In Part 1 of this blog, I discussed key opportunity areas for 3D printing in the chemical industry. Let’s now take a look at commercial implications and the future ahead.

Commercial benefits

3D printing promises to reduce supply chain costs across all industries. For example, the ability to print spare parts on demand can save money through improved asset uptime and more efficient workforce management. 3D printing also helps control costs with reduced waste and a smaller carbon footprint. In contrast to traditional “subtractive” manufacturing techniques in which raw material is removed, 3D printing is an additive process that uses only the amount of material that is needed. This can save significant amounts of raw materials. In the aerospace industry, for example, Airbus estimates 3D printing could reduce its raw material costs by up to 90 percent.

From a manufacturing perspective, 3D printing can streamline processes, accelerate design cycles, and add agility to operations. Printing prototypes on site speeds the R&D development cycle and shortens time to market. Researchers can make, test, and finalize prototypes in days instead of weeks. Also, the ability to print parts or equipment on demand will eliminate expensive inventory holding costs and restocking order requirements and free up floor space for other purposes.

Of course, as mentioned earlier, the primary benefit of 3D printing for the chemical industry is the market potential of developing innovative proprietary formulations for printer feeds and owning the corresponding intellectual property.

Obstacles to adoption

As with most new technology introductions, barriers must be overcome for this potential to fully be realized. A much-discussed but unresolved issue is intellectual property protection. Similar to the way digital music is shared, 3D printable digital blueprints could be shared illegally and/or unknowingly either within a company or by outside hackers.

In addition to digital files, users can print molds from a scanned object and use them to mass-produce exact replicas that are protected under copyright, trademark, and patent laws. The problem will continue to grow as companies move to an on-demand manufacturing network, requiring digital blueprints to be shared with independent fabricators. Gartner predicts that by 2018, 3D printing will result in the loss of at least $100 billion per year in intellectual property globally.

Regulatory issues are slowing the adoption of 3D printer applications. This is especially applicable in the medical and pharmaceutical industries, but has potential impact in many markets. For example, globally regulating what individuals will create with access to the Internet and a 3D chemical printer will be difficult. Also, as 3D printing drives small and customer-specific lot sizes, it will likely spur an explosion of proprietary bills of material and recipes, which will be hard to track and control under REACH or REACH-like regulations. Because this is a new frontier, many regulatory issues must be addressed.

In addition to legal and regulatory challenges, the industry has a long way to go to reliably reproduce high-quality products. Until 3D printing can match the speed and quality output requirements of conventional manufacturing processes, it will likely be reserved for prototypes or small-sized lots.

3D printing: a new frontier

While 3D printing has not reached the point of use for large-scale production or to consistently make custom products, ongoing innovations drive high demand. Gartner’s 3D printer market forecast estimates that shipments of industrial 3D printers will grow at a compound annual growth rate (CAGR) of 72.8 percent through 2019 – from almost $944.3 million to more than $14.6 billion. The number of 3D printers purchased each year is expected to increase to more than 5.6 million units in 2019, a CAGR of 121.9 percent.

3D printing will initially help chemical companies increase profitability by lowering costs and improving operational efficiency. However, the industry-changing opportunity is the chance to develop new feeds and formulations. The most successful chemical companies of the future will be the ones with the vision to begin developing and implementing 3D printing solutions today.

How far are you in implementing 3D printing as part of your overall digital transformation strategy? Feel free to share your thoughts and ideas with us!

For more on the implications of 3D printing technology, see 6 Surprising Ways 3D Printing Will Disrupt Manufacturing.

Learn more about SAPPHIRENOW and secure your spot today!

Last week I visited the ARC Forum in Orlando, and cybersecurity was one of the most prominent topics throughout the whole event. Here are some key lessons I learned:

There are different categories of cyberattacks. On one end are high-frequency attacks perpetuated by attackers with low-level skills. Those typically have a low impact on your company and its operations.

On the other end are less frequent but high-impact attacks that affect critical operations or that target high-value data. Such attacks require a high skill set on the attacker’s side.

How do you protect yourself and your company from both types of attacks?

The first category includes such things as spam, common viruses, or Trojans, most of which you can to fight with technology like spam filters or anti-virus software. However, the boundaries are blurring. The more the attacks move toward the high-impact category, the more you need resources with special skill sets that at least match those of the cyberattackers.

In other words, technology, skilled resources, and executive-level commitment and support must go hand-in-hand to build a resilient cybersecurity and threat protection system.

Sid Snitkin, from ARC, presented a five-stage maturity model comprising the following levels:

• Secure
• Defend
• Contain
• Manage
• Anticipate

The higher you climb on this “maturity ladder,” the more skilled resources come into play, and the more you have to break up silos within and beyond your company boundaries. Dan Rosinski, from Dow Chemical, stated that “it takes more than a village” to establish a strong cybersecurity. Fostering collaboration between IT, engineering, operations, legal, safety, purchasing, and business is a critical success factor.

Also, cybersecurity is not a one-off exercise. As hacker’s skill sets grow exponentially, you need to dynamically revisit your strategy and tools. Increasingly, new hardware and software are developed with embedded security and self-protection, especially tools that are used at the perimeter of a company’s environment. Hence, cybersecurity should be considered as a journey that just has started.

Share your experiences and thoughts on cybersecurity with us!

For more insight on cybersecurity technology, see Machine Learning: The New High-Tech Focus For Cybersecurity.

Drones have captured the popular imagination, making a splash on social media, in the popular press, and even on hit television shows. But drones can do a lot more than entertain. They are actually a core driver of transformation in the digital economy. Here are a few examples.

Precision farming

Using swarm intelligence, specialized drones home in on weed-infested areas to prevent invasive plants from encroaching on valuable crops. These drones can deliver pesticides only and precisely where they are needed, reducing the environmental impact and increasing crop yields. Drones can also measure soil conditions as well as health status of plants to deliver water, fertilizers, or other components to ensure optimum growth. The result is increased crop yields at lower cost and with reduced use of potentially dangerous pesticides, a concept known as digital farming.

Remote location inspection and maintenance

Pipelines, mining operations, offshore oil rigs, and railroad tracks are often located far from centers of commerce, yet it is imperative that they operate flawlessly. Drones can easily monitor even the most remote stretches and when signal repairs are needed or dangerous conditions are occurring.

Spare parts delivery

When machinery and equipment goes down, time is of the essence. Drones can quickly and efficiently deliver needed spare parts from manufacturers or 3D printers directly to the equipment’s location, saving time, preventing unnecessary downtime, and reducing investments in MRO inventory.

Military observation

Drones can keep track of weapon and troop deployments in military situations without endangering humans. They can also provide a complete view of any skirmish, creating a tactical advantage by eliminating the element of surprise.

Search and rescue

Search-and-rescue missions are expensive and time-consuming. Physical limitations such as fatigue, hunger, personal safety, and the need for light and visibility can delay or slow searches conducted by human rescuers. Drones can search wide areas under challenging conditions and instantly send data back to a central location. Once the search target is identified, rescue teams can set off with the right equipment, knowing exactly where to focus their search. This makes search-and-rescue operations faster, less costly, and more effective. Watch this video for more insight.

Scientific research

Drones can track animal migrations, report on weather patterns, and help discover rare and previously unknown plant and animal species.

Life sciences

Combining nanotechnology and drones enables technology first envisioned by science fiction in the 1960s. Tiny drones can now be injected into the body to perform potentially lifesaving tasks such as micro-surgery, clear blockages, inspect aneurisms, and deliver targeted chemotherapy drugs to cancer sites.

