Supply chains for consumer goods are finally showing signs of stabilization following a rollercoaster 18 months. This trend could be reinforced by China’s decision to moderate its zero-COVID policy that led to repeated shutdowns during the pandemic.

SAP’s Take

“With the holiday season in full flow, it is great to see some positive news come out of the supply chain,” said Richard Howells, a supply chain expert at SAP. Howells also noted that Black Friday and Cyber Monday shopping hit records.

According to the latest figures from Adobe Analytics, consumers spent $116.5 billion in e-commerce sales over the long Black Friday and Cyber Monday weekend – a 1.7% increase from last year. That increase came despite a for consumers to do even more of their holiday shopping ahead of Halloween.

Along with other good news for U.S. consumers (and manufacturers), the threat of a rail strike receded after the Senate voted to impose a tentative labor deal – helping to save the holidays from supply chain mayhem.

In addition, recent numbers from the marine transport industry showed that there were zero container ships waiting offshore of the ports of Long Beach and Los Angeles prior to Thanksgiving: “The first time this has happened since October of 2020,” Howells said.

Congestion in the East and Gulf Coast ports has also gradually eased over recent months. New York, New Jersey and Houston in particular have significantly reduced ship backlogs.

The easing of China’s zero-COVID policy following an unprecedented wave of protests should also help stabilize supply chains with fewer factory shutdowns and disruptions.

Meanwhile, a recent release from the Bureau of Economic Analysis shows that inflation-adjusted consumer spending jumped 0.5% in October compared with September, the largest such increase since January. That’s welcome news for retailers that held a slew of promotions that month and reflects consumers’ eagerness to start holiday shopping far earlier than usual.

But it’s not all good news. Preliminary data from Adobe Analytics also suggests much weaker post-Thanksgiving spending than in previous years. Even if 2022 shakes out to be a banner year for holiday shopping, there is still the question of whether consumers will be able to afford their new purchases.

The surge in early holiday shopping could yet turn to boon the reverse logistics industry if consumers end up returning purchases in late December and early January that they realize they cannot afford.

Contact:
Ilaina Jonas, Senior Director of Global Public Relations, SAP
+1 (646) 923-2834, ilaina.jonas@sap.com

U.S. technology companies, beginning with smartphone manufacturers, are considering diversifying their manufacturing operations away from China.

Apple and Google, which are respectively launching new versions of their iPhone and Pixel handsets shortly, have said they are exploring other countries for . Apple is expected to produce some of its latest iPhones — unveiled this week — in India, while Google will reportedly manufacture some of its latest Pixel handsets in Vietnam.

SAP’s Take

Many U.S. and European tech companies began to reassess their Chinese manufacturing operations during the Trump administration trade war with China and some said they would shift at least part of their operations to other offshore manufacturing centers including Vietnam and Mexico.

Those initiatives have gained momentum in the wake of the pandemic and China’s zero-tolerance COVID-19 policy, which has resulted in the repeated shutdown of manufacturing centers in the country causing sever supply chain disruption.

At the same time, China’s domestic economy has shown signs of slowing and potentially falling into recession, potentially reducing local demand for consumer electronics.

The Chinese economy grew by a modest 0.4% in the 2022 second quarter and is unlikely to reach its economic growth target of 5.5% this year.

China’s shifting economic outlook was reflected in a leaked memo penned recently by Huawei Founder Ren Zhengfei, who warned that the pandemic, the Ukraine war and ongoing trade tensions between the U.S. and China will lead to a “very painful historical period,” over the next decade.

Amar Sindhwad, industry lead in SAP’s internal analyst group, CMI, said that several issues are causing tech companies to reconsider their manufacturing presence in China. “There are a couple of systemic challenges facing China,” he says. They include lockdowns, power shortages and costs, rising inflation and a partial collapse of its real estate sector.

Increased geopolitical tensions between the U.S. and China over Taiwan have also exacerbated concerns. While there are no signs yet of a mass exodus, analysts believe Western technology companies are likely to continue to slowly scale down their reliance on Chinese manufacturing facilities.

“These moves clearly indicate a problem for China and foreign companies operating there,” says Sindhhwad. “Many foreign companies are deliberating alternate strategies in their board discussions and for some, relatively, it’s an easy exit owing to the nature of their operations and manufacturing. It’s a gradual, deliberate and a systematic exit plan for companies that decide to do so.”

Contact:
Ilaina Jonas, Senior Director of Global Public Relations, SAP
+1 (646) 923-2834, ilaina.jonas@sap.com

Back then there was very little reason to look back. , but through government initiatives and entrepreneurial spirit, .

Since 2015, Li has maintained orchards full of blooming dragon fruit plants, one of . An annual yield nearly 30,000 kilograms per acre has helped earn Li the honor of “top return entrepreneur” in Sichuan in 2020.

