FIFTH EDITION Sheds light on his company’s expertise, helping customers increase their operational efficiency
WELCOME
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ur June issue of CHAIN has landed! We are excited to bring you your latest instalment of global supply chain news, together with four exclusive interviews guaranteed to inspire. This month’s cover story comes courtesy of logistics consulting firm GCL Group (p6). Managing Director Charles-Antoine Marcil shares how GCL supports companies on their journey towards operational efficiency and excellence. Charles-Antoine stresses the importance of not putting all your eggs in one basket and having a plan B! Plus, we talk sustainability with Jerwin Tholen, Partner Sustainability at KPMG Netherlands, and Anne-Cecile Moreno, Director in KPMG Global Climate Risks and Decarbonisation Hub (p94), while Capgemini Invent’s Door van der Wiel and Dico van Dijk explore how companies can take their first steps towards a more sustainable supply chain (p30). Climate change is also a subject close to the heart of our fourth and final interviewee, Dr Jan Joachim Herrmann, Partner at PwC Deutschland (p68). Dr Jan kindly shares his key future procurement trends, so look no further for top tips on maximising business success. All this(!), together with a host of fascinating features focused on all things supply chain… We hope you enjoy!
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+44 (0) 203 890 1189 enquiries@ithink.media All rights reserved. Every effort is made to ensure the accuracy of material published in CHAIN Magazine. However, the company cannot accept responsibility for the claims made by advertisers or contributors, or inaccurate material supplied by advertisers. CHAIN magazine is a product of iThink Media Ltd. Company Registration Number: 10933897. Company Registered in England and Wales
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FIFTH EDITION
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GCL Group’s Charles-Antoine Marcil on increasing operational efficiency
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The future of self-learning factories
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Capgemini expounds the virtues of a sustainable supply chain
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Supply chain tech start-ups have thrived during Covid
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How can we cut the carbon footprint of the pharma industry?
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Dr Jan Joachim Herrmann, Partner at PwC Deutschland, on the major procurement trends for 2022
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Are lean manufacturing principles outdated?
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KPMG Netherlands talks sustainability, net-zero and decarbonisation
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The first digital supply chain platform for textile businesses
Jerwin Tholen
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Dr Jan Joachim Herrmann
Charles-Antoine Marcil
Dico van Dijk & Door van der Wiel
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COVER STORY
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SUPPLY CHAIN VISIBILITY: IMPLEMENTING THE RIGHT TOOLS Charles-Antoine Marcil, Managing Director at GCL Group, sheds light on his company’s expertise, helping customers increase their operational efficiency.
CL Group is a logistics consulting firm, assisting customers in their logistics and supply chain optimisation projects. Based in Montreal, the company has offices around the world, working across multiple industries. Charles-Antoine Marcil is Managing Director at GCL Group.
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His role is to develop the business and identify new customers, trends and challenges with which to assist customers, as well as recruiting the right people to build his team. GCL Group has three pillars of expectation for team members:
1. Curiosity – be aware of what is happening in the market and in the supply chain industry.
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2. Collective intelligence – collaborate cross-functionally across the team to bring the best solutions to customers. 3. Engagement – engage with customers, with the supply chain community locally and internationally, and within the company to promote an entrepreneurship mentality.
Many challenges are currently impacting supply chain globally. The labour shortage remains a problem for many companies in Canada and around the world. Charles-Antoine explains, “People are having issues recruiting staff, so they want to keep the workforce they have. They are looking at alternatives to better use their resources, such as
automation and robots, which can help workers to be more efficient. Also, Robotic Process Automation (RPA) can help to reduce manual work that is not value-added. We recommend automation technologies in warehouses in order to better use the workforce. We also propose resources from our team to help the customer achieve their supply chain projects.”
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The environment is also a huge topic for companies like GCL Group in helping customers to fulfil their sustainability ambitions. Charles-Antoine continues, “We recommend strategies to support companies in their aim to have a better impact on the environment, taking into account transportation or the mode of transport, for example. We look at the impact today, and the strategies we can use to reduce that impact in the future, such as infrastructures that are more sustainable. With 10
ecommerce, there is a lot of packaging involved in moving products around the world, so we also have to ask how we can make that process greener.” Sustainability strategies are becoming increasingly important for GCL Group’s customers, but Charles-Antoine believes it is crucial that companies take action to help protect the planet for future generations. He adds, “We need to consider what strategies we can take to make sure the supply
“We need to consider what strategies we can take to make sure the supply chain has a reduced impact on the environment” equipment, organisational structure, and automation, aiming to improve the overall effectiveness of operations.”
chain has a reduced impact on the environment.” Charles-Antoine says, “Because we touch different industries, we can bring the best practices from one industry to another. Our value proposition is built around six different expertise areas, but most projects are in logistics, warehouse design and distribution centre layouts. This involves everything that happens inside the four walls of the warehouse or distribution centre, such as optimising process,
The second expertise area is around information systems. Charles-Antoine explains, “It is about making sure that companies have the best solution to be able to support the physical processes, revolving around warehouse management systems, transport management systems, supply chain automation, and everything related to Industry 4.0. “There is another expertise touching the supply chain, including suppliers, import/export and inventory levels. We have seen a lot of disturbance over the last two years due to the Covid-19 pandemic, so supply chain projects have become increasingly important. A lot of customers 11
are asking questions about how everything will look five years from now. We are putting strategies in place to support the growth of these companies.” Outside of the warehouse and distribution centre, another of GCL Group’s expertise lies in optimising the distribution network. Charles-Antoine says, “We look at warehouse positioning in a geographical area, whether it is throughout Canada, the
the supply chain community, helping them to learn best practices via webinars and training sessions, as well as providing interim management. Charles-Antoine adds, “We offer resources from our team to support projects, or lend a hand as analysts or project managers. Companies lack the expertise, resources and time, so that is where we come in, making sure that their projects will be successful.”
“Pedlex is a partner we recommend to customers to get the optimum equipment for their needs. They come in and do the installation, making sure everything is set up properly, with us acting as project manager” Charles-Antoine Marcil, Managing Director
US, or the world. Where should we put our warehouse and distribution centres to make them more efficient and reduce the distribution costs? With ecommerce on the rise, a lot of our customers are asking how they can be more efficient in delivering on the last mile, especially since Amazon has set the benchmark of same-day deliveries.” The last expertise areas centre around training and coaching of 12
In supporting companies on their journey towards operational efficiency and excellence, CharlesAntoine says the starting point is always a review of their operations. He continues, “It is about understanding where the company is at the moment, compared to best practices in their industry. With their data and having talked with their people, we can understand the business, its challenges, and identify opportunities. We take a human approach, which our
Pedlex is a proud partner of the GCL Group
Freestanding mezzanines
Modular shelving
Modular cabinets
Modular building
Pallet racking
Security systems
Ergonomic workstations
High-rise shelving 13
customers really like, as we can pull together information from the people who work in the operations. From there, we build scenarios, action plans and strategies to make sure their vision, growth and expectations can be met, with the right tools, systems, equipment and people in place. We work as a team, cross-functionally across the different expertise areas, to ensure our customers get the best solutions.” Some customers come to GCL Group knowing what is lacking in their supply chain and where to focus their attention. They just want to confirm that the actions they are taking are appropriate. On the other hand, other companies are unable to pinpoint where they are going wrong. Charles-Antoine says, “Looking at the financial data or service level, for example, we can start to understand how we can help. Audits and diagnostic tools determine where the company is today versus best practice in their industry. An action plan can be put in place to benchmark what they are doing. We use different tools to look at their strategies, financial data, operational data, organisational structure and KPIs, to make sure we can really understand where their issues lie.” 14
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Some factors may be external, such as the Covid-19 pandemic, which affected all businesses around the world. Ships and containers were stuck in ports, so companies had to look into alternative measures, such as buying locally or using different products. Charles-Antoine says, “We developed a webinar for companies on how to review their supply chain and manage risk. Evaluating your current suppliers and ensuring you have good strategies for new product introduction are key to making 16
your supply chain more efficient. A lot of companies ship in products from China because it is cheaper, but that became an issue during the pandemic. Identifying risks and not putting all your eggs in one basket will help to mitigate against future challenges.” Charles-Antoine highlights the importance of having a Plan B in the event of the unexpected happening. He elaborates, “If we have an issue today or in the future, how can we help the company to keep running and ensure everyone continues to obtain
“We help companies select the right solution and implement the right tools to make sure they can have good visibility in their supply chain”
their objectives? It is a question of strategy. A lot of companies have come to us in the last month for different strategic projects. Take network optimisation, for example. How should we organise our network and our supply chain in order to integrate risk management and make sure we can compensate for those risks? We have developed such supply chain strategies, whether opening or closing facilities, or asking partners to support us to offer greater flexibility.” One step towards reducing risk
is to bring in tools to support the data, ensuring supply chain visibility, which is essential when forming any action plan. CharlesAntoine confirms, “A good system, dashboard, KPIs and relationships with your partners help provide visibility on where your products are and if you are likely to have any issues along your supply chain. The technologies exist – you just have to identify the right one to implement in your supply chain strategy in order to give the decision makers the visibility to make the right decision. We use the Excel Index to determine how good a system a company has in place. Are they using Excel spreadsheets to manage information, which are not centralised and lack visibility? We help companies select the right solution and implement the right tools to make sure they can have good visibility in their supply chain, with access to their data 17
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i.e. business intelligence. It is hard to know what will happen in the future, but with the data, you can make a reliable forecast.” GCL Group has formed an ecosystem of trusted partners to make sure the company can bring the best solutions to its customers. Charles-Antoine says, “We have a couple of partners per expertise area. In warehouse design and distribution centre layouts, we have to make sure the right equipment is being used for every zone of the warehouse, whether it’s picking, packing or shipping. We do the analysis and look at what the customer requires in terms of capacity, density and selectivity in order to recommend the best tools. Pedlex is a partner we recommend to customers to get the optimum equipment for their needs. They come in and do the installation, making sure everything is set up properly, with us acting as project manager. We are there to ensure everything runs smoothly and that the customer is satisfied with the end result.” For further information, visit www.gclgroup.ca Or call 514-733-3000 19
ARTIFICIAL INTELLIGENCE
ENAB SELF FACT
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BLING F-LEARNING TORIES
AI is becoming one of the most important enablers of autonomous systems, but in order to become more widely used, it has to be industrial-grade.