Drones are clearly powerful agents of change as we transform to a digital economy. In addition to the examples highlighted here, drones also play an important role in such industries as insurance risk and damage assessments, wholesale distribution and last-mile deliveries, and delivery and maintenance of essential infrastructure services such as Wi-Fi, Internet, and telephone for remote locations in emerging areas. As drone technology gets more sophisticated, industries of all types will find increasingly innovative ways to use them to increase business efficiency and bolster the digital economy.

For more on how advanced technology will impact our future, see 20 Technology Predictions To Keep Your Eye On In 2017.

The history of 3D printing started 30 years ago with Chuck Hull, the Thomas Edison of the 3D printing industry, who introduced the first 3D printer. Since then, 3D printing (also known as additive manufacturing) has been used to create everything from food and other consumer goods to automotive and airplane parts.

Key drivers of adoption

The tremendous growth of 3D printing has been driven by three key factors. First, the cost is rapidly decreasing due to lower raw material costs, stronger competitive pressures, and technological advancements. Second, printing speeds are increasing. For example, last year, startup company Carbon3D printed a palm-sized geodesic sphere in a little more than 6 minutes, which is 25 to 100 times faster than traditional 3D printing solutions. Third, new 3D printers are able to accommodate a wider variety of materials. Driven by innovations within the chemical industry, a broad range of polymers, resins, plasticizers, and other materials are being used to create new 3D products.

While it’s difficult to predict the long-term impact 3D printing will have on the overall economy, it is safe to say that the it could affect almost every industry and the way companies do business. In fact, the chemical industry has already implemented 3D applications in the areas of research and development (R&D) and manufacturing.

Innovative feedstocks and processes

3D printing provides a vast opportunity for the chemical industry to develop innovative feedstock and drive new revenue streams. While more than 3,000 materials are used in conventional component manufacturing, only about 30 are available for 3D printing. To put this into perspective, the market for chemical powder materials is predicted to be more than $630 million annually by 2020.

Plastics and resins, as well as metal powders and ceramic materials, are already in use or under evaluation for printing prototypes, parts of industry assets, or semi-finished goods—particularly those that are complex to produce and that require small batch sizes. Developing the right formulas to create these new materials offers an opportunity for constant innovation within the chemical field, which will likely produce even more materials in the future. For example, Covestro, a developer of polymer technology, is developing a range of filaments, powders, and liquid resins for all common 3D printing methods; 3M, working with its subsidiary Dyneon, recently filed a patent for using fluorinated polymers in 3D printing; and Wacker is testing 3D printing with silicones.

The chemical industry is also in the driver’s seat when it comes to process development. About 20 different processes now exist that share one common characteristic: layered deposition of printer feed. The final product could be generated from melting thermoplastic resins (for example, laser sinter technology or fused deposition modeling) or via (photo) chemical reaction such as stereo-lithography or multi-jet modeling. For both process types, the physical and chemical properties of feed materials are critical success factors for processing and for the quality of the finished product.

New tools and techniques in R&D and operations

Typically, the laboratory equipment used to do chemical synthesis is expensive and complex to use, and it often represents an obstacle in the research progress. With 3D printing, it is now possible to create reliable, robust miniaturized fluidic reactors as “micro-platforms” for organic chemical syntheses and materials processes, printed in few hours with inexpensive materials. Such micro-reactors allow building up target molecules via multi-step synthesis as well as breaking down molecular structures and detecting the building blocks through reagents which could be embedded during the 3D printing process.

Micro-reactors can also be used as small prototypes to simulate manufacturing processes.

In addition to printing equipment used in laboratories, some chemical manufacturers are using 3D printers for maintenance on process plant assets. For example, when an asset fails because of a damaged engine valve, the replacement part can be printed on site and installed in real time. Creating spare parts in-house can significantly reduce inventory costs and wait time for deliveries, hence contributing to increase overall asset uptime.

For companies that do not want to print the parts themselves, an on-demand manufacturing network is available that will print and deliver parts as needed. UPS has introduced a fully distributed manufacturing platform that connects many of its stores with 3D printers. When needed, UPS and its partners print and deliver requested parts to customers.

Commercial benefits

Across all industries, 3D printing promises to reduce costs across the supply chain. For example, the ability to print spare parts on demand can save money through improved asset uptime and more efficient workforce management. 3D printing also helps control costs with reduced waste and a smaller carbon footprint. In contrast to traditional “subtractive” manufacturing techniques in which raw material is removed, 3D printing is an additive process that uses only the amount of material that is needed. This can save significant amounts of raw materials. In the aerospace industry, for example, Airbus estimates 3D printing could reduce its raw material costs by up to 90 percent.

From a manufacturing perspective, 3D printing can streamline processes, accelerate design cycles, and add agility to operations. Printing prototypes on site speeds the R&D development cycle and shortens time to market. Researchers can make, test, and finalize prototypes in days instead of weeks. Also, the ability to print parts or equipment on demand will eliminate expensive inventory holding costs and restocking order requirements and free up floor space for other purposes. In the U.S. alone, manufacturers and trade inventories for all industries were estimated at $1.8 trillion in August 2016, according to the U.S. Census Bureau. Reducing inventory by just 2 percent would be a $36 billion savings.

Barriers to adoption

As with most new technology, barriers must be overcome for this potential to fully be realized. One much-discussed but unresolved issue is intellectual property protection. Similar to the way digital music is shared, 3D printable digital blueprints could be shared illegally and/or unknowingly either within a company or by outside hackers.

In addition to digital files, users can print molds from scanned objects and use them to mass-produce exact replicas that are protected under copyright, trademark, and patent laws. This problem will continue to grow as companies move to an on-demand manufacturing network, requiring digital blueprints to be shared with independent fabricators. This poses a huge threat on companies losing billions of dollars every year in intellectual property globally.

Regulatory issues are slowing the adoption of 3D printer applications. This is especially applicable in the medical and pharmaceutical industries but has potential impact in many markets. For example, globally regulating what individuals will create with access to the Internet and a 3D chemical printer will be difficult. Also, as 3D printing drives small and customer-specific lot sizes, it will likely spur an explosion of proprietary bills of material and recipes, which will be hard to track and control under REACH or REACH-like regulations. Because this is a new frontier, many regulatory issues must be addressed.

In addition to legal and regulatory challenges, the industry has a long way to go in reliably reproducing high-quality products. Until 3D printing can match the speed and quality output requirements of conventional manufacturing processes, it will likely be reserved for prototypes or small-sized lots.

3D printing: a new frontier

While 3D printing has not reached the point of use for large-scale production or to consistently make custom products, ongoing innovations drive high demand. 3D printer market forecasts estimate that shipments of industrial 3D printers will grow by ~400% through 2021 to a value of about $26 billion. Global inventory value is estimated to be over $10 trillion. Reducing global inventory by just 5% would free up $500 billion in capital. Manufacturing overall is estimated to contribute ~16% to the global economy. If 3D printing just would capture 5% of this $12.8 trillion market, it would create a $640 billion+ opportunity.

3D printing will initially help chemical companies increase profitability by lowering costs and improving operational efficiency. However, the industry-changing opportunity is the chance to develop new feeds and formulations. The most successful chemical companies of the future will be the ones with the vision to begin developing and implementing 3D printing solutions today.

Learn more about SAPPHIRE NOW and secure your spot today!

Companies in nearly every industry rely on chemicals to produce goods and services. Despite this ongoing need, many chemical manufacturers struggle to achieve or retain stability, profitability, and market leadership. With market unpredictability, increases in regulations, changes in end-user demand, and global economic risk, it’s easy to see why companies are struggling to deliver growth in a very competitive market. To overcome these challenges, more and more chemical companies are turning to mergers and acquisitions to strengthen their market positions.

Drivers of M&A activity for chemical companies

Acquiring or merging with another company can help organizations bolster their existing offerings with complementary product lines or move into new markets that align well with their strategic business goals. This can be especially relevant for chemical companies, which historically have held fragmented product portfolios.

