Catena-X Explained: Driving Supply Chain Transformation with Real-Time Data Exchange

[Transcript]

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[00:00:27] Jim Liegghio: I'm Jim Liegghio from AIAG.

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[00:00:36] Jan Griffiths: Hello, and welcome to another episode of the Auto Supply Chain Prophets Podcast. Let's check in with my co-host, Terry Onica. What have you been up to?

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So, we're starting to take a look at what needs to be updated. We might take a different approach and maybe do a minor version, if there's not a lot of changes, or possibly, a full version. But you know what was really exciting? There are over 125,000 MMOG/LE assessments out there according to the database that's account, and I believe it's like 10,000 or maybe even 14,000 sites around the world that are filling it out.

So, just great news for AIAG, and just how prevalent that is for supply chain.

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[00:01:27] Terry Onica: Yes. Yes. That's huge. Actually, we're at about the same pace as the IATF 16949 is.

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[00:01:38] Terry Onica: I always like to say they're the sister organization to AIAG. So they do the exact same thing, but they oversee Europe.

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[00:01:48] Jim Liegghio: Hi, Jan. Yeah, just a lot going on here at AIAG. We had our supply chain event yesterday. We podcasted live. That was super fun. Very exciting event. Really great content from Tanya and her team.

We had our charity golf outing recently, so we benefited Camp Quality, which is a camp for children with cancer. So we're happy to support that event. And everything's going well. We're kind of in the midst of summer here, and I'm actually super excited about today's episode with Kevin. Catena-X is a huge game changer for the industry, and I'm just really excited to talk about that today.

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I don't know that we can collaborate at the OEM level, but certainly within the supply chain we've got to do a better job of communicating with each other. And just yesterday, in the AIAG Supply Chain conference, Terry, we had Jenny Smith on from Royal Technologies. And she's a tier two, and she said, "Please, just tell us why you're making changes. Just communicate with us." It's the simple things.

And the OEM panel yesterday, in the conference, they talked about collaborating between the OEMs and the tiers. And there's so much that we have to do as an industry in order to compete, and we know that collaboration is one piece of it. Speed is another.

We've got to break down these silos. We've got to be able to send data back and forth a heck of a lot faster than we do today. And that's why I am thrilled that we've got Kevin Piotrowski on the show today. Kevin is the Chief Transformation Officer for AIAG, and we are gonna talk about a tool that AIAG is launching.

This is a very successful and exciting launch time that we're in right now to do exactly that. And it is called Catena-X, and I am sure that our audience has heard the name, and they're probably thinking, "What is this thing?" Kevin Piotrowski, first of all, welcome to the show.

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[00:04:28] Jan Griffiths: Kevin, keep it simple. What is Catena-X?

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So the term radical collaboration comes into play, because it is not just a point to point to connection, but it goes through up and down the supply chain. And this is for complex data, Jan, not standard data—so data around product carbon footprint, data around the battery passport, data around the digital twin—and it moves in a secure, encrypted way. And it's the data that the supplier and the customer, they decide: what data, who gets to see it, what's the sharing of that data. So it's very well controlled as well.

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[00:05:47] Kevin Piotrowski: Yeah. I mean, that's really the point of this. It's a standard way, it's a common way to share this data. And if you think back to the way data was shared way back when, right? It was a fax machine. It was very linear. Then we moved into Electronic Data Interchange and Application Interfaces and a variety of XMLs and things. That data moved point to point—so a supplier sent something to their customer, they received that data and processed it.

Today, when you mentioned speed and collaboration and transparency—some of these other data sets, like product carbon footprint or battery passport—this data needs to move not just from one location to another, but throughout the supply chain, down many levels, up many levels. It has to move quickly.

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[00:07:16] Kevin Piotrowski: Yeah, for sure. That's one of the primary targets. When you think about tariffs, or traceability, or quality, or, you know, deforestation regulations and compliance—all the customers are requiring this information. And there's one primary source or one field that's, I would say, really important: It's country of origin, right?

So, this is common across all of them. As this gets standardized—as this gets, what I would say, more common—you're gonna see a top-down approach where customers are requiring this information from their suppliers and their supply chain, more importantly. Not just one below them, but all the way through the supply chain.

