Your Data Supply Chain Is Broken - Here's How to Fix It

[Transcript]

[00:00:00] Jan Griffiths: This is the Auto Supply Chain Champions Podcast. We are on a mission to bring you real conversations with the leaders who are transforming supply chains in the automotive sector. These leaders are true champions of manufacturing, and we're here to share their stories. I'm Jan Griffiths, your host and producer, and I'm joined by my co-host, Tom Roberts, Vice President of Strategic Industry Development at QAD.

[00:00:30] Tom Roberts: Great to be here, Jan. What I see every day is simple: manufacturers don't have a data problem; they've got an execution problem. This show is about how artificial intelligence, systems of action, and empowered teams can help close that gap.

[00:00:45] Jan Griffiths: Let's get into it. This podcast is powered by QAD RedZone. Hello, and welcome to another episode of the Auto Supply Chain Champions podcast. Let's check in with my co-host, Tom Roberts. Tom, how are you doing?

[00:01:01] Tom Roberts: Hi, Jan. Doing well. Just getting ready for the American Manufacturing Summit next week, getting my presentation ready to go. So, excited about that.

[00:01:09] Jan Griffiths: That's good.

[00:01:10] Tom Roberts: Good to see you.

[00:01:10] Jan Griffiths: Yeah. Well, I've been spending time talking about tariffs and the refund process, as you can imagine. And I read a stat that said, " Did you know there are over 52 million transactions that have to go through this refund system. I mean, what?

But it made me think, Tom, about data and how we handle data in this industry. And I know you are more of the data guy than I am because of your IT background, but it made me think about the auto industry and how we spend decades optimizing physical supply chains. We're very, very good at it. But that data supply chain, if you think about it in supply chain terms, that data supply chain is still broken.

Critical information about parts, materials, carbon footprint, quality systems, it still lives in thousands of disconnected systems. And I know there have been attempts over the years to try to bring all that together, but now we have a system. We have a system called Catena-X, and it's trying to solve that exact problem.

And that's why I am thrilled today that we are bringing on the show, Kevin Piotrowski. If you don't know Kevin, he is the Chief Transformation Officer for AIAG, and he is going to enlighten us all on what Catena-X is and why you need to know. Kevin, welcome back to the mic.

[00:02:40] Kevin Piotrowski: Oh, thank you so much, Jan and Tom, and I certainly appreciate being here. Very excited to give you guys a lot of updates on what's been happening over the last six to nine months in Catena, 'cause it is a very fast-moving technology.

[00:02:53] Jan Griffiths: It is. Kevin, answer this very simple question, please: What is Catena-X? Now keep it simple. Don't get all data geeky on me now. Keep it simple.

[00:03:04] Kevin Piotrowski: Right. In its simplest terms, it's a way for companies to move data and exchange data, but not just point-to-point, across their entire supply chain. So, it's a simple way for companies to move data inside and out. And there's some really important reasons why it's more important than just having data within your four walls.

[00:03:25] Jan Griffiths: So, tell us what are they?

[00:03:27] Kevin Piotrowski: So, for example, a number of years ago all the rage was data analytics. It was get data within your four walls, which was difficult enough, right? The terabytes of data that were inside somebody's four walls, get that data, move it down to the right person into the organization to actually make a decision on it. That's all changed, right? So, the data itself has changed.

We're talking about complex data, digital twins, passports, product passports, battery passports, product carbon footprint data. So, this is pretty complex data. It's also sensitive; the IP needs to be protected. So, data sovereignty, encryption, and cybersecurity are all attributes that didn't necessarily exist 10 years ago when we exchanged data.

The other big difference is where that data is going. As we move data throughout a supply chain, one thing that's very different, and this is super important, Jan and Tom, and for the audience, is that the data that used to be needed to make decisions typically was within your realm, within your four walls, within your enterprise. Today, 60, 70, 80% pick a number, but it's a big number. They need data outside their four walls to make the proper decisions. Data from their supply chains, both up and down. And so, that is a key difference that did not maybe exist 10, 20 years ago, or people didn't worry about.