Many chemical companies also are engaging in M&A activity to offset limited organic growth opportunities. With almost flat global growth and increased shareholder pressure, M&A transactions offer a chance to capture more market share. Another trend driving M&As for growth and innovation are tax-free spin-offs and divestitures. A report by Deloitte predicts that “spin-off momentum will continue given the often low tax basis in legacy businesses, resulting in tax-free spins delivering greater shareholder value than straight dispositions.”

Moreover, challenged by new competitors entering the market, chemical companies are urged to transform their business models by leveraging the latest technology innovations, such as the Industrial Internet of Things (IIoT). Here, a merger or acquisition can help to rapidly achieve a leading position.

Fortunately, lower oil and natural gas prices have reduced the feedstock cost for many chemical companies, putting them on more stable financial footing. On the buy-side, lower interest rates, rigorous cost cutting programs, plus a shortage of viable business investments over the past few years have created strong cash-flow positions for many strategic buyers.

Recent M&A activity

In 2016, nearly 1,200 deals valued at more than US$380 billion were announced, including pending blockbusters such as Bayer-Monsanto and Dow-DuPont. When the $68.6 billion Dow-DuPont merger is completed later this year, the historical deal will be one of the largest and most valuable mergers in the chemicals industry. Despite the numerous advantages, many M&A transactions do not deliver the expected synergies. Common pitfalls to successful M&A deals include issues with data accuracy and accessibility; disparate or proprietary technology systems; and a lack of communication throughout the process.

Five questions to ask for a successful M&A integration

Well-conceived and properly executed integration plans after a closed merger or acquisition can ensure maximum value is gained from the transaction. While no two companies will be integrated in the same way or with the same timeline, executives can improve their chances of realizing the new company’s maximum value by investing in areas that add strategic agility. Asking the following five questions can help evaluate the potential of an M&A target and improve the chances for a successful integration:

1. “Do I have the correct team in place to manage the M&A processes?” Having the proper organizational setup can dramatically affect a company’s ability to extract value from its deals. As proof, a report by McKinsey & Company found that close to two-thirds of underperforming companies lacked the capabilities to integrate their acquisitions. To position an organization for M&A success, executives must develop strong in-house skills and organizational entities if they consider ongoing M&As as a strategic vehicle for growth. Continuous observation and evaluation of possible targets, in line with dynamic portfolio management, is critical to success.

2. “Who will be affected and what do they need to know?” Communication is an important integration element during mergers and acquisitions. Knowing who will be affected will help facilitate relevant discussions with each group. Open, consistent communication will avoid feelings of uncertainty and frustration, while also ensuring everyone is working toward a common goal. This can be especially important when companies are trying to blend different cultures and align workforce management processes, such as scheduling, compliance, payroll, or benefits.

3. “Does the company have a customer-centric philosophy?” Customers demand products and services on their own terms. They want customized products, 24-hour service, and support available through multiple channels. To successfully meet consumer needs and maintain competitive advantages, companies must be able to enter new markets quickly. Any acquisition or merger should support the ability to understand market needs in real time and rapidly implement appropriate channels to serve different segments.

4. “Can the acquisition target support or serve as a catalyst to adopt a transformative business model?” In today’s digital economy, business models are rapidly changing. Many manufacturers are becoming service companies, for example. When evaluating potential M&A targets, executives should determine if the company can positively contribute to transformational capabilities in the new digital era, such as by delivering business outcomes instead of products and services or orchestrating an entire ecosystem without owning any capital-intensive assets.

5. “Does the company have the right data and IT platform in place to support the integration?” The explosion of the Internet of Things and the resulting amounts of information have made standardizing data a must. For this reason, it is more important than ever before to critically evaluate how a company handles its data and make that data available to drive innovations around artificial intelligence, machine learning, or blockchain, for example. Also, standardized business process templates will help to quickly harmonize the process landscape in the post-merger phase and allow for deviations only in cases of differentiation.

All of these aforementioned needs call for a scalable and flexible IT platform enabling end-to-end process integration, real-time analytics, decision support, and innovation. Embedded prediction and simulation capabilities, including machine learning, artificial intelligence, and “what if” scenarios, are also essential elements driving operational excellence as well as business process and model transformation.

Along with the right data and process infrastructure, you also need to establish a framework of tools and capabilities, which allow you to readily run predictive simulations on possible acquisitions, mergers, or spin-offs and assess the impact on key KPIs around profitability, portfolio performance, and associated risks. This will provide you with the necessary strategic agility you need in today’s dynamic markets.

Asking the right questions and having the right mindset, tools, and technology in place are vital for any company looking to strengthen its market position through a merger or acquisition. Taking the necessary steps to help smooth the integration process will result in a strong workforce, improved company insight, and happier customers. It can also help improve the company’s profitability through optimized business processes and innovative business models.

Are you leveraging mergers, acquisitions, and divestitures to prepare for sustainable growth? Let us know your thoughts!

Learn how to innovate at scale by incorporating individual innovations back to the core business to drive tangible business value by reading reading “Accelerating Digital Transformation in Chemicals.” Explore how to bring Industry 4.0 insights into your business today by reading “Industry 4.0: What’s Next?”

First called additive manufacturing, 3D printing refers to the technology and processes that transform digital files into physical objects. The digital file might be created by scanning an existing object or by using design software. Software transmits instructions to the 3D printer, and the printer “prints” the object by adding layers of material until it produces a completed product. Typical materials used in 3D printing include metals and plastics, depending upon the application. I recently wrote about the potential for 3D printing to transform the chemical industry with innovative materials and formulations. This emerging technology also holds a lot of promise for the military and related logistics.

Military applications for 3D printing

The U.S. Army successfully 3D printed and fired both a grenade launcher and a grenade in May 2017. As long ago as 2014, the U.S. Navy installed this technology on ships to create spare parts for both the ships and for weapons carried onboard. In addition, both the Air Force and the Marine Corps have created policies to explore 3D printing for their own uses.

The military’s experience with 3D printing so far has highlighted a couple of key benefits:

• It can simplify logistics, because military units can transport just the technology and raw materials, rather than every conceivable spare part or weapon.

• Soldiers trained as technicians in 3D printing have been able to produce customized parts for unique situations or individuals.

Overall, the military wants to invest in this emerging technology because it can speed up the supply chain, reduce costs, and help make them more productive and battle-ready. Since some supplies may be invented in the field, it may also make the armed forces more innovative. In addition, 3D printing requires only the cheaper raw materials and not the finished products. Thus, the military may enjoy all of the benefits of 3D printing while reducing both their budgets and procurement times.

The military recognizes that they can’t use 3D printing for everything. For instance, some components may be too complex for the current technology. In addition, the design of some devices may still be the intellectual property of their designers, so they can’t legally be scanned and printed.

Learn more about 3D printing in general and specifically in the military. 

The chemical industry is at a crossroads. Faced with market unpredictability, increased regulations, and products that are quickly moving toward commoditization, it is becoming increasingly difficult to maintain reasonable margins. A few companies are finding success by developing breakthrough products, but true revolutionary innovations are hard to uncover.

Instead, most chemical manufacturers have responded by reducing costs with operational efficiencies. One area that is often overlooked, however, is sales and marketing. This department continues to deploy traditional approaches to selling, despite rising expenses. In fact, a recent study from McKinsey indicates that average sales, general, and administrative (SG&A) costs increased by as much as 10% over the last decade.

Fortunately, new technology solutions and data analytics are offering surprising models for selling products and related services. With these new strategies, chemical companies are finding it is possible to preserve margins while adding new revenue streams.