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LAST YEAR, PORSCHE’S ELECTRIC TAYCAN OVERTOOK THE CLASSIC 911, WHICH THE CARMAKER HAS PRODUCED IN QUANTITIES REACHING MILLIONS OVER THE COURSE OF SIX DECADES. he increased production meant there was not enough space at Porsche’s Zuffenhausen headquarters, and manufacturing had to be extremely flexible to quickly respond to changes and custom requirements. There also had to be a significant reduction in carbon emissions and resource consumption. So, Porsche dared to take a revolutionary step; it abandoned the assembly line. Instead, mobile automated guided vehicles (AGVs) convey the Taycans to various workstations on multiple floors, based on the equipment required. Porsche’s innovative manufacturing is a model for future production. In all industries, smart technologies based on comprehensive digitalisation are going to ensure ever-greater flexibility and shorter innovation cycles, as 22
well as products that are more customised, manufacturing processes that are more sustainable, and an ecological footprint that’s seamlessly transparent along the entire supply chain. The comprehensive automation of production steps allows machines to perform hundreds of thousands of repetitive tasks extremely efficiently, reliably, and economically. When the manufactured products and their packaging are subject to frequent changes, current production concepts are pushed to their limits, so this is where new technologies come into play. Autonomous selflearning systems can immediately respond to changes and individual specifications, with the help of AI. These systems depend on consistent data, sensors, connectivity that includes Industrial
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5G, and the integration of shopfloor technologies in corporate information technology (IT). The methods for acquiring and evaluating data, including on the shop floor, have had tremendous advances. Many plants, machines, and products and workpieces are generating their own data. To optimise production, this data is evaluated either in the cloud or, increasingly, on-site with edge computing. In manufacturing, a number of AI applications can recognise and categorise specific patterns to improve productivity. Northern Italian machine-builder E.P.F. Elettrotecnica produces 24
systems for manufacturing brake pads. Its customers used to need trained personnel to perform quality control, because conventional image-recognition software couldn’t detect the pads’ surface structure and identify rejects, and employees needed at other stations had to assume this task. E.P.F. developed a technology to automate quality control by connecting a camera to a dedicated AI-processing module with a neural network that could automatically assess the quality. This process initially required employees to train the digital control system and show it defective pads. The system now continuously optimises itself.
“MANY PLANTS, MACHINES, AND PRODUCTS AND WORKPIECES ARE GENERATING THEIR OWN DATA. TO OPTIMISE PRODUCTION, THIS DATA IS EVALUATED EITHER IN THE CLOUD OR, INCREASINGLY, ON-SITE WITH EDGE COMPUTING” Siemens’ Electronics Works Amberg (EWA) in southern Germany annually produces 17 million Simatic components for automating plants and machines. The automated production facilities experienced a bottleneck in their automatic X-ray inspection, where massproduced components are functionally tested. Each fingernail-
sized part had to undergo an inspection process, which slowed production. Engineers at EWA fixed the problem using AI. Important data from ongoing production is now transferred to the cloud via the Totally Integrated Automation (TIA) environment, which consists of a controller and an edge device. Experts train an algorithm that’s fed information when the quality 25
of the soldered joints on a component is unsatisfactory. The algorithm then examines the process data collected for the component and establishes causalities. After the training phase is completed, the algorithm recognises the probability of defects when process data deviates from the norm, and it then sounds an alarm. Only then are the relevant components inspected in the X-ray machine, while the vast majority can pass through without further inspection. These examples demonstrate that AI can significantly boost the efficacy and efficiency of industrial processes and serve as an important enabler on the path to the factory of the future. But despite these initial successes, AI needs to become industrial-grade i.e. robust, reliable, and trustworthy enough to run mission-critical processes on it, before its use in industry can become widespread. A lot of requirements therefore still have to be met. Critical production processes require quality-assured AI development processes and 26
the seamless traceability of autonomous actions performed by AI-supported components. The AI also has to be resistant to all types of faults. AI projects also depend on intensive collaborations between AI experts, automation specialists, and industry experts. The only way for industry to use the potential of the new manufacturing environment and make AI the enabler of new business models is by getting highly qualified experts from different sectors working together, including through partnerships with customers, suppliers, service providers, companies outside the industry, scientists, start-ups, and even competitors. These kinds of collaborations result in complex business ecosystems in which digital enterprises like Google, Microsoft, and Amazon, with their massive IT resources for cloud computing, can make a substantial contribution to creating models for AI and machine learning (ML), to the models’ training, and to the development of scalable solutions. 27
“AI SYSTEMS NEED TO BE AS SIMPLE AND INTUITIVE AS POSSIBLE FOR USERS, SO THEY DON’T OVERWHELM THE PEOPLE DIRECTING THE TECHNOLOGIES” We also need intelligent marketplaces whose members can offer their expertise, goods, and services, such as production capacities, raw materials, and production knowledge. AI can bring all these elements together, coordinate supply and demand, and serve as a sort of digital general contractor for pooling and controlling the providers’ individual services, including payment processing and shipping. Nevertheless, given the increasing shortage of skills and the growing complexity of production, it will be extremely important to not disregard the human factor. AI is based solely on statistical information. Whenever there’s a need for creativity, control, application, training, or troubleshooting, employees will always take
precedence. AI systems need to be as simple and intuitive as possible for users, so they don’t overwhelm the people directing the technologies. If we succeed in making AI comprehensively fit for industry, only then can technology reach its disruptive potential and make grand visions a reality, such as connecting partner companies to build any product to a consumer’s exact specifications. The success of automation technology has always been linked to its simplicity, allowing customers to program it with minimal training and without the need for specialised IT expertise or external service providers. Future autonomous systems will also be measured against this. The greater its simplicity, the sooner businesses and consumers will enjoy all the benefits of this technology. Source: www.hbr.org
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Door van der Wiel
Dico van Dijk
BUSINESS INTERVIEW
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HOW TO MAKE YOUR SUPPLY CHAIN SUSTAINABLE Capgemini Invent’s Door van der Wiel, Senior Consultant Supply Chain Strategy; and Dico van Dijk, Senior Manager Procurement Transformation, talk about supply chain sustainability in the wake of the European Green Deal.
oor van der Wiel and Dico van Dijk both joined Capgemini Invent two and a half years ago. As Senior Consultant Supply Chain Strategy, Door focuses on end-to-end supply chain optimisation and supply chain sustainability, and has helped develop the company’s Supply Chain Sustainability Assessment.
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Meanwhile, Dico van Dijk, Senior Manager Procurement Transformation, is helping clients with their procurement questions and advises on the implementation of digital procurement solutions. With greater pressure on companies to move towards a more sustainable supply chain, Door and Dico highlight three key reasons why sustainability in supply chains is increasingly important. Door explains, “Climate change is the first reason. There is a huge climate crisis happening. We are already experiencing the impact with changes in the weather, flooding, and drinking water becoming scarce. Supply chains account for more than 80 per cent of greenhouse gas emissions, so it is essential that we make sustainability improvements. “Secondly, we are seeing that consumer requirements are changing. People are more aware of where their products come from and want them to be sustainably sourced. This is becoming increasingly important for both companies and their customers. Research performed by the Capgemini 32
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Research Institute showed that 68 per cent of consumers want information on the amount of waste generated when food and beverages are produced. “The third reason is the introduction of further official regulations. The penalties regarding unsustainable actions are increasing, which can put an enormous financial burden on companies. In 2021, the European Green Deal was signed, and there 34
are a number of implications. For example, from 1st January 2023, companies are obliged to report their sustainability performance. In addition, companies need to have a sustainability strategy, a risk management system, and a system to collect the data for this reporting.” On the subject of data collection for sustainability reporting, Dico says, “Many of our clients do not know how to collect this data, integrate it, and what kind of strategy they
“Digitalisation holds the key. We have developed smart tools to collect the data, get all the information together, put it in a dashboard, and help clients on the actions they should take on the supply chain part” Dico van Dijk, Senior Manager Procurement Transformation
can roll out to reduce their carbon emissions. We can advise them from a supply chain point of view. Digitalisation holds the key. We have developed smart tools to collect the data, get all the information together, put it in a dashboard, and help clients on the actions they should take on the supply chain part.” So, what is the starting point for improving sustainability in your supply chain? Door answers, “The
starting point is to have a baseline. Some clients lack insights regarding sustainability, whilst others have the insights but do not have a plan. We have developed a carbon calculator, which can measure the emissions of your supply chain and the environmental impact of all products and services in your company. We are using several databases to make it as accurate as possible. From there, you can easily identify the pain points and start with improving your supply chain by modelling different scenarios.” Depending on the scope of the client – whether manufacturing, procurement, sourcing or distribution, for example – the 35
O N A S US TAI N A B L E F U T U R E Why Automation is Key for Supply Chain Sustainability and Transparency
The pressure is growing with regards to Environmental, Social and Governance (ESG) standards, and while many companies are proactively doing their part, the time is coming where taking action will be much less of a choice. Those in the EU are already quite accustomed to sustainable investment regulations, such as the EU taxonomy, the Sustainable Finance Disclosure Regulation (SFDR), and Non-Financial Reporting Directive (NFRD). But mandatory reporting for climate-related risks will soon be a reality in many regions of the world.
