The well-hyped potential of digital technology to transform manufacturing — denoted by terms such as Industry 4.0, Smart Industry and the Industrial Internet of Things — already is turning into a reality in the chemical industry, according to a survey released in August by consultants PricewaterhouseCoopers (PwC), New York City. Based on inputs from 222 chemical company executives in 26 countries, the report, “Industry 4.0: Building the Digital Enterprise — Chemicals Key Findings,” states that digitalization now has become a strategic and operational imperative.
Three-quarters of chemical industry respondents expect their companies to have reached advanced stages of digitalization and integration of value chains in five years, a level that is among the highest of all industry sectors surveyed. This will represent a considerable increase from today’s situation: only 32% of chemical industry respondents say their companies now have advanced digitalization and integration, notes the survey.
The return on investment is expected to come fairly quickly. Nearly half (48%) of the chemical industry respondents foresee a payback within two years, while 43% anticipate recouping their investment within two to five years.
Most respondents (73%) expect horizontal value chain integration by 2020 (up from 45% today), the highest percentage of any of the nine industrial sectors surveyed, says PwC. Even a higher number, 77%, foresee vertical value-chain integration by then (versus 48% now). Proportionately, though, customer access, sales channels and marketing will experience a greater gain in digitalization and integration, rising from 35% today to 70% in five years, reports the survey. Digitalization and integration in product development and engineering will increase to 65% from 42% during this period, it adds. The slowest growth will take place in business models and product and service strategies.
The chemical industry respondents expect digitalization and integration efforts to reduce operational costs by 4.2%/yr and boost revenue by 3.1%/yr — levels that again exceed those of respondents in other industry sectors, notes PwC. One key benefit that digitalization and integration promise is better visibility and transparency across the entire supply chain. This can lead to a step-change improvement in forecasting of demand and planning of operations, believes PwC.
The biggest single challenge faced by the chemical industry is the lack of a digital culture and the right training, say the respondents. Because many firms have deep roots, their culture is well-established and tough to change, notes the survey.
Another key issue is taking fuller advantage of all the data available. Many chemical companies (60%) already place significant importance on data analytics, says PwC, and that level will rise to 88% by 2020. However, only 27% of the firms rate the maturity of their data analytics capabilities as advanced, which still is well above the 19% for all industry sectors surveyed. Nearly half (46%) of the chemical companies cite lack of data analytics skills in their workforce as a challenge, and nearly three-quarters (74%) foresee improving in-house data analytics technology and skill levels as the single best route for bolstering capabilities. Another impediment is the lack of a structured approach to data analytics organization and governance, notes PwC. Many chemical companies (35%) now take an ad-hoc approach based on the particular capabilities of individual employees, and 4% have no significant data-analytics capacity whatsoever, it adds. In contrast, 37% of the chemical companies have embedded data analytics into specific functions, and 17% have established dedicated departments for data analytics.
To download the survey, go to goo.gl/faCvAV.
MARK ROSENZWEIG is Chemical Processing's Editor in Chief. You can email him at email@example.com