[00:04:56] Tom Roberts: So, Kevin, in my past, I've had a little bit of experience with self-declarations, conflict minerals, all those kinds of things. The one thing that was always drilled into me was you can't expose your supplier list to someone else. That's something you can't do. How do I have this federated model with Catena-X, but still protect my supplier list?

[00:05:19] Kevin Piotrowski: And that's so critical, not only for things like product carbon footprint, but think of a digital twin, right? It's everything about your product, so you don't want that going out too far. But in terms of suppliers, there's actually a couple of components. One is a legal component that's between a customer and supplier work through purchasing, where they decide what data is going to be shared and on what frequency, and that's part of the data sovereignty.

That information only goes either one level up or one level down. Beyond that, that you don't get access to the other person's data. You just get to see potentially some of the impacts of that data. An example would be your maps in a car that we all typically use, right?

So, there's an accident two miles up the road, maybe it's just information and you're gonna be stuck in it. Or maybe if there's an exit you can get out and work your way, navigate your way around that problem. So, you get a notification, but you don't know the cars, you don't know the people, you don't know who's at fault. You don't know any of the sensitive information. You just know there's a problem and you have a way of navigating or fixing it for yourself to get around that problem without any proprietary information being shared. That's a very simple example.

[00:06:36] Tom Roberts: So, if I'm tracking sustainability, carbon footprint, something like that, and I'm a tier two, I don't have to share a lot of information, but I can say that my carbon footprint was X on this particular part, and I send it to tier one, and the tier one adds there, you know, they have their value added, their assembly, and so forth. So, they add my tier two number with their number, and then it goes to the OEMs, and they add theirs, but I didn't necessarily have to share anything. They just have that information as part of that.

[00:07:02] Kevin Piotrowski: Correct. And the OEM, in this example, is not seeing the tier two. They're just seeing the results of the tier two that's reflected in the tier one.

[00:07:09] Tom Roberts: Excellent.

[00:07:10] Kevin Piotrowski: Yep, that's exactly it. And that data sovereignty, when you hear that term, that's one of those data attributes. It's making sure everybody has access only to the data they should see and to nobody else's.

[00:07:23] Tom Roberts: You called this, Kevin, you called Catena-X a movement. I kind of like that, but why? Why do you call it a movement?

[00:07:30] Kevin Piotrowski: So, we talked a little bit about how you need data outside your four walls to make decisions. And we talked a little bit already about what types of data and its complex data, right? It's pretty significant. These are hundreds of data sets, not just a few fields.

If you start to look at what are some of the key things that drive this from a business perspective, right? So why this is important. Well, you need data to be clean, right? No matter what you're doing. Clean and accurate and good data. So that's in the very early stages, inside, outside, wherever it is, it needs to be clean.

The very second step in keeping it very simple is you have to be able to move that data. You have to be able to exchange that data and transport it somewhere. So you have to be able to move it. Then, the question becomes, where is that data moving to, and what are you doing with it?

So, in a lot of cases now it's gonna be shared and connected to go into AI engines, whether those are large language models or generative AI, instead of moving it down the organization for an individual to make a decision, AI, in a lot of cases, will be making decisions and making recommendations 'cause they can process a lot more transactions than any individual, right? You're talking about millions of transactions per second.

But beyond that, where would that data go from AI, even if you were moving it forward? Robotics is a key piece, right? So there's a variety of robotics that you're gonna see with their own AI enabled. So if you think now, this path which was, in some respects, siloed even as of a year ago when folks were talking about that, there was AI over here, there was Catena-X over there, there was robotics over here. Today, many companies, and especially on the IT side, are merging all those groups together, 'cause they realize it starts with data, it works its way where you need to exchange it in a secure way, and then it goes to AI engines, and then it goes to robotics. And that's a much more integrated approach to getting value out of that initial data, the terabytes of data that's out there.

So, one of the questions I'm thinking, Jan, is, Tom's in the IT world as well, and what are some of the customers asking of you, Tom, and your team to work on in terms of all this data that we're talking about?

[00:09:44] Tom Roberts: We have started to get some questions about Catena-X from some of our customers, or at least from our customers who have to deal with their customers. That is starting to come up, so the questions that I would have, what kind of systems do I need to have in place? Like, say that I'm a tier one supplier, tier two, what do I need to have in place to meet some of these requirements?

