Smart supply chains
By Noora Mukhtar, Research Analyst, GPCA
The GCC chemical industry, like its global counterparts, is rapidly advancing into the age of the 4th Industrial Revolution, implementing transformative technologies to improve its operational processes and cost efficiencies. According to Accenture, global digital maturity of the manufacturing industry (of various sectors, including the chemical industry) in 2020 was at 39%, whereas for the chemical industry this figure stood at 42%. This indicates that most of the chemical producers worldwide are in the stage of scaling up the deployment of digital solutions at various sites or functions within their operations.
The move towards digitalization by all industries was already apparent before the COVID-19 pandemic, but it is now accelerating. During the pandemic, demand and supply fluctuations have driven the scale down of manufacturing production to match short-term volatility and reduce both working capital and operating expenses. Supply/demand imbalances have caused a ripple effect and impacted organizations’ ability to maintain production, sanction new development, or even explore new markets and business opportunities.
Amid all this, chemical companies in the Arabian Gulf will need to plan for greater transformation and innovation to differentiate themselves from their global competitors. In addition, society, shareholders, and employees have higher expectations for responsible value chains, as well as resilience to the cyclical economic challenges the industry still faces. The Industrial Internet of Things (IIoT), artificial intelligence (AI) and predictive analysis are critical components designed to help organizations be better equipped to respond with agility and drive business performance with new approaches and ideas. It is essential to catalyze the value chain with digital technologies in the GCC region to not only tackle uncertainty but also address the growing complexity in customer and product portfolios.
Companies are now obliged to modernize the tools they use for forecasting demand and planning how to meet it. Latest applications involve artificial intelligence, machine learning, and data analytics to speed up decision-making and pave the way for autonomous planning. This requires real-time and actionable data, trusted sources, and insights that empower them to better run their business. Supply chain data management can facilitate this by providing an efficient, high-quality and easy-to-access, centralized and trusted sources for all products, materials, and supply tiers, enabling a digital supply chain that dynamically predicts demand patterns and improves visibility and asset reliability. The digital technologies applied in most effective organizations for supply chain activities to achieve supply chain imperatives are listed in Figure 1.
Against this backdrop, GPCA is developing a report, in collaboration with IBM, about the digital technology adoption in chemical supply chains, highlighting the rising need for crafting demand-driven supply chains amid global disruptions in chemical business models through the emerging technology trends. The report delves into what digital technology in supply chain means, its implementation and the various factors influencing its adoption in chemical supply chains.
It provides an overview of digital technology adoption in the global and GCC supply chain markets along with key trends and success stories both globally and regionally. It features must read success stories from BASF, Monsanto, Qatar Energy, SABIC, Aramco, Sipchem and Sadara, followed by recommendations and challenges pertaining to digital technology adoption which regional stakeholders can learn about, and subsequently implement within their respective organizations to drive the digital technology innovation. The report showcases how implementing digital supply chains through integrated planning, value chain visibility, and intelligent assets maximizes supply chain performance in all supply chain dimensions and introduces an end-to-end framework for enabling a digital supply chain future with five key levers, departing from the past linear architecture.
The IBM Institute for Business Value (IBV) and Oxford Economics surveyed 460 chemical leaders in 19 countries recently. GPCA collected 24 responses from its member companies in the Arabian Gulf in 2022. Respondents included CEOs, CSCOs, VPs/GMs of Supply Chain, Directors/Managers of Supply Chain and others. The report provides an analysis of the GPCA survey data with a comparison with the IBM global study.
From the survey’s analysis, the main performance objectives supported by the GCC supply chain are identified along with gaps between the importance of imperatives to the enterprise’s supply chain and the effectiveness of the supply chain function. It also assesses the impact of predictive analytics on supply chain imperatives, places supply chain among the different departments in terms of level of investment in digital technologies over the next three years, and the level of maturity in implementing a digital supply chain strategy in the GCC. The survey examines the most effective chemical supply chain organizations and their view on adopting digital technologies, their supply chain imperatives gaps, and how they are enabling and managing change.
Global chemical respondents see cloud, IoT and predictive analytics as the key technologies for the supply chain, while GPCA respondents emphasize on predictive analytics for enterprise’s supply chain strategy.
Next month GPCA will release the report exclusively for members. Watch this space and be the first to access the report.