Use of Internet-based information storage and services — the so-called cloud — instead of traditional direct connection to servers is gaining adherents in the chemical industry — and, thus, challenging traditional conservative information technology (IT) habits, notes Lauren McCallum, solutions manager, industry business solutions — chemical, SAP, Philadelphia. Indeed, companies including Dow Chemical, BP and BASF are rapidly expanding their adoption of cloud-based applications — and reaping substantial benefits.
For example, Dow Chemical, Midland, Mich., says it has saved over $85 million as a result of the improved supply-chain visibility offered by cloud-based services.
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The importance of this was highlighted for the first time when Storm Bill approached Texas in June 2015. The company quickly was able to identify 5,900 railcars in the storm’s impact zone. This allowed Dow to warn customers of any potential delivery problems well in advance and, for critical deliveries, to arrange for shipping from other locations. Similarly, when a cargo ship caught fire in 2016, it took Dow’s supply chain team less than ten minutes to determine what containers were on the vessel. Again, the company alerted customers and organized alternative supplies.
Dow also is using three cloud-based Oracle applications to improve its human resources (HR) operations. Together, the three form the backbone of the company’s HR analytics system that delivers real-time personnel data throughout the company to enable matching people with the most appropriate jobs.
Figure 1. Cloud-based platform enables customers to access information on dispersions and additives. Source: BASF.
For its part BP, London, has been working with Amazon Web Services (AWS) over the last few years to improve the efficiency of its workplace practices. In 2016, the company decided on a fully cloud-based strategy. Using AWS tools and services, BP recorded a 30–40% reduction in the total cost of IT hosting even before the system was fully optimized.
Ensuring Security
Nevertheless, for any cloud-based activity, security remains key. “The cloud would be unthinkable without security. By outsourcing data and applications to the cloud, companies entrust the authorization to use their data to the external cloud provider. Before doing that, they need to define their own compliance security guidelines,” stresses a spokeswoman for BASF, Ludwigshafen, Germany.
For BASF, this means that any cloud provider must pass a security assessment for the classification needed before processing company data. This ensures compliance with security criteria including encryption and periodic security updates as well as contractual agreements such as the location of jurisdiction and data-privacy regulations.
The company’s involvement with different cloud environments has enabled it to retire and consolidate IT infrastructure. “For example, we have leveraged the facilities of our former onsite data center for the new BASF supercomputer,” she says. (For details on the company’s plans for the supercomputer, see “Digitalization Drives Development.”)
Two current projects particularly are benefiting from using cloud infrastructure.
The first is a joint project with SAP to evaluate digital cooperation with business partners. This involves the SAP Asset Intelligence Network, a collaborative network that brings together information from manufacturers, service providers and plant operators in a cloud-based platform. “The goal is to establish a fully integrated and centrally located asset information repository. With this single source of truth for asset information, it is intended to further improve the efficiency of engineering and maintenance processes throughout the asset lifecycle,” she explains.
The SAP Asset Intelligence Network allows BASF to collaborate with its customers in a digital ecosystem and manage smart devices in the industrial Internet of Things (IIoT). The evaluation project likely will run for several more months and is part of the BASF 4.0 digitalization initiative.
A second example of cloud use is an online platform named Lab Assistant (Figure 1) developed by BASF’s Dispersions & Pigments Division. This tool helps customers find the right chemicals for their own products. The cloud platform provides information about BASF’s dispersions and additives portfolio, e.g., pH levels and viscosity, or regulatory status in a given country. Customers also can find recommendations for decorative paints, including formulations or active ingredient calculations.
Figure 2. A move to the cloud can do away with issues posed by legacy software. Source: SAP.
Also, since the 2014 deployment of cloud-based Microsoft Office 365 to better integrate the working environment of its 100,000 staff, BASF has been working on a broader Connected Enterprise project to improve global collaboration both within the company and with its external partners. Via a seven-step process, BASF has introduced modern communication and collaboration tools — including smartphones, tablets and notebooks — so employees can work at maximum efficiency wherever they are located. However, ensuring success has demanded a strong focus on training.
“These big technical changes also demanded a sophisticated change management. That is why we started an extensive initiative to support our employees in learning new ways of working. We chose an approach with multiple formats and media: a smartphone app, training videos, live online trainings, a change agent network, handbooks and some face-to-face trainings. We provided our documents in 24 languages and took care to early engage executives and offer specific workshops to target groups such as assistants and employee representatives,” notes the spokeswoman.
“The BASF project involves digital transformation of their entire source-to-pay process using Ariba solutions and Ariba Network. The project is progressing well,” says SAP’s McCallum. “A number of other chemical companies are also currently implementing Ariba solutions, including one which is using Ariba Strategic Support Suite to implement a structured and consistent sourcing process and centralized document management system,” she adds.
