The Supply Chain —
Reimagined

What the early visionaries failed to see was that the supply chains are too complex for a single company to be able to integrate them all into a single central cloud entity. No company can formulate the standards for all the others — and certainly not in a sector as international as the automotive industry. Moreover, there are good reasons for companies not to entrust their most important asset, namely their data, to a single actor. It makes far more sense for each individual owner to retain control of its data and to exchange only the specific information needed for a given application. “Everyone involved first had to grasp the concept,” says Sturm. “We all had to realize that cooperation is the better way forward. Together, we have to move beyond the notion of individual ‘ego systems’ and develop an overarching ecosystem.”

Collaboration was what was needed, as well as technical solutions that could allay the fears of the partners. For example, the fear of exposure, also and especially to one’s competitors. The principles of Gaia-X formed milestones along the road to the automotive industry’s shared ecosystem. These laid the groundwork for the launch of Catena-X by a handful of companies in 2021. “It was nothing less than a paradigm shift,” observes Sturm. The partners joined forces to develop everything right from the start, from formulating the task — what do we want to achieve together? — to designing the solutions. “This shared precompetitive basis laid a solid foundation of trust.”

Because the data from each company have to remain under that company’s control, they are only “mutually accessible in context-sensitive ways,” as Sturm explains. The key component of the new data space is a technology known as eclipse dataspace connector (EDC), which has both a control plane and a data plane. On the control plane, participating companies negotiate which supply chain data are needed for a specific use case. On the data plane, the system then displays the specified data — and only those data. The crucial feature of the system is that the supply chain members enter into contractual relations with other members regarding that specific data set, which eliminates potential ` misuse of information right from the start. Catena-X uses a “one up and one down” principle in its data chain. That means each participant sees only its immediate suppliers and customers, but no further companies either upstream or downstream. Data are only exchanged directly between companies, without a central intermediary.

Catena-X’s approach is designed to integrate a large number of companies of different sizes. “As such, it’s not a German or even a European network,” says Sturm. “The European automotive industry can only be successful on a global basis — and that means the overall standards have to be applicable everywhere in the world.” But the initiators were not just thinking about the big fish. Right from the start, they wanted to include small and medium-sized enterprises (SMEs) as well. “That’s essential, because SMEs make up a majority of the supply chain — you can’t do without them if you want Catena-X to be successful.”

What, then, is the best way to encourage SMEs to join in? Pressure is not the way to go, according to Sturm. Instead, he says, these companies need to recognize the added value Catena-X has to offer. At the same time, the network’s applications should work on a “plug-and-play” principle to the extent possible. In contrast to the big players, after all, smaller companies often do not have their own IT experts who can carry out complex system integration projects. “That means we need low-threshold offers with the fewest possible accessibility hurdles, because otherwise we won’t manage to get these companies on board.”

Part of the benefit for SMEs lies in the applications Catena-X makes available. For instance, it can optimize and streamline data management systems for business partners. Small enterprises, too, are interested in supplier queries. If Catena-X succeeds in becoming a universal instrument that balances capacities in supply chains and lets manufacturers coordinate their needs with suppliers, this will represent an additional major incentive for all parties to work together. Yet another benefit is the interoperability of the applications. Regardless of which supplier or which open-source application is used, the applications themselves are compatible because of the uniform semantics and calculation methods defined by the Catena-X standards.

For its part, ZF neither can nor wants to do without the small suppliers in Catena-X. “We want to achieve climate neutrality by 2040 at the latest,“ says Sturm. “The speed at which we can commit to this target, and also demonstrate and document it, will depend in part on our data chains.” And SMEs are integral parts of these data chains. As Sturm explains, too many companies are already losing too much time precisely when it comes to aggregating their data. However, “If companies succeed in gathering the requisite data faster, they’ll have more time to analyze these data and ultimately also take steps to eliminate problems or to enhance processes and make them more economical.”

Catena-X would exceed all other systems in its ability to accelerate the exchange of data multiple times over. But ZF expects far more than that from Catena-X. This can be seen in the extent to which it is already using the consortium’s apps — namely in seven of the ten use cases: for sustainability, supply chain matters, data compilation for circular economies, demand and capacity management, business partner data management, and the exchange of quality data. And finally, Sturm and his colleagues are using Catena-X data to generate digital twins. The idea here is that vehicle use patterns are expected to enable preventive maintenance and repair.

