Earlier this year, ASUG had an opportunity to chat with Alex Pierroutsakos, Chemicals and Process Industries Executive Advisor at SAP. He walked us through where the chemicals industry currently is as we begin to emerge from the worst parts of the COVID-19 outbreak and the SAP strategy with its chemicals customers. 

Q: What's exciting you the most about the chemicals industry? 

A: Before COVID-19, things were pretty steady for the chemicals industry. There wasn’t a lot of ripple in the supply chain. What COVID-19 did was take all of that and throw it up in the air, and create, what we call in the supply chain world, a bullwhip effect. A bullwhip effect is when you make a significant change in demand or supply that causes a reverberation effect across the entire supply chain – and not only within chemicals. People don't realize that 96% of everything that's made comes from the chemicals industry and of that almost 99% comes from, in some shape or form, the oil and gas industry. What people also don't realize is that chemical companies don't have to manage all of the industries that they serve.

The positive of all this disruption was a realization that chemical companies need to become more resilient. They need to have the ability to adjust their product portfolio for when things happen: like single-use plastics and the medical industries that they serve are skyrocketing. How do you manage all of that disruption? That question has begun to allow chemical companies to realize that they need to become more dynamic in how they address the volatility in the industry. The chemicals industry is further back in the supply chain. Our products get turned into products, which become the products consumers find on shelves. Now, what's happened is that COVID-19 has created a level of urgency.

I think people are also realizing, more and more, that sustainability is very important. But it's not just about reporting sustainability. It’s also about looking at how to drive change in those things that drive improvement.

A good analogy for the industry right now is when somebody goes to the doctor and gets a tough diagnosis, but they have enough time to fix things and get healthy. The chemicals industry got the memo, and they’re looking to make changes.

Q: How are you seeing sustainability play a role in the chemicals industry?

A: A lot of our sustainable solutions help to measure and quantify. Just as you measure dollars and cents of revenue and profit, you then also measure carbon and emissions. It's like another currency. But what's important about all of this is that our solutions can help do a lot of that measuring. What people don't realize is that our new advancement of SAP S/4HANA and the cloud solutions that drive operational improvement all help grow revenue, save profit, and help to address emissions.

Fewer emissions mean less raw materials used and more lean manufacturing. Being sustainable is just on the other side of the coin of being profitable. If you use less, you spend less. That's what's differentiating us in the market: we don't just have a bunch of sustainable solutions that measure. We built sustainability within the platforms that we use as part of the business processes that most of our customers use, which are SAP S/4HANA and SAP ERP.

Q: How has COVID-19 affected the chemicals industry?

A: I would say two things. First, strategic sourcing and making sure that they manage risk around sourcing – we all remember the impact on the supply chain as parts of the world shut down during the pandemic. Number two, and the big one, is around customers needing what I like to call a “customer portal environment.” When people couldn't work from the office, they needed to build a way for their customers to have the ability to see where their products were in the supply chain. They also need to easily go online to give their customers a business-to-consumer (B2C) experience, even though they're in a business-to-business (B2B) type of world. Everything used to be very brick and mortar, so trying to improve the customer experience perspective is essential.

The second piece is being much more connected outside of their four walls, or what we call the network of networks. This notion is being able to be connected to logistics while your suppliers are connected to procurement. When you integrate and connect things, customers can respond quickly to change as opposed to being very manual. Manual processes have made it very hard when you're not working in a central location like a plant.

Q: What are some of the biggest challenges that you're seeing in the industry right now? How can they be overcome?

A: The biggest challenge that the industry as a whole always has had—and will continue to have—is how it manages growth, organically or through acquisition. There's always this thirst to manage how you grow. While at the same time, the big challenge is dealing with commoditization in the industry. Knowing that raw material prices continued to rise, how will companies avoid being squeezed in their margins?

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