YOU NEED THE RIGHT TECHNOLOGY Automation is an opportunity for organizations of all sizes to reinforce their green credentials by reducing CO2 emissions. When you look for finance and procurement automation solutions, they should not only enable you to eliminate paperbased processes, but also allow you to track and benchmark your carbon emission savings from that over time. A sustainability dashboard in Basware’s analytics solution shows customers their average CO2 index per invoice, enabling them to benchmark and improve their index over time or against other organizations in our Network. This helps you tie your automation project back to your company’s green initiatives. These emission savings are mainly from gains through enabling remote working, the elimination of paper and the impact this can have on your supply chain practices.
WHAT CAN YOU DO? Eliminate paper: Getting rid of an overreliance on paper means you can reduce your contribution to CO2 emissions while reaping the benefits of cost savings and efficiency. Leverage automation: A digital process means you can encourage some of your teams to work remotely for a day or two per week. Working from home decreases emissions from one of the costliest contributors to the carbon problem— transportation. Use SaaS solutions: Cloud computing means less infrastructure is required to power your business from a hardware and IT perspective so
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fewer servers and less equipment are needed, decreasing CO2 emissions. Automate procurement: Efficient procurement processes enable bundled orders and shipments, creating less pollution from deliveries and packaging materials. Business networks: Connecting to a business network means you can identify new sustainable suppliers and source goods and materials from companies that share your values. Reinvest savings: Fund other sustainability initiatives from the cost savings you realize by going digital.
AUTOMATION ENABLES TRANSPARENCY Automation also brings transparency to the actions of all parties within your supply chain and while it does not prevent risk totally on its own, it does add a layer of insight that provides increased, proactive visibility into areas where risk could be lingering. But you can’t possibly expect to keep track of all the nuances of your supply chain manually. With all the working pieces, digital, intelligent technologies are a surefire way to properly manage and identify risk and fraud. With a comprehensive supplier management solution, companies gain visibility into 100% of suppliers and spend, enabling exceptional risk mitigation. With the right automated tools built specifically to improve supply chain visibility, your company can: 1. Decrease business disruptions: Prepare for supply chain disruptions before they even happen. When your supply chain operates with a
strong foundation on data analysis and open lines of communication, you decrease supply chain bottlenecks and even avoid disruptions entirely. 2. Drive your business with data: Manually updating supplier information leads to obsolete data, potential risks, and wasted time. Basware solutions deliver 100% visibility into your entire supplier base, delivering the benefits of complete supplier data. Processing this data through Basware empowers you with the insights you need to make smart, data-based decisions that will lead to supply chain excellence. 3. Team up with the right suppliers: Your suppliers are an extension of your brand. So, it’s important to ensure you’re doing business with the right suppliers who align with you ethically, meet your price requirements, offer the right experience, can meet your orders, and are financially stable. The right technology helps you ensure your suppliers check all those boxes.
BASWARE SUPPORTS GREEN INITIATIVES AND SUPPLY CHAIN TRANSPARENCY Many organizations overlook the impact paper-based processes have on the environment. Basware’s procure-to-pay (P2P) solutions, powered by the largest open business network and advanced AI and Machine Learning technology, connects you to all your suppliers (even the long tail) and automate deep into the workflow so you can remove paper-based and manual tasks and collect more data for insightful analytics.
LEARN MORE Learn more about important trends such as sustainability, supplier diversity, global regulations, and more procure-to-pay trends impacting 2022 and beyond in the ebook. GET YOUR FREE eBOOK
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Capgemini team creates a roadmap together with each individual client, prioritising which ideas they wish to implement first and highlighting the benefits of the different opportunity areas. Dico says, “The roadmap is important to help the client see what they can do, while also making them aware of the regulations in place and those coming into effect in the coming years in order to reduce carbon emissions. The ESG topic is
smaller items from different large platforms, but they are realising the environmental implications. There is definitely a trend for more localised supply chains.” Capgemini works with several software companies, such as Basware, to ensure clients are able to have full transparency of the sustainability of the products they source. Dico explains, “Basware has included
“Capgemini considers every client to be unique. The Supply Chain Sustainability Assessment identifies the pain points and opportunity areas for all areas of ESG for each client” of huge interest to our clients. We can perform an assessment to see where they score high or low, and advise on what actions they can take.” Capgemini considers every client to be unique, from the local food producer, to the manufacturer, to the retailers and distributors. They all have their own sustainability related pain points and opportunity areas to look into. Dico adds, “There is a huge footprint associated with shipping products from China and people are becoming more aware of this. Consumers are ordering many 38
a questionnaire in their sourcing solution, so suppliers must answer questions on sustainability. You sometimes need to go deeper into your supply chain to ensure all companies involved are compliant. There could be unwanted labour conditions in level 1, 2, or 3 of your suppliers, for example, and the supplier is not even aware of it. Basware’s solution helps mitigate the risk by making the supply chain more transparent.” Basware first entered into partnership with Capgemini last year on the procurement side.
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“As a company, we want to be seen to be innovative, so we joined forces with Basware because they have a strong focus on providing an end-to-end solution, as well as the emphasis on sustainability” Dico elaborates, “As a company, we want to be seen to be innovative, so we joined forces with Basware because they have a strong focus on providing an end-to-end solution, as well as the emphasis on sustainability. We are still developing the program and have a couple of certified Basware consultants implementing the product. We collaborate strongly with Basware and are aligned with them on supporting each other.” Sustainability improvements have previously been associated with high costs, but Door argues that this does not have to be the way. She says, “An optimised network with more local sourcing can reduce transportation by as much as 15 per cent, leading to cost reductions alongside emission reductions. If you can say to customers that your products are locally produced or locally sourced, it will also boost your sales. “The same applies to manufacturing. The Green Deal stipulates that by 2030, all 40
packaging material should be recyclable, which will have a big impact on supply chains. If you are optimising your packaging in order to make the production process more efficient, this leaves room for opportunities with packaging reductions. In a previous project for a large FMCG client, we changed the shape of ice cream tubs, significantly reducing the plastic used whilst also bringing sustainability and financial improvements.” Capgemini has a high-level framework for sustainable supply chains consisting of three pillars: 1. Sustainable procurement – topics include designing and developing low carbon products, designing circular products and services, supplier ESG assessment and implementing sustainable procurement strategies. 2. Green Lean Digital Manufacturing – topics include transforming factories to be efficient in their energy, water and
MAKING A N I M PAC T Discover efficient processes throughout the entire procure-to-pay cycle and reduce your CO2 emissions, leading to less pollution.
FIND OUT MORE IN OUR eBOOK
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material usages by leveraging digital technologies, taking into account the six R’s; Reduce, Reuse, Recycle, Recover, Redesign and Remanufacture. 3. Sustainable distribution – topics include CO2 emission reduction through Supply Chain Network optimisation and Smart Planning, but also sustainable last-mile strategies.
“The most important thing to make it all work is to have a data platform for monitoring and reporting, so you are constantly aware of the sustainability performance of your operations” Door van der Wiel, Senior Consultant Supply Chain Strategy
Door says, “The most important thing to make it all work is to have a data platform for monitoring and reporting, so you are constantly aware of the sustainability performance of your operations. You need to be able to model the environmental impact in terms of carbon 43
“With global warming, we all understand that we need to do something, but this is especially the case for production companies. We are innovating constantly and making positive changes internally at Capgemini to bring benefits to our clients” footprint or product lifecycle, as well as having access to ESG data across the value chain in order to mitigate risks.” Another regulation of the Green Deal is that 75 per cent of your goods must be transported by either rail or water by 2030. Door adds, “This means you are not just looking at the geographical area of where you are going to source, store and produce your products, but also the transport mode for shipping them.” Dico says that in the Netherlands, the internal distribution to shops and factories is done increasingly by electric lorries. He explains, “We have a good network of charging stations in the Netherlands, and our clients are increasingly saying that they want to move to 44
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electric vehicles, which will be huge for their carbon footprint. But the infrastructure needs to be there to support it. The Netherlands is one of the top countries for electrifying industrial vehicles, and in the city, more and more buses are electrified.” Door and Dico agree that collaborating with other companies in order to make your supply chain
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more efficient is essential, but it can be a difficult road to navigate. Door explains, “You do not want to share all the data you have with your competition, but you cannot look at supply chain from just one perspective. In the end, it will be a win-win situation if you can share at least part of your data with your competition to increase the efficiency of your supply chain.”