Despite the wide range of applications already available, the partners are working tirelessly to expand the areas of application, and to extend them to other industries with similar approaches, for example in the form of Manufacturing-X in the production industry. Sturm expects that connecting Catena-X with other industries will open up “undreamt-of business possibilities” in the future. He sees an especially high level of potential in integrating infrastructure, mobility, energy, and safety within the context of smart-city concepts, for example. “Many areas of life are merging ever more with each other,” he notes. “If we can use data-space technology to interconnect the underlying data in context-sensitive ways, we’ll be able to develop entirely new business models.“

That being said, Göller and his team have accomplished a lot in a short period of time. Under his direction, the first European Catena-X hub outside Germany was founded in France. It wasn’t easy to win over the French, says Göller. Their initial skepticism revolved around two points: first, how will companies retain complete control over their data at all times; and second, how will existing French structures combine with those of Catena-X.

Regarding data control, Göller first held many discussions in Paris on standard definitions. His French colleagues were also interested in the use of blockchain technology and how to integrate existing material tracking applications. Göller and his team repeatedly emphasized the advantages of a decentralized data space and the principle of context-based access rights. “Those were the factors that ultimately convinced our colleagues to join the shared project,” he says. Göller also satisfied his French counterparts on the topic of connections with existing structures. “Our idea is precisely to create compatible interfaces for existing networks, and to build our network on this basis,” he explains. “Catena-X is the network of networks.”

“We start by talking with the club of the willing”: this is Göller’s method and his term for those who are already open to the idea. In France, the first large partner to join the “club” was Stellantis with brands such as Peugeot and Citroën, but also Opel, Fiat, and Chrysler. Valeo, an important supplier that is also active internationally, joined shortly thereafter. The two companies are members of Galia, a major French automotive association headquartered in Boulogne-Billancourt. With Stellantis and Valeo as intermediaries, Göller had multiple meetings with Galia representatives in Paris. “The result we came up with satisfied everyone and generated visible synergies,” reports Göller. It also brought a new Catena-X member, namely Renault. Today a Renault representative is active in Catena-X as an elected member of the board.

The internationalization team is pursuing a similar, albeit not identical, course for important automotive markets in Asia. The focus is on Japan and China. Göller and a number of Catena-X expert members visited Shanghai and Beijing in mid-2023, where they spoke with representatives from eight automotive associations and organizations within just four days. Most of their contacts came from superbly networked colleagues at Volkswagen China, but the strong presence of the German Chamber of Commerce and Industry (IHK) and the German Chamber of Industry Abroad (AHK) also opened doors in the Middle Kingdom. Nevertheless, Göller’s “German ideas” are also met with skepticism here too. “We keep having to explain that Catena-X can only be successful on a global scale, and that all Germany did was get it started.”

At the same time, those European values underlying Catena-X are often a strong point in the network’s favor. “The data-sovereignty principle is a strong argument for non-Europeans as well,” Göller observes. It shouldn’t come as a surprise that the export-oriented Chinese companies are especially open to Catena-X. After all, they too have to meet the legal requirements that already apply in Germany and will be Europe-wide as of 2024. “Many of our contacts quickly realized that Catena-X can help them here.” These contacts are the ones currently engaged in the most active talks with the internationalization team. An alliance of the willing is expected to form in China soon too, with member companies such as Siemens, BMW, SAP, Huawei, and T-Systems.

In Japan the team is a step further along. Intermediaries here included colleagues from the German software company SAP, which itself was one of the original Catena-X members. Inspired by Catena-X, the Japanese have been working on their own supply chain network known as Ouranos — and consequently already thinking of future collaboration with the Europeans. Here, too, the guiding principle is that of a “network of networks.” The only thing that counts is enabling data to flow smoothly from suppliers in Germany to OEMs in Japan, and the other way around. “Whether the network is later called ‘Catena-X,’ ‘Ouranos,’ or ‘Let’s Share Data, Inc.’ doesn’t matter to us.”

