Top 10 digital innovations to disrupt the chemical industry
By Aditya Krishnan, Research Analyst, Frost & Sullivan
The Digitalization of the Chemical Industry, 2020
As with all other industries, digital technologies are being rapidly implemented in the global chemical industry. Leading chemical manufacturers globally are closely monitoring process improvements by leveraging digital technologies within their operations. Advances in data processing, network connectivity, sensor technology, and user interface are expected to increase productivity across the chemical value chain.
Manufacturers of coatings, elastomers, plastics, adhesives, and sealants have already invested in digital technologies for streamlining their sourcing, manufacturing, sales and marketing, and R&D departments, thereby, improving efficiency.
The impetus for Industry 4.0 and complete automation is expected to be driven by these digital initiatives. The overarching need for a circular economy and reduction in carbon footprint is also expected to drive digital innovation. Frost & Sullivan believes that digital transformation in a more complex value chain, such as that of the chemical industry, will materialize through a multifaceted approach. The enabling technology, business domain, end-product industry, all play an equally important role in optimizing this transformation. Frost & Sullivan’s prediction of the top 10 digital themes that will affect the chemical industry are:
“The overarching need for a circular economy and reduction in carbon footprint is expected to drive digital innovation.”
“As part of Industry 4.0 vision, manufacturers will increasingly adopt technologies to automate systems, reduce waste, and increase overall process efficiency.”
A- Top enabling technologies
The most important step in digital transformation is the adoption of technology that enables change. A diverse set of technologies enable data analysis and interpretation; the results of which can be viewed through interactive user interfaces.
As part of Industry 4.0 vision, manufacturers will increasingly adopt technologies to automate systems, reduce waste, and increase overall process efficiency. Technologies discussed below are extremely crucial for the success of digital transformation in this industry
Artificial Intelligence (AI) and Machine Learning (ML)
AI is a system of smart machines that interpret analyzed data to perform tasks that require human-like intelligence. This technology will be revolutionary in the chemical industry as manufacturers leverage AI to achieve higher levels of productivity and efficiency. AI, ML and deep learning will enable optimization across all departments. Global chemical giant BASF launched its ‘Chemistry 4.0’ platform to optimize its production, sales, R&D, supply chain; and increase efficiency. This transformation helped BASF attain sustainable manufacturing and realize its circular economy goals.
Advanced data analytics
The chemical industry generates immense amounts of data through the supply chain. Famous British mathematician Clive Humby said, “Data is the new oil. It’s valuable, but if unrefined, it cannot be used. It has to be changed into gas, plastic, chemicals, etc. to create a valuable entity that drives profitable activity; so data must be broken down, analyzed for it to have value.” This is applicable and important for the chemical industry. Raw, unstructured data generated by various business departments needs to be analyzed. Advanced analytics helps extract valuable business insights.
Platforms designed by IBM and SAS are being used by chemical companies such as Evonik and Solvay, respectively to optimize several business functions. This has helped these companies reduce capital expenditure (CAPEX) and R&D budgets.
Virtual Reality (VR) and Augmented Reality (AR)
AR and VR give real-time visibility into the operations of a plant, optimize product design and R&D results, and help in product prototyping. These technologies will help visualize enterprise-wide “key performance indicators” (KPIs) by providing all business units with real-time information.
“AR and VR give real-time visibility into the operations of a plant, optimize product design and R&D results, and help in product prototyping.”
“Companies that create visualization and simulation tools to help downstream manufacturers identify products best-suited to their needs, stand to benefit.”
B- Top digital domains
Digital business models
Companies will use enabling technologies to help create new business models and optimize existing ones to generate new revenue streams. Changes in consumer perspectives and rise in demand for innovative products will push downstream manufacturers to create consumer-centric business models. To efficiently develop these business models, business will require a digital leader – The Chief Digital Officer (CDO), who will run the digital side of the business, and ensure the smooth functioning across all aspects to help attain sustainable digital transformation.
Companies that create visualization and simulation tools to help downstream manufacturers identify products best-suited to their needs, stand to benefit. This will help them establish long-term relationships with their existing customers as well as in new customer acquisition. For example, AR, VR, 3D printing, and on-screen simulation tools will help augment sales and marketing initiatives. These being digital products, can be sold to downstream manufacturers to help optimize their processes.