Dico’s final word is on the topic of sustainability. He says it is a must-have, gaining traction in the market. Dico concludes, “In the past, we had to bring the subject of sustainability to the table, but now the client brings the subject to us. We have smart tools across the whole supply chain to support our clients in becoming greener. With global warming, we all understand
that we need to do something, but this is especially the case for production companies. We are innovating constantly and making positive changes internally at Capgemini to bring benefits to our clients” For further information on Capgemini Invent, visit www.capgemini.com
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S TA R T - U P S
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Supply chain tech start-ups have thrived during the Covid-19 pandemic, raising $7 billion since 2018.
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VENTURE CAPITALISTS HAVE INVESTED ALMOST $7 BILLION INTO THE SUPPLY CHAIN TECHNOLOGY SECTOR SINCE 2018, ACCORDING TO DATA FROM ANALYTICS FIRM GLOBALDATA. f that, $2.46 billion was raised by the sector in the past two years. That figure is bigger than the 24 deals worth a total of $180 million raised in 2013. However, that’s still down from the peak of 2019 when 240 deals injected $2.99 billion into the sector. Pitchbook suggests the figure could be even higher, saying investors put $7.8 billion into the sector in the last quarter of 2021 alone. While Pitchbook included funding raised grocery delivery companies like Gorillas, GlobalData doesn't seem to have included them in its definition of supply chain start-ups.
However, all of this demonstrates how the pandemic benefited these start-ups. Investors gave new enterprises the resources they needed to solve logistical bottlenecks using automation, AI and IoT solutions. Alexey Bulygin, Associate Business Analyst at Sova VC, said, “The pandemic revealed multiple inefficiencies in supply chains across all major industries. As a result, both VCs and corporate investors have turned their attention to tech start-ups aiming to solve these problems.” The trend seems to be maintaining its momentum into 2022. In January, freight 51
technology start-up Loadsmart became a freshly minted unicorn after bagging $200 million in a Series D round at a $1.3 billion valuation, supply chain startup Inspectorio landed a $50 million Series B raise, and UKbased smart logistics start-up 7bridges raised $17 million in a Series A round. Covid-19 created considerable supply chain challenges. National lockdowns and travelling restrictions led to fewer people working on factory floors, in harbours, in warehouses, and on the roads. Consequently, the flood of goods turned into a trickle. Research by consultancy Grant Thornton also blamed the UK's Home Office, saying migration restrictions imposed as part of the Brexit process resulted in fewer EU workers being available to help unload containers These tech startups saw a gap and massively benefited from the crisis, but what happens now that the ‘full-blown’ phase of the pandemic is over?
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“ALL THE PANDEMIC HAS BEEN ABLE TO DO IS FAST-TRACK THE SOLUTIONS AND BRING SUPPLY CHAIN EXCELLENCE TO THE FOREFRONT OF EVERY COMPANY” Clemente Theotokis, Co-founder of digital freight platform Zeus Labs
Clemente Theotokis, Cofounder of digital freight platform Zeus Labs, answered, “I do not think there (will) be any major impact from an operational point of view. The problems in supply chain existed well before the pandemic and will exist after the pandemic is over too. All the pandemic has been able to do is fast-track the solutions and bring supply chain excellence to the forefront of every company.” While the underlying problems of the sector won't go anywhere, that doesn't eliminate other threats to their venture capital cash flow. 53
Investors and customers could, for instance, lose patience in these start-ups. Camilla Dolan, Partner at Eka Ventures, said, “Sectors that go through periods of transformation often encounter a phase where the exuberance around what is possible doesn’t keep pace with the reality. In the supply chain space, it is possible that due to the complexity of global supply chains and the fragmentation of information, it takes longer for the results of supply chain innovation to be realised, and that during 54
this period capital without longterm conviction in the digitisation of supply chains comes out of the market.” With one group of start-ups maximising warehouse efficiencies with robots, and a second segment helping businesses solve their environmental, social and governance (ESG) woes by enabling companies to track their carbon footprint, these companies are working towards creating transparency in supply chains. In
“IT IS ESTIMATED THAT THE SUPPLY CHAIN SOFTWARE MARKET WILL INCREASE FROM $25 BILLION TODAY TO $50 BILLION IN 2028, AND POTENTIALLY $100 BILLION BY 2030”
turn, this enables smoother crossborder transactions, helping companies find unused space in carriers or removing other inefficiencies. But, despite the many different types of technology-focused supply chain start-ups out there, the sector is still in its early stages. Only a fraction of the venture financing deals raised over the past decade have been worth over $50 million, according to GlobalData's data.
Dolan confirmed that there are still plenty of opportunities in this sector, as “the global logistics and supply chain industry is a $11 trillion industry growing at 5 per cent CAGR a year.” Quoting figures from Bessemer Venture Partners, it is estimated that the supply chain software market will increase from $25 billion today to $50 billion in 2028, and potentially $100 billion by 2030. Source: www.verdict.co.uk 55
S U S TA I N A B I L I T Y
CUTTING THE CARBON FOOTPRINT OF PHARMA’S SUPPLY CHAIN Pharma, like every other industry, has an impact on the environment – and in the face of a climate crisis, it has a responsibility to find ways to mitigate this damage.
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IN A GLOBALDATA SURVEY CONDUCTED LAST YEAR, 43 PER CENT OF RESPONDENTS CONSIDERED THE ENVIRONMENT THE MOST PRESSING ESG ISSUE FOR THE PHARMACEUTICAL SECTOR TO ADDRESS. rug companies must therefore make a concerted effort to reduce the carbon footprint associated with getting their medicines to patients, but how? While several pharma companies have pledged to reduce their carbon footprint, they can achieve those 58
goals only if every stakeholder in the process works to make the necessary changes. Each stage of the pharmaceutical supply chain has a carbon footprint, right down to the very beginning, where the raw materials for active
pharmaceutical ingredients (APIs) are sourced. Jing-Ke Weng is Co-founder of Double Rainbow Biosciences, a sustainable biotech dedicated to developing new therapeutics with minimal impact on the environment. He says the manufacture of APIs for small-molecule drugs relies largely on chemicals derived from petroleum, a fossil fuel. There are many energy-intensive steps in the chemical synthesis of raw materials and solvents, and the amount of carbon it takes to make these molecules is usually not calculated. Double Rainbow’s long-term vision is to replace fossil fuel-reliant manufacturing with methods based
on synthetic biology and inspired by the chemical processes seen in nature. Weng’s group is trying to assemble microbial enzymes from diverse sources in a particular manner to make a molecule that can be incorporated into a new or existing drug. He explained, “Conventionally, these compounds have to come from natural resources, but now we have new technology to entirely replace that with a fermentation-based method, which is a major step.” Manufacturing the finished pharmaceutical product is another 59
carbon-intensive stage of a pharma company’s supply chain. One of the most effective ways of reducing carbon emissions associated with drug production is to adopt continuous manufacturing, an efficient alternative to batch manufacturing, that combines multiple separate production stages into one single, continuous production line. In 2014, US biotech Amgen opened a $200 million biomanufacturing plant incorporating continuous purification methods in Singapore. Compared with a traditional manufacturing facility, Amgen’s plant produces 69 per cent fewer carbon emissions, a promising figure for a company that plans to be carbon neutral in its operations by 2027. French healthcare company Sanofi followed suit in 2019, opening a continuous manufacturing plant in Massachusetts, US, that it said will generate 80 per cent fewer carbon emissions than the company’s firstgeneration facility. Scott Lawson, a Partner at PwC, said, “Continuous process manufacturing has been evolving rapidly over the last six to 10 years. The focus has been on small-molecule manufacturing principles and big pharma has made investments in this space. We've seen the number of authorised products (made with 60
“CONTINUOU MANUFACTURING H RAPIDLY OVER T 10 YEARS. THE FOC SMALL-MOLECULE PRINCIPLES AND B MADE INVESTMENT
US PROCESS HAS BEEN EVOLVING THE LAST SIX TO CUS HAS BEEN ON E MANUFACTURING BIG PHARMA HAS TS IN THIS SPACE”
continuous manufacturing) increase over the last two to three years – and as that portfolio increases, the use of continuous manufacturing becomes more attractive.” If pharma and biotech companies are to meaningfully curb their carbon emissions over the next few years, moving away from fossil fuels and shifting to greener, renewable energy resources is a necessary step. In 2021, energy and automation giant Schneider Electric, ranked the world’s most sustainable corporation that same year, launched the Energize program to increase the pharmaceutical industry’s access to renewable energy. Through Energize, drugmakers will be given the opportunity to access and contract for renewable energy throughout their value chain. Ten global pharma companies signed up to promote the initiative and encourage their suppliers to decarbonise with renewables including AstraZeneca, Biogen, GSK, Johnson & Johnson (J&J), MSD, Novartis, Pfizer, Novo Nordisk, Sanofi, and Takeda. When it comes to greener energy, at least, the pharma industry at large appears committed to making changes. In addition to collaborating on the Energize program, many large drug companies have set ambitious carbon reduction targets for themselves. J&J aims to get its electricity solely from renewable 61
sources by 2025, with goals to achieve carbon neutrality across its own operations by 2030, and net zero emissions across its value chain by 2045. By 2025, MSD plans to be carbon neutral across its operations, and aims to reduce value chain emissions by 30 per cent before 2030.
cent of its electricity from renewable sources. Following a virtual power purchase agreement with Vesper Energy, Pfizer expects its North American operations to be 100 per cent solar-powered by the end of 2023.