Traditional approach to sales and marketing

In the past, chemical companies developed specialty products that met individual customer requirements. To help justify the high purchase prices of these custom solutions, chemical companies included free, comprehensive support services. Rather than limiting top-tier services to top-tier customers who are willing to pay for them, the same deep level of service was provided to all customers. By following a “same level of service to all” approach, some chemical companies ended up hurting their own profitability and devaluing the provided services.

New approaches

The old-school approach still works well when there are strong margins and customers see value in both the customized products and the support services. However, when customers make purchasing decisions based on the lowest price and feel they no longer need support, chemical manufacturers must find new ways to add value and differentiate their offerings. Fortunately, some visionary companies are leading the way by combining the latest technology with insightful customer knowledge to develop innovative approaches to selling. Below are three examples of new sales approaches made possible by the digital economy that could bolster revenue:

1. Offer multiple service levels: Rather than bundling the same service with all product purchases, chemical companies could offer multiple service levels at different price points based on customer need. For example, chemical companies could start by including only essential services with their standard products. To lower costs, technology could be used to automate and standardize business processes such as delivery and payment terms. However, in addition to basic services, chemical companies also offer additional layers of services if a customer wants to upgrade and pay for it. Data analytics can help provide direction as to which level of service would be most appealing to which customers. From an IT perspective, this requires customer segmentation supported by a thorough price waterfall analysis, along with real-time insights into prices and margins at customer and product level.

2. Product-only pricing: Some customers view chemical products as pure commodities. To accommodate this mindset, chemical companies could unbundle services from their products. With this model, customers can purchase products only online. Digital technologies with artificial intelligence help determine the rules. Dow Corning adopted this approach in 2002 when it launched Xiameter, an online, low-cost sales channel for its silicone products. Through this online channel, Dow can meet the low-pricing demands of customers willing to buy in bulk that do not need support services. Seven years later, Dow Corning reported the new sales model resulted in five times the number of products sold and sales continue to grow (McKinsey & Company, May 2011). This is an ideal application for the IoT, where chemicals may be ordered machine-to-machine, and many sales may proceed entirely without human intervention.

3. Separate business units: Developing a separate business unit often is an effective strategy to compete in situations with intense competitive pricing pressure. In this way, companies can be low-cost providers without the risk of “cross-contamination” with services they still provide to customers who are paying high prices for chemicals that retain specialty status. Using a separate business unit is clear cut and eliminates confusion in both customers and employees about the services provided as well as the processes used.

The role of technology and a 360° view of the customer

In order to define and implement the right service strategies for each customer segment, companies need the latest technology, not only to gain a deep understanding of customer needs, but also to drive seamless, end-to-end execution of process automation and execution along different channels. Here are a few examples:

• Leverage sensors and telemetry to implement vendor/supplier-managed inventory concepts and completely automate the replenishment process (no- or low-touch order-to-delivery).

• Monitor your customers’ manufacturing process parameters in real-time via sensor technology. Leverage advanced algorithms to correlate process parameters with quality of (semi-) finished products. Start selling first-pass quality as business outcome instead of selling products, which provides an opportunity to offer benchmark data as a service.

• Use advanced algorithms to better understand customers’ buying behavior/patterns, adjust product and service portfolio, and identify cross-selling opportunities to increase customer loyalty and share of wallet. With this information, it is possible to better understand and respond to demand patterns without direct point-of-sale information.

• Get visibility into customer/market sentiment via capturing and processing unstructured data from social media, then responding with appropriate marketing campaigns and innovative service offerings.

Commoditization in the chemical industry is not going away. To be successful, chemical companies must move beyond selling products. Instead, to improve profitability, they must be willing to transform their business models in a way that allows them to sell business outcomes and results. Top performers have already started bundling products with value-adding services that differentiate their offerings, increase customer loyalty, and grab a larger share of the customer wallet.

For more on marketing in a data-driven era, see Influencing Customers Through Infinite Personalization.

Original article posted on Manufacturing Today

As we approach the end of the year, it is time to look into next year’s trends and drivers for the chemical industry. Here are three major trends that will drive the chemical industry in 2018:

1. Accelerated globalization. Supply centers are shifting due to the advent of shale gas in the U.S. or coal to olefins in China. Also, demand centers are shifting thanks to a rapidly growing middle class in the emerging countries. In addition, new market entrants drive shrinking lifecycles and rapid commoditization of products.

2. The circular economy. Key raw materials are getting scarce. Regulatory requirements exponentially increase as the environmental impact of emissions and waste becomes more and more evident. Chemical companies are in the driver’s seat to respond to this, and some are already extending their ecosystems with the purpose to establish end-to-end concepts.

3. Digitalization will drive a tremendous wave of innovation. Recent advancements in digital technology offer unprecedented levels of connectivity, granularity, and speed in accessing, processing, and analyzing huge amounts of data. Besides mobility, cloud and in-memory computing, the Internet of Things, machine learning and blockchain will start acting as game-changers in the chemical industry.

All three trends are coming together to challenge existing strategies and create a perfect storm for the chemical industry. Customer and feedstock proximity, intellectual property, and technology know-how may no longer secure a sustainable competitive advantage. Early adopters of innovative business models have the unique opportunity to act as game-changers or digital disruptors.

Emerging business models

What innovative business models are emerging for companies in the chemical industry?

First, companies will start to adopt strategic agility. The need to rapidly transform product and service portfolios in response to dynamically changing market and stakeholder needs will continue unabated in 2018. Preparing for ongoing mergers, acquisitions, and divestitures will be a critical success factor.

Second, we’ll see more companies going beyond their traditional value chains and start competing as entire ecosystems. Such ecosystems are presently built around hot topics like precision farming or the “circular economy.”

Third, we’ll see companies become more customer-centric and focus on selling business outcomes instead of products. In that context, think about delivering first-pass quality products instead of paints, coatings, or reactive resin components.

Fourth, companies will get another push towards operational excellence and business process automation. With digital technologies becoming scalable and commercially feasible, companies can now realize concepts like lights-out manufacturing and touchless order fulfillment.

However, to enable these innovative business models, a 4^th-generation platform as foundation for business processes and IT infrastructure, as well as the right skills in your workforce, will be pivotal to success.

Want to learn more about trends, drivers, and new business models around the chemical industry? Visit us at the Best Practices for Chemicals Conference in Austin, TX on March 6-7, 2018.  View the agenda and register now! We look forward to seeing you there.

If chemical companies want to stay competitive in a changing world, they need to rapidly adopt innovative technologies. Incorporating IoT – especially combining IoT with machine learning – can move the chemicals industry forward to work more efficiently and create better results.

Improving the chemical industry with IoT

Andy Chatha, president of ARC, explained in a presentation for the ARC Advisory Group 2014 Industry Forum how the IoT is as important to the chemical industry as it is for other industries. Chatha said that the IoT can streamline many parts of industrial companies, including providing smart machines, offering better capacity for Big Data storage, and helping optimize systems and assets. The benefits of IoT within this industry are far-reaching. They include better productivity, improved asset utilization, and higher revenue.

Fostering innovation

Significant opportunities exist in R&D to create higher value and higher margin products at a faster pace, particularly in specialty and crop protection chemicals. Advanced analytics and machine learning enable high-throughput optimization of molecules as well as simulation of lab tests and experiments for systematic optimization of formulations for performance and costs (“from test tube to tablet”).

In addition, advanced analytics and machine learning can drive the allocation of best-available resources to research projects in line with portfolio priorities.

They also enable screening of internal knowledge and patent databases to maximize use of intellectual property and fill gaps.

Machine learning can also help chemical manufacturers run simulations on sustainability and environmental impact across a product’s lifecycle.

