April 18, 2019
By: Lyat Avidor Peleg
Digital Transformation Key to Innovation Leadership in Chemical Industry
Decades ago, chemical producers were among the first to ride the wave of digital transformation, integrating data into their R&D teams and computer assistance into the design of their facilities. “However, in recent years, the chemicals sector has fallen behind companies in banking, retail, media and telecom that have explored innovative ways to use digital technology to improve their businesses—not only in running their operations, but also in engaging customers and generating new value,” according to a recent report by the management consulting firm Bain and Company. “Now, chemical companies are innovating again to catch up.”
Industry leaders have come to understand that they need to not merely implement digital solutions for the sake of it, but rather focus on digital tools that can help them accomplish pre-set, corporate-wide strategies. Chemical plant managers can no longer afford to view their technology as a means of identifying and fixing individual problems or pieces of equipment. Reactive attitudes, by which technologies are merely another way of improving old modes of operations, no longer make sense as plants need to establish flexibility and across-the-board collaboration. The sophistication and complexity of plant operations require data- and machine learning-powered monitoring, so that the various parts of the plant can communicate. This is necessary to give plant managers the tools to boost production, cut costs, prevent delays and foster innovation. It is also necessary for increasingly popular means of measurement such as the Overall Equipment Effectiveness, or OEE, formula, which are being crunched to glean precisely where plants are succeeding, and where they’re not meeting expectations.
The Opportunities of the New, Globalized Reality
Chemical plants function in globalized markets that have, in recent years, been fueled by the skyrocketing demand for imported chemicals in Asia, home to half of the world’s middle class, according to the International Society of Automation. The soaring demand in countries like China has opened up new avenues for growth for European and North American players, at a time when their home markets are stagnating.
But with the windfall, global dynamics also bring new pressures. High volatility in global commodities prices are affecting already-thin margins. As the market diversifies, smaller, digital-native companies have carved out niches with individualized products. In 2016, the European Chemical Agency estimated that some 70,000 new chemical companies, including many small and medium-sized specialty chemical businesses, were set to apply for registration. It was a threefold spike compared to previous rounds in 2013 and 2010. Such companies have established new levels of customer demand and introduced new competition to the large producers which once dominated the field.
A Data-First Approach
With such challenges only increasing, industry leaders have recognized data as the solution. Data promises to expedite the rising trend of collaboration between IT (or, Information Technology, which includes IoT, AI, and advanced analytics) and OT (or Operations Technology, which generally refers to the control and automation technologies supporting operations and includes additive manufacturing, advanced materials, and robotics). According to the data management consulting firm Isolutions, “a growing collaboration between Information Technology teams and Operations Technology teams is providing an opportunity for a shared strategic vision and a better alignment of all systems (including IT and OT) with enterprise business goals.”
Moreover, data feeds from smart sensors, like those captured by SAM GUARD’s AI-powered system, can identify patterns to predict and diagnose possible breakdowns. Smart equipment, like Precognize’s predictive monitoring platform, can send messages to plant operators about maintenance updates, potential breakdowns, and parts ordering and delivery schedules. All this enables manufacturers to minimize scheduled or reactive repairs and instead focus on predictive maintenance.
Such systems form a real-time database of knowledge sets across the company that, in turn, create a space for various plant departments, or even various plants across the world, to benefit and learn from the problems or successes in predictive maintenance, performance optimization, and facility designs. With this high-resolution overview of plant activity, managers can enjoy control over their plant and its operations and be able to adjust more quickly and accurately as manufacturing or supply chain issues arise.
With more than 20 million employees and annual sales of $5 trillion, the global chemical industry is the backbone of agriculture, automotive, construction, pharmaceuticals, and countless other industries. Its success in digitizing, therefore, will have ripple effects across economies around the world. In the past, the field focused on core business, rather than disruption, but the tide has started to turn as more executives have begun to confront the need for more focused and specific technologies. In a survey by Deloitte, 36% of chemical executives said that they realized their “ability to accelerate and scale up digital initiatives at an enterprise level is a top organizational barrier to digital transformation.” In recent years, executives have been increasingly investing in technologies for predictive monitoring, cloud computing, robotics, smart sensors, and big data and analytics — all tools through which to help plants plan for the near and distant future. As they continue to use software like Precognize’s SAM GUARD to crunch OEE calculations and get an overview of their plant’s operations, they have come to understand how sorely they need the benefits that come with digitization: reduced costs, improved production levels, new standards of operational excellence, and, most importantly, an atmosphere conducive to innovation. The price of not embracing the transformation, they’ve seen, is missing out on new markets that are needed for their businesses to thrive.