Over in Europe, Novartis is working to achieve carbon neutrality across its Pfizer has pledged to go carbon operations by 2025, and throughout neutral by 2030 and will, among other its supply chain by 2030. The Swiss strategies, reduce direct emissions company’s Chief Sustainability by 46 per cent, and purchase 100 per Officer, Montse Montaner, said, 62
“TEN GLOBAL PHARMA COMPANIES SIGNED UP TO PROMOTE THE INITIATIVE AND ENCOURAGE THEIR SUPPLIERS TO DECARBONISE WITH RENEWABLES INCLUDING ASTRAZENECA, BIOGEN, GSK, JOHNSON & JOHNSON (J&J), MSD, NOVARTIS, PFIZER, NOVO NORDISK, SANOFI, AND TAKEDA”
“Novartis is on track to deliver its 2025 carbon neutrality target for our own operations, with a 34 per cent reduction in CO2 emissions achieved to date, compared to our 2016 baseline. We have developed a detailed framework and robust plan to underpin effective collaboration with suppliers towards delivery of our 2030 carbon neutrality targets.” Multinational Catalent, however, has beaten many of its fellow
pharma players to the punch. In 2021, the company announced that an impressive 97 per cent of its electricity usage had been obtained from renewable sources such as wind, solar, hydroelectric, and biomass. While drug manufacturing carries a large carbon footprint, the steps taken to distribute medicines out of the factory and into patients’ hands also have a significant 63
impact on the environment. One way by which distribution in pharma contributes to climate change is the use of cold chain shipping, which allows temperature-sensitive products to be transported at controlled temperatures that do not compromise their efficacy or safety. Usually, these temperatures must be maintained all the way from point of manufacture to the patient. An obvious way to reduce the carbon emissions caused by cold chain shipping is by investing in greener fuels and energy sources for transport vehicles. Hydrotreated vegetable oil, a renewable, biobased fuel that can be used in diesel engines, can reduce greenhouse gas emissions by up to 90 per cent, compared with regular diesel. Lawson adds that companies should look to invest in localised manufacturing as a means of reducing the carbon footprint associated with pharmaceutical distribution. He asked, “Can we re-shore certain pieces of the manufacturing process, to optimise the amount of time a product has to be maintained within a storage environment or shipped amongst the different transportation solutions? Anything that reduces the complexity of the supply chain, and the number of movements that need to occur, is seen as a good thing.”
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The solutions for an eco-friendlier supply chain are gaining traction in the pharma industry, but is there a desire to change? Weng is hopeful that the industry will move in that direction in the next decade. He added, “The strongest force will come from the market itself – just the inability to do business as usual will be the main driving force for companies to think, at a fundamental level, how they could replace non-sustainable steps with more sustainable biology-based approaches.” Meanwhile, Lawson believes “there's an appetite” in executives across the pharmaceutical sector to achieve net zero goals, but eco-friendly technology and greener methods must be applied throughout a drug company’s value chain to meaningfully reduce the industry’s impact. He concluded, “If the industry is to serve its mandate correctly, it needs to think holistically, right across the value chain. If we want to be net zero, all aspects of the value chain need to be achieving the net zero purpose, not just outsourcing the bits that are too difficult or complex. Given the highly science-driven nature of our sector, I do believe that it will take significant steps towards that.” Source: www.pharmaceutical-technology.com
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BUSINESS INTERVIEW
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T HE S T RAT EG I C ENABL E R S F O R T OM OR R O W Dr Jan Joachim Herrmann, Partner at PwC Germany, shares his four key procurement trends for 2022 and beyond. ith the urgency to act on raw material shortages and inflation, Dr Jan Herrmann is mindful that price increases will be one of the most important topics in the coming years.
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That said, there are four key enablers related to the current situation, which he outlines as follows: 1) Digitalisation 2) Technology Development 3) Sustainability and 4) Risk Management. Here, Jan shares his views on each of the aforementioned procurement trends, as well as advice on how companies can best prepare. 70
Taking the first point, Jan begins, “When we talk about the digitalisation of procurement, we are focusing on getting rid of old manual procurement processes, such as tendering, negotiations, ordering, invoicing, order confirmations, goods receipts, and contract and supplier management, with everyday tasks becoming more and more
“I R ECOG N ISE A N EXPON EN TIA L G R OWTH OF PR OCUR EMEN T D IG ITA LISATION IN TH E N EXT F EW Y EA R S, PR OCESS BY PR OCESS, U N TIL EV ERY TH IN G IS C OV ER ED” Dr Jan Herrmann
digitalised. At the moment, we have a lot of the tools available, but the only obstacle explaining why we haven’t as yet solved everything is the fact that companies are at the beginning of the digitalisation of procurement and are not able to cover the complexity of digital possibilities. They will soon evolve from classical processes to, for example, supplier-network
management (n-tier supplier), contract lifecycle management, and new disciplines like data and analytics or risk management. I recognise an exponential growth of procurement digitalisation in the next few years, process by process, until everything is covered.” However, Jan flags up that having knowledge of the market trends 71
does not take into account unprecedented global events such as the Covid-19 pandemic, the war in Ukraine, or a container ship blocking the Suez Canal. He adds, “It is important to bear in mind that the impact of such unexpected events of the last decade cannot be solved by digital solutions. You need the solutions to ensure an early and proactive involvement in solving upcoming events to reduce the long-term effect on your business.” The second trend refers to the development of technology. According to Jan, for the digitalisation of procurement, the technology is readily available, but the challenge lies in understanding how it works. He explains, “There is no new technology surprising us at the moment. What we are seeing is that when you have solved the first steps of procurement, you can fill the gaps with technologies such as RPA, AI or blockchain. We have all heard about these, but nobody really understands what is behind them. The chances offered by these solutions are therefore not really understood right now. If we can start to understand how we can use the solution 72
“ FO R T H E D IG ITALIS AT ION OF P R O C U R E ME N T, T H E T EC H N OLOGY IS R E AD ILY AVAILABLE , B U T T H E C HALLE N G E LIE S IN UN D E R S TAN D IN G H O W IT WORKS”
in the right manner, we will open up more opportunities with these new technologies.” Jan cites the example of using blockchain for track and trace. With this technology, you can follow containers around the world and ensure special requirements are considered across entire value chains.
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This offers fantastic potential to understand how the value chain is working, enabling companies to see for themselves how they can use this solution in practice. A further example is semantic folding. Jan continues, “Having the possibility to evaluate all the information on the world
wide web in every source, in every language, is a very strong development. The technology coming through understands the meaning behind all sentences and is able to find the right information in the right language. It is a great chance for us to use technology as a lever to increase the impact on procurement.” 73
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Perhaps Jan’s favourite trend of all, sustainability is next, but he stresses that it is difficult to say whether or not something is sustainable procurement at the moment. Jan explains, “The focus for sustainable procurement is making sure the supply chains I have behind my suppliers are transparent and able to react on effects in the supply chain. This means that when there is an issue in the supply chain, the system and network are able to change
“When I have this transparency, I can then take the next step to create the best portfolio of suppliers in terms of ESG, financial risk, raw material shortages etc. We call it an optimal supplier portfolio. Having the right portfolio of suppliers ensures that the ESG equilibrium can be maintained.” The final trend Jan mentions is risk management, highlighting the difficulty of evaluating the risk
“CO UPA S OF TWA R E HAS AN E N T IR E S U IT E FO R P RO C URE M EN T, SU P P LY C HAIN AN D R IS K MANAG E ME NT. JAN REF ER S TO TH EM AS AN E N D -T O - E N D D IG ITAL E NAB L ER F OR P R OCU R EM E N T, A PART N E R T O FU LFIL T H E C O MP L ETE SU PP LY C HAIN V IS IBILIT Y MO D ULE ” the structure of the network itself, so I am able to create new supply chains for suppliers to get raw materials or resources to enable the supplies to reach my sites. Therefore my supply chains are able to react to environmental hazards, social impacts and governance issues, for example, due to high transparency and analytics to raise the red flags, and therewith a chance to implement (automatically) preventive or remedial actions.