Supported by SAP, he is now learning to apply new technologies in combination with trickle irrigation to achieve even greater yields at less cost.

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Li Jie’s story is an integral part of China’s transformation to economic superpower and its negative impact on rural areas. Four decades of strong growth and increases in per capita income have and improved food security, nutrition, and human development.

But there has been a palpable drain on rural towns, whose populations are projected to drop from 40% of China’s total population today to 31% by 2030. If not checked, this trend is predicted to have a , according to Matteo Marchisio, head of East Asia Regional Hub at the International Fund for Agricultural Development.

Urban-Rural Divide Is Global

The worldwide exodus from rural areas to cities is not new and it is not limited to China. The world’s rural citizens currently but bear a disproportionate burden of poverty, malnutrition, and poor quality of life. This is why to make rural areas more attractive to young people.

Rebalancing initiatives, referred to as “rural revitalization,” are essential to achieving sustainable living conditions for all, concluded a . “Policies, institutions, and investments that take advantage of new opportunities and technologies, increase access to basic services, create more and better rural jobs, foster gender equality, and restore the environment can make rural areas vibrant and healthy places to live and work,” the report stated.

51·çÁ÷Introduces The Leader Plan

Dragon fruit farmer Li Jie is at the forefront of an emerging trend in China, as more and more young people are attracted by government-sponsored incentives to move back to their rural communities and start new livelihoods as farmers. According to China’s Ministry of Agriculture and Rural Affairs, 7.5 million young people returned to rural areas in 2019.

Since 2017, 51·çÁ÷has been supporting China’s “rural renaissance” by providing digital skills training and mentorship to these returning workers. Under the title “The Leader Plan,” 51·çÁ÷partnered in 2019 with , , and to launch the new initiative. 51·çÁ÷provides funding and volunteer expertise to develop learning courses that are delivered online. By 2023, 51·çÁ÷aims to train 50,000 rural entrepreneurs across 30 provinces.

After moving back to his village, Li took online courses which focused on the industrialization and commercialization of agriculture. With his new knowledge and skills, Li plans to build intelligent greenhouses and manage the temperature in them automatically.

Now in its third year, online courses have reached more than 43,000 learners. 51·çÁ÷has also supported Tsinghua University in conducting an “Elite Camp” courses and mentoring for entrepreneurs. “We’ve had great impact with The Leader Plan, and I look forward to more success in the future,” said Mark Gibbs, president 51·çÁ÷Greater China.

Next Steps for The Leader Plan

In the future, 51·çÁ÷in China will explore how digital farming technology and information systems can help agricultural productivity in rural China. This includes the use of e-commerce, Internet of Things (IoT), data analytics and other technologies that support the entrepreneurs’ ambitions of improved productivity and commercialization. Employee volunteers will contribute their expertise to the program, and other opportunities such as the program will be explored to train rural entrepreneurs with the skills they need to grow their businesses sustainably.

Top image via video.

RPA does not stand for “recovery from pandemic aftermath,” but it could serve as an alias for the technology during the current economic downturn.

RPA is defined by IDC as a class of software designed to automate or augment repetitive tasks that require a significant manual effort. RPA using software scripts or robots. Although not new, it has been catapulted into the limelight by the business-process vulnerabilities that the COVID-19 pandemic exposed.

“Companies find themselves adapting faster and faster to new circumstances while trying to maintain seamless operations,” says Sebastian Schroetel, vice president of Machine Learning and Intelligent Robotic Process Automation at SAP. “RPA provides a way to manage the demand peaks, cut costs, and free up employees for higher-value tasks.”

Another example of RPA’s use during the pandemic is illustrated by the Swiss Canton of Zürich, which deployed a solution to cope with a deluge of short-time work requests. The number of requests per month exploded from around 10 to 30,000. By deploying an RPA solution, processing time per request was shortened from 25 minutes to 20 seconds.

But even beyond COVID-19 and the crisis, RPA is also viewed by some analysts as a means to counter the . According to David Vellante, chief analyst at Wikibon, global challenges like climate change, global competitiveness, aging populations and infrastructure, deficits, mass immigration, sustainable food sources and healthcare all will require — and RPA will be on the menu.

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Defying Cuts in IT Spending

Despite the for 2020, Vellante is bullish on RPA for this year and beyond. “Robotic process automation solutions remain one of the ,” he wrote recently. And compared to other technology investments, he says RPA is “the enterprise software sector with the highest spending momentum — .”

Similarly, IDC identified RPA as a key investment technology for the post-COVID rebound in its recent . One of the use cases that will see the greatest growth in spending is RPA-based claims processing in insurance.

Enterprise software providers also expect an accelerated uptake of RPA projects. Worldwide according to San Francisco-based Grand View Research, and is expected to grow between 29 and 41 percent over the coming five to seven years.