Key Drivers
McCallum cites two main drivers for chemical industry adoption of cloud-based applications. First is the need to increase margin in a historically low margin business, especially for companies with activist investors on their boards. Profitability is critical, and applications with subscription contracts and lower IT costs look more attractive to shareholders than expensive perpetual licenses, she notes.
“Secondly, the need for agility is driven by extraordinary amounts of merger, divestiture and acquisition activity. For companies who are growing by acquisition and who want to get all their business units/acquired entities using the same software quickly, without a large capital expenditure, cloud solutions are the best option. Or, conversely, for spin-offs who need their own software landscapes ASAP, cloud solutions provide a faster and cheaper way to get there. Less hardware. Less IT support required. Faster user adoption. More scalable as the company grows or shrinks,” she stresses.
Chemical industry adoption of cloud-based applications is about middle of the way when compared with other industries that SAP is involved with — although uptake has been more rapid than expected given the industry’s historically conservative IT habits.
“Perhaps this is the case because many, if not most, chemical companies have had the same ERP [enterprise resource planning] system for years, even decades, during which time old configuration and customizations have accumulated. This results in systems that are difficult to upgrade and that impede adoption of new business processes. Those companies whose competitive advantage is hampered by cumbersome on-premises systems see the move to the cloud as an opportunity to start afresh with software that will automatically be upgraded as business processes evolve and change,” she explains (Figure 2).
Early adopters of cloud applications in the chemical industry started with “shared services” applications such as HR and procurement. “Solutions like these provided an easy way for companies to test the waters of [the] cloud, without risking mission-critical activities. Pretty quickly, we saw companies moving more differentiating business processes to the cloud, such as sales and operations planning, and some chemical companies are currently considering moving even their manufacturing operations to the cloud,” notes McCallum.
The cloud is ideal for any non-specialized functionality that multiple users need to access from many different places and that can be standardized across the company, she counsels. “HR, travel, indirect procurement are obvious examples. The selling point here is ease of use and standardization, in addition to lower implementation, support, and license cost.”
However, chemical companies must understand issues the cloud does pose: for instance, compliance with data-privacy legislation in different countries and the impact of where specific servers are physically located; uptime, i.e., how often will the system be down for upgrades and how long will these take; and disaster recovery.
Alternative Scenarios
Chemical companies can choose from among a number of options to avoid the security, legal or transition costs that typically raise most concern with cloud computing, says Michael Risse, vice president of Seeq Corp., Seattle, Wash.
“Given chemical company financial and governance investments in existing data collection and storage systems, some organizations are uninterested in beginning their cloud efforts with a massive project to move their data to the cloud. At the same time, with a reasonable Internet connection, data movement is not necessarily a prerequisite for end users to unlock insights in their data,” he notes.
By using a cloud deployment of analytics software, a secure (HTTPS) connection, and a remote connection agent, a chemical maker can take advantage of browser-based applications running on the cloud that connect back to its on-premise data. “The advantage here is that the solution is deployed and accessible in a matter of hours. So, the cloud is the deployment platform for analytics, but the data stays where it is, enabling deployment and insight in hours rather than months,” he explains.
Another option is to make the cloud the destination for monitoring datasets collected from remote or IIoT end points. This, he emphasizes, frequently is a natural and easier option than trying to reroute data from carriers and wireless systems into IT systems and then to the cloud because data “born on the cloud” is a popular option for many monitoring applications.
“In this case, end users can then access the data by either running analytics on the cloud or by running the analytics solution on premise with a remote connection to the cloud-based data. In either scenario, the monitoring data may be complemented or contextualized by connecting the analytics solutions to other data sources — historians, manufacturing execution systems, etc. — to get a complete view of all data. For chemical companies, this scenario can be used to enable new insights into supply chain and operations by complementing existing data with data from wireless or cellular networks,” he adds.
A third scenario is accessing multiple sites from a cloud deployment of analytics software. While moving or copying the data to the cloud also could facilitate cross-plant comparisons for yields, quality, etc., a simple remote connection for occasional queries and comparisons may suffice, depending on the frequency and requirements of the end user.
“These early comparisons may be a proof point to demonstrate the value of cross-plant analysis, after which a company may choose to begin the process of moving data to the cloud for future leverage. As with the other scenarios, taking a cloud-based analytics software approach with connectivity to on-premise data enables rapid deployment of new software while maintaining the status-quo for data collection, storage, access and governance,” notes Risse.
Cloud computing provides many advantages to organizations in typical IT scenarios for on-demand capacity in storage and computing power, he says. However, this should not preclude companies from leveraging other benefits of cloud computing such as rapid deployment, remote access and low cost, advises Risse.
“Leveraging software as a service (SAAS) offerings to reduce overhead and capital expenditures are additional opportunities. If data lakes and data aggregation are the goal, the cloud is certainly an option, but it’s not the only model, and other approaches may be a better fit for chemical companies,” he concludes.
