Most industry pundits seem to agree that, despite continuing volatility in the global economic environment, the chemical manufacturing outlook is showing good signs of growth. However, chemical companies generally lag firms in other sectors in embracing a wide range of digital advances — including the Industrial Internet of Things (IIoT), cloud computing, big data and networked supply chains — to drive their growth. Digitization represents a major opportunity for chemical makers. In fact, Accenture predicts that digital technology could bring the chemicals industry benefits up to $550 billion over ten years.
Now, not only must chemical companies play catch-up on technology investment, they also must move into the digital fast-lane with limited resources and battle-weary personnel and equipment. The potential applications cover a wide range of tactics for creating revenue and saving resources, from online portals for customer engagement, to sensors for monitoring performance of costly mission-critical assets. While the journey still holds some treacherous terrain, manufacturers that take a focused approach to modernizing operation technology (OT) as well as information technology (IT) systems will maximize their results. Correctly figuring out where to begin and how to approach choosing and implementing new technology can play a critical role in achieving success.
Key Considerations
Here are the eight most important points to assess before diving head first into adopting digital technologies:
1. Take stock of your industry. Start by spending time to understand the state of the chemical industry and the specific segments you compete in — because this will help navigate implementation and reveal the most pivotal pain points this technology should aim to alleviate. The chemical industry faces some arduous challenges ranging from decreasing margins to increased risk of commoditization; understanding the specifics for your business segment is critical.
Most vertical industries also have felt market contraction, driving waves of consolidation and causing further volatility, notes PricewaterhouseCoopers. Market consolidation has helped eliminate some of the short-term entrants, including start-ups prone to disrupting pricing and weakening the reliability of the global supply chain. The economics of shale gas in the United States also have fostered new investment and growth in capacity, spurring optimism and generating revenue. (See: “U.S. Chemical Industry Soars”.) An understanding of this current chemical landscape is essential for knowing what’s required to thrive in this environment.
2. Plan ahead. Demand is projected to remain strong. Consumers will have capital to spend on homes, vehicles and packaged goods while industrial customers will focus on new facilities, fleets and product innovations. All these activities, of course, rely on products made by the chemical industry. In a June CP webinar, Thomas Kevin Swift, chief economist of the American Chemistry Council, forecast that American chemical production will expand 3.75% this year and 4.75% in 2020.
Shifting into growth mode requires a change in attitude, new strategies and investment in IT to help companies improve their efficiencies as well as prepare for future opportunities. The smartest companies don’t just buy for what they need today, they invest in the technology they will need in the future.
3. Identify potential roadblocks (and opportunities thereof). One of the biggest barriers to success for chemical makers is maintaining a positive brand image with a growing number of environmentally conscious consumers that don’t necessarily understand the science behind the processes and controls used in our industry. The fact is that chemical companies must contend with complex regulations — e.g., environmental mandates, compliance issues relating to workforce health and safety, as well as strictures for safe transportation of hazardous materials — that put pressures on their bottom line but also help control environmental concerns. Overlapping regulations govern facets from labeling to storage and shipping of products. U. S. chemical makers spend more than $12 billion/year on compliance, notes one report.
Pendulum swings in attitudes, such as the current outcry over plastics, have helped fuel a subtle underlying worry. However, with changing consumer attitudes to environmental safety and new regulations to accommodate their requests comes an opportunity to pivot quickly and pass the competition in the process. By paying attention to emerging trends that may raise potential roadblocks, chemical companies can foresee issues down the line and choose technology today that will allow them to respond nimbly to those challenges. As consumers ask for and brand/retailers set goals for sustainability, chemical manufacturers are uniquely positioned to enable the vision of a circular economy. Stakeholders down in the value-chain often don’t understand the technical aspects of what makes or does not make finished goods reusable/recyclable. But chemical companies are uniquely positioned to bring this expertise to the table. Accenture recently reported that companies using the right product lifecycle management tools can ensure that each of the intermediate goods comply with set objectives to eliminate waste and unlock new value by continuously keeping products/molecules at their highest utility and value.
4. Remember, one size never fits all. It’s easy to get swept up in the promise of the latest technologies and their potential impact on the bottom line. However, it’s important to remember that each company has a distinctive footprint and demands different applications and functionality. Businesses should start planning investments by taking a hard look at the core of their operations, setting goals and defining ideal workflows. This will enable them to choose software that best aligns with their specific needs.
Advanced technologies, like the IIoT, machine automation, predictive analytics and artificial intelligence (AI), may or may not make sense for a specific business or location. For example, some processes may be too critical or high risk to trust completely to automation. Perhaps quality control involves a subjective judgement call, the kind only a human can make. On the other hand, robotics might eliminate risks to personnel in handling dangerous materials. When considering IIoT use-cases for chemicals or drugs that could be weaponized, remember that data security may be especially critical. Looking for generic blanket fixes to digitization always will result in a poor fit. Instead, seek out technology that not only is designed for the chemical industry but also is tailored to the specific use-case, vertical sector and market demands.