Changing the game in plant operations

IoT builds the foundation for machine learning in manufacturing and asset management, as it can capture real-time data on asset status and performance, process parameters, product quality, production costs, storage capacity and inventory (telemetry), inbound/outbound logistics, workers’ safety, pairing products with services, and more.

With today’s advanced capabilities in capturing, storing, processing, and analyzing data, a vast amount of plant, asset, and operational data can be used in conjunction with advanced algorithms to simulate, predict, and prescribe maintenance to increase assets’ availability, optimize uptime, improve operational performance, and extend their life.

In this context, digital twins play a major role in managing asset performance and maintenance. Once plants and processes have been designed and engineered, digital twins can be used to train operators by simulating special plant and process conditions related to safety and/or performance (like flight simulators). Digital asset twins can be used in maintenance to predict the impact of certain process parameters on asset performance, asset lifecycle, and maintenance needs. A Deloitte University Press document, “Industry 4.0 and the Chemicals Industry,” says with digital twins, “organizations create value from information via the movement from physical to digital, and back to physical.” An IDC whitepaper, “The IoT Imperative for Energy and Natural Resource Companies,” notes that a petrochemical company that used a digital twin model created a 20% improvement in product transitions.

Completely new opportunities for the chemical industry arise from distributed manufacturing/3D printing in terms of developing innovative feedstock and driving new revenue streams. While more than 3,000 materials are used in conventional component manufacturing, only about 30 are available for 3D printing. The market for chemical powder materials is predicted to be more than $630 million annually by 2020.

Worker safety can be enhanced by the addition of smart tags on wearables, which could alert workers on exposure to dangerous substances (like toxic gases) or help locate workers in cases of emergency. Moreover, alerts could be triggered if employees work out of their designated or authorized working area (“connected worker”).

Taking your supply chain to another level

There is a lot of untapped potential for new IoT and machine learning technologies in supply chain. Think about using advanced analytics to increase forecast accuracy leading to improvements along the entire sales and operations planning process and related KPIs.

Advanced analytics and machine learning could be used for mitigating risks of supply chain disruptions. For example, in natural disasters shipments could be automatically re-routed to meet on-time delivery goals and customer commitments at minimum costs.

Another opportunity resides in optimizing the use of transportation assets and related costs. Moving chemicals often means considering special equipment and complex compliance requirements so empty backhauls are the norm rather than the exception. Machine learning could better leverage transportation assets to drive waste out of the logistics function, decreasing costs and optimizing asset utilization.

Innovate by getting closer to your customer

Over the last few years, the “asset-intensive” chemical industry has focused its efforts towards optimizing plant and asset operations. However, there is huge untapped potential to develop innovative, customer-centric business models and services. Here are a few examples of how chemical companies could benefit by better leveraging IoT and machine learning at the customer frontend:

• Leverage sensors and telemetry to implement vendor/supplier managed inventory concepts and completely automate the replenishment process (“no” or “low-touch” order-to-delivery).

• Monitor customers’ manufacturing process parameters in real-time via sensor technology, leverage advanced algorithms to correlate process parameters with the quality of (semi-) finished products, sell first-pass quality as a business outcome rather than selling products, and offer benchmark data as a service.

• Use advanced algorithms to better understand customers’ buying behavior and patterns, adjust product and service portfolio, and identify cross-selling opportunities to increase customer loyalty and purchases.

• Get visibility into customer/market sentiment via capturing and processing unstructured data from social media, then respond with appropriate marketing campaigns and innovative service offerings.

Moving forward with IoT

By using IoT with machine learning, chemical companies can move forward and gain positive business results. Chatha said industrial businesses already have or are building the foundations for incorporating IoT and machine learning. Overall, IoT can help the chemical industry keep up with changing times and better meet the needs of shareholders and customers. However, having clean and abundant data available to train algorithms and build high-quality models that predict high-quality results is pivotal to success. Another critical success factor is having highly skilled data scientists; they are key to rapid adoption of IoT and machine learning in the chemical industry.

Learn how to innovate at scale by incorporating individual innovations back to the core business to drive tangible business value by reading “Accelerating Digital Transformation in Chemicals.” Explore how to bring Industry 4.0 insights into your business today by reading “Industry 4.0: What’s Next?”

Changes in technology provide an opportunity for growth and development in any industry. The challenge is identifying the right tools to obtain the goals of the business. Understanding the impact of a blockchain on the chemical industry can help your company grow.

What is blockchain?

According to Investopedia, a blockchain is a public ledger used to record transactions or keep track of data. The Harvard Business Review suggests that it may also refer to a type of database of information. It is not limited to transactions and may focus on information that benefits a business.

Since the data or ledger is not owned by any individual, each person in the chain has the opportunity to keep track of data, or mine the data, and follow the transactions. It limits the risks of inaccurate documentation and keeps individuals honest in their transactions.

Innovating in the chemical industry

Innovation in the chemical industry is more important than ever before since new competitors and technologies are entering the market and product cycle times are continuously reduced driving to faster commoditization of products and services. By using blockchains, a chemical company may improve their ability to innovate and create interesting solutions for their customers. A blockchain facilitates close collaboration in an open or closed community (a dedicated community of experts) by sharing information safely with all stakeholders in real time, following the rules set by this community without the need for validation or authorization by third parties. As everybody works from the same data and information, costly redundant work can be avoided, increasing overall return on innovation and reducing time to market.

Fostering commodity trading

Trading is a key part of particularly commodity chemical value chains. It allows the business to buy and sell more products through networks at the best prices and margins by leveraging current market conditions. In the chemical industry, a blockchain provides a new way to engage with potential clients. As chemical manufacturers produce as well as consume electricity, machine-to-machine integration and interaction is an innovative vehicle to safely and efficiently (Science Direct) trade electricity, utilizing data produced by process flow sheet models of industrial equipment.

Another example is the ZrCoin Network. A group of Russian scientists has developed a new manufacturing process for Zirconium Dioxide using waste material as feedstock instead of the traditional mining process. Instead of funding the construction of the new ZrO2 plant, the group founded a ZrO2 trading market on a blockchain platform called ZrCoin. Here investors trade ZrCoins, a derivative representing a physical amount of ZrO2. After having reached a critical threshold of investment, a buyback program will start where the initial investors will be repaid at a premium for the assets that they currently hold, with compensation being either monetary or in an equivalent of ZrO2. The ZrCoin team can retain full ownership of their business. The blockchain platform offers the speed, transparency, and safety that is inherent in its design, but most importantly, it will enable the creation of a market without the need for a third-party organization to regulate and facilitate trade. This has the potential to dramatically cut down on trading fees since all trades will be B2B.

New avenues for manufacturing

3D printing, also called distributed manufacturing, is proving to be another revolutionary technology that is moving manufacturing closer to mass customization. In particular, the chemical industry can benefit developing tailor-made proprietary formulations and systems.

However, a much-discussed but unresolved issue is intellectual property protection. Similar to the way digital music is shared, 3D printable digital blueprints could be shared illegally and/or unknowingly either within a company or by outside hackers. In addition to digital files, users can print molds from a scanned object and use them to mass-produce exact replicas that are protected by copyright, trademark, and patent laws. The problem will continue to grow as companies move to an on-demand manufacturing network, requiring digital blueprints to be shared with independent fabricators. Gartner predicts that by 2018, 3D printing will result in the loss of at least $100 billion per year in intellectual property globally.

With blockchain, data and rights holders could store metadata about any substance, from human cells to powered aluminum, on the blockchain, in turn opening up the limits of corporate manufacturing while also protecting intellectual property. New markets could enable buyers and sellers to contract more easily in an open market.

