June 14, 2021
By: Lyat Avidor Peleg
Digital Transformation & Industry 4.0 in the Chemical Industry
The chemical industry has been slower than average in driving digital transformation, although it’s far from the back of the pack. Like with every vertical industry, COVID-19 has vastly increased the momentum of digitization among chemical plants.
Having to adjust to remote and hybrid work practices, coping with a fractured – and sometimes broken – supply chain, and responding to changing customer demands forced even reluctant plants to recognize the urgency of digital transformation.
According to a KPMG survey, 96% of manufacturing CEOs saw digital transformation speed up in their companies, and 48% said it advanced by a matter of years. In a recent Manufacturing Leadership Council (MLC) survey, 82% of participants agreed that the pandemic had “created a new sense of urgency” in driving investment in new technologies and digitalization.
Different types of manufacturers are at different stages along the path towards digital maturity, and are centered around differing motivating factors. This post is part of a series exploring the impact of digital transformation on various process manufacturing industries. Read our earlier articles about the oil and gas industry, and the pharma industry.
The State of Digital Transformation in Chemical Manufacturing
The last decade or so has seen only incremental innovation and digital transformation, but now digitalization is speeding up. The pandemic rocked customer demand, supply chain operations, workforce interactions, and maintenance routines, while demands for sustainability, personalization, and greater efficiency rose in the background.
Digital transformation is now seen as critical. According to one survey, 64% of chemical CEOs view digital transformation as their primary strategic concern for the next two years, making it more important than innovation, reviewing their portfolios, or reducing costs, and protecting cash flow. Another found that 66% of chemical manufacturing leaders expect revolutionary change within the next three years, jumping from 31% who gave the same answer in 2019.
Chemical companies expect to invest 5% of their annual revenue, on average, in digital operations solutions over the next 5 years, and 75% predict that they’ll have reached advanced digitalization by 2026. The manufacturing industry as a whole has a digital maturity profile of 39%, but the chemicals vertical is slightly ahead at 42.2%.
However, there are signs that chemical plants are struggling to scale up from the pilot stage. 35% of chemical plants are rolling out digital transformation schemes, while 30% are still running pilots and another 30% are planning to do so. The broader industry average shows 41% are at rollout.
The gap is growing between the more digitally mature plants, which are already applying digital transformation tactics to more advanced use cases, and those which are still in the early stages. Gartner warns that a major chasm is developing between chemical plants that are digital leaders, and those that lag behind, adding that the laggers are likely to fail.
Regionally, plants in Asia-Pacific are further advanced, seeing strategic opportunities arising from digitzalition while those in Europe and North America are still focused only on operational improvements. Thought leaders from this area are the only ones who said that the primary benefit of digitization is improved market and customer access, while plants in other parts of the world cited cost reduction.
Key Trends in Digital Transformation in the Chemical Industry
The chemical industry is complex, with a number of different sub-sectors facing different pressures. With the rise of COVID-19, some sub-sectors saw demand plummet, like those serving automotive, aerospace, and oil and gas customers, while others saw demand grow and change, like those serving pharma clients.
The primary focus for digitalization thus varies somewhat within the sector. For example, large plants are focused on increasing speed of throughput, while specialty chemicals with smaller batches but higher profit margins are concerned with enhancing quality.
Across the board, however, every plant needs to optimize production, cut waste, increase safety and sustainability, and become more agile to be able to respond to rapid and frequent fluctuations in demand, supply, and working conditions. Over the next two years, the leading applications for digital transformation are predicted to center around the Industrial Internet of Things (IIoT) at 67%, artificial intelligence (AI) at 64%, and cloud computing at 61%.
The first and highest value use cases for digitalization in chemical plants focus on optimizing production, through increasing equipment efficiency, automating some processes, predictive and remote monitoring, and streamlining maintenance.
Advanced analytics plays a key role, and a survey found that the top three issues for digitalization are improved data analysis (43%), integration and optimization of processes and systems (33%), and the improvement and integration of data management (29%). 71% of manufacturers say that advanced data analytics like predictive maintenance are their top areas of focus.
Predictive analytics that uses machine learning (ML) and AI can spot anomalies that indicate fouling, impending part failures, bottlenecks, or other issues that can affect product quality and/or quantity. They produce early alerts that often require a quick fix, but if the problem had persisted unnoticed, it might have been necessary to replace the part, carry out a much longer repair job, or even shutdown production. Early alerts also allow maintenance teams to plan repairs for the most convenient times.
Maintaining a consistent high product quality is particularly important for chemical plants, which generally supply base chemicals for end use in other industries, but it’s challenging when supply and quality of raw materials can vary widely. Better data and analytics allows finer and more frequent adjustments, as process engineers can alter the mix on the fly in response to variations in quality, feedstock, or ambient temperatures.
Additionally, end to end (E2E) digital transformation means that plants can leverage data and analytics to predict low demand and push lower-margin volumes into the market to fill capacity and mitigate fixed costs, or reallocate demand more effectively across the plant. When demand rises, they can quickly scale up production in the most effective ways possible.