of human rights, modern slavery and raw material shortages in the supply chain. Jan says, “The risk analytics behind these issues are not available right now, so there are methodologies in place within companies across their entire supply chain to understand how risk can be evaluated and prioritised. This is a huge trend in procurement at the moment.” Sustainability and risk management are related insofar 75
as sustainability is the target, and risk management is the enabler. For risk management to be in place, you also need technology and digitalisation at your disposal. Jan adds, “Risk management will be a connector of classical procurement decisions with, for example, network decisions, sustainability decisions etc. I believe that we are not able to 76
focus on just one of these angles. When new technology arises, we have to understand how we can use it for risk management, for digitalisation, for sustainability. You have to think about each of the individual quadrants.” Speaking of sustainability, the Supply Due Diligence Act 2023 was
“P R O C UREM EN T ACT S AS T HE O PERATIVE I NST I T U T I ON T HAT TRIES TO F U L F I L T H E R E G UL ATIO N S THAT COM E UP ON THE CO M P L IA N CE SI D E ”
adopted by the German Federal Parliament last June and will come into effect on 1st January 2023. It aims to improve the protection of international human rights and the environment by setting binding standards for large companies and their value chains. So, what do companies need to do in order to prepare? Jan answers, “When
we talk about the Supply Due Diligence Act, we are talking about human rights, which companies need to consider across their entire supply chain. There are six main obligations including a policy statement, risk analytics for the supply chain, a focus on preventative and remedial actions in the case of an incident, an evaluation of the impact of these measures, the expansion of your grievance mechanism from your company into the entire supply chain, and an external report on what you are doing on human rights. “When you look at these six obligations running across the entire supply chain, you can see there is a request from the German government – and in the future, the EU – to gain transparency on the specific topic of sustainability. When you bring this back to the four trends I mentioned, it is about creating the right risk analytics across the entire supply chain to gain transparency in this way, which is heavily related to technology and digitalisation. It is the first regulated step to ensure you cover a specific topic for your entire supply chain.” 77
The new law therefore offers the opportunity to focus on the four procurement trends Jan highlights. Once they understand what the regulation means, companies must consider what they already have in place (e.g. risk management, an agreements mechanism, policy statements, a code of conduct etc) upon which they can build. Jan continues, “Having looked at the status quo, you can then figure out where the
compliance side. Germany (PwC) assists companies by analysing the gaps and understanding what they need to do to fulfil these legal requirements alongside the company’s own ambitions. Jan says, “There is the law, the requirements, and then the gaps. If a company has transparency of their supply chain on human rights, they can then measure critical financial issues in their
“ P R EWAVE I S A NE WCOMER F OCUSED ON TH E R I SK MA NAG E MEN T AN D TECH N OLOGY ENA B L E ME NT OF SE MAN TIC F OLDIN G F OR TH E EN T IR E S UP PLY CHA IN ” gaps are and take the first step towards creating transparency. Where are your critical suppliers and critical supply chains on human rights? Once you have this information, you can take initiatives to convince the regulator you have sound processes in place that fulfil the law.” Procurement acts as the operative institution that tries to fulfil the regulations that come up on the 78
supply chain and increase their ambition level. They therefore gain more out of this transparency than merely human rights.” Jan believes that in order to maximise success, it is important for PwC to leverage key partnerships with other likeminded companies. He explains, “The complexity of a solution to have the view on technology, the law, procurement, supply chain, is such a massive
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task that no one can do it on their own. You need help from experts to satisfy each of the dimensions, especially on the technology side. Companies like Coupa Software and PreWave are at the leading edge, so it is essential for us to combine our strengths in order to meet the law, enable us to give excellent advice, and provide our clients with the best consulting experience.”
“ T HE IM P O RTA NT MESSAG E
T O TA KE AWAY IS T O TRY NO T O B O IL T HE O C EA N ! ”
Coupa Software has an entire suite for procurement, supply chain and risk management. Jan refers to them as an endto-end digital enabler for procurement, a partner to fulfil the complete supply chain visibility module. He adds, “We have named this software the entire procurement technology suite. It enables us to digitally analyse every single procurement process.” PreWave is a newcomer focused on the risk management and technology enablement of semantic folding for the entire supply chain. Jan elaborates, “It is a new technology, which enables an already implemented tool to give greater visibility in the entire supply chain. It is essentially 80
edge technology designed to increase and improve the current tools.” For Jan, it does not matter which innovations you decide on, or which angle upon which you choose to focus. He says if you have a strategy for the entire digitalisation of procurement,
E
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you can decide step-by-step what you want to improve. Jan concludes, “Whether you are process-driven or sustainabilitydriven, you need to make a plan offering an entire view and start to work on the pieces. The important message to take away is to try not to boil the ocean!”
For further information, visit www.pwc.de/en/strategyorganisation-processes-systems/ operations.html www.pwc.de/en/strategyorganisation-processes-systems/ operations/procurement.html
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L E A N M A N U FA C T U R I N G
THE IMPACT OF DISRUPTION
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Is Toyota’s much-publicised supply chain system crying out to be streamlined?
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EVERY SUPPLY CHAIN HAS FACED SOME KIND OF DISRUPTION IN RECENT YEARS, BUT WHAT HAS BEEN THE IMPACT ON THOSE SYSTEMS THAT ADOPT LEAN MANUFACTURING PRINCIPLES? TOYOTA’S SUPPLY CHAIN MODEL IS A GOOD EXAMPLE. oyota’s supply chain model is a good example. Toyota developed its Toyota Production System in the 1940s, which quickly gained global influence, as other companies adopted this methodology. There are two core concepts to this system. One of which is ‘jidoka’, a form of intelligent automation where equipment is programmed to come to a halt when an issue arises to stop faulty products from being produced. The second concept is known as ‘Just-in-Time’. This is where each step within the manufacturing process only produces what’s needed for the next one. 85
“THE OVERALL PHILOSOPHY IS TO ELIMINATE WASTE DURING MANUFACTURING AND AIM TO WORK IN THE MOST EFFICIENT WAY POSSIBLE, BUILDING ON CONTINUOUS IMPROVEMENT OVER THE YEARS”
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Businesses adopting this model try to structure supply lines so they receive goods just as they need them, cutting down on storage costs and making sure that money is not tied up in inventory. The overall philosophy is to eliminate waste during manufacturing and aim to work in the most efficient way possible, building on continuous improvement over the years.
chains. The whole system can easily collapse if one link breaks. That is basically what happened for several companies during the pandemic when businesses’ highly complex global supply chains broke. The inefficient, outdated and siloed systems that many organisations had relied on for decades broke down because they were not able to adapt to such a rapidly changing environment.
The downside of this system is its reliance on strong supply
So, is the Toyota way still the right way for a company that
has grown so much in the past decade? For a company that relies on this production process technique, the big question right now is how do you stay nimble and efficient to keep consumer prices competitive, yet still be able to deal with unforeseen events? Several schools of thought have emerged following recent events:
• The automaker has remained lean while its volume has
increased dramatically since the days when the company’s principles and methods were established. Thus, Toyota can no longer maintain sufficient support and quality control, especially as it adds new suppliers around the world. Yet it still governs the design of key components.
• Toyota’s streamlined supply base is at fault. By relying so heavily on sole suppliers and using parts across multiple 87
platforms and vehicles, the automaker increases its risks.
• Toyota’s methods have minimised the damage. This enabled a relatively quick fix to its recent sticky pedal problem because of the automaker’s inherent ability to work closely with suppliers on engineering solutions.
“IN MY VIEW, THE MOST IMPORTANT PART IS THE TRUST AND RESPECT BETWEEN TOYOTA AND OUR SUPPLIERS, WHO ARE TRULY PARTNERS” Leila Aridi Afas, Director of Global Policy
The methodology has been revised and improved upon over the years. Toyota implemented a strategy in 2011 following the devastating earthquake and tsunami, which split the procurement of their supplies from three different sources. This meant that should one part of their 88
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“OVER TIME, TOYOTA WORKED TO INCREASE INVENTORY AND MANAGE LEAD TIMES FOR THESE CRITICAL PARTS”
supply chain fall, they would have two back-up options already in place. When a problem arises, the first step is to gather information, so during Covid, a team in the company worked around the clock to map out the entire supply chain – not just one supply chain for the company, but chains for nearly every single part it takes to make nearly every single one of their 90
automobiles. They identified about 1,400 critical parts (out of roughly 30,000 parts) that had relatively long lead times. If any one of those 1,400 critical parts were not available, the entire production line could be forced to a halt. Leila Aridi Afas, Director of Global Policy at Toyota Motor North America, said, “The team identified their suppliers, their suppliers’ suppliers, and their suppliers’ suppliers’ suppliers.”
Over time, Toyota worked to increase inventory and manage lead times for these critical parts. Leila described several ways in which Toyota worked to safeguard its supply of critical parts:
• Toyota began standardising parts across different vehicle models. Now, if one supplier shuts down for any reason, another plant is able to increase production of the standardised part to meet demand.
• A team within the company worked to diversify its presence in • When standardisation wasn’t multiple geographic regions while an option (as is the case for the ensuring that it could procure the 1,400+ critical parts Leila’s team necessary parts to keep building identified), Toyota increased vehicles if one particular region inventory to maintain a supply were unable to produce. in case of emergencies.