Validating asset history and employee qualification

Blockchain can be used to prove ownership when procuring or disposing of an asset. It can also help to track the history of an assets and related maintenance activities. Furthermore, it can serve to validate qualification of employees and certifications of contractors in chemical plants. The latter is particularly important since with new technologies and millennials entering the plant floor completely new skill sets are required. Those skill sets need to be certified to ensure safe operation of plants and assets.

Tracking information for improved integrity and accuracy

Some segments in chemicals (e.g., pesticides) are threatened by counterfeiting. Blockchains single ledger verifies the integrity of a product as the record can be traced back to the product manufacturer and even the manufacturer of its precursor agents.

Also, as complexity in chemical supply chains increases tracking products and shipments becomes more and more important. Contemporary logistics solutions must deal with transportation, location services, regulations, hazards, packing requirements, security, customer engagement and more. Accounting for these variables requires a lot of planning, and complex expensive systems. Even with extensive planning, billions of dollars of goods are lost each year through mismanaged transportation or fraud. Logistics companies are beginning to turn to blockchain for a solution.

Competing as an ecosystem

As companies are spun off in a stream of M&As, many stil have the R&D know-how, business relationships, and the brand recognition of their parent companies. These organizations will compete as part of an ecosystem rather than a single business with broad coverage. They will have minimal inventory and will therefore apply products made by organizations with a core competency around manufacturing into their overall “solutions.”

So how does blockchain fit in? Blockchain technology provides an agile commerce platform in which these next-generation chemical companies can compete. The new ecosystems fit nicely into the consortium blockchain model, providing a platform for safe, efficient, traceable, resource trading. These trades will also be done without the need for a third party and will be pure B2B transactions.

Learn how to innovate at scale by incorporating individual innovations back to the core business to drive tangible business value: Accelerating Digital Transformation in Chemicals. Explore how to bring Industry 4.0 insights into your business today: Industry 4.0: What’s Next?

In mid-February, I attended the ARC Forum in Orlando, Fla. There was a strong emphasis on digital transformation as well as platforms and standards supporting it.

Within the digital transformation, a variety of platforms are emerging, such as Infrastructure-as-a-Service, IoT edge, cognitive computing, and cloud application platforms. This makes it even more important to integrate these platforms and establish a semantic layer across them to ensure they can be orchestrated towards company strategies and business goals.

To help companies in today’s world digitally transform their business, here are some trends and observations:

• IT, operations, and engineering departments need to ensure interoperability between and across their domains. Historically, these three entities have all operated in their own silos under different standards set by different organizations with different goals.

• More and more associations and companies are starting to collaborate and converge on open standards that support end-to-end processes, cycles, and value chains. For example, Namur Open Architecture, ZVEI Modul Type Package, and the Open Process Automation Group have a memorandum of understanding in the works to promote common standards and frameworks. Besides integration and simplification, avoidance of vendor lock-in is another key driver behind this.

• Cloud platforms are starting to gravitate around functional needs with an underlying common IT technology (enterprise system of record platform, enterprise innovation platform, intelligent supply chain platform, operations and maintenance platform, asset network platform, product design platform, and so on).

• Seamless, bidirectional data and information flow, supported by rules and workflow engines, are indispensable ingredients for turning data and analytics into action. This goal will be supported by an “intelligent and agile core” enhanced by a peripheral layer of microservices that can be easily consumed via APIs (IT landscape of the future).

• The importance of the “intelligent edge” is increasing. Initially focusing primarily on reducing-data security risks, now operational issues such as analyzing and controlling devices, improving process speed, and reducing latency issues will prompt end users to get a much broader perspective on edge computing. Overall, this is driven by the ongoing need to maximize asset maintenance and production performance. Innovative models are now run on the edge, leveraging inexpensive cloud space for optimization.

• People and processes are as important as technology for the adoption of digital transformation. In other words, machine learning, IoT, and blockchain don’t excel by themselves. They need to be embedded into industry and business contexts as well as processes. From a hiring perspective, the data engineer is an emerging species, as special skills are needed around data mining, data analysis, data orchestration, and data governance. Such data engineers need to be paired with business and process-domain experts to ensure innovative technologies unfold their true potential.

• Change management is more important than ever before. Consistent and clear top-to-bottom communication and measuring transformation program progress by a common set of clearly defined KPIs are pivotal to successfully building relationships and trust across all enterprise entities.

What do you think? Please share your thoughts and observations with us.

For more insight on emerging tech, see Future Of Work 2018: 10 Predictions You Can’t Ignore.

According to Wikipedia, a ”smart city” is an urban development that integrates information and communication technology (ICT) and Internet of things (IoT) technology in a secure fashion to manage its assets. Multiple industries and stakeholders collaborate on platforms owned and run by local communities. Arup estimates that the global market for smart urban services will be $400 billion per annum by 2020. Examples of smart city technologies and programs have been implemented in Milton Keynes, Amsterdam, Barcelona, Madrid, Stockholm, and in China.

Often overlooked for their benefits, chemical companies can play a major role in the digital economy and the efficiency of smart cities. How could chemicals benefit a smart city?

Utilities and environmental benefits

Chemical companies can contribute to the energy needs of a smart city and improve better environmental practices. For example, many chemical companies operate their own power plants. When these plants create energy surpluses, they could offer the energy to local communities in a smart energy initiative. Since plants are connected to the grid, the infrastructure for this application is already in place. This solution could eliminate the need for additional power plants, minimizing environmental repercussions.

There are also many potential applications for the chemical industry to support breakthrough innovations that reach beyond their usual boundaries. For example, chemical companies that produce hydrogen could be integrated into a fuel cell-driven connected-car concept.

Chemical companies could also be tied into water systems. Many chemical companies produce chemically treated clean water as a service. In addition, using treated water for municipalities and cooling the power generation units of chemical and utility plants would help to streamline wastewater treatment processes and cut overall costs.

Safety protocols

Chemical companies could easily be aligned with emergency services, providing emergency workers and first responders with training and relevant information on chemical usages and hazards. Smart cities would need to be able to track chemicals being transported and implement safety guidelines such as specific truck routes to minimize risk.

Further, smart cities could collaborate with chemical companies on real-time models to predict the impact of the wind direction, air temperature, and other factors in the event of a chemical release.

Smart regions

Chemical companies could have further applications by combining smart cities with nearby rural areas. For example, these areas could use precision agriculture, which creates better yield with less irrigation, less use of chemicals, and reduced labor.

Also, chemical parks could be established as “smart regions” that incorporate transportation and logistics solutions to help areas run more efficiently. Chemical parks could also include smart buildings, facility management, and other solutions that align with the smart city concept.

Many people see chemical companies as a danger or health threat, but these companies also enhance life and boost civic efficiency in many less visible ways. Offering plant tours, sustainability reports, and other local public relations activities could improve the perception of the chemical industry and help the public understand its important role in everyday life.

Learn how to innovate at scale by incorporating individual innovations back to the core business to drive tangible business value: Accelerating Digital Transformation in Chemicals. Explore how to bring Industry 4.0 insights into your business today: Industry 4.0: What’s Next?

Find out how to unlock the value of IoT for your business.

A recent S.M.A.C. Talk Technology Podcast delves into the trends that make the global chemical industry tick and how its progressive use of technology appears to be reshaping grassroots businesses within the sector.

Hosted by Brian Fanzo and Daniel Newman, the 15-minute audio interview of industry expert Thorsten Wenzel, vice president of the worldwide chemical business unit of SAP, illuminates some practical success stories.

Without a doubt, Wenzel possesses a cutting-edge and global understanding of the chemical sector, where the forward-looking innovation resides and misconceptions about the industry’s willingness to embrace technology. He points out that industry analysts have too often claimed chemical-focused companies had fallen behind other industries.

