The global chemicals industry provides key raw materials to many applications, from construction to packaging to automotive and medical. In fact, specialty chemicals are often the key contributor to performance in end-use markets. Consumer preference and demanding performance requirements lead producers to create broad and expansive product portfolios and often lead to long and complex supply chains. At the same time, the external challenges of regulation and geopolitical risks generate uncertainty in the market. In this essential context, innovation and sustainability remain important strategic priorities for the sector.
Applying digital technologies is becoming a strategic imperative in many industries, including the chemicals sector. Leading multi-national and diversified chemical company, BASF’s website states, “Digitalisation presents big opportunities for us. Using digital technologies and data, we are creating additional value for our customers and increasing the efficiency and effectiveness of our processes.”
Chemical industry response is lagging
Although many chemical companies are actively working to use digital technologies in their business, by most accounts, the industry is lagging. In 2017, the Deloitte report ‘Digital transformation: Are chemical enterprises ready?’ stated that most chemicals enterprises lack a digital roadmap or strategy. The authors cited several possible reasons for the slow progress – from the challenge of large capital projects to the lack of confidence in and knowledge of digital technologies.
In its 2018 update, Deloitte reported some progress but still rated the chemical sector as a five on a scale from 1 to 10, even as 85% of the executives believe that the chemical industry is moderately to highly digitally mature. This assessment comes in the context of anticipated growth in the market and with it a realisation that digital technologies are a key tool to realise the full business opportunity. At the same time, Deloitte reports that chemical executives acknowledge the value of deploying digital technologies to achieve operational efficiency and productivity, while also addressing key challenges in R&D and in complex manufacturing environments. These challenges are typically leading concerns for specialty chemicals companies. Chemical companies are similar to oil and gas companies in operational efficiency and productivity concerns but have greater need for innovation and advanced manufacturing.
In a European Petrochemicals Association (EPCA) report published last year, 73% of petrochemical companies surveyed rated themselves as ‘lagging behind’ in supply chain digitalisation, while their customers rated their lag more significant at 95%. The survey results, analysed for EPCA by the Vlerick School of Business, noted that customer behaviour was an important driver in the need to develop new supply chain tools. The challenge for many companies is gaining enough understanding to harness the advantages that are possible with digital technologies. Organisations struggle to learn the terms, correlate with current and future assets, harness data to ensure safe and secure operations and leverage advanced models to develop greater business expertise.
Leaders are gearing up for change
Leading companies are introducing new organisational approaches to digitalisation, as they see value across their portfolios and align their organisations to best capture the advantages. Evonik established a digitalisation subsidiary and named a Chief Digital Officer in 2017 and has since moved to invest £100 million in developing and testing new digitisation technologies. Executive Board Chairman, Christian Kullmann, noted, “For us, as a specialty chemicals company, digitalisation brings with it a world of possibilities.” Wacker Chemie has launched a new program to advance digital transformation across its supply chain. In its 2018 annual meeting, Rudolf Staudigl, President & CEO, Wacker Chemie, acknowledged the value, stating, “Digitalisation will help us satisfy the customer needs even better. It is a topic that encompasses the entire supply chain, from product development and manufacturing right through to customer service.”
In 2018, diversified major Dow added ‘Chief Digital Officer’ to its ‘Chief Information Officer’ title to reinforce the company’s emphasis on digital tools. In her role as CDO and CIO, Melanie Kalmar leads a team of executives, business-line Presidents and functional Vice Presidents to develop Dow’s digital strategy.
At Fortune’s 2018 Brainstorm Reinvent conference, Kalmar highlighted that digital technologies are not meant as an add-on to existing operations. “Many companies have failed because they looked at digital as an add-on to what they do already, as a new tool. The reality is that you have to step back, simplify and rethink how you execute your work on a day-to-day basis.” The value of using digital tools, she asserted, is to be more agile and to come closer to the customers. In specialty chemicals markets, better alignment with the customers is a key tool to achieving business success. With this digitalisation emphasis, these companies are acknowledging that digital technologies are a differentiator in the competitive specialties segment.
In heavy asset process industries like chemicals and refining, leaders are embracing an asset optimisation strategy to enhance the entire asset lifecycle using digital tools. Asset optimisation has always been about digital technologies. Now it is accelerated through new developments, like Artificial Intelligence, Machine Learning and multivariate analytics and is further enhanced with concepts like innovation, vertical integration and asset lifecycle.
Value opportunities in digitalisation
In the specialty chemicals market, digital technologies can effectively address the following emerging priorities:
Optimising across the value chain
Aligning with customer demands
Innovation allows businesses to meet customer demands while also staying ahead of competitors. Specialty chemicals manufacturers are continually looking to innovate and enhance product performance at a lower cost – often with fewer or alternative raw materials. Digital technologies can boost productivity and reduce errors by easing the transition from laboratory to plant production processes. Researchers at Dow Chemical call this ‘model-guided experimentation.’ They use first-principles modelling tools to accelerate the time to market for new polymers, running simulations to adjust process conditions in advance of the plant trials. Manual procedures, hand-written reports and paper-based systems are still common for critical activities, such as recipe execution, quality monitoring and raw material management. These isolated tools limit visibility into data and often delay responses to potential quality issues and regulatory requirements. Through digitalisation, companies can gain insight that allows for improvements in quality and consistency.
Specialty chemical producers have improved quality by 10-20% by implementing best practices enabled by manufacturing execution, advanced process control and asset performance management solutions from AspenTech. These systems deliver reduced variability that has directly contributed to improved outcomes for their customers.
For example, modelling tools can be used to better predict and control behaviour in plant reactors. Qenos, a specialty polymer producer in Australia, accelerated its introduction of a new product by six months using Aspen Polymers™ and process data. Additionally, the company cut costs by US $135,000 per year by optimising production processes to reduce monomer use and cut by product wax production.
Rapidly changing market and customer demands force frequent changes in production schedules; according to some producers, adjustments of 25-45% each month are not uncommon. Scheduling tools deliver the best value when linked with manufacturing execution systems, often referred to as vertical integration, so commercial systems are synchronised with process automation. Improved scheduling tools help companies make better business decisions as variations occur by incorporating key constraints, such as storage limitations, throughput rates and variable lead times – while minimising excess inventory and off-spec production. Better scheduling capabilities can also boost asset utilisation. At the same time, schedulers can see the impact of their decisions and make adjustments to avoid problems along the supply chain before they happen.
Benefitting from digital acceleration
The tools, services and solutions specialty chemicals producers need to manage their complex operations and achieve new levels of reliability and profitability, which are accessible to companies now. The first step is to consider the primary challenge for one’s business and identify relevant digital solutions. Adopting such tools will set one on a path towards a more holistic approach to achieving the highest possible financial return over the entire asset lifecycle. The process industries have been on this digitalisation journey for the past 40 years, continuously striving to improve operational performance. Digital technologies enable opportunities that do not stop with operations but expand to address key drivers in specialty chemicals markets, such as accelerating innovation, optimising across the value chain and aligning with customer demands.