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Leila identified several takeaways from Toyota’s experiences in dealing with supply chain problems. She explained, “In my view, the most important part is the trust and respect between Toyota and our suppliers, who are truly partners.” She also emphasised the importance of staying in close and constant communication with suppliers. She added, “It’s crucial that the information is always up-to-date. You never know when a crisis will strike.” A supply chain management system that is flexible under unforeseen circumstances is key, with contingency plans in place should the unexpected happen. With the current level of global disruption supply chains are facing, even the best plans might go awry, but being able to analyse and learn from it will be the difference between companies that survive and those that fail. In the short term, it is about evaluating the data, seeing what is possible, and understanding how it can be achieved. Sources: www.discoursemagazine.com www.just-auto.com
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Anne-Cecile Moreno
B U S I N E S S I N T E RV I E W
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ith growing pressure on companies to focus on their sustainability strategies, Jerwin Tholen and AnneCecile Moreno at KPMG have been tasked with helping companies to achieve net-zero.
Jerwin Tholen
Jerwin Tholen, Partner Sustainability at KPMG Netherlands, and Anne-Cecile Moreno, Director in KPMG Global Climate Risks and Decarbonisation Hub, share their thoughts on net-zero, greenhouse gas emissions and decarbonisation.
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Net-zero commitments have flourished over the last 18 months, so what would they say have been the main drivers? Anne-Cecile begins, “The main drivers span different dimensions. Investors, for example, are putting on the pressure. A couple of years ago, BlackRock sent personal letters to companies to ask them to consider climate change and its impact. In November, a transformative COP in Glasgow was a follow-up to the Paris Agreement (COP21). It aimed to implement the commitments of the Paris Agreement. We also had the sixth report of the IPCC a few months ago, which is pressing governments, companies and society to act on climate change. We see governments making net-zero commitments, such as China, which has said it will reach net-zero by 2060, as well as Japan, Korea, the UK, and Europe. The governing bodies are putting increased pressure on climate risk first; emissions and decarbonisation are following.” Jerwin continues, “Many companies enter into 96
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conversations with their banks on refinancing debt and new loans which are more sustainability-linked and have clear requirements for the companies to reduce their carbon footprint. The banks are making demands of the companies to have a decarbonisation plan that goes beyond their current plan, stretching them to put more skin in the game. It is a real opportunity to look at finance differently.” 98
Net-zero presents several challenges for companies. First and foremost, it should include value chain emissions (scope 3) to be meaningful and credible. Anne-Cecile says, “Challenges include the economy and society. The world has been releasing greenhouse gases into the atmosphere for more than 100 years, and now has to move close to zero within 20 to 30 years. Having the right regulations, innovations, and incentives in place presents further
“Digitalisation plays a vital role in every stage of any net-zero strategy” Jerwin Tholen, Partner Sustainability at KPMG Netherlands
challenges, but the main challenge is time. You have to understand what you need to reduce by measuring your carbon footprint, and then you need to act quickly to reach net-zero by 2050.” It would be best to look at the entire value chain from a company perspective. Jerwin explains, “How do you influence your suppliers when you do not necessarily have direct control? You are just one
client, so how do you persuade them to reduce their carbon footprint? On the other hand, what can you do to make the consumer use the product differently with less hot water, lower electricity use, and more efficiency? The net-zero of companies is therefore determined by many things they cannot control, and that complexity is a challenge.” Intuitively, companies often know the carbon footprint of their value chain, but before they measure it, they need to identify which parts they can influence. This takes time, and technology is required to get it right. Jerwin says digitalisation plays a vital role in every stage 99
of any net-zero strategy. He continues, “From procurement data to field data, digitalisation has a role to play. Smart data, including data obtained through advanced remote sensing, gives farmers worldwide information on how to make their farming systems optimal based on the weather patterns, which products to grow at which time of the year, where to plant shade trees, how to minimise
emission reductions. They enable companies to run simulations on how to structure a low emission network whilst running a profitable business. “To lower the carbon footprint is not always the primary driver in that case. The primary driver could be to optimise shipping routes, for example. Therefore, the classical supply chain
“It is something you obviously need to do for society, but as a business, if you are not reducing your emissions, you will be potentially lost in the future” Anne-Cecile Moreno, Director in KPMG Global Climate Risks and Decarbonisation Hub
fertiliser and pesticides, and how to have better price expectations.” Companies often have hundreds and thousands of suppliers, which need to be trained to understand what scopes 1 and 2 mean for them, and how they can be measured and reported using digital tools. There are multiple lenses to these digital solutions, bringing a scope of benefits such as cost reductions and optimisation. Jerwin adds, “You don’t always need new technology. Some supply chain tools like AIMMS, Llamasoft and other network optimisation tools can help to drive the carbon 100
optimisation tooling is now used to bring another layer to articulate the need for optimisation.” It helps to have a collaborative platform where you can see what others are doing in another part of the world. Anne-Cecile says, “The collaboration is between the suppliers, but it can also be within the whole sector. Companies are joining forces to develop tooling solutions, so there are multiple lenses of collaboration.” Jerwin adds that one of the difficulties companies face is which technology to choose.
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“The commercial and carbon footprint reductions go hand in hand. The challenge lies in finding new pathways where a company needs to pay to reduce its carbon footprint” He explains, “There is so much technology out there. At KPMG, we have built a platform for farmers that categorises all of the optimisation tools available to them to help them navigate the technology they require for a particular business challenge. We also help farmers in Africa, Latin America, and Asia to optimise their farming practices using technology. Agricultural trainers are instructed on how to bring technology to the farmer.” In many cases, companies focus on upstream emissions, particularly category 1 procurement emissions (i.e., emissions from all the purchased goods and services). Anne-Cecile explains, “When companies start measuring their carbon footprint, they categorise their value chain emissions using the Greenhouse Gas Protocol. Upstream emissions include everything around logistics and procurement, and downstream is around the customer, use of the sold 102
product, and end-of-life emissions. For many sectors, the emissions are generated very early in the value chain, so they are largely upstream, and these emissions are embedded in what you buy.” Companies are therefore focusing on procurement because it is something they can influence. Jerwin adds, “There are often quick wins if you help your suppliers reduce their energy spend, then they can lower the product’s price for you. The commercial and carbon footprint reductions go hand in hand. The challenge lies in finding new pathways where a company
needs to pay to reduce its carbon footprint. You need to get quickly to the point where you can influence. The natural procurement cycle is important because you can only reduce something in your procurement cycle if you have a new contract and can influence your supplier. A five-year contract presents fewer opportunities to influence because you have agreed on the terms over five years. If you know when a change is happening, that is the moment a carbon discussion can happen. If you don’t do it, you could lose the opportunity to influence. Everyone has to drive their emissions down fast, so you
might have to invest more in the long run.” So, what is required to decrease these emissions? Anne-Cecile answers, “Aside from technology, you need to understand how your contracts are structured and their end term. If you have a contract ending next year, you want to discuss ahead of the new contract emission measurement, target setting, and what can be done to reduce emissions. In addition, connecting with your suppliers and the sector more broadly enables companies to share their best practices, so everyone can 103
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work towards decreasing their emissions.” Understanding where to invest depends on the type of industry you are in, whether it is an ingredient you need to tackle or a packaging material. Jerwin continues, “You might need to focus on using the lowest footprint packaging material by making it lighter, replacing it, or reviewing its production process
but it is about today versus tomorrow. In the future, it will present new opportunities, new jobs, and new ways of thinking.” Anne-Cecile believes decarbonisation will become an even bigger topic in the next few years. She adds, “It is great that everyone is moving towards decarbonising their suppliers, but what about the impact of this plan versus people? For
“If you are not reducing your emissions, you will be potentially lost in the future” for a more energy-efficient option. Optimising scopes 1 and 2 will result in better packaging materials and the company becoming more profitable, and, in turn, you strengthen your relationship with that supplier. You need a lot of data and insights to be successful.”
example, suppose you want your suppliers to access renewable electricity, such as solar panels. In that case, they need a lot of land, leading to greater competition between food and energy production, so how will the plan fit with the local economy?”
Anne-Cecile views reducing emissions not in terms of sustainability, but more from a business strategy point of view. She explains, “It is something you obviously need to do for society, but as a business, if you are not reducing your emissions, you will be potentially lost in the future. Being future-proof is key. It costs money to have digitalisation, data, engagement and innovations,
Jerwin agrees that such complexity means you need an ecosystem of tools, technologies and alliance partners to get things done. He explains, “Every challenge may have a different solution, and all major technology providers are bringing in ESG lenses. We help our clients to navigate this landscape. We are technology agnostic, which means we do not sell a specific 105
solution, but work with a select group of highly accredited alliance partners that are leaders in their fields of expertise, including Microsoft, Salesforce, ServiceNow, IBM and Appian, and can bring our tools, like KPMG CarbonView, built on our proprietary Sofy platform for data and analytics and workflow management, if there are no tools available.” Two of KPMG’s alliance partners include Appian and Coupa Software. Jerwin enthuses, “The Appian Low-Code platform offers organisations the opportunity to break down corporate silos that hinder ESG management. With data sources seamlessly integrated and crossfunctional workflows orchestrated and automated, ESG processes and management are simplified. Appian enables companies to quickly address evolving ESG criteria, including managing changes to processes, inputs collected, and reporting designations.