The digital plant is the most important facet of digital innovation in the chemical industry. Process optimization through automation will help manufacturers reduce CAPEX and wastage, optimize plant performance, and create uniform product properties. For example, BASF managed to reduce the batch time for producing expanded polystyrene by 30%. This was done using dynamic optimization techniques based on kinetic models developed from the data generated during production. Increasing efficiency of smaller plants will generate new opportunities for smaller manufacturing facilities catering to localized demand. This will create nearshoring (the practice of transferring a business operation to a nearby country, in preference to a more distant one) opportunities, thereby helping in localizing the supply chain.
Nearshoring is expected to reduce supply chain anxieties created by global disruptions such as geopolitical tensions, pandemics, natural disasters, etc. The digital plant will help improve worker safety and reduce accidents in the plant.
“Nearshoring is expected to reduce supply chain anxieties created by global disruptions such as geopolitical tensions, pandemics, natural disasters, etc.”
“Connecting the physical with digital is also expected to be a major initiative in the coatings business.”
Digital supply chain
Supply chain integration is important for digital transformation of the chemical industry. Structured data flow across various segments of the value chain will optimize R&D, production, and logistics.
Real-time transfer of consumer data from downstream to upstream manufacturers will create a seamless map for R&D. Products can thus be tailor-made to address evolving demand. This will also influence the final product quality and design uniformity. Furthermore, increased efficiency of R&D, production, and logistics will create a sustainable ecosystem and help manufacturers achieve their circular economy goals.
C- Top industry segments
The coatings industry is highly competitive with manufacturers focussing on product innovation, being first mover and finding hidden, unmet needs. Digitalization will enhance innovation in R&D (formulation) by integrating consumer and regulatory inputs directly into R&D processes.
Visualization of products is also expected to be a key driver in the adoption of digital technologies in this sector. Connecting the physical with digital is also expected to be a major initiative in the coatings business. Sensors can be integrated into coatings to help product-users optimize user experience. This is expected to help companies generate valuable data with respect to physical environments of their customers. This will further help creating unique insights for individual customers and products catering to their needs.
The plastics industry is expected to lead digital transformation initiatives. Resin manufacturers are expected to use data analytics to optimize polymerization processes to improve overall resin quality. The data generated by these manufacturers will help create digital products such as onscreen simulation tools using AR/VR to help downstream manufacturers identify a suitable resin for their products.
For example, SABIC launched its Simulation Portal in 2019 to enable customer access data. It helped them model engineering simulations of plastic performance, and thereby, achieve cost savings. Major resin manufacturers are expected to launch digital products and services to integrate a highly fragmented plastics supply chain. This will increase efficiency, plastic traceability, reduce manufacturing and logistics wastage and create a more sustainable manufacturing ecosystem.
“The plastics industry is expected to lead digital transformation initiatives. Resin manufacturers are expected to use data analytics to optimize polymerization processes to improve overall resin quality.”
“Online platforms and handheld devices used to relay real-time performance metrics at the customers’ end help manufacturers enhance products/services to suit end-user industry needs.”
Adhesives and Sealants (A&S)
Leading global A&S manufacturers have invested in digitalization of their business operations using AI, data analytics, and a strong IT infrastructure. These support downstream manufacturers in end-user industries such as automotive and aerospace to help them with lightweighting and safety initiatives.
Online platforms and handheld devices used to relay real-time performance metrics at the customers’ end help manufacturers enhance products/services to suit end-user industry needs.
Future of digitalization and its implications on the chemical industry
The chemicals industry is in its early stages of digitalization as leading manufacturers invested in digital technologies after 2017. They integrated digital initiatives in all business operation/functions to enhance overall efficiency. It was done to achieve their sustainability and circular economy goals. End-to-end transformation under Industry 4.0 is a significant step for chemical manufacturers. Moreover, digital transformation is expected to help smaller plants be economically viable and enable nearshoring for the supply chain. It will help create local job opportunities, cater to local needs, and reduce major supply disruptions due to geopolitical factors.