The chemical manufacturer of today finds itself in a complex position, despite the prospect of solid growth after the downturn of 2020 and 2021. While increasing revenue after a downturn is always welcome, the industry also faces a growing list of imperatives regarding sustainability, regulatory compliance, and the circular economy. The industry also faces the same problems bedeviling the global economy—labor shortages and supply chain disruptions.
Even the prospect of growth—driven by construction, automotive, and health and safety industries’ demands, according to consultancy Deloitte–isn’t without problems. The chemicals sector still lags many others in its use of technology to improve operational efficiency and better align to important new trends in B2B and B2C processes. Many chemical industry companies also lag their peers in the digitization of services, products, and assets, and face mounting requirements for improvements in sustainability and carbon reduction; workplace and environmental safety; and other key issues.
Tech Portfolio to Leverage
The good news for chemical industry companies is that an expanding portfolio of technology and services is becoming available from SAP and its partners to help meet these myriad challenges and help move organizations forward into new markets and create new competitive advantages. The trick for many will be to balance the deployment of new technology and processes while maintaining legacy IT infrastructure assets alongside the complex, often aging operations technology (OT) infrastructure so endemic to the industry.
This is a particularly acute balancing act for a linchpin industry in a global economy that itself wrestles with finding the right pace and level of investment. Given the current economic landscape and its myriad regional and global imperatives, the task of staying abreast of the opportunities can be daunting.
Despite the need for a cautious approach to transforming an industry that has eschewed “disruption” and technology for technology’s sake trends, a playbook for the future is emerging. Operational efficiency is perhaps the area in which change can happen quickly. Advances in IoT technology, together with the use of advanced analytics to optimize industrial assets, make it possible to better understand operational challenges and bottlenecks. Armed with these data and the insights they can reveal, leaders can realize valuable, incremental improvements without massive technology upheaval.
These operational changes on the OT side of a company can be used to optimize business processes managed by the IT side as well. Optimized OT assets allow for ERP processes, such as resource utilization and planning, to be optimized, for example. Other IT resources that can benefit from OT innovation include those that deal with working capital, inventory, and people, among others. Improving the processes that use newly optimized resources can help extend both bottom and top-line growth.
Digital twins are another important new technology that can help drive advanced planning and operations. A digital twin of a plant, supply chain, or core business process can provide valuable insights into whether that twinned asset is delivering the goods, literally and figuratively. Digital twins also can serve as virtual laboratories for testing new ways to deploy assets. This ability to simulate how assets behave can help detect potential problems before an asset actually fails, as well as predict how well a particular change or configuration will support new operations and business initiatives.
SAP Business Network to Advance Innovation
Another key area where the chemicals industry is poised for dynamic change is in sustainability and the circular economy. New laws, regulations, and business practices are coming at the industry from all directions—local and national governments, international regulatory bodies, and industry supply chains, among others. Participation generally is not optional, nor is it practical to try to meet these new requirements via big bang IT and OT infrastructure retooling. Chemical companies must be extremely strategic in their innovation planning, even if the result is a collection of tactical moves that meet short-term goals while positioning the company for longer-term success.
This is where SAP Business Network strategy can potentially make a significant difference for chemical companies, even if the full realization of the SAP vision may take time. At a minimum, a Business Network can help companies selectively innovate in critical areas—like sustainability and supply chain visibility—without huge new capital outlays. The ability to conduct business in a many-to-many network is particularly relevant to the chemicals industry: according to the American Chemistry Council, more than 96% of all manufactured goods in the U.S. are “directly touched by the business of chemistry.”
These and many other topics will be explored during the forthcoming ASUG Best Practices: SAP for Chemicals event in November. Join ASUG members, non-member customers, and other stakeholders in the SAP ecosystem and dive into the important new trends, technology, solutions, and business processes that are moving the chemical industry into the future.
Joshua Greenbaum is Principal at Enterprise Application Consulting.