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AI can help automakers keep slavery out of their supply chains

FILE – Guard towers stand on the perimeter wall of the Urumqi No. 3 Detention Center in Dabancheng in western China’s Xinjiang Uyghur Autonomous Region on April 23, 2021. China’s discriminatory detention of Uyghurs and other mostly Muslim ethnic groups in the western region of Xinjiang may constitute crimes against humanity, the U.N. human rights office said in a long-awaited report released Wednesday, Aug. 31, 2022. (AP Photo/Mark Schiefelbein, File)

A two-year chip shortage, electric vehicle (EV) production problems, parts delays and last year’s decade-low new car sales have automakers stretched thin already. And now Congress has announced it is expanding its investigation into the use of forced labor in car manufacturing following a bombshell report on the use of slave labor to produce automobile components in China’s Xinjiang province.

With today’s supply chains, it’s not enough for automakers to know who their suppliers are. To gain certainty that they’re not unknowingly sponsoring modern slavery, violating federal trade laws or creating vulnerabilities in their production, automakers need to know what they’re buying. They need visibility into products, parts and raw materials, all the way to the proverbial “hole in the ground.”

While some of the industry’s leaders have invested in building out this capability, it needs to become the standard across the board. To encourage every stakeholder to adopt this mindset, the sector needs to rethink supply-chain risks based on the experiences of the pandemic, geopolitical tensions, the exposure of forced labor, growing demand for scarce raw materials and other realities of an increasingly complex supply chain. 

Once lawmakers, regulators and automakers realign around the modern risk landscape — the nature of it, how to prioritize it and solutions to address it — the industry can begin to normalize and even leverage investments in AI to reduce costs, increase resilience and manage compliance.

In recent months, the Senate Finance Committee has sent inquiries to some of the most recognizable names in the industry, asking automakers to explain how they conduct supply chain mapping to determine if their supply chain has links to Xinjiang Autonomous Region and how they plan to avoid or sever any such ties going forward. 

“I recognize automobiles contain number parts sourced across the world and are subject to complex supply chains,” wrote Senate Finance Committee Chair Sen. Ron Wyden (D-Ore.). “However, this recognition cannot cause the United States to compromise its fundamental commitment to upholding human rights and U.S. law.”

Unfortunately, transparency isn’t a level-playing field. This is part of the challenge automakers face in responding to the Senate’s investigation. Some countries, such as India and Mexico, require clear lines of sight into sources and movements of goods. Others, such as China, have implemented blocking statutes designed to obfuscate the original source of goods and circumvent the impact of foreign sanctions, making it exceedingly difficult for automakers to accurately attest to the absence of forced labor in their supply chains.

This has contributed to the “friendshoring” movement to bring manufacturing to more transparent regions; however, this process will take time. And some automakers, such as Buick, are investing in Chinese manufacturing and growing their presence in the Chinese market.  

Much of the industry was caught flat-footed by the onslaught of supply chain challenges, leaving many automakers struggling to satisfy regulatory compliance requirements and get their arms around their vendor ecosystem. 

Some rely on armies of people and spreadsheets to meet reporting requirements and comply with relevant trade agreements such as the US-Mexico-Canada Agreement.

Many have turned to a mix of sticks and carrots either to mandate or coax voluntary transparency from their vendors, including supplier scorecards, expanded reporting capabilities in exchange for more transparency, and flow-down requirements that make transparent disclosure a condition of the purchase process. We’ve also seen codes of conduct updates — a baby step in the right direction, but woefully inadequate to enlist the kind of transparency needed.

These approaches are helpful in strengthening long-term vendor partnerships, but they fall short of addressing the risks the industry faces today. What’s needed is a modern risk management framework that reflects the dynamic nature of supply chain risk and, recognizing that automakers can’t eliminate all risk, directs the focus on risk management that can be scaled, replicated and automated across their entire enterprise and vendor network. 

The challenge is to create a real-time risk snapshot for automakers that reflects the part and item-level granularity of automotive supply chains and the absence of reliable traditional documentation such as bills of lading. The only adequate solution to this is artificial intelligence.

AI can look beyond the information and data provided by vendors and governments, instead combing the expansive universe of open-source data for relevant information. AI allows automakers to draw in data from sources such as product manuals, news articles and technical data packages in an autonomous fashion. That data can be compiled into a database which can assign information to relevant entities in an automaker’s supply chain on a probabilistic basis.

The data can then be converted into mapping and visualization tools that illuminate a wide range of risks, including forced labor, adversarial interest, financial health, cyber vulnerabilities and criminal activity. 

With the help of AI, the entire risk assessment process can be completed within a matter of minutes, and at a level of granularity not previously possible or conceivable. 

And the long-term potential of this capability is not just to mitigate risk. The widespread adoption of supply chain AI software will empower automakers to confidently satisfy compliance requirements, strengthen their economic resilience and automate time-, cost- and labor-intensive processes.

Automakers face a ticking clock, as congressional inquiries can quickly turn into enforcement actions. This leaves limited time to mobilize solutions that can meet the scale of a complex, global challenge. In this opaque risk landscape, AI offers arguably the only viable answer to a swift and sustainable path forward for the auto industry.

Trevor Stansbury is president of Supply Chain Transformation at Exiger, a supply chain risk-management software company.

Tags AI auto industry China Ford GM Honda Ron Wyden Ron Wyden supply chain Uyghurs Xinjiang

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