[00:10:07] Kevin Piotrowski: So, great question, because I think we're now going, and where we saw with this movement, Jan, just to continue on that question, is that Catena-X is approaching its fifth anniversary this summer. The first year or two, it was kind of around design. The next year or two was around development. Last year was around a lot of pilots and proof of concepts where companies started doing things in North America, especially around product carbon footprint and quality, and a variety of use cases.

And this year, the movement is really moving more toward adoption. And so the question then becomes is how do you move quicker? How do you get more success faster? How do you get to value faster? And so, with Catena-X and AIAG, there's a Readiness Booster Program. It's, for lack of a better term, it's a 12-week onboarding to get you streamlined access to value. It includes training, it includes getting your ID on the network. It includes setting up an enterprise data connector, which is like the pipe to move data. It includes some testing to get data to move back and forth between you and a supplier, or you and a customer, and all this is at a pretty reasonable cost.

So, there's a program in place to get people to value quicker, and the beauty of it is there's a lot of flexibility, right? So, companies, suppliers, whether you're big or small, you can use one of your software providers already. If you're fairly large, you typically have a lot of software companies. They're working on getting their solution certified on the Catena-X network.

In many cases, you can build your own. This is all open source code. So we're seeing companies come in and hey, I'm gonna build my own solution rather than buy one from one of the existing software providers. So, that's an option. And if you're real small, so think of a small guy out there and someone says, hey, I need your product carbon footprint data. Well, they go, hey, I only have two part numbers that I deal with, you know, the data is not changing that often. So there's a way for them actually even to create an Excel file, give that to a provider company, who will take that Excel file, put it into the Catena-X format, and move that data along for them. So it's a very low-cost option for those small suppliers that don't need a full-blown system. So, from big to small, we think we have it somewhat covered across the board.

[00:12:28] Jan Griffiths: Kevin, what are some of the challenges that you're faced with this? I mean, I could just imagine some tier ones and tier twos just rolling their eyes and going, oh, another system, really? I mean, that's gotta be a huge challenge, right?

[00:12:41] Kevin Piotrowski: Yeah, I mean, a key challenge for companies is at the simplest level it needs to start with a strategy, right? What's my strategy for data? How am I gonna get access to the data within my enterprise and make it available to even share, right? And what data am I gonna share?

So I think a lot of companies have sometimes thought about it, trying to go right to the solution versus kind of formulating their strategy which works best for them not only to comply with a customer requirement, if that's what they're doing, but also to really leverage this to work with their suppliers so they can extract that same level of value down the supply chain.

So that, I think, is certainly one key challenge that companies face, just, hey, let's build a strategy of how we're gonna actually approach this.

[00:13:28] Jan Griffiths: Yeah. I like that because that goes back to my opening comments about your data supply chain. It's about where is your data? Ask yourself that question, and like you say, what is the strategy? How many companies have done that? Some have, some have not. This is the time to do it.

[00:13:46] Kevin Piotrowski: And a lot of that data is not inside your four walls or inside your enterprise anymore. So, trust, I think it was brought up earlier, and it may be a different way, but trust up the chain and down the chain is gonna become a very key factor.

[00:14:01] Jan Griffiths: Yeah, we're not good at that in automotive, you might have noticed. Trust in the collaboration, and collaboration suffers because of the lack of trust. So, I agree with you, Kevin. I think that yes, it does, it needs to happen, but there's an awful lot of work that has to be done on those relationships between the OEMs and the tiers before that can really gain momentum.

[00:14:26] Kevin Piotrowski: Going right with that, the challenges of extracting the data out of your enterprise, right? So that isn't always as easy as it could be. It depends on your internal systems. It depends on how many you have, where that data is, how common you are versus if you're very disjointed with 10 different ERP systems or 20 different ERP systems. Some of that data could be more challenging to obtain.

If you're already done a lot of that harmonization and commonization, and you're a software supplier already certified in the network, it would be, it'll be far easier. So it does vary also by a customer; there's no one-size-fits-all, and here's the answer. It's different for each and every supplier.

[00:15:07] Tom Roberts: You brought up an interesting point there. So most of the data source for this is ERP, not probably PLM or something else. It's mostly ERP.