“A digital transformation is not really new for the chemical industry,” Wenzel says. “We are doing that since 25 years, and if you think about it, there’s lots of truth about that at the plant level where a lot of automatization efforts and digitalization efforts were done in the last 20 years already.

“But on the other side, if you talk to analysts and compare industries, it seems to be that the chemical industry is somehow a laggard and little bit delayed in comparison to other industries, which are way more advanced in that. So this is somehow contradictory, but I can tell you, wherever I go, whenever I talk to customers, digital transformation and IoT topics are on top of the agenda.”

He also sees things such as predictive maintenance, shutdowns, turnaround, outages, and profitability as driving force issues going forward. But Wenzel enjoys the unique talent of breaking down complex theoretical ideas into tangible lessons. And real-life success stories are things non-theorists can really wrap their heads around.

Technology transforms businesses in practical ways

During the podcast, Wenzel provides examples that make sense to real meat-and-potatoes business decision-makers. During his time in the chemical industry, he watched as a paint outfit completely shifted its marketing strategy and to some extent, its customer base by integrating virtual technology.

“Let me just give you one example: This is Asian Paints from India, which was the classical producer selling their paints and coatings via the classical channels; wholesale, distribution, the big supermarkets,” Wenzel says. “And they confirmed … They changed their business model from a just producing-oriented model to a more service-oriented model. That means today, Asian Paints is a company which visits the big customers they have, like companies with big corporate offices, offices that would like to change their interior, who want to paint their offices in a new way.”

Asian Paints, Wenzel says, changed directions by integrating virtual design applications. These programs allowed them to go into high-end corporate spaces, photograph, image, and create design proposals for the customer. They transformed from a one-dimensional manufacturer to a “service-oriented” outfit that went beyond just selling paint products. Basically, virtual design helped them become profitable on two fronts.

In the agricultural industry, organizations like Monsanto have morphed from product producers and sellers to developing hands-on relationships with salt-of-the-earth farmers.

“Monsanto is doing something where they really use machine learning for seed optimization,” Wenzel says. “They let the machine bring out the seeds, put on the fertilizer, the plant protection chemicals, and then see which plants grow best and what do we have to do from the seeds producer perspective to really have the optimum seed portfolio for our customers, plus plant protection, plus disease protection. So that’s an interesting thing we are seeing with these customers, both based on machine learning.”

By using machine learning, farmers can convey images directly to Monsanto, which can advise them on plant-protection and seed protocols. Just as IoT, Big Data, and blockchain provide beginning-to-end technology that has reformed much of the retail industry, the chemical sector is immersed in stakeholder connectivity.

Regardless of insider and outsider differences of opinion about the chemical industry embracing technology, digital transformation is having a profound impact on businesses and the economic advancement of people everywhere. That extends from the chemical product manufacturer to the end customer. In effect, things like digital boardrooms put all the key stakeholders in the same virtual space.

Take 15 minutes while enjoying your beverage of choice and immerse yourself in the cutting-edge thinking of this S.M.A.C. Talk Technology Podcast featuring SAP chemical industry expert Thorsten Wenzel.

Hear the full episode here. Learn how to innovate at scale by incorporating individual innovations back to the core business to drive tangible business value by reading Accelerating Digital Transformation in Chemicals.

The Chinese zodiac calendar says it’s the Year of the Dog, but in the chemicals industry, 2018 might be more appropriately dubbed the Year of the Tiger for the pace at which the business is changing its stripes.

This year we’ve seen a continued shift in supply centers due to the rise of shale gas in the United States and the move from coal to olefins in China, for example. Demand centers are shifting, too, due to a rapidly growing middle class in such places as the Asia Pacific region and Latin America. The accelerated globalization of the chemicals market is one of four major trends that we see shaping the chemical industry through the remainder of 2018 and beyond.

1. Rapid globalization

As part of this rapid globalization, new market entrants – from emerging countries and adjacent parts of the supply – are emerging with innovative business models, concepts, and processes. In turn, this drives shrinking lifecycles and rapid commoditization of products as innovators rapidly catch up with or even exceed incumbents in terms of the speed and responsiveness in which they are developing new products, formulations, and services.

Amid such a dynamic and pressurized global environment, the onus is on chemical companies to explore new ways to maintain a competitive edge. Many are doing so by reimagining fundamental business processes through a digital lens. They’re investing substantial amounts in new digital solutions and applying them in areas like sales and operations planning, demand planning, supply, and response, with the goal of making them real-time ready, more collaborative, and better integrated with the entire ecosystem – within and beyond company boundaries.

This move to integrated business planning and execution provides an agile decision-making framework for realigning strategy with execution plans across all business functions. It also goes a long way toward ensuring that business goals and targets are consistently aligned while minimizing business risks.

2. The circular economy

The rise of the circular economy is another trend worth watching in 2018 and beyond. Scarcity of raw materials is a reality that chemical companies must factor heavily into their strategic thinking. So, too, is regulation. Amid a drive to reduce material, energy, resource consumption and waste, and emissions, regulatory requirements are rapidly expanding their reach at the global, regional, and local levels.

To put themselves in the driver’s seat to respond to stricter regulation, chemical companies are extending their ecosystems to establish end-to-end, “cradle-to-cradle” approaches. As companies like SAFECHEM Europe GmbH demonstrate, these approaches are as much about competitiveness as they are about compliance. SAFECHEM Europe has developed a sustainable solution using chlorinated and non-chlorinated solvents for high-precision metal surface cleaning and dry cleaning applications, where high quality is a must. Here, the solvents are managed in a closed-loop process without any release to the environment.

Critical to innovations like these are digital platforms that allow the rapid, highly collaborative development of new products and services in a way that minimizes their impact on people and the environment along the entire lifecycle. It’s important that these platforms also embed safety and compliance requirements along those lifecycles and monitor the impact of changes in regulatory requirements on products and services in real time so chemical companies can respond accordingly.

3. Digitalization

The trend toward digitalization in the chemicals business goes hand-in-hand with globalization and the emergence of the circular economy. A massive wave of digital innovation shows no sign of cresting this year. Recent technological advancements such as in-memory processing power along with almost unlimited data storage capabilities at low cost offer unprecedented levels of connectivity, granularity, and speed in accessing, processing, and analyzing huge amounts of data.

The Internet of Things, machine learning, and blockchain are also fueling the digitalization movement within the chemical industry. Big players like BASF are using the IoT to improve efficiency in its engineering and maintenance processes throughout the asset lifecycle, while also increasing reliance on machine learning for invoice matching and on blockchain technology to more efficiently manage the supply chain with a “smart pallets” approach.

To capitalize on the potentially massive efficiency and competitive gains that accompany an embrace of digital solutions, chemical companies need an agile business process and IT foundation, one that combines a stable core system – a “system of record” for running day-to-day transactions, including real-time insight and decision support – with a “system of innovation” that allows an organization to leverage external data in order to rapidly develop new business processes and even entirely new business models. Tight integration between these two systems on a single platform provides the foundation to rapidly scale such innovations for maximizing business value across the entire enterprise.

4. New business models

Digitalization is indeed helping to feed the emergence of new business models, another key trend that figures to shape the chemical business for the foreseeable future. How companies fare in that future will depend largely on their strategic agility. They need the ability to rapidly transform product and service portfolios in response to dynamic market conditions and changing stakeholder needs. Döhler is among a wave of chemical companies that are demonstrating that kind of agility. One of the world’s most venerable food and beverage companies, Döhler also happens to be one of its most innovative.

The drive to explore new business models is prompting companies to look beyond their traditional value chains and start competing as entire ecosystems. Such ecosystems are presently built around hot chemical segments like precision farming and the aforementioned circular economy. As they become more customer-centric, expect to see more chemical companies positioning to sell business outcomes instead of products. So it’s less about delivering paints, coatings, or reactive resin components and more about delivering first-pass-quality products.

