Solving industrial and social challenges together: A roadmap for a more fulfilling society
Modern Japanese society is faced with a variety of challenges, including food loss and waste resulting from excess production, labor shortages due to aging populations and declining birthrates, the rise of myriad cashless payment services and a changing consumer environment, and continued advances in digital technologies accompanied by the corresponding emergence of a variety of new threats. These are first and foremost issues affecting society. At the same time, they are also challenges that industries and businesses should urgently address, as members of society.
NEC Value Chain Innovation is making great strides towards solving those social issues.
As a company that champions social value creation, NEC is seeking to realize a more fulfilling society through this initiative. But why exactly is NEC so unusually passionate about value chain innovation and what specifically does that entail? To find out, we spoke to the key drivers of the initiative, Kazuyuki Ogawa and Ryoichi Morita.
They both belong to the Digital Integration Division, which plays a hub-like role linking the business activities that make up NEC Value Chain Innovation and marketing activities. As Deputy General Manager of the division, Ogawa is in charge of the overall mission of NEC Value Chain Innovation across all industries. Morita, meanwhile, joined the division looking to make use of the skills he developed through launching new services such as visualizing manufacturing processes using the Internet of Things (IoT) or improving network efficiency. He currently plays a central role in the Digital Integration Division, overseeing a project to optimize supply and demand and reduce food loss and waste.
What impact can NEC Value Chain Innovation have on businesses and society?
Businesses can solve huge challenges if they work together
Until now, individual businesses or industries have tried to tackle issues such as food loss and waste, labor shortages, and the changing consumer environment on their own. However, these problems are no longer of a scale that can be solved by any one company alone.
Because supply chains are so closely connected from upstream to downstream, it is no longer possible for a single company to solve such issues on their own. However, thanks to technological progress, such as the evolution of the Internet and IoT, there are now many more cases of collaboration among companies or industries. I believe that by encouraging companies and industries to work together, they will be able to take on and overcome challenges that could not be solved with companies working by themselves.
For instance, companies have tried many different ways to overcome labor shortages. In the case of retail stores, examples include shortening opening hours, introducing self-checkout machines, or limiting production of seasonal goods such as Christmas cakes to the number of orders received.
However, such efforts would only solve the problem for that one business or store. Ogawa and Morita are taking a much broader perspective when thinking about solving social issues.
If you take the example of retail stores, besides the retail staff in the store itself, you also have people delivering goods to the store, as well as people working in the warehouse where products are stored, the logistics people distributing the product, and the manufacturers of the product. So, this one area of business actually involves several companies, and the various challenges they face are interconnected. In recent years, companies have become more closely linked as a result of advances in digitalization, and I believe the key to solving the issues they face is to become even more tightly connected.
Companies across a wide range of sectors are involved in the process of delivering products to consumers, from manufacturing and logistics, to retail. Previously, companies and industries tackled challenges by themselves, but the problems they face are now evolving so rapidly that it is impossible to keep up if they only work on their own.
NEC believes that digitalization is an essential factor for solving these issues and it has a track record of making companies and processes more efficient, using the various digital technologies it has developed such as IoT and image recognition solutions, and robust security technologies.
Creating new value through added-value data
Digitalization is the key to bringing the business community closer together and creating new value.
An example of this can be seen in convenience stores that are run by very few staff. By introducing various digital technologies such as image recognition for managing customers entering and leaving the store, self-checkout machines for payment, and AI-based systems for forecasting purchase orders, a convenience store can be run with virtually zero staff. Besides making it possible to run the store with fewer staff, the use of AI-based systems for forecasting purchase orders can also help to reduce food loss and waste. Clearly, digital technologies have the power to address a variety of issues.
Digitalization has also resulted in greater attention being paid to linking businesses.
The point is not just to simply share the data that each company has. It is to take data that is based on actual society, link all the data together in a digital space, and bring different companies and industries closer together. Our focus is on how much we can connect things digitally.
IoT has already made it possible to collect field data across manufacturing, logistics, retail and other sectors.
It has now become routine for companies to analyze such data and use it to predict when machines need maintenance, monitor the status of trucks, or forecast purchase orders, but most of these efforts are limited to internal use.
