Among other things, COVID-19 has underlined the importance of straightforward and seamless supply chain management in the automotive industry. Characterized by a highly complex and intertwined ecosystem, cross-border deals, and multiple stakeholders spanning design, manufacturing, and marketing to sales, distribution, and servicing, the industry has long placed a premium on transparency, traceability, and compliance across its ecosystem. Here, blockchain has been considered as a key enabler of innovation and improved business outcomes for global automotive industry participants. The automotive industry will pilot parts traceability, supply chain visibility, contract management, in-vehicle payments, ownership/identity management, and data monetization blockchain projects by 2022.
It will be interesting, therefore, to see how the recently released blockchain-based solution for the European automotive industry – eXtended Compliance End-to-End Distributed (XCEED) – will play out. Will it exceed the expectations of the automotive industry? What value will be derived from this instance of blockchain in action?
Enhanced Component Compliance Traceability Supports Multiple Benefits
XCEED is the result of the collaborative efforts of Faurecia, Groupe Renault, Knauf Industries, Simoldes, Coşkunöz, and IBM. It is a shared blockchain solution based on an open-source blockchain protocol Hyperledger Fabric that can be used for vehicle component/parts traceability. After successful testing at Renault’s Douai plant, the XCEED solution has now been developed to scale and made available globally to OEMs and suppliers.
XCEED is designed to “certify the compliance of thousands of the components of a vehicle almost in real-time from design to production.” It ensures rapid component compliance traceability across the automotive supply chain. Like distributed, shared, digitally-driven blockchain platforms in other industries, we expect XCEED to support greater product transparency, traceability, compliance, and conformity across the European automotive ecosystem.
It will allow every participant on the automotive supply chain ranging from a parts supplier to a vehicle manufacturer, to automatically share data and information, more effectively identify and respond to problems, and enforce enhanced compliance management within the framework of a secure, trusted network. To allow for greater flexibility, it will be available in a hybrid cloud environment, with OEMs/suppliers able to select the cloud platform on which they want XCEED to operate.
This gains significance in light of the implementation of increasingly stringent regulations in Europe. Most recently in September 2020, the EU introduced new EU type-approval and testing rules to ensure less polluting and safer vehicles, enhance oversight over the system, and increase checks on cars already on the market. We are convinced that blockchain solutions, with their compliance and conformity traceability attributes, will allow the industry to rapidly achieve regulatory compliance without getting mired in associated data complexities. More importantly, they will allow companies to retain ownership and confidentiality over their data.
Over the short- to medium-term, we expect the increasing deployment of blockchain solutions by the automotive industry as it seeks to improve parts traceability and enhanced data sharing across its supply chains. For instance, BMW’s ‘PartChain’, launched in 2020, supports complete visibility and tracking of every vehicle part/component on its journey from source to the factory. Mercedes-Benz’s collaboration with Ocean Protocol for a proof-of-concept (PoC) focuses on promoting greater transparency and data sharing internally among its production centers and externally among its supply chain partners. Meanwhile, Volvo has partnered with Circulor to enhance the traceability of a key element – cobalt – used in its electric vehicle batteries.
Powering Up to New Level
The complexity of automotive supply chains highlights the need for rapid and effective communication between automakers and multiple stakeholders, including Tier 1 and Tier 2 suppliers. Blockchain solutions like XCEED will power the automotive industry to a new level. By facilitating transparent data and information exchange, strengthening the chain of custody, and providing near real-time alerts, they will enable more seamless and frictionless functioning. More importantly, they will support improved compliance and auditing. Over time, such solutions will be deployed by automakers to monitor the movement of crucial raw materials from mines to processing centers.
We believe such solutions will enable stakeholders to achieve regulatory compliance more rapidly and easily by allowing necessary changes to be effected in their supply chains and processes. They will provide a springboard for greater competitiveness, efficiency, and agility. And perhaps most importantly, in our opinion, they will help realize that much sought-after intangible – trust – across the ecosystem.