Carmakers set to revolutionise supply chain transparency

The 89th annual Geneva International Motor Show in Switzerland, which took place from 7-17 March, put the spotlight on energy efficient vehicles, showcasing a huge range of low fuel consumption and low emission models. Both the Car of the Year award and title of fastest car at the show went to electric vehicles.

However, facing tightening environmental regulations, carmakers are beginning to go further than simply producing low emission cars by engaging the entire automotive supply chain in sustainability.

Ahead of the Geneva Motor Show, Volkswagen announced that its new electric ‘ID’ compact car, which will go into production at the end of this year, will be ‘carbon neutral’ throughout its entire life cycle, from the upstream production of materials and components through to the sourcing of raw materials.

Volkswagen has more than 40,000 direct suppliers worldwide, plus multiple indirect suppliers, some of whom are seven or eight stages away from the finished product. Initially, the company is focusing on sustainability improvements in the production of battery cells, followed by the production of steel and electric motors - where emissions savings of 50-70 per cent are achievable through end-of-pipe technologies, recycled metals and other measures.

However, with such a large supply chain, in many cases the first step will be to ensure transparency. In a statement, the company said:

“Several pilot projects are underway at Volkswagen to precisely identify the material origin of goods and to initiate measures if risks are identified. In addition, award criteria have significantly been tightened for suppliers by means of a new sustainability rating: compliance and sustainability performance will thus become a selection criterion as binding as price or quality.”

Another leading carmaker taking action to improve supply chain transparency is Mercedes-Benz, which in February announced that it was developing Blockchain technology to map its entire supply chain.

With the goal of ensuring close cooperation with suppliers on sustainability, the Blockchain platform will create a retraceable ‘transaction book’ that will disclose sustainability-related information to all participants. Should a supplier deviate from its contractual obligations, it would become visible in the Blockchain, similar to a secure accounting system.

Wilko Stark, Member of the Divisional Board of Management Mercedes-Benz Cars, Procurement and Supplier Quality, said:

"Blockchain technology has the potential to fundamentally revolutionise our procurement processes and could affect nearly the entire value chain. Global supply chains are becoming increasingly complex. With our Blockchain prototype, we are in the first step [of] testing one of diverse possible applications with the aim of increasing transparency beyond our direct suppliers."

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