But you're also gonna see this start to bubble up. Like, what I would say, a cell phone was 15, 20 years ago when companies would put their, you know, we have coverage in these areas. Because you're gonna have suppliers saying, "Wow, I'm doing it. This common way for five of my customers, and I would really like my other five to do it the same way."

And that's why it fits so well with AIAG. Because we're all about commonization. We're all about standards. We're all about doing it one way, and not trying to have a high burden on the supply chain. And these use cases in Catena-X go straight across our three most important pillars: quality, supply chain, and sustainability/corporate responsibility.

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[00:08:50] Kevin Piotrowski: We had the benefit of having one of our OEMs and one of our top suppliers at a couple events here in the last month, where they actually demonstrated this use case on stage. One of 'em is around product carbon footprint and getting product carbon footprint data from your supply chain.

And by leveraging Catena-X, and being able to leverage primary data versus average secondary data—that's more of an average, not an exact amount—they were able to report 46% less carbon emissions from just one example. And that wasn't because there was something wrong with the prior calculation; it was just using accurate, real-time data in the supply chain.

And one other example we have for the whole audience is around quality. Everybody is very concerned about it, and you know that that's the most headline news there is—when there's a quality recall by any OEM. How do you contain? How do you track where all those parts are? That takes time, right? So when the defect is found, all of a sudden you have to look how many vehicles are at dealers, how many dealer vehicles are on the assembly line, and start working your way backwards through the supply chain—which takes a lot of time, a lot of manual effort, and typically results in a recall that's much larger because you don't wanna make any mistakes.

With Catena-X, and leveraging it for quality, you can blow through the supply chain and get information back up—greatly containing that issue. And then, when you throw AI in and you throw other things down the road, it'll work from being not only helping contain but helping be more predictive, and then ultimately preventing these types of recalls.

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[00:10:55] Kevin Piotrowski: That's a great question, and that's one of the more common questions, because I think everyone's like, "Wow, what? Is this replacing something?" And the answer is no.

EDI has been around for a long time. I happened to date myself 'cause I was part of the EDI work group and the barcode labeling work group in the mid-eighties that started the work. We probably did, right? It started working on the first ASN that was ever done via electronically versus a fax machine. So, no—EDI still has a place, right?

EDI is really strong and really good at point-to-point and EDI communications. And then EDI is really good when you want to receive the data and put it into your system. So, as an example, a supplier wants to send an ASN—they're gonna do it via EDI. That ASN data, that shipment data goes into the customer's receiving system, and updates their inventories, and gets put into their ERP.

So, those use cases that are perfect for EDI. For Catena-X, it's more of the complex data, where you really wanna see not just move data from one point to another and then be done as a one-time thing, but where you wanna move data up and down the supply chain—not to store or save the data, but just to have visibility. That's the key: seeing where the issues are or what the data is, without storing it. And that's the beauty of Catena-X — to be able to do that very quickly.

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[00:12:28] Kevin Piotrowski: It's many-to-many. Yes.

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[00:12:37] Kevin Piotrowski: Say you want to understand your product carbon footprint for your vehicle, you need data from all the information prior to that, from all the tiers, all the way throughout the supply chain. So it's not just getting data from the Tier One, but it's making sure you have data from the Tier Two, the Tier Three, the Tier Four, and so on.

But to do that, some of that data is proprietary. So this, with Catena-X, is very encrypted. It's cyber-secure, but it's also protecting the information—that's what I would call IP, critical IP for the companies other than their Tier One.

So, if I'm an OEM, I can see my Tier One's data. I get to see the results of the data from the supply chain below them, but I don't get to know the details. And that's the beauty of the encrypted data.

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[00:13:40] Kevin Piotrowski: That's a super good point, Jim, because supply chains over the last 20-30 years really have changed a lot, and there's some key, key things that I think impact data.

