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Artificial intelligence and optimization in the supply chain are more relevant than in the past. Companies from Germany are still highly dependent on commodities that are essential for key technologies. In a recent study, the ifo Institute analyzes the dependencies. It demonstrates that there is a need for action. In addition, 21strategies shows how artificial intelligence can already be used to increase reliability in supply chains and reduce the associated financial risk. 21strategies offers third-wave AI-based technology to strengthen the resilience of supply chains and thus of entire companies.
Commodity dependencies – still in important key technologies
‘How dependent is Germany on commodity imports in the production of key technologies?’ is the question posed by the ifo Institute in a recent study. In particular, the dependency at the product level is examined. In this context, several areas were currently identified as key technologies: Electric motors, wind turbines, photovoltaic technologies, 3D printing, robotics, digital technologies, drones, lithium-ion batteries, fuel cells as well as hydrogen technologies. The European Union has already defined 23 commodities as important for production in Europe. Critical commodities are those that, on the one hand, have a high concentration of suppliers and thus a low diversification potential. And on the other hand, these commodities are a prerequisite for the production of certain key technologies. Particularly critical are therefore commodities for which both are true, namely those that have a low diversification potential and at the same time are partly necessary for half of the key technologies. In its study, the ifo Institute identified nine critical commodities: Cobalt, boron, silicon, graphite, magnesium, lithium, niobium, rare earths, titanium.
Potential for diversification unused at country and company level
Diversification potential exists at country level, but also at company level. The ifo Institute notes that diversification opportunities are already being exploited at country level for a large proportion of critical commodities. However, in the area of rare earths, for example, the potential is not being fully exploited. The ifo Institute concludes that trade relations should be expanded at the country level. Joint action at the European level is also important. The market power of the European Union alone and also due to the commodity resources within the EU can make a difference.
Unused technological potential for reducing dependencies in supply chains – opportunities offered by artificial intelligence
Furthermore, the ifo Institute concludes that the expansion and use of new technologies should also be promoted and exploited. Environmentally friendly key technologies as well as innovative ones can provide a solution.
21strategies offers an efficient way to do this with its AI technology based on third-wave artificial intelligence. Commodity price developments and hedges against price developments can be developed in an optimized way. 21strategies is able to create a model of the market situation in an algorithmic way. This allows commodity price developments and an optimized purchasing strategy to be determined. Foreign exchange rate risks can be minimized depending on current developments on the capital market. The AI technology also offers appropriate decision support to provide assistance in daily business routine. The AI technology from 21strategies thus enables optimized daily recommendations for execution. In this way, the technology contributes to the company's overall strategy. The advantage here is that not only risks in global procurement are minimized, but also opportunities can be identified and exploited. Advantageous developments in commodity prices and foreign exchange rates can be utilized in a targeted manner. This contributes in the long term to greater resilience in the company's procurement. On our website you find information on how to specifically use AI technology to increase the resilience of supply chains. Just have a look.
References:
Flach, Lisandra et. al. (2022). Wie abhängig ist Deutschland von Rohstoffimporten bei der Produktion von Schlüsseltechnologien? Eine Analyse für die Produktion von Schlüsseltechnologien. ifo Institut – Leibniz-Institut für Wirtschaftsforschung an der Universität München e. V., München. https://www.ifo.de/node/70265 [30.06.2022].
Author: Tanja Zimmermann
