Mega-trends Driving Chemical Industry (Success Priorities)
By Saumitra Mani Tiwari ?|| Director-Product Assurance, Solulever
The priorities for success in the chemical industry are dynamic and constantly changing. End users' demands and priorities shift with changing technology, usage experience, and processes. So, organizations in the industry must evolve to remain competitive.
This document will examine the priorities the chemical industry must set to become or remain a leader in their sector.
For leaders of an organization, safe, compliant, sustainable operations and any relevant transformational effort hold top priorities. Despite automation being in existence for over a decade, many chemical companies still suffer from siloed data and a lack of integration in manufacturing and the supply chain. This siloed state further prevents them from automating other processes and capitalizing on internal know-how and relationship-building with customers and vendors. If we trace back to the roots of the chemical company sales, we find that they originally sold crude oil products and inorganic materials to the downstream industry. However today, their consumer base has expanded to include the life sciences and automotive industries and in future, it will continue to evolve.
To garner success and evolve with the market, chemical companies will put these four strategies on their priority list.
Operational Efficiency Increment
Chemical companies can automate a major part of their back-end systems by utilizing machine learning, artificial intelligence and predictive models, thus enabling scenarios like touchless order fulfilment, and lights-out manufacturing and bringing the vision of autonomous enterprise even closer. Initially, companies can focus on reducing the processing time, increasing first-pass yields through predictive quality and improving overall equipment effectiveness. This can be achieved by continuously improving Integrated IoT, Machine learning and Digital Twins in everyday operations. Next, companies can put their efforts into collaborating with customers, suppliers and upstream-downstream service partners.
This can be achieved through the use of an intelligent asset network, predictive models, and experience management. These tools can improve the overall supply chain management of an organization. Additionally, they can anticipate possible disruptions, simulate them, and implement contingency plans to mitigate risk throughout the supply chain. Furthermore, by utilizing machine learning, standard end-to-end operations can be automated.
Managing Integrated Operations
The ability to operate safely and effectively is critical for chemical companies. One of their never-ending tasks is reducing cycle time and improving the first yield pass. They focus on individual inefficiencies, such as material movement or equipment efficiency and strive to reduce cycle time by fully integrating end-to-end operations. Manufacturing connectivity and intelligence solutions, such as Brabo, and technologies like digital-twin enable companies to operate more reliably and efficiently, by providing them with an integrated view of day-to-day operations. They also offer valuable insights into operations, improving problem rectification and business outcomes.
Problems in Traditional Scenarios
Solutions offered by New World Scenarios
Top value drivers for Integrated Operation Solution are:-
Collaboration Via Business Networks
Product-based value chains have forced chemical companies to push their boundaries. Chemical producers, along with a partner network, now plan to develop sustainable, customer-specific solutions and applications that serve industries such as automotive, pharmaceuticals, high-tech, aerospace, defence, and consumer products. This collaboration can enable them to deliver outcome-based applications and services, while also providing flexibility in redesigning networks and relationships according to market dynamics and ongoing portfolios.
Chemical companies can begin by collaborating with their customers to understand their needs and sustainability requirements. They can co-innovate with them in product development, and share data to maintain transparency. At the same time, they can use the ecosystem to connect with business networks and expedite and improve support for product development, production, and delivery. Partners can range from raw material suppliers to equipment manufacturers and service providers, to contribute to rapid delivery and lower the cost of production. This will enable chemical companies to develop differentiating and innovative products, services, and business models that support a higher purpose and circular economy.
It is expected that by end of 2023, 60% of manufacturers will start building R&D labs as cloud-based platforms that are open to external ecosystem participants, realizing a 25% greater product success rate than competitors.
Driving Sustainability: From Traditional Battery Value Chain To Circular Economy
The adoption of electric engines by the automotive industry is considered a major step towards the decarbonization of transportation. However, concerns from regulatory bodies and end consumers have increased due to the production of batteries and the impact of battery raw materials on the environment and society as a whole.
These concerns have motivated automotive manufacturers to expand beyond their traditional value chain. They are increasing visibility and consumer transparency while moving towards a circular economy. The supplier can enable complete transparency and tracing of raw materials for batteries such as cathodes, electrolytes, anodes, and enclosures using a digital passport.
Problems in Traditional Scenarios
Linear sequential battery value chain with poor visibility into raw material provenance or end-of-life management, resulting in inefficient resource utilization.
Solutions offered by New World Scenario
Top Value Drivers
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Improve Strategic Agility In Response To Market Dynamics
The company's future growth will be directly proportional to its ability to adjust its strategy in response to changing market dynamics. Continuous improvement of its product and service portfolios, as well as expanding into different markets or segments to realize the synergies of mergers, acquisitions, and spin-offs, will drive overall performance, profitability, competitive position, and growth.
