In its study, SAP shows that four business models have emerged in the chemical industry. In this blog post, we shed light on the different strategies.
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How Trends in the Chemical Industry Are Shaping Digital Transformation
Evolving into an intelligent enterprise takes time for large chemical companies, but trends in the chemical industry are adding urgency to their transition. Four emerging business models in the chemical industry show these enterprises are leveraging technology to advance toward intelligent operations as well as address immediate demands.
At the threshold of a new decade, chemical manufacturers are on the horns of a dilemma: Holding fast to market position requires transforming into an intelligent enterprise but also ensuring output from core operations. Moreover, trends in the chemical industry are creating additional pressures for these businesses. As a Global Senior Director for Chemical Industry Solutions, I see more and more challenges from new competition within the chemicals industry. An enormous commoditization and reduction of product lifecycles took place. Customers are taking advantage of a broader field of suppliers and demanding greater product customization. Raw materials and energy price volatility and shifting supply and demand centers in the global market make it essential for the C-suite to have visibility into markets and real-time decision-making ability. Additionally, chemical manufacturers must deal with ever-changing regulatory compliance requirements with agility and know-how.
Forward-looking enterprises have been able to unravel these challenges and overcome them by altering their perspective. Specifically, they’re not looking at digital transformation as a box to be checked while addressing current trends. They’ve discovered, instead, that it’s the means to the end. A chemical company can focus on areas of its business in the greatest need of efficiency and modernization to pivot quickly with change as an intelligent enterprise.
Tech Solutions that Address Trends in the Chemical Industry
SAP research reveals the emergence of four business models in the chemical industry. Let me outline the different strategies:
1. Delivering business outcomes instead of products
One of the biggest movements in the chemical industry is the shift in customer objectives. To provide the answers potential customers want, chemical companies are collecting data on their products to quantify quality and performance. A coatings manufacturer, for example, may use IoT sensors to determine how a product performs while being processed at customer locations, providing data on optimal conditions for application and use. Similarly, a resin manufacturer could remotely monitor product processing under various conditions to provide guidance to a finished goods manufacturer, helping to ensure overall product quality and reduced waste. This data can become a compelling part of a company’s differentiating strategy for engaging users and closing sales.
2. Creating error-proof operations with new technologies
Chemical companies are also beginning to use technology to achieve operational excellence. They’ve discovered the advantages of automating standard back-end processes with technologies, including machine learning and IoT. These technologies minimize the need for human intervention — as well as the potential for human error. Blockchain technology also offers great potential to prevent use of counterfeit chemicals, which is especially crucial for chemical manufacturers providing products to the pharmaceutical or agricultural industries. Blockchain can enable track-and-trace processes with less work and waste while protecting the enterprise’s reputation.
3. Competing as a part of an ecosystem
Chemical manufacturers can no longer exist within their own four walls. They recognize that they must cooperate with their customers and other businesses and organizations to preserve resources and protect the environment. As a part of a circular economy, chemical companies may be sourcing raw materials from recyclers, which requires fool-proof solutions to confirm their quality and availability. Circular economy consortiums may be calling for a decrease to environmental threats like ocean plastics or exposure to hazardous chemicals, creating opportunities for innovation.
Their customers, too, may be looking for ways to reduce waste and protect their ecosystems. Farmers, for example, may benefit from solutions that can immediately analyze soil quality, weather, and crops to determine the correct products and correct schedule to apply fertilizers, crop protectants or benefit from new seeds. With this data, they use only what they need, create less waste, and maximize output.
4. Staying agile in a dynamic market
For some enterprises, the priority is staying agile in an uncertain M&A environment. Chemical companies need the ability to rapidly divest assets, adjust their portfolios, and adapt operations in response to market changes. Technology can provide the visibility into operations, shipments, and market conditions that executives need to make vital decisions and stay agile.
The Slow, but Steady, Route to Success for Chemical Companies
Rapid or radical changes throughout a chemical enterprise’s operations could have negative impacts on product quality, customer satisfaction, and business operations. Moreover, digital transformation in any industry requires a change in mindset, new management techniques, and new skills of the workforce. There is no magic bullet that can accomplish quick digital transformation. Change, especially for large enterprises, simply takes time. But I would highly recommend starting your journey now. In alignment with your customers’ needs, look for opportunities that will take your operations into the future. Choose the areas of greatest need or those that will deliver the greatest ROI — and then plan and execute the next phase of digital transformation.
The key is deploying technology with business outcomes in mind rather than just using technology for technology’s sake. Enterprises that follow this practice will thrive, regardless of changing trends in the chemical industry. Understanding technology’s role will enable you to deliver business value and stay competitive, now and in the face of challenges that lie ahead.
Learn More
Download the latest SAP white paper “The Intelligent Enterprise for the Chemical Industry” and discover how technologies like machine learning and blockchain are reshaping the chemical industry.
– written by Stefan Guertzgen – Global Senior Director Marketing and Communications for Chemicals at SAP
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