New business models also are emerging around operational excellence and business process automation. With the aforementioned digital technologies becoming scalable and commercially feasible, companies can now realize concepts like “lights-out manufacturing” and “touchless order fulfillment.”

For these innovative new business models to prosper, companies will need a solid foundation that includes a fourth-generation platform for business processes and IT infrastructure, as well as a skilled workforce. Machine learning, IoT, and blockchain won’t succeed in a vacuum. They need to be embedded into our thinking and into our processes. But they will go only as far as you and your people carry them – people such as the emerging data engineer with the specialized skills to perform vital data mining, data analysis, data orchestration, and data governance functions. Such data engineers need to be paired with business and process domain experts to ensure that innovative technologies tap their true potential.

A perfect storm

The convergence of these trends – globalization, digitalization, new business models, and the circular economy – is creating a perfect storm for the chemical industry, challenging strategies that companies have relied upon for a generation. In today’s chemical business, factors such as customer and feedstock proximity, intellectual property, and technology know-how no longer guarantee a sustainable competitive advantage.

Hard-to-anticipate geopolitical risks and an emerging protectionism movement in some countries may adversely impact free trade and the availability of critical raw materials, further clouding the competitive outlook. Still, the edge goes to early adopters of innovative business models, which have a unique opportunity to act as game-changers and digital disruptors, even amid so much uncertainty.

Visit the SAP Experience Area at SAPPHIRENOW to learn more about this topic and others from customers and experts in the chemical industry.

With digital disruption changing our world, chemical companies are facing challenges to their processes and business models. How can they adapt and thrive? Leading companies in the chemical industry are succeeding by becoming intelligent enterprises.

Facing modern industry challenges

Chemicals companies face challenges from numerous areas. These include factors like the changing price of raw materials and geopolitical climates, erratic demand patterns, mass commoditization and customization of products, complex supply chain management, the transition to digitalization, competition from new companies, and more regulations and environmental expectations than before.

Challenges like these are not always negative but instead can present opportunities. Smart chemical companies are already shifting their models and offering new services, selling business outcomes instead of products, further automating processes leveraging machine learning, collaborating beyond traditional boundaries and competing as ecosystems, or developing strategic agility as a new core competency.

Mastering the challenge

With the mass adoption of cloud, Big Data, and mobile technologies over the last 20 years, chemical companies are generating an overwhelming volume of data. But most of them are unable to leverage this data effectively. As data becomes the new “oil,” most companies are simply building up larger reserves without a clear path for how to cash in this new asset. To make sense of all the noise, draw meaningful insights from their data, and dynamically allocate resources, our customers must become intelligent enterprises.

Intelligent enterprises operate with visibility, focus, and agility to achieve game-changing outcomes. They do more with less and empower employees through process automation. They deliver a best-in-class customer experience by proactively responding to customer expectations. They invent new business models and revenue streams.

Key capabilities of an intelligent enterprise

Intelligent enterprises differentiate with three key capabilities. They operate with:

• Visibility: the ability to collect and connect data that was previously siloed and recognize unseen patterns

• Focus: the ability to simulate the impact of potential options and direct scarce resources to the areas of maximum impact

• Agility: the ability to respond faster to changes in the marketplace or the business and pivot business processes towards the right customer outcomes

Business outcomes

By adopting the capabilities of an intelligent enterprise, chemical companies can achieve game-changing outcomes faster, more effectively, and with less risk:

• Do more with less and empower employees through process automation, freeing time for people to do more meaningful work

• Deliver a best-in-class customer experience by anticipating and proactively responding to end-customer needs

• Invent new business models and revenue streams by monetizing data-driven capabilities and applying core competencies in new ways

Technology enablers

For enterprises to become intelligent enterprises, they must invest in three key areas of technology:

• An intelligent suite bringing intelligence into the applications used to manage customers, supply chains, networks, employees, and core business processes

• A digital platform to manage data from any source (first or third party) in any format (structured or unstructured), and support the development, integration, and extension of business applications

• Intelligent technologies to apply intelligence to data and processes through innovations such as machine learning, advanced analytics, and IoT

Learn how you can transform your company into an intelligent enterprise. Start today!

As one of the world’s best-known manufacturers of the rolling rubber objects that populate landfills by the millions — automotive tires, specifically — Michelin seemingly was destined for a role in the Circular Economy. Michelin further embraced that role last October with its acquisition of U.S. specialty chemicals company Lehigh Technologies, which produces a material called micronized rubber powder (MRP) from waste tires. These powders are capable of replacing oil- and rubber-based feedstocks in a variety of applications, including the production of high-performance tires.

It’s exactly the type of business, and the type of closed-loop, zero-waste process, that manufacturers are pursuing as they move away from the traditional linear “take-make-dispose” model of creation and consumption, to a circular model in which materials are continuously looped back into the value chain for re-use, resulting in less energy and resource consumption.

Chemical manufacturing and plastics in particular have emerged as a key target for the Circular Economy movement. And for good reason:

• 95%, approximately, of plastic packaging material value, or $80-$120 billion in economic value, is lost annually because of a short first use, according to a 2016 report by the World Economic Forum.

• 72% of plastic packaging is not recovered, according to the WEF report; 40% ends up in the landfill and 32% leaks out of the collection system.

• $13 billion in damage to marine ecosystems caused by plastic waste each year, the United Nations estimates.

Although Europe is the movement’s epicenter, the circular economy has become a global imperative. In July, China and the European Union (EU) agreed to cooperate on circular economy initiatives. In the United States, meanwhile, the American Chemistry Council’s Plastics Division this spring committed to a goal of recycling or recovering all plastic packaging used in the U.S. by 2040, and along the way, to make all plastics packaging recyclable or recoverable by 2030.

“Together with our value chain partners we intend to transition to increasingly circular systems for designing, manufacturing, recycling and recovering our plastic packaging resources,” explained Steve Russell, the ACC’s vice president of plastics.

As the Michelin-Lehigh alliance illustrates, some manufacturers view that transition as an opportunity to cultivate new business opportunities while closing the loop on their products. But the business case for embracing the Circular Economy extends well beyond the creation of new, high-value product applications. It also gives chemical producers an opportunity to optimize their manufacturing processes, to increase vertical integration of the supply chain, reduce resource consumption, and gain greater control over the entire product lifecycle, including the ability to sustainably manage the end-of-life of a product such as tires.

Realizing these benefits takes a creative strategic vision along with a robust digital technology foundation, one that enables a manufacturer to explore, design and scale up new products and processes quickly and efficiently. Here are several ways technology is positioning chemical manufacturers to capitalize on the opportunities the Circular Economy presents:

• A digital platform can enable rapid development of innovative products and services in a collaborative fashion. Manufacturers can bring together suppliers, customers, and other relevant parties, relying on the “wisdom of the crowd” to design products that fit the tenets of the circular economy: built-to-last, built-to-repair and/or built-to-recycle products, made from homogeneous materials to facilitate full recycling at end of life. This open innovation could be guided by goals that are commonly agreed-upon via blockchain. During the design process, machine learning tools attached to that platform can predict the environmental performance and impact of a new product, forecasting its carbon footprint along the entire lifecycle.

• Such a platform can enable manufacturers to track and trace production materials (including rare earth and noble metals, etc.) along their entire lifecycle, using blockchain, allowing them to authenticate the origin of raw materials, which helps to reinforce fair trade and labor practices.

• Digital tools can be the catalyst for optimizing manufacturing and business processes across an enterprise to gear up for the Circular Economy. With machine learning tools, manufacturers can predict new product quality in the manufacturing process while minimizing waste and energy consumption. Additive manufacturing and 3D printing technologