NEWSLETTER

February 2024

Editorial

February brought seismic shifts to the global supply chain landscape, spanning procurement, technology, and operations. A UN report sounded an alarm, projecting a 60% surge in global raw material extraction by 2060, urging a shift in focus from GDP growth to equity and resource efficiency. Accenture strategically reinforced its sourcing and procurement services by acquiring Insight Sourcing, aiming to amplify its capabilities across industries. Simultaneously, the German government invested €1 billion to diminish reliance on foreign producers, especially China, for critical minerals. In the tech realm, OpenAI's Sora emerged, a text-to-video model sparking enthusiasm but raising ethical concerns. European Parliament committees backed the AI Act, positioning Europe as a leader in AI regulation. Accenture and Mujin formed Accenture Alpha Automation, a joint venture enhancing manufacturing and logistics through AI and robotics. Sales and operations witnessed a UK sales rebound of 3.4% in January, while the U.S. sold its Federal Helium Reserve, triggering concerns for healthcare services reliant on helium. Market responses were swift, impacting global stocks, Treasury yields, and the dollar after a notable drop in U.S. retail sales. February’s dynamics underscore a critical juncture in the global supply chain, navigating growth aspirations with sustainability imperatives. The subsequent essays delve deeper into these pivotal developments, offering insights into the evolving challenges and opportunities shaping our interconnected supply chain ecosystem.

Procurement & Sourcing

Extraction of Raw Materials to Rise by 60% by 2060, says UN Report

Global extraction of raw materials is projected to increase by 60% by 2060, causing severe climate and environmental consequences, with resource extraction already responsible for a significant percentage of global heating, air pollution, water stress, and biodiversity loss.
The UN analysis advocates prioritizing equity and human well-being over GDP growth, proposing measures to reduce overall resource demand. It suggests that systemic resource efficiency, such as better use of existing infrastructure and community-focused living, could cut greenhouse gas emissions by over 80% by 2060, emphasizing the need for a shift in focus from cleaning the supply side to demand-side measures to address the interconnected crises of climate, biodiversity, and pollution.

Accenture to Strengthen Sourcing and Procurement Services with Acquisition of Insight Sourcing

Accenture has entered into an agreement to acquire Insight Sourcing, a strategic sourcing and procurement services provider, to expand its sourcing and procurement services for private equity companies and industries such as consumer goods, retail, technology, and industrial sectors.
The acquisition will bring approximately 220 sourcing consultants and more than 40 technology procurement tools from Insight Sourcing to strengthen Accenture's Sourcing & Procurement practice, with a focus on cost takeout strategy, category and supplier market intelligence, and efficiency across supply chains.

Germany Invests €1 Billion to Counter China on Raw Materials

The German government has allocated €1 billion ($1.1 billion) for raw materials investments over four years, aiming to reduce dependence on foreign producers, particularly China, for critical minerals such as cobalt, copper, lithium, silicon, and rare earth metals.
The funds will be managed by Germany's state-owned KfW development bank, with a focus on projects related to extraction, processing, and recycling of critical raw materials. The initiative is part of a broader effort to secure the supply chain for high-tech and green projects, addressing vulnerabilities exposed by the pandemic-induced disruptions and geopolitical events like Russia's invasion of Ukraine.

Intel, UMC Form Foundry Partnership

Intel and United Microelectronics Corporation (UMC) announced a collaboration to develop a 12-nanometer semiconductor process platform, targeting high-growth markets such as mobile, communication infrastructure, and networking. The partnership aims to leverage Intel's U.S. manufacturing capacity and UMC's foundry experience, providing customers with a more geographically diverse and resilient semiconductor supply chain.
The 12-nanometer node will utilize Intel's high-volume manufacturing capacity in the U.S., with production set to begin in 2027. The collaboration is expected to broaden UMC's market access, accelerate its development roadmap, and enhance customer choice in sourcing decisions. The agreement reflects Intel's commitment to partnering with innovative companies in Taiwan and aligns with its goal of becoming the world's second-largest foundry by 2030.

Extraction of Raw Materials Could Rise 60% by 2060 - and Making Mining ‘Greener’ Won’t Stop the Damage

The UN's Global Resources Outlook report warns that global raw material consumption is projected to increase by 60% by 2060, contributing to environmental issues and disrupting ecosystems. The demand for critical materials, essential for both military and green transition purposes, is intensifying geopolitical competition among major powers.
To address environmental concerns, the report highlights the need for changes in mining practices, promoting enhanced recycling and urban mining. However, challenges include low recycling rates, lack of regulation, and the dominance of extractive mining over more sustainable alternatives. "Degrowth" strategies, emphasizing a radical reduction in material and energy use, are suggested as a potential solution, reallocating resources for a more sustainable future.

Technology, Automation & AI

OpenAI teases Sora, Its New Text-to-Video AI Model

OpenAI has unveiled a new text-to-video model called Sora, capable of generating videos up to a minute long based on user prompts. Although not yet available to the public, the announcement has sparked excitement among AI enthusiasts and concerns about job erosion and digital disinformation.
Sora, part of OpenAI's efforts in the generative AI revolution, demonstrated realistic visual details in various scenarios. However, it may struggle with complex scenes, leading to illogical outcomes. OpenAI acknowledges potential ethical issues, such as deepfakes, and is working on tools to detect Sora-generated content, collaborating with experts to assess its potential for causing harm.

EU Politicians back new rules on AI Ahead of Landmark Vote

European Parliament committees on civil liberties and consumer protection have overwhelmingly endorsed provisional legislation for regulating artificial intelligence (AI), known as the AI Act, aiming to ensure AI compliance with fundamental rights. A legislative assembly vote is scheduled for April.
The AI Act, proposed by the European Commission, is seen as a global benchmark to balance the potential benefits of AI with the need to mitigate risks such as disinformation, job displacement, and copyright infringement. The legislation covers various industries, including banking, cars, electronic products, airlines, security, and police, and aims to establish Europe as a leader in AI while boosting innovation.

Accenture and Mujin Establish Joint Venture to Bring AI and Robotics to the Manufacturing and Logistics Industries

Accenture and Mujin have established a joint venture, Accenture Alpha Automation, with a 70% ownership by Accenture and 30% by Mujin. The venture aims to leverage AI and robotics to automate management infrastructure in the manufacturing and logistics industries, seamlessly integrating operational data with business management data.
Accenture Alpha Automation will combine Mujin's expertise in intelligent robotics with Accenture's digital engineering and manufacturing service to provide solutions that hyper-automate manufacturing and logistics processes. The joint venture marks Accenture's first Project Spotlight investment in Asia, emphasizing the focus on disruptive enterprise technologies in collaboration with Mujin.

GenAI is Redrawing Europe’s Intelligent Automation Map

Rapid advancements in generative AI (GenAI) are reshaping the European market for intelligent automation products and platforms, with increased enterprise demand for conversational AI. The technology promises improvements in customer and employee experiences, but caution exists regarding the risks associated with large language models.
The 2023 ISG Provider Lens™ report identifies ABBYY and UiPath as Leaders in two quadrants each, recognizing their capabilities in Conversational AI Platforms, Intelligent Document Processing, and Process Discovery and Mining. The report highlights the growing European appetite for GenAI, driven by factors like rising labor and energy costs, while emphasizing the need for automation providers to address the current limitations and risks of large language models.

Singtel Partners with Nvidia in AI Data Centre Push in ASEAN

Singapore Telecommunications (Singtel) partners with Nvidia to deploy artificial intelligence (AI) capabilities in its Southeast Asian data centre to meet the growing demand for digital services. Singtel will offer remote access to Nvidia's graphics processor units, enabling clients to adopt AI technology without the need to own or maintain expensive processors.
As part of Singtel's launch of the regional data centre brand Nxera, the telecom company aims to position its data centre business as a key growth pillar. Singtel is building a new facility in Singapore, set to go online in 2025, with a focus on AI readiness and liquid cooling for processor-intensive workloads. The company plans to expand its data centre projects in Southeast Asia, considering entry into Japan and other Asia-Pacific markets to meet rising demand for AI-ready data centre.

Sales & Operations

Shop Sales Rebound in January as People Sought New Year Deals

Shop sales in the UK rebounded by 3.4% in January, following a record drop in December, with a notable surge in food sales at supermarkets and positive impacts from January sales reported by department stores. The increase comes after a sharp fall in retail sales during December, attributed partly to early Christmas shopping during Black Friday sales.
Inflation remains elevated at 4%, higher than the Bank of England's 2% target. While inflation has slowed, the central bank had raised interest rates to address rising prices. Economists are divided on whether the January bounce signals a turning point for retailers and consumer spending, with some optimistic about recovery due to falling inflation and rising wages, while others express caution, citing consumer spending pressures and predict a sustained recovery only in the second half of 2024. The UK officially entered a recession at the end of last year.

The U.S. Just Sold its Helium Stockpile. Here’s Why the Medical World is Worried

The U.S. government has sold the Federal Helium Reserve, a major helium stockpile in Amarillo, Texas, supplying up to 30% of the country's helium. The sale, likely to industrial gas company Messer, raises concerns about potential disruptions in the healthcare sector, particularly affecting MRI machines that require liquid helium for cooling.
Regulatory and logistical challenges in the transition to private ownership may lead to a temporary shutdown of the facility, exacerbating an existing helium supply shortage. Experts warn that a shutdown could impact critical healthcare services, as MRI machines, vital for diagnosing various medical conditions, heavily rely on helium for operation.

Stocks Climb, Yields and Dollar Ease after US Retail Sales

Global stock indexes advanced, Treasury yields declined, and the dollar weakened against the Japanese yen after a larger-than-expected 0.8% drop in U.S. retail sales for January, prompting a slight repositioning of expectations for interest rate cuts. The decline in retail sales, the largest since February 2023, led to increased bets on a rate cut, with odds for a 25-basis-point cut in May at 40.6% and in June at 82%.
Despite unexpectedly weak Japanese GDP figures for Q4 2023, causing Japan to fall to the world's fourth-largest economy, the yen strengthened. The dollar was down 0.41% against the yen at 149.94, and the dollar index fell 0.38% at 104.28. The U.S. 10-year Treasury note yield fell 3 basis points to 4.234%. The Dow Jones, S&P 500, and Nasdaq Composite all posted gains, and MSCI's global stocks gauge rose 0.79%. Oil prices rose as the retail data prompted a dollar sell-off, with U.S. crude settling at $78.03 a barrel, and Brent settling at $82.86. Spot gold was up 0.6% at $2,004.05 per ounce.

Sony Cuts PlayStation 5 Sales Forecast, Signalling a Dim Year for the Video Game Industry

Sony has reduced its sales forecast for the PlayStation 5 console, expecting to sell 21 million units in the fiscal year ending March, down from the previous forecast of 25 million units. The cut follows a record quarter where the company sold 8.2 million units. Sony faces the challenge of maintaining momentum for the PS5, which was released over three years ago.
The gaming business's sales rose 16% year-on-year to 1.4 trillion yen in the December quarter, but operating profit fell 26% due to increased hardware losses from promotions and a decline in sales of first-party games. Sony also lowered its overall sales forecast for the fiscal year. The company plans to partially spin off its financial services business via a public listing in October 2025. Sony's financial services unit reported a significant revenue increase in the December quarter, and the company aims to sell 18 million PlayStation 5 consoles in the fiscal year ending March 2023.

Making the Leap: From Smart to the Metaverse in Operations

Smart Operations and Industrial Metaverse: Manufacturers are investing in key technologies like IoT, data analytics, and digital twins for smart operations. The industrial metaverse, utilizing these technologies in combination, offers an immersive 3D virtual environment for global collaboration, redefining efficiency across various operations.
Digital Maturity for Metaverse Adoption: To unlock the potential of the industrial metaverse, manufacturers need digital maturity. This involves understanding customer needs, fostering a culture of digital transformation, investing in infrastructure, and encouraging experimentation. Digital maturity not only enhances current operations

Sources

https://www.theguardian.com/
https://newsroom.accenture.com/
https://www.mining.com/
https://www.intel.com/
https://theconversation.com/
https://www.nbcnews.com/
https://www.aljazeera.com/
https://www.businesswire.com/
https://asia.nikkei.com/
https://www.bbc.co.uk/
https://www.forbes.com/
https://www.cnbc.com/
https://www.reuters.com/