If, instead, this data could be used outside the company as well, it could surely elevate the entire value chain, impacting not only individual companies but also entire industries and even consumers. That is what Ogawa and Morita are aiming for. By sharing and linking data across different companies, they are hoping to create new value.
But linking data does not just mean sharing data from different industries. It involves taking the data from individual companies, adding value to it through digital technologies such as image recognition and AI, and creating new value. Ogawa calls this “added-value data.”
The digital technologies behind NEC’s Supply and Demand Optimization Platform
NEC Value Chain Innovation encompasses a wide range of initiatives, one of which is the Supply and Demand Optimization Platform, a solution aimed at reducing food loss and waste.
One of the causes of food loss and waste is unrealistic supply and demand forecasting, which leads to excess inventory and lost sales. Not only do food products go to waste, but the costs of these losses are reflected in higher product prices, so consumers suffer the effects as well.
Reducing food loss and waste is also an important United Nations Sustainable Development Goal (SDG). This is no longer an issue that any one company can solve alone. NEC Value Chain Innovation is one means of tackling this problem. A major source of food loss and waste is lack of synchronization.
As consumers, we go to the store when we decide we want to buy something. Meanwhile, the store puts out products a little bit before the consumers go to the store. Obviously, the delivery of the products to the store happens before that, and the manufacturing takes place even earlier. If the timing of these processes is out of sync, stores will either have surplus stock, resulting in food loss and waste, or run out of stock and miss out on potential sales. What we are trying to do is to use digital technologies to ensure that the right number of products are manufactured and distributed, in line with actual consumer demand.
NEC developed the Supply and Demand Optimization Platform to tackle such cases of food loss and waste. The platform compiles data provided by different companies and uses AI to generate new data. The data being compiled includes not only companies’ past revenue data, but also a wide range of causal data. These are combined and analyzed using Heterogeneous Mixture Learning, which is both highly precise and also enables the creation of new value for a specified purpose. A number of food product companies are already using this platform to forecast shipment requirements.
It is easy to imagine how, if one company were to try to analyze only its own data using AI, it would run into great difficulty from the data collection stage. By contrast, the Supply and Demand Optimization Platform allows each company to collect a variety of data from all other participating businesses, and leverage this for their respective needs. A major advantage of this is that it greatly reduces the amount of time and effort that companies have to spend on data collection and analysis.
In addition, because the platform utilizes wide-ranging data that no company could produce individually, it generates information that can be utilized by companies across all sectors. In other words, NEC provides not only the technologies for data analysis, but, to some extent, also the necessary data.
A key feature of the Supply and Demand Optimization Platform is that it is a white-box system, meaning that it produces both a forecast, as well as the evidence it used to arrive at that conclusion. This makes it clear what the main rationales for the forecast are, such as pricing, weather, in-store measures, etc., which also makes it easy for the person in charge of making the final decision to use their experience and intuition to adjust the numbers if necessary.
Widespread adoption of this system can really raise the baseline performance for a particular task, reducing the number of people required from three to two, or the time needed from 10 hours to 3 hours, and so on. Ideally the freed up manpower or time could then be used for other tasks of value.
If these technologies continue to develop and come to be used by an ever wider range of companies, they could even help to optimize entire supply chains.
We think of the Supply and Demand Optimization Platform as a data distribution platform. Right now, it is mainly used for food products, but, in the future, we hope that it can be used for other products as well, such as producer goods, semiconductors and electronic parts. Our plan is to first encourage different companies to use it for optimizing demand forecasting and then to gradually roll it out to other areas, such as distribution, to promote more efficient operations.
Taking ownership of social issues by running stores with fewer staff
NEC Value Chain Innovation is supported by a number of important digital technologies, including not only the aforementioned Heterogeneous Mixture Learning technology and Autonomous and Adaptive Control technology, but also face recognition technology for ensuring seamless customer experiences, as well as IoT-based monitoring of facilities for preventive maintenance. Such technologies are already being utilized by a variety of industries. For example, verification tests are being conducted in the 7-Eleven on the 20th floor of the Mita International Building, which also houses a number of NEC group companies.