5. Prioritize strategy over speed. With the pressure on for quick growth, chemical makers eager to digitize may want to embark upon digital initiatives at full throttle. While it’s imperative that companies modernize their systems to outplay their competitors as opportunities unfold, the chance of failure is high if the leadership team hasn’t aligned on a core strategy. Speed is still certainly important but chemical manufacturers must ensure they have a company-wide IT foundation in place before sending off department heads to pursue ideas or launch isolated programs.
A phased approach can be helpful if it doesn’t become too narrowly focused. Proper choice of initiatives in the initial phase — ones that take advantage of synergies between IT and OT investments, and that offer a quick financial return — will build acceptance. Stakeholders, from officers to field technicians, will see value and be motivated to continue adopting more digital initiatives in phase-two and phase-three projects. Digitalization should be an ongoing priority, using technologies that evolve with change and as innovations emerge.
6. Make technology worker friendly. Chemical makers, as they strive to keep pace with the rapid development of new digital technologies, will need to reassess how they train their employees to ensure they have the skills necessary to succeed. According to research by McKinsey,“While traditional chemical and management skills will still be important, new skills will be required that are not traditionally found in chemical companies.” These skills will vary from firm to firm; so chemical companies must ask themselves: What capabilities and talent pools do we need to execute our digital initiatives? How should we enhance skills and expand capabilities across the broader organization? What is our build-partner-buy strategy for technologies?
This often is an overlooked aspect of choosing digital technology. While functionality is critically important, it doesn’t mean much if employees can’t use its features. Training the workforce properly is one way to ensure seamless transition, but chemical companies also should pay close attention to the user-friendliness of technology being considered. Intuitive interfaces make a big difference when training existing staff and accommodating incoming hires of digital natives — making the entire organization as efficient and frictionless as possible. Furthermore, dashboards and workbenches can offer greater visibility and help empower personnel to coordinate activities based on personalized key performance indicators and keep everyone motivated.
7. Don’t forget about physical assets. Digitization isn’t just for back-end organization and filing. Chemical makers can reengineer and streamline the entire production process, from improving the availability of raw materials, to scheduling tighter batches, to effectively managing assets and cash flow. Sensors and IIoT technology attached directly to physical assets can monitor for idiosyncrasies and collect data on performance, helping to spot early warning signs of equipment deterioration so the maintenance team can stop problems before they even happen.
After identifying the equipment most suited for IIoT monitoring, companies not only must collect readings, but also must apply predictive analytics to those data to gain actionable insights. In this way, chemical makers can achieve most efficient operation and avoid unplanned and costly downtime. Overall, improvements to chemical asset management can allow companies to better utilize their equipment while enabling more-agile manufacturing to optimize production across all facilities and manufacturing plants.
8. Think of technology as an innovation partner. One of the most important benefits of digitalization and the adoption of new technology for chemical makers is the visibility and insight derived from connected networks and advanced business intelligence tools. Using AI, predictive analytics and machine learning, companies can foresee future trends and take advantage of unfolding opportunities with agility and confident decision-making. New analytic tools also can help chemical manufacturers by enabling them to sift through their datasets to deliver greater business value, whether by planning and scheduling orders more precisely or ensuring better quality management among facilities.
Take Fullest Advantage
The insights generated from these tools can spur greater innovation and allow companies to expand and improve their current product portfolio with new features to bolster their position in existing markets or to develop products that open up new markets. Enhanced research and development can help speed the time to market for a new product, foster better collaboration with partners, and facilitate servitization, i.e., the offering of products as a service. Additionally, digital technologies can help companies engage with customers in meaningful ways, such as inviting product feedback through an online portal.
As market opportunities are starting to look up, a chemical maker can leverage the boosts in revenue to invest in digital tools. Modernizing patched and outdated systems, plus adding innovative advances like IIoT and AI will help propel the company into the digital era. Smart assets that can predict the need for maintenance also will well-prepare the firm to step up to the increased challenges and incremental rise in sales.
Agility and customer alignment are the go-forward mandates. To remain relevant, chemical companies must step up their capabilities. Waiting on the sidelines no longer is an option, nor can merger-and-acquisition tactics alone accomplish the bottom-to-top transformation needed. Although the pressures are intense, companies still must take time to create a holistic strategic plan and build a solid foundation.
MIKE EDGETT is Atlanta-based industry and solution strategy director, process manufacturing, for Infor. Email him at [email protected].