Supporting Remote Operations
The COVID-19 pandemic forced plants to reevaluate their ability to support remote and hybrid operations. Better communications and collaboration platforms help remote teams to work together in chemicals manufacturing just as they do in any other vertical. A Deloitte survey reported that 61% of executives are developing a hybrid production model over the next 3 years.
Chemical plants are also creating digital twins, which reproduce certain systems, processes, or the entire plant in digital form. Digital twins enable remote visibility into machinery and processes, remote diagnostics, and often remote maintenance and repair. Together with AR technology, maintenance teams can frequently investigate and troubleshoot incidents from afar, speeding up resolution and cutting plant downtime or production slowdowns.
Advanced use of sensors to measure corrosion, fouling, and changes to raw material quality also allows plants to cut the number of employees needed onsite without affecting production output.
Cutting costs has so far been the key benefit for plants that have undergone a digital transformation. The chemical manufacturing industry struggles with volatile pricing for raw materials, but customers naturally demand consistent low prices. At the same time, plants deal with high energy costs, which make it crucial to reduce waste as much as possible.
Early alerts about inefficiencies and potential part failures can enable maintenance teams to carry out an inexpensive repair job instead of having to replace a part, thereby extending equipment life cycle. The more efficient the processes, the lower the energy consumption and the fewer raw materials are wasted along the way.
Analytics solutions that track changing prices of raw materials also help plants to get the best deal from suppliers and to prepare in advance when prices change dramatically. More accurate demand forecasting means that plants can prepare the right amounts of different products, lowering the risk of oversupply.
Unlocking New Growth Opportunities
Although the earliest use cases for digital transformation relate to improving operations, more digitally mature plants are moving on to using digital technologies to unlock new growth opportunities, drive innovation, and increase their competitive advantage.
For example, AI is being applied to chemicals research to design new materials or chemical structures and develop new synthesis pathways that improve sustainability. Multivariate analysis enables scientists to more precisely identify the impact of individual ingredients in the mix, enhancing product quality. Automation is speeding up R&D for new products from around two-to-three years to approximately four-to-six months, so plants can meet new demands far faster.
Opening Up Visibility into the Supply Chain
When the pandemic shattered supply chains, it highlighted the vulnerability of chemical plants. As a result, companies have focused on improving visibility into and integration of supply chains. Over 60% of manufacturing leaders said they would increase their focus on supply chain resiliency.
Plants are implementing digital twins to access a unified view of the entire supply chain, from raw materials to production to market forecasts. This way they can respond more swiftly to changes and bottlenecks. Plants are also reshoring and nearshoring supply chains, building their new suppliers into a digitally integrated ecosystem.
A seamless digital supply chain with full data sharing up and downstream enables companies to develop and produce the right products that match both demand, and the available materials.
Safety, Compliance, and Sustainability
Thanks to the amount of hazardous chemicals and the number of end use industries that depend upon it, the chemical industry is highly regulated. Companies are embracing digital transformation to help them raise their safety profile, cut emissions and dangerous flare events, and ensure a clear and accurate audit trail.
Digital twins, remote monitoring, and predictive maintenance solutions all help reduce the number of times that workers have to enter hazardous situations to check on operations or carry out repair and maintenance tasks. The more smoothly and efficiently the plant is running, the lower the emissions.
Finally, digital documentation is more accurate and more reliable than paper controls and monitoring documents, which might not be accepted in the event of a safety or compliance audit.
What is Holding Back Chemicals 4.0?
There are a number of factors causing chemical plants to move slowly in their digital transformation. Chief among them is a lack of qualified talent, an issue which challenges most manufacturing industries. Half of all US manufacturers say they’ll still struggle to find the right talent for the next 12-18 months, even as the pandemic eases.
The chemicals industry is perceived as an older, less exciting sector, making it hard to attract young digital talent. The Gulf Petrochemicals and Chemicals Association (GCPA) says that only 15% of companies have an effective recruitment process for digital talent. Globally, a lack of qualified employees is the biggest barrier to digitalization, cited by 40% of companies.
Chemical companies also grapple with a lack of leadership support and a dearth of understanding of the benefits of digitalization. 30% of global companies say they are still unsure about the economic benefits of digital transformation, and only 38% of GCPA members think their organization fully understands the impact of digitalization on the chemical industry.
As mentioned above, many plants are struggling to scale up from their pilots. They are having trouble seeing the impact of their efforts and identifying the areas of greatest value, which is holding them back from rolling digitalization out across the plant. There’s a temptation to apply digital transformation to only the most obvious use case, which means that companies miss out on the broader benefits.
The Digital Gap is Widening in the Chemicals Manufacturing sector
The COVID-19 pandemic made it crucial for chemicals plants to embrace digital transformation, and the chasm between digitally mature companies and those that are still struggling to gain the necessary talent and understand the benefits of digitalization is widening all the time.
Plants that are quick to adopt digital solutions for remote monitoring, supply chain visibility, reducing waste, optimizing production, raising their safety profile, and opening up new opportunities will benefit from higher profits and increased revenue, while those that hesitate too long could fail permanently.