Experience gained by Volkswagen is helping put Catena-X into practice. The world’s largest carmaker began building its own successful internal digital production platform back in 2019. Its first step was to connect more than 100 sites with each other on a digital production platform (DPP). But determining end-to-end PCFs, or product carbon footprints, for its vehicles using a single industry-wide standard would have required the Group to connect with additional partners well beyond its own supplier network. “We were forced to realize the project was a little too big even for Volkswagen,” admits Göller.

Volkswagen’s experts contributed their knowledge as one of the first members of the association and also of the consortium. Together, within the circle of 28 partners, they developed the project’s initial software on an open-source basis. “That was when we really got excited about the big picture of Catena-X,” recalls Göller.

No one in the Group has regretted taking that step. The progress made in just two years by the Catena-X partners has taken the wind from the sails of initial skeptics. Numerous apps are already available that can considerably enhance supply chain management, meet reporting requirements, and mitigate damage in future crises. With ever more users providing the data needed by the apps, Catena-X is becoming ever more valuable to its community. In light of these rapid developments, Göller is certain that “Catena-X will soon be able to identify facts and contexts that we even can’t even imagine today.”

The digitalization expert was especially interested in two topics right from the start: the new platform should cover the entire automotive value chain, and it should be based on the key criterion of interoperability. The centrality of these two points reflects the special significance BASF has for the automotive industry and beyond. The globally active chemical company occupies various positions in the automotive supply chain. It is a tier 1 supplier, namely of top-level modules and systems, for products such as coatings. For battery chemicals and synthetic materials, it is positioned further down the value chain in the automotive supply sector, at tiers 2 to 5. The goal, of course, is to incorporate all of these points along the chain into the new data space.

Similar considerations are leading Wollny to place a greater emphasis on interoperability. “Because we’re active in many different industries, we want to be able to move data back and forth between different platforms,” he explains. The data therefore have to be compatible with other systems’ standards. That is precisely the point of interoperability.

One factor that fosters interoperability is the example Catena-X is setting to an increasing degree for counterparts in related branches of industry. As Wollny observes in describing the development, “Catena-X is already serving as a type of blueprint for other decentralized data ecosystems.” Its leading role is based in part on the shared approach taken early on by a number of automotive companies — and surely also on financial backing from the German Ministry for Economic Affairs and Climate Action. As Wollny explains, “Catena-X gives Germany a new, scalable, future-oriented technology that will become ever more relevant both nationally and internationally in an increasing number of sectors.” The Manufacturing-X and Health-X data spaces, which have also been developed in Germany, are already utilizing principles developed by Wollny and his colleagues from the consortium.

Another benefit of Catena-X is the enormous speed at which its operators are achieving their goals and interim targets. “More than 1,000 employees at 28 companies are working on it together in agile ways,” says Wollny. That admittedly requires an enormous amount of coordination. Yet the mutual trust arising from joint efforts by what are actually competitors has helped master many a challenge. The first prototype was ready sooner than anticipated. Assuming the upcoming “go live” is successful, signs will then point to expansion — “internationally as well as nationally with greater recruitment of smaller and medium-sized companies.”

Although Catena-X has already made astonishing progress on European and other international levels, Wollny expects the challenge of increasing acceptance among smaller and medium-sized enterprises (SMEs) to continue. “We’re attending many events and trade fairs and holding a lot of individual talks these days, but the value chain still has gaps that we want to close,” he says. However, ever more decision-makers are realizing the advantages of no longer needing to draw their data from different platforms with different standards but instead being able to access it from a single space with a uniform standard.

Wollny himself has higher aims for Catena-X. BASF is especially interested in sustainability and product carbon footprints (PCFs). “We’re looking at the entire circular economy here,” he says, “starting with the raw material producers on one end of the chain and going all the way to recycling companies at the other.” When the data are gathered and analyzed, the idea is to share them with the market and customers. BASF is already working on a good solution here.

Wollny is especially proud of the Battery Passport, an app whose development BASF has guided with partners from Catena-X. Once users download and integrate it into their systems, they can see the chemical composition of batteries at a glance. The app can also show battery status. As Wollny notes, “The data are all the more important toward the end of battery life cycles when recyclers have to determine whether they can be reused or reprocessed.” Thanks to Wollny and his consortium, a check of the Battery Passport will soon be all that is needed.