This store is located on the 20th floor, and customers enter and pay using face recognition. Heterogeneous Mixture Learning technology is used to provide AI-based assistance for placing product orders and maintaining inventory. As a result, staff are able to focus on tasks that cannot be done by machine, such as stocking shelves and helping customers.
The store has drawn much attention. It not only allows busy office workers to just show up, with nothing but themselves, and do their shopping very quickly, but it is also seen as a successful example of how to run a store with fewer staff.
It is of course important to listen to the views of our customers, but I think that embarking on such an initiative ourselves has the benefit of promoting a sense of ownership.
NEC is not simply providing existing technologies, but working to develop technologies from the actual perspectives of consumers and store operators. This is indicative of how the company is approaching this line of business.
“NEC Group AI and Human Rights Principles” for ensuring the safe and secure application of data
NEC has developed wide-ranging technologies over its 120-year history. The company drew on that accumulated knowhow in this case as well. Based on its experience working with and developing technologies for customers across many different sectors, NEC decided to incorporate in the Supply and Demand Optimization Platform technologies for concealing data and carrying out secure computation, so as to ensure the safe and secure management and application of companies’ data. Ogawa speaks of “the need to create an industry-wide movement to do so” and NEC is indeed recognized as an industry leader in this regard, serving as part of the secretariat for a project run by the Japanese Ministry of Economy, Trade and Industry to promote cross-industrial data-sharing, among other efforts.
However, this is not merely a matter of technology and there are many other aspects to consider as well. For companies, their data is a valuable asset. It can be difficult to decide to simply share their data with other companies, how much of their data they should share, or what an appropriate use of their data would be. Personal data, in particular, must be handled very carefully.
That is why NEC formulated the “NEC Group AI and Human Rights Principles,” which ensure respect for and prioritization of privacy and human rights across all businesses. The principles are designed to prevent and address human rights issues arising from AI utilization.
In addition to facilitating compliance with relevant laws and regulations around the globe, these principles guide NEC employees to recognize respect for human rights as the highest priority in each and every stage of the company’s business operations in relation to AI utilization and enable them to take action accordingly.
I think that, besides of course creating clear fundamental rules about not using data for anything other than the intended purpose, we need to address this issue not only from the perspective of merely being IT vendors who utilize data, but also from the standpoint of thinking, together with everyone else, about how to ensure the safe and secure application of data.
Solving industrial issues will make companies stronger and contribute to solving global issues
Half of all food loss and waste is said to be produced by industry. Working out how to solve that problem can not only reduce food loss but also reduce waste in the value chain and greatly enhance efficiency. That will in turn make businesses more profitable and competitive. At the same time, it will also contribute to solving global issues such as environmental destruction, the food crisis, and poverty. Creating such a huge positive cycle is the ideal goal of NEC Value Chain Innovation.
NEC Value Chain Innovation is aimed at producing cross-industrial efforts to tackle social issues. What is more, it also promotes the concept of companies becoming more competitive by tackling such issues, as espoused by the SDGs. Central to it all is the business community.
As an example of such efforts, NEC has launched the API Economy Initiative, a workshop for cross-industrial innovations that utilize open application programing interfaces (APIs) to realize secure data collaboration between corporations. In collaboration with companies from different fields such as finance and communications, in November 2018, NEC set up a working group that has since been holding discussions on the API economy, a new economic zone created by connecting different industries. These activities have also given rise to the co-creation of new initiatives.
In a digitally inclusive world, where digital technologies have reached all parts of society, NEC Value Chain Innovation seeks to connect the business community using those digital technologies and create a society that operates much more efficiently and smoothly. It also works to realize a fulfilling society where everyone can enjoy the benefits of digitalization safely, securely, efficiently, and fairly, and feel inspired as they lead their lives. NEC Value Chain Innovation is aimed at producing smoother connections throughout the whole of the business community, while developing shared rules, such as on appropriately managing and using data.
However, that is not all. NEC believes that it also brings about the collective transformation of the many different companies that make up the business community, which simultaneously pushes each company forward, and ultimately contributes to solving various global issues.
NEC Value Chain Innovation is not merely a business platform. It will become a central pillar of business in the 21st century, contributing to solving the issues faced by society. It will surely transform the business community and help create a society where everyone can find happiness.
(October 23, 2020)