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. 

OT-to-IT Applic­a­bil­i­ty

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.