[00:15:15] Kevin Piotrowski: It's all of those systems. It could be IMDS, it could be ERP, it could be PLM, it could depend on the use case being selected.

[00:15:24] Jan Griffiths: Now, I've seen a lot of buzz on social media lately about a conference coming up on May 21st. What's that all about?

[00:15:33] Kevin Piotrowski: So, all the things we just talked about, all these issues, we are setting up a conference. It's the first conference AIAG is having. It's Elevate in Detroit. It's on May 21st, but it's all around breaking down the barriers, having discussions, having OEMs share their plans, having suppliers share their plans on what they're doing in terms of Catena-X, and what they're trying to accomplish in terms of data collaboration. What they expect from their suppliers, but also to hear from the suppliers some of the challenges they're facing in implementing these things.

And one of the things AIAG has done is the hub for Catena-X in North America. We've worked with our members. We have about 5,000 members. So, we got input from our members to say, what are the most important use cases?

Today, within the Catena-X ecosystem, there's 25 or so with variations of use cases that are available. Well, we've picked five or six to do pilots on with OEMs, with suppliers, with solution providers, and we're working those hard now, but we're also looking to work with our OEMs and tiers to even narrow that down to maybe one or two or three, so that it's easier on the supply base to adopt.

Imagine if you're a supplier and you get asked from 10 OEMs to work on 10 different use cases, that would be very difficult. So why not consolidate that down? Have everybody pick one or two; that way, if you're a supplier, you only have to focus on one or two. That would work for everybody in these initial stages. So, anyway, that's stuff we are working on and hope to have more information to share at this conference.

[00:17:11] Tom Roberts: Kevin, two years, five years, where do you see this in two years, and if I map out five years, where do you see the adoption levels and the collaboration?

[00:17:21] Kevin Piotrowski: So, when you think about it, we kind of talked a little bit about the timeline, you know, Catena-X is approaching year five. That's primarily in Europe, right? In the US and in North America, Canada, Mexico, it's maybe year two or maybe even year one, I would say right now, but it is rapidly expanding. So we're seeing a hub gonna start up. It was just announced in India. We're seeing for their automotive market. We already have hubs all around the world, China, Spain, et cetera. So, these hubs will be just like AIAG as a North America hub; it will be there to help broadcast the message. So, I see this expanding more and more globally in two years.

Then, in five years, you know, I would expect a lot more adoption, but not just adoption for the sake of adoption. For value, right? This has the potential to save, just like EDI and Common EDI and common barcoding and common quality requirements have saved the industry, you know, probably billions of dollars over the decades. This has that same promise. It has the same ability or capability to do that, and even maybe bigger because this not only is for automotive, but this goes across a variety of industries outside of automotive.

So, imagine if you're an electronics provider and you provide something, a chip that goes into a circuit board, that then goes into a vehicle that's automotive, but that same person who's making chips is selling 'em to somebody else, that is in the electronics industry. They don't want to report product carbon footprint or a battery passport or any of these other things, multiple ways. So, this is one way across many industries. So, the sky's the limit, but it will take some time to get there.

[00:19:06] Jan Griffiths: I mean, this is not something to be ignored. This is something to truly embrace, and if you wanna understand more about it, we will drop a link into the show notes. I know I will be at the conference on May 21st, because I want to feel the tension between the OEMs and the suppliers, and I don't mean that in a negative sense because there's gonna be a little bit of tension there, but I wanna understand it. I wanna embrace it, I wanna ask questions, and I wanna get deep into the detail. And Tom, you're gonna join me, right?

[00:19:37] Tom Roberts: Absolutely. 100%.

[00:19:39] Jan Griffiths: Okay.

[00:19:41] Kevin Piotrowski: We'll be glad to have you and participate. And that'll be fantastic.

[00:19:45] Jan Griffiths: Yeah. So, Kevin, we'll see you on May 21st. Thank you for sharing all about Catena-X with us today.

[00:19:51] Kevin Piotrowski: Thank you. Glad to be here.

[00:19:53] Jan Griffiths: We love to hear from our listeners. Reach out to any of us; our contact information is in the show notes. And if you want to dive deeper into our content, check out our website at autosupplychainprophets.com.