So, one: long ago, we had a handful of customers and they were local, and your most suppliers were within a hundred-mile radius of the facility. Then, to to be successful, companies knew they had to get global, they had to get more customers, and they had to have a global supply chain. So their business suddenly became more complex — many business requirements from different customers, plus how do you deal in a multinational environment when you were maybe a smaller or mid-size company.

So that was kinda the first start of it. All of these enterprises, though, have mountains of data within their enterprise, both inside the four walls, but also outside with their partners, their suppliers, and all those types of things. So the way data now gets managed has become critically important.

The supply chain used to be: hey, if your supply chain is flexible, if it's lean, if it's fast, if it's nimble, that brings more value to you as a company, whether you're public or private, right? That was more important.

Well, now all that still applies, but how you leverage the data, and how you manage your data, and how you drive data down in the organization to the right people to make decisions will impact your business and your bottom line.

Having access to data is really knowledge. And getting the data quickly—not waiting weeks, months, or through a very manual process—doesn't work anymore. That will lower the value of your supply chain. So not only do supply chains have to be lean, fast, nimble, quick, they've gotta be able to share and have transparent data throughout their ecosystems.

That's, I think, a big difference that didn't exist even five years ago.

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[00:15:43] Kevin Piotrowski: Absolutely, yep. And the companies that do it better are gonna be far more successful that the companies that don't, so it's very critical.

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[00:16:22] Kevin Piotrowski: You're absolutely right, and we're working really closely with a lot of now solution providers. Many new solution providers have joined AIAG because of Catena-X, 'cause they wanna be part of this ecosystem.

You know, we're, in essence, a powerhouse sub or a powerhouse hub, I should say, for Catena-X because of our almost 5,000 members. And we represent those members, help get the priorities.

But for solution providers like yourselves, you'll be wanting to get your solution certified on Catena-X for your customers.

And so, like the example that we did—and it's public information—you know, we had Ford on stage with product carbon footprint. We had Flex, which is a tier. One supplier, and they use a different software provider. And we had Micron, who's a chipmaker, and they use a different supplier. But all we're leveraging the Catena-X network to communicate this information.

So the solution providers play a super key role in this. It's really an ecosystem—OEMs, suppliers and solution providers—that are gonna help make this be valuable for the supply chain.

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[00:17:34] Kevin Piotrowski: Yes. This is a global standard that everybody is trying to get on board with.

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[00:17:55] Kevin Piotrowski: I think the key is there, Jan—and you're right—it is something additional, but there's a lot of values be had.

There's a lot of benefits from an enhanced collaboration, improved efficiencies, data security, integrity, state of sovereignty, and also innovation. And a lot of these attributes are new, right? These attributes didn't exist 10, 20 years ago. These aren't attributes that people, when they share data, had to worry about.

So, we're inviting folks: hey, come to AIAG, be part of this ecosystem, start learning about Catena-X. Start working on helping us drive, for North America, the standards, the best practices. We'll help with awareness, we'll help with education, we'll eventually help with very formal training, right, for these folks.

We're working already on a number of collaborative pilots with a variety of OEMs, a variety of suppliers, and a variety of software providers. Hey, be part of this ongoing engagement. This is exciting. This is new. There's gonna be some ups, there's gonna be some downs, but people need to stay the course — because with new technology, you always have ups and downs. You don't wanna get too high, you don't want to get too low.

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To our audience—what would you like to know? Because this is the first of several episodes that we'll produce on the subject of Catena-X. But tell us, what is it that you wanna know?

So, send your requests, please, to me directly: Jan, J-A-N, @ gravitasdetroit.com. I will put them together, we will review them, and we'll bring in the relevant experts and we will answer your questions.

So please do that. We want to provide content that serves you, that helps you. Understand Catena-X is just one part of it, but it is critical as we move our entire auto industry forward.

We love the idea that AIAG is indeed uniting minds and elevating standards. This is it. I mean, this is almost like the North Star for us, right? For the future.

So I am very excited to be taking this to the next level. So, kevin Piotrowski, thank you so much for joining us today.

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[00:20:27] Jan Griffiths: We love to hear from our listeners. Reach out to any one of us—our contact information is in the show notes. And if you want to dive deeper into our content, check out our website at autosupplychainprophets.com.