Supply chain technology is stronger on resilience than ESG

There’s probably not a single supply chain professional on the planet who hasn’t managed to utter the words “visibility”, “resilience” and “agility” over the past two tumultuous years.

In striving to bring these qualities to their supply chains, organizations have turned to Industry 4.0 technologies such as artificial intelligence (AI), machine learning (ML) and the Internet objects (IoT). This technology is reshaping the way businesses operate in a world of uncertainty and disruption.

Leanne Melnyk is Head of Global Supply Chains at Diginex, a blockchain-enabled SaaS solution for ESG reporting. Asked how Industry 4.0 technology helps organizations build supply chain resilience, she replies, “Since the dawn of Industry 4.0, supply chain transparency has matured. “

Melnyk adds that with a greater focus on environmental and social risks, the demand for transparency “extends to the upstream parts of a company’s supply chain”, and that this means “more data will have to be collected from multiple actors, including indirect providers”. and workers”.

“This increases supply chain resilience as the physical is connected to the digital, opening up new avenues and providing real-time insights and visibility into processes and operations at all levels.”

Striking examples of Industry 4.0 at play in the supply chain

There is no doubt that Industry 4.0 technology is revolutionizing the way business is done, and Melnyk can cite some outstanding examples of innovation in the ESG space. One such example is Diginex customer Tat Win – a major latex manufacturer.

“Tat Win is an upstream partner in complex supply chains that produce end products such as medical PPE, as well as consumer goods, such as balls and adhesives.

“There was a significant responsibility to ensure supply chain transparency for its end consumers, including around protecting the rights of vulnerable worker groups.

“Thanks to our blockchain solution, Tat Win has visibility into the recruitment and employment of migrant workers – from their country of origin to their place of work – and is therefore able to proactively address risks before ‘they only get worse.’

She adds: “The data and information collected allowed the Tat Win team to put in place action plans to strengthen policies, management systems, due diligence and remediation practices.

Outside of Diginex customers, Melnyk cites another outstanding example of Industry 4.0 innovation: the case of ESG transgressions aboard the bulk carrier Fortune Genius.

When Fortune Genius entered Australian waters, the International Transport Federation (ITF) – the global shipping union – carried out a digital inspection. Through its technology-based complaints channels, the ITF learned directly from the ship’s Myanmar crew that they had been forced to work excessive – and unpaid – hours. It was essentially forced labor.

“The ITF multilingual app has an SMS number and hotline, Facebook page and Seafarer centres. This is a powerful illustration of how multi-party due diligence systems, backed by technology, can effectively detect and resolve labor issues in supply chains,” Melnyk says.

Aerospace manufacturing, a hotbed of technological innovation

Evan Sloss, EMEA Director for iBASEt, a company that simplifies complex manufacturing with digitally integrated solutions. According to Sloss, complex manufacturing is an area where technology makes a huge contribution.

“Aerospace manufacturers are using Industry 4.0 technology to keep pace with the rapid changes required during production, sometimes just at the last moment,” says Sloss. “The sophisticated nature of space technology means that production processes often require sudden changes due to new technical designs and updated project requirements.

“When this happens, production line equipment can send triggers to automated carts to find and load smart pallets, then deliver them as needed. Replacement supplies can then be automatically ordered from the inventory system. In many cases, this complex chain of actions can be managed without any human intervention. »

Industry 4.0 technology ‘falls short of ESG due diligence’

While technology is doing wonders in many areas, Melnyk believes it has yet to make an impact in others, such as business due diligence. “Transparency on due diligence has not progressed as quickly as it should have,” she says. “This is largely due to the lack of scalable due diligence systems that can touch the entire supply chain.”

Melnyk cites a 2020 report published by the European Union, in which only 36% of companies surveyed said they publicly disclosed the processes they followed to prevent risks and human rights violations throughout. of their supply chains – and that even fewer were following such protocols when it came to upstream.

“This ineffective oversight can be addressed through a combination of stronger mandatory due diligence legislation and new technologies, including the use of blockchain.

“Until recently, the highly analog nature of the upstream part of global supply chains meant that most companies relied only on social audits to identify risks, while supply chain due diligence Procurement calls for a stronger mix of smart metrics, including engagement with stakeholders, proactive monitoring and target setting.

Melnyk points out that even though the market for socially responsible supply chain tools is expected to reach US$2.7 billion over the next five years, “many supply chain tools have reported the same problems that exist with the social audit”.

She adds, “Most of the business tools are designed for big brands and cost an average of $30-$50,000 a year. And, while there are tools that focus on upstream supply chain actors and others that focus on workers, very few create a bespoke end-to-end due diligence journey for everyone. the partners.

This, she says, means that today’s digital tools can miss “hidden” agents, such as contractors or lower-tier suppliers. “We need affordable and scalable tools that speak to businesses and workers downstream and upstream, and that provide relevant data for all parties,” she stresses.

Industry 4.0 technology and supply chain cybersecurity concerns

Another area where many believe advanced technology has a ways to go is in cybersecurity. Cybercriminals are known to target supply chains to gain “backdoor” access to upstream multinational targets.

A recent report from a consulting firm Capgemini pointed this out, suggesting that Industry 4.0 technology is on the way out smart factories open to cyberattacks and that urgent action is needed. Sloss, for his part, agrees that organizations need to be wary of the vulnerabilities that come with the technology.

He says: “Industry 4.0 brings many benefits, but an increasingly connected factory producing more and more data also increases the potential attack surface that criminals can attempt to exploit.

“Manufacturers should be aware that this means cyberattacks are a much more realistic threat than ever before.”

This is followed by Sloss saying that in order to combat this risk, companies need a strategic approach to security. “At a fundamental level, they need to establish private networks within the larger system so they can isolate zones, divide network flow, and separate end users and critical applications,” he advises.

For his part, Melnyk believes that, deployed correctly, blockchain has the ability to counter cybersecurity risks. “If everyone in the supply chain knows who the other players are, then a cyberattack on one side doesn’t necessarily mean everyone goes down with them,” she says. “So if an attack were to occur, it could remain isolated at this point in the supply chain.”