Chemical companies will begin by analyzing the profitability of their existing product and service portfolios using real-time, granular data that range from raw material costs and overall production to development costs, logistics, and order fulfilment costs. In a follow-up step, they will embed external market and company data into ad hoc simulations of strategic scenarios, such as mergers, acquisitions, and divestitures, to assess overall corporate KPI and company performance. They will also proactively address customer and market concerns regarding mergers and acquisitions (M&A) by collecting and acting on stakeholder sentiment. In the final stage, after the merger, acquisition, or divestiture, companies will restructure themselves around their revised product portfolios, using consolidated financial data to measure and monitor the impact of their restructuring in real time.
Enable M&A For Rapid Differentiation And Diversification
Enhanced speed and agility would be required to adjust company strategies and refocus product and service portfolios on an ongoing basis. Portfolio optimization is the true force behind M&A activities in the chemical sector, and this is often the case with divestitures as well. M&A and divestitures allow companies to grow their business where they can do better than the competition and carve out a business that is no longer strategic.
Problems in Traditional Scenarios
Long-lasting and expensive system consolidation doesn’t deliver value quickly enough, due to missed opportunities to take advantage of synergies.
Solutions offered in New world scenario
Early financial consolidation provides the visibility required to take advantage of synergies while accelerating the process of integrating acquired business units and spinning off divestitures.
Top Value drivers for Rapid Diversification are-
Sell Business Outcomes Instead Of Just Products
In Future most chemical companies will move from B2B push models to business-to-business-to-consumer (B2B2C) models. Digital technology and concepts such as Industry 4.0 will be leveraged to deliver sustainable, co-developed applications, services, and business outcomes. Companies that have identified an experience gap will gain a competitive advantage by engaging more closely with their customers and ecosystem partners. This engagement will enable them to deliver outcome-driven services and address customer expectations. This experience, along with developing customer relationships based on trust and shared values and risks, will be the new paradigm.
They will establish searchable intellectual-property databases to access relevant scientific information to create co-innovated products and solutions. Having established this foundation, they will extend into properties prediction and performance of new formulations to significantly shorten the development process and time to market while monitoring product and formulation compliance along the entire lifecycle. Furthermore, they will extend into their customers’ value chain, monitor process parameters, and allow in site quality control in real-time through sensors at customer operations. The implementation of Industry 4.0, where all sensors, devices, machines, and other equipment are connected in one single network, will provide an unprecedented amount of insight that eventually reveals new business opportunities, such as predictive maintenance, further improving the product experience. In terms of logistics, they will track and trace material flow and product integrity along the entire value chain.
Finally, they will collaborate on open innovation platforms, turn data into value-based services, and establish transformative business outcome-driven and customer-centric revenue models to improve quality and reduce costs and risks for customers.
Outcome-Based Co-Innovation In Chemical Companies
Traditionally, chemical companies have developed products in response to market needs driven by downstream industry sectors, such as consumer products, pharmaceuticals, engineering, and construction. In the future, chemical companies will strive for unprecedented levels of customer experience by anticipating market trends and needs, rapidly developing and manufacturing corresponding formulations and selling based on business outcomes, such as first-pass-quality semifinished parts or goods, instead of selling by quantity. Innovative technologies, such as machine learning, the IoT, artificial intelligence, and blockchain, enable these processes. A cumbersome, multistep development process and a traditional revenue model based on product quantity delay time to market and time to value.
Solutions offered in New World Scenario
Chemical Company simulates property and performance of new formulation using machine learning.
Top Value Drivers
With growing competition, ongoing globalization, and blurring industry boundaries, companies can no longer afford to focus solely within their own four walls. Established business models and practices based on linear value chains are no longer sustainable in an era where companies are expected to be responsible for the emissions of their suppliers, customers, and other downstream business partners. To survive and thrive in today's competitive environment, companies cannot rely solely on organic growth. Instead, more and more are turning to mergers, acquisitions, and divestitures to expedite portfolio adjustments and diversify into promising new markets or segments. The business model is being challenged by the mass commoditization of products and formulations, global competition, higher demand from consumers for sustainable products and operations, and exponentially increasing regulatory requirements.
In conclusion, those who are willing to evolve will be welcomed by the market, while those who are not willing will be lost in the crowd.
About the author:
Saumitra Mani Tiwari ?|| Director-Product Assurance
Saumitra?has over 12 years of experience in driving and solving projects involving Digital Transformation, SAP and Process Integrations. He has been the driving force behind various successful implementations involving Smart Factories, Supply chain Automation, Warehouse management automation to GST tax implementation for end-of-end processes.
Very detailed and creative work
Product Management | Marketing
1 年Quite an informative piece Saumitra Mani Tiwari. Kudos!