This collaboration has also been highlighted as a case study on ClimateAi’s official website.
At Hitachi’s Digital Observatory (DO) Project, we are developing advanced technologies to strengthen supply chain resilience in an increasingly unpredictable world. But what exactly is supply chain resilience? Simply speaking, it is the ability of a supply chain to recover from disruptions. Disruptions might be caused by extreme weather, geopolitical events, pandemics, or other unforeseen challenges. To build resilience, it is essential to proactively identify risks within the supply chain.
Among the various disruptions, extreme weather is increasingly important in recent years. Therefore, we have started to utilize the solution from ClimateAi, a San Francisco-based company. This solution enables us to tackle a critical category of risks: climate-related risks.
Enhancing Supply Chain Resilience Against Climate Risks Requires Seasonal Forecasts
Climate risks pose significant challenges to global supply chains. For example, the North American cold wave in 2021 severely disrupted car manufacturing and the semiconductor supply chain. Japan’s typhoon season consistently impacts factory production and transportation networks. As climate change drives more frequent and severe extreme weather events, climate risks have become an unavoidable threat to supply chain.
Building true resilience against climate risks demands proactive measures. This is where seasonal climate forecasts come into play. Unlike short-term forecasts spanning a few days or weeks, seasonal forecasts provide insights months in advance. With this level of foresight, the procurement team can take proactive measures to mitigate risks and enhance the stability of production operations. For instance, if seasonal forecasts predict a high cyclone impact risk in Chennai, India, the procurement team can proactively increase stocks from suppliers in affected regions well before the cyclone season begins. In this way, they can minimize the risk of supply chain disruptions. Even if a supplier’s factory faces temporary shutdowns due to the cyclone, the buyer's operation is merely affected.
How Hitachi Leverages ClimateAi Data
ClimateAi's weather forecast data is potentially a game-changer for Hitachi. Weather forecasts extend up to six months into the future and have an impressive 1-kilometer resolution on a global scale. Also, seasonal cyclone forecasts are provided. These forecast data empower Hitachi to monitor climate risks at supplier locations worldwide, months in advance. In Hitachi, leveraging ClimateAi forecasts, we are conducting research in identifying climate risks and associated risk impacts for the procurement process. This ensures we stay ahead of potential disruptions and build greater resilience in our supply chain operations.
In particular, weather is inherently uncertain and hard to predict. ClimateAi embraces the complexity of nature by providing probabilistic forecasts rather than deterministic ones. By leveraging probabilistic data, our team can take uncertainties into risk modelling.
A case study of how Hitachi utilized ClimateAi data has already been posted. In the case study, how Hitachi can utilize cyclone forecast data to improve supply chain resilience has been introduced.
The Future: Adding Actional Intelligence to Climate Risk Data
Seasonal climate forecasts provide the procurement team with early warnings about potential risks. But here is the remaining challenge: how can the procurement team truly understand the impact of these risks on their supply chains? After all, climate risk data alone is statistical data.
For example, for a procurement team based in Japan, it might be straightforward for them to assess the impact of a flood risk in Japanese prefectures and take swift countermeasures. But what happens when the risk arises in India or the United States? Understanding localized impacts of climate events in unfamiliar regions can be far more challenging for the procurement team.
To address this challenge, we are developing cutting-edge technology powered by Generative AI. By processing vast amounts of open data, this technology extracts actionable impact annotations that complement climate risk data. These annotations enable the procurement team to better understand potential impacts associated with the climate risk. With a better understanding of impacts, the procurement team is able to design more targeted and effective countermeasures to mitigate risks.
As climate risks continue to challenge global supply chains, Hitachi is committed to leveraging advanced solutions to enhance supply chain resilience.
