Logistics & Supply Chain

It All Starts with Chemistry

Chemical: An Industry in Front of Every Supply Chain

03.04.2017 -

Reviewing the list of the world’s top chemical companies will confirm “the chemical industry touches all other industries.” You will see the inventors of Aspirin, Teflon, Saran Wrap and Styrofoam products on this list. These companies deliver products that ultimately make up the wall next to you, your table, your car, your clothes, your smartphone, your medicine, the packaging of your food, as well as many of the food items themselves — you name it.

Many Dow Jones industrial average companies were around when Teddy Roosevelt was US president and Victoria was queen of the British Empire. In fact, the average DJIA company is 111 years old. The chemical industry is well-represented here, along with companies that basically helped invent the modern industrial age — and pioneered most of the modern production and supply-chain philosophies.

The required long-term capital investments, ramp-up times and utilization levels have driven these companies to very high internal efficiency and deep expertise in automation and orchestration, with investments spanning well over 50 years. For their own production value chains, they are masters of efficiency and reliability. However, specifically on the systems side, the traditional IT approaches (monolithic, behind-the-firewall enterprise software modified by yearlong waterfall projects with armies of consultants) are struggling to keep up with the new global, multicompany, fast-paced reality of the market. According to an Accenture survey, 57% of chemical companies believe that optimizing their supply chains is one of the biggest areas of opportunity — so developing digital supply-chain capabilities will be crucial.

The End of the Vertically Integrated Company

Together with the commodities sector (mining, resources), the chemical industry can be perceived as one of the last industries with a complete end-to-end value chain within the enterprise. Chemical companies buy the raw materials (or dig for them), refine and modify them through many steps, put the results in a bottle, bag, drum, truck or bulk vessel, and ship them to the customer. The fundamental infrastructure required to execute these transformations has been built over a century, in a fully integrated fashion, on gigantic factory sites and across entire continents. An example is the European ethylene pipeline network.

As a result of consolidation, outsourcing, globalization and transformation, all stakeholders in today’s chemical supply chain need to be interconnected, collaborate and have access to accurate, real-time information outside of just their own enterprises. And with shorter product life cycles and ever more demanding customers who are constantly looking for an even more scratch-resistant glass, even more complex medicine and even more sustainable cars, the need for visibility and agile supply chains is even more obvious.

Industry 4.0 brings together a host of technologies, including the Internet of Things, advanced analytics and robotics that enable chemical companies to create a smart supply-chain network and factories. It also explores new ways for information to create value: “We are doing a joint Industry 4.0 pilot,” to “Tomorrow I will be able to scan a diseased plant and receive the corresponding cure the next day.”

However, your customers (and sales team) expect you to plug this evolving network rapidly and seamlessly into your own production data networks. On-site enterprise resource planning (ERP) systems and legacy portals are not made to model a supply chain outside your own four walls — they are too slow to keep up with the pace of new and constantly updated information and are too expensive.

Relying on outdated approaches results in mostly single-tier visibility and provides incomplete collaboration support as well as limited support for traceability, planning, optimization and automation.

The growing consensus among experts is to leverage the power of cloud-based offerings and business networks to ensure you can exchange data, rapidly roll out new connections and business applications, and protect your internal ERP architecture road map from the noise and disruption of the outside world.

Five Things to Keep in Mind in Today’s Digital World

In this changing chemical landscape, what can be done? Here are five tips that are important to remember as digitalization sweeps through the chemical industry:

  • Think in terms of information first, then technology. What is out there? Can you receive it regularly? Who else could benefit from it? How does it relate to others? The world is run on emails and Excel sheets — go find them, and identify the processes, connections and dependencies they represent. Then, look to integrate or migrate those to more robust, automated solutions.
  • Your IT budget will never catch up with your M&A team. Forget about “one SAP.” Focus on “one company.”
  • Leverage cloud-based offerings to support the many different customer processes and maturity variations. Trying to manage these using an ERP system is an unwinnable race, and it will just make your own architecture more complex and brittle.
  • Whatever technology is there to stay, there will be more of it. Embrace the inevitable transformations. At worst it will make them less painful; at best you will gain control of your destiny.
  • The quantity of data will increase, but human ability to process information will stay roughly the same. Find ways to turn raw data into actionable information through automation and machine-learning algorithms.

Companies that are slow to explore the opportunities of digitalization, specifically in supply chain, may find it hard to compete in an increasingly cost-competitive market.


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