“The coronavirus pandemic has increased demand in RPA,” says Al Hilwa, senior director of AI, Machine Learning, and Platform Technology Research, SAP. “The integration of machine learning into RPA is driving many of the new investments, including more funding and acquisitions.”

Hilwa also sees a shift to RPA into the cloud on the horizon as players focus on “unattended” RPA, where robots work autonomously and predictively with human supervision only.

Rather than being applied as a standalone solution, RPA is increasingly seen as part of a spectrum of process automation tools best applied in unison, for example and process mining.

“51·çÁ÷is currently seeing major adoption of the combination of RPA and intelligent business process tools,” says Flat Chen, head of 51·çÁ÷Intelligent Enterprise Solutions in Asia-Pacific, and lead for the company’s RPA program in China. “They are two sides of the same coin. RPA augments BPM by letting customers combine system-to-system and human-to-system interactions within a single executable workflow.”

“Intelligent document processing is a layer that most of the RPA vendors are beginning to offer as they extend capabilities to support AI use cases,” shares Maureen Fleming, program vice president for Integration and Process Automation at IDC, who examines the products and processes used for building, integrating, and deploying applications within extended enterprise systems. “51·çÁ÷has a document processing service that works with 51·çÁ÷Intelligent RPA and also is callable by workflow, a form, or by an integration component – and it works really well for business documents that are managed by 51·çÁ÷applications.”

RPA can also be combined with conversational AI technologies, which apply natural language to communicate intent and trigger actions downstream. Under the new rules of COVID-19, wherein businesses are challenged to interact physically, the need for digital customer engagement and service has been amplified.

RPA Cloud ERP Co-Innovation Project in China

51·çÁ÷views RPA as an essential technology in its goal to help customers realize the . With prescient foresight in 2019, Jan Gilg, president 51·çÁ÷S/4HANA, called on development teams to make bot development a priority. 51·çÁ÷employees based in China took on the challenge, and the fruits of their labor were recently rewarded when REHAU Polymer China went live in June with an RPA bot and machine learning. The application automated invoice processing and helped REHAU achieve higher process efficiencies.

REHAU is the first 51·çÁ÷S/4HANA Cloud customer in Greater China, as well as the first reference customer for and intelligent technology packages that include machine learning, natural language understanding, and advanced analytics capabilities. The co-innovation project with REHAU brought together teams from across SAP: 51·çÁ÷S/4HANA Finance & Risk, New Ventures & Technologies, and Intelligent Delivery Group of Greater China.

To streamline and automate the financial operational process in 51·çÁ÷S/4HANA Cloud, project members trained a machine learning model that, when used in combination with the RPA bot, was able to achieve greater accuracy and seamless automation.

A machine learning model is only as good as the data it has been trained on and each method of training – isolated, centralized, or federated – has its own advantages and disadvantages. Certain types of data, such as transaction data, is highly sensitive and usually cannot be shared outside a company’s network for building a model, which makes it difficult to apply AI for RPA solutions.

“While training the model, we were able to keep sensitive data on the customer’s system, aggregating it in anonymous form to build a federation of data,” shares Voga Li, data scientist at 51·çÁ÷Labs China. “This method allowed us to achieve a higher prediction accuracy for the model.”

The REHAU project under the guidance of 51·çÁ÷demonstrated that federated training can be applied to datasets related to enterprise resource planning (ERP) and achieve the same or better performance as isolated and centralized training models. “We are now testing an out-of-the-box machine learning model for federated learning and are currently validating this work together with our co-innovation customers,” Li says. He attributes the success of the co-innovation project to strong leadership and open environment provided by 51·çÁ÷Labs China.

REHAU has been live on 51·çÁ÷Intelligent RPA since January 2020, having already replaced two manual processes with the combination of AI and RPA. In one solution, the company was able to reduce its monthly manual processing time of about 1,000 financial accounting documents from four days to 10 minutes. In the other, a bot that combines 51·çÁ÷Intelligent RPA and machine learning reads invoices, extracts the information from them, and then automatically generate payables in 51·çÁ÷S/4HANA Cloud. It can currently process 3,000 product invoices in roughly two minutes.

Chengbo Yu, CIO of the Asia Pacific Region for REHAU Polymer China, is satisfied with the result: “We used 51·çÁ÷Intelligent RPA to automate use cases that required significant manual intervention and redundant work. This saves us time and cuts down on human error, and our employees are spending more time on innovative work.”

Thanks to the following 51·çÁ÷employees for their support: Akie Pan, Camile Zhou, Voga Li, and Cyrano Chen from 51·çÁ÷Labs China; Claire Tseng and Pierre Col from New Ventures and Technologies; Sarah Harvey from Analyst Relations.