationships and generate a live risk assessment of a company’s supply chain. Most notably, the proprietary product genome database can build a predictive build of materials (BOMs) that breaks down your purchases to determine the material and services inputs, allowing the platform to map risk up through the third tier. The platform creates dashboards for companies and their suppliers with live risk rating and issues alerts powered by machine learning for ongoing risk alerts. It also provides a forum for supplier engagement on remediation and enables report generation on progress updates and impact tracking.

The IBM FRDM solution also provides risk management and response management services that assist companies with taking remedial action, documenting, and reporting on the applicable due diligence obligations. These services include coverage of and a first-level response to risk alerts, supplier questionnaires, and risk assessment changes. IBM can provide a third-party review of supply chain whistle-blower reports and help to ensure timely escalations to the appropriate parties and expeditious remedial action.

Reducing the burden on suppliers

Suppliers routinely receive audits, surveys, and requirements for trainings from their many customers, generating not only fatigue for their teams, but also a financial burden. It would be desirable for businesses to develop and implement processes that are effective and efficient for complying with LkSG, and to partner with suppliers to lessen the collective burden of compliance.

Most risk assessment platforms in the market today rely on supplier-filled questionnaires and are not verified through audit. They are backward looking in the sense that they ask suppliers about measures they have put in place to mitigate risks. Some of these platforms also charge the supplier a fee to respond to the questionnaire and have their data available to their customers. The IBM FRDM joint solution uses big data to generate insights and risk ratings at no cost to suppliers and doesn’t require suppliers to sign up for any special platform.  Moreover, if companies want to take a deeper dive into their suppliers, they are able to deploy a free digital supplier assessment within the platform.

Having no supplier cost allows companies to collect information from all their suppliers, not just their strategic partners with high order volumes that can pay platform fees. Smaller suppliers can also afford to participate, which is especially important as LkSG requires companies to look at all suppliers, the smallest of whom are more heavily burdened by platform/survey costs. This also means that the companies don’t have to pay out of pocket to cover the cost for these smaller suppliers.

The IBM FRDM solution also saves suppliers time—they don’t have to pay for the platform or module, and they don’t have to be trained on a new platform where they would be entering data. This allows the suppliers to focus on higher value activities, and helps reduce their survey fatigue. Overall, this allows companies to foster healthier relationships with their suppliers, and create more effective supply chain operations.

The evolving regulatory environment

LkSG is Germany’s response to holding companies accountable to creating and nurturing more equitable and sustainable supply chains. It follows other regulations in Europe, such as the French Duty of Vigilance law and UK Modern Slavery Act, and regulations around the world, such as the Australia Modern Slavery Act and California Supply Chain Transparency Act. A similar European Union-wide act is expected to be effective in January 2024.

Companies need to build capabilities that allow them to be nimble and react in a timely manner to growing regulatory demands. With a large number of requirements, it becomes challenging to build teams with expertise in every type of environmental, social and governance request. IBM’s managed services help companies understand the requirements, manage the data, and prioritize follow-up and remediation. With a global presence, IBM is also able to set up local teams that understand the requirements and can work in real time, on the ground with clients. These teams serve as a first level response to risk alerts, supplier questionnaires, and risk assessment changes, and route necessary escalations to the responsible parties in the company.

The IBM FRDM solution provides the ability to adapt to changing or expanded many regulations through AI and machine learning and provides local teams with deep expertise and support.

Conclusion

LkSG is but one of the more recently enacted government regulations on supply chain responsibility. As regulatory bodies, consumers, and employees continue to demand more due diligence around protecting the people in the supply chain and the planet that we inhabit, companies must design and implement solutions that can address risk as a dynamic variable, and scale with the changing environment. Risk is not static, it is ever-changing, and companies need more than a snapshot of their supply chain risk to adequately address shortcomings. The IBM FRDM solution is forward-looking and can adapt to new risk factors and indicators, and expand with new legislations and requirements. IBM and FRDM are ready to support companies as they continue to improve their practices to safeguard the planet and people globally.

Source: ibm.com

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