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“The Appian Low-Code platform offers organisations the opportunity to break down corporate silos that hinder ESG management. With data sources seamlessly integrated and cross-functional workflows orchestrated and automated, ESG processes and management are simplified. Appian enables companies to quickly address evolving ESG criteria, including managing changes to processes, inputs collected, and reporting designations” Jerwin Tholen, Partner Sustainability at KPMG Netherlands
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Appian for a Sustainable Supply Chain
In 2022, organisations across industries will continue to improve agility and resilience across their supply chain ecosystems. With ongoing disruption caused by the pandemic, changing customer expectations, an evolving technology landscape, and the demand for more sustainable practices, supply chain managers need efficient and transparent supply chain and environmental, social, and governance (ESG) processes more than ever before. According to Forrester’s State of Environmental Sustainability in the Fortune Global 200 report, sustainable targets are top of mind with companies across industries taking these actions:
58%
55%
23%
Appointing a sustainability lead.
According to Forrester’s analysis, 58% of G200 firms have created a position for a director, VP, or executive to lead the sustainability program.
Establishing GHG emissions reduction targets.
55% of G200 firms have established a target date for the partial or total elimination of GHG emissions.
Setting carbon neutral dates.
23% of G200 firms have set a date by which they will reach carbon neutrality, typically 2050 (in line with the goals of the Paris Agreement).
Manufacturing’s role in supply chain sustainability. Most manufacturers are taking a look at their supply chains as a core area for improvement in the move toward sustainable operations. On top of the demand for more sustainable practices, having a sustainable supply chain is a competitive differentiator. And as an added benefit, good sustainability practices reduce risk overall. While sustainability is often at the top of manufacturers’ mission or purpose statements, too many lack visibility and don’t have the right processes in place across the supply chain to achieve their goals.
Incremental steps toward a sustainable future. While there is no one right way to approach sustainability, Forrester advises looking for ways to make incremental changes that help reduce waste and boost efficiencies. Organisations that want to increase resiliency and sustainability in their supply chains are using low-code tools for agile change. The Appian Low-Code Platform provides the capabilities and centralised view of data that companies need to make well-informed short- and long-term sustainability decisions.
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Unified dashboard view of carbon footprint data in Appian.
A unified platform for a simplified approach to ESG. Our platform integrates data from anywhere—no migration required—and optimizes processes by automating workflows with intelligent document processing, Robotic Process Automation (RPA), and more to simplify your approach to ESG initiatives: •
Adapt to evolving regulations. Quickly address evolving ESG criteria by managing process changes, inputs collected, and reporting designations.
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Embed ESG in automated processes. Orchestrate people, systems, data, and bots in a single workflow to streamline ESG activities.
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Integrate with ESG data sources. Easily integrate with pre-existing data systems and virtually any third-party data source, including ratings, benchmarks, and analytics providers—no data migration required.
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Ensure visibility and control. Gain a single, unified view of all your data in a secure platform to easily share ESG status with stakeholders. Quickly access data to support audits, meet compliance requirements, improve ratings, and escalate issues while maintaining data security.
For more information about ESG visit: https://appian.com/solutions/use-case/corporate-esg-strategy-and-measurement-platform.html For more information about Appian for Supply Chain: https://appian.com/solutions/use-case/supply-chain.html
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Build a Sustainable Supply Chain With Coupa, your business spend can create measurable impact for both the bottom line and the world. By optimising supply chain routes and suppliers, your business can minimise its carbon footprint.
Support Executive Goals for Ethical Business Practices Make business spend a lever for change to keep your company positioned to attract and retain the best customers and talent, and to support executive ESG commitments. Supercharge initiatives with proper governance across the supply chain to deliver greater impact.
Minimise Supply Risk in the Value Chain Develop a multi-level third-party risk assessment model that includes each third party and their relevant fourth parties.
Coupa’s global alliance with KPMG enhances our ability to help clients truly transform their business spend management processes. To truly gain an ESG advantage, companies should go beyond compliance, combining data with technology. KPMG’s Powered Procurement, enabled by Coupa’s Business Spend Management tools, embodies this mindset by empowering procurement teams with the necessary insights to make responsible, datadriven business decisions to turn ESG aspirations into action.
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www.coupa.com
“Coupa help companies make their procurement processes smoother and play an important role in collecting supplierspecific data to optimise their carbon footprint”
At the moment, Coupa is mainly used in procurement and supply chain optimisation. They help companies make their procurement processes smoother and play an important role in collecting supplierspecific data to optimise their carbon footprint.” With many companies continuing to focus on the measurement of emissions, Anne-Cecile worries that they are spending too much time on this as opposed to leveraging what is already in place. She explains, “Suppliers should primarily focus on the purpose of the measurements, which is to reduce their carbon footprint. Measuring is great, but reducing should be the end goal.”
Jerwin adds, “You don’t need to have perfect data to know where changes should be made. If you think the data is inaccurate to go to action, you will fall short of the timelines. It would be best if you moved intuitively. The data that tells you when tenders change is more helpful than an accurate estimate of your carbon footprint.” The leaders started measuring their value chain emissions more than four years ago, and are now looking at supplier-specific data. Those not part of the leading pack require a tool that will allow them to go to the next level. Anne-Cecile concludes, “The leaders do not necessarily have the tool in place just because they were the only ones focusing on it. I feel that the companies waking up today will get to the same level quicker.” For further information on KPMG Netherlands, visit www.home.kpmg/nl 111
SEED FUNDING
FIRST OF ITS KIND Digital supply chain platform for the textile industry, Tengiva, has raised $4.95 million.
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Tengiva, the first digital supply chain platform for the textile industry, has announced that it has raised CAD$4.95 million in seed funding. The funding round was led by Fonds Ecofuel, with participation from Inovia, Anges Québec, Active Impact Investments, and N49P. The funds raised include $1.7 million in commercialisation funding from the Investissement Québec Innovation Program, and a $100,000 grant from the Sustainable Development Technology Canada (SDTC) Seed Funding program. Textile production is a trillion dollar industry, and still mostly managed offline without much modern digitisation. Tengiva was created to solve some of the biggest industry 114
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challenges, which, for emerging clothing designers, is the ability to source materials quickly, cost effectively, and sustainably. By modernising the complex and outdated months-long sourcing and distribution process used in the textile industry, Tengiva is making it easier for clothing brands to seamlessly source the textiles needed directly from manufacturers in the quantities 116
they need, while enabling sellers to build their online presence, easily showcase their materials to develop new business relationships, and reach new markets. Today, millions of dollars of inventory are available through the Tengiva platform, including more than 300 different materials that are available to brands in 30 countries worldwide.
“Our platform is changing this by modernising the global distribution and trade of textiles, ensuring the critical steps that take place behind the scenes of every piece of clothing manufactured and sold is as automated and streamlined as possible” Annie Cyr, Co-founder and CEO of Tengiva
Tengiva will use the funds to commercialise its platform, build a state-of-the-art warehouse, and execute on its global expansion strategy. Annie Cyr, Co-founder and CEO of Tengiva, said, “The textiles industry is one of the oldest in the world, with the manufacture and trade of fabrics dating back thousands of years. While consumers today can easily purchase fashion products
online from any clothing brand worldwide, the supply chain that enables the flow of textiles from mill to fabric manufacturer to apparel brand has not kept pace. Our platform is changing this by modernising the global distribution and trade of textiles, ensuring the critical steps that take place behind the scenes of every piece of clothing manufactured and sold is as 117
automated and streamlined as possible.” Johanne Sevigny, Managing Partner at Fonds Ecofuel, added, “With 7.2 per cent of global climate impact caused by textile production alone, Tengiva platform is the key to better act on significant gaps in the supply chain. Leveraging their expertise, they have created a purposebuilt platform for the industry that not only solves some of the sustainability challenges faced by the sector, but has also attracted early interest from the world’s most notable textile mills and apparel brands.” In addition to enabling unprecedented access to materials across the supply chain, Tengiva also takes a holistic approach to addressing sustainability, which is a significant issue faced by the textiles industry. By centralising and providing structured access to data for textiles manufacturers and apparel brands, Tengiva aims to optimise resource usage, increase transparency across the entire supply chain, and promote better 118
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The Tengiva platform is now ready or global commercialisation, which will be a primary focus for he company in 2022”
practices – such as CO2 emissions calculations, material combination recyclability, and recommendations around production processes that lower the environmental impact and reduce chemical usage. This approach to driving sustainability in the textiles industry led to Tengiva attracting interest from Fonds Ecofuel, a leading clean tech fund based in Montreal, and Active Impact Investments, which is Canada's largest climate tech seed fund. In 2021, Tengiva was among 12 companies in Canada and the U.S. to be selected for the Google for Startups Accelerator: Women Founders. During this time, Tengiva relaunched its proprietary technology, completed beta testing of its platform, and reconfirmed its product-market-fit for both manufacturers and apparel brands. The Tengiva platform is now ready for global commercialisation, which will be a primary focus for the company in 2022. For further information on Tengiva, visit www.tengiva.com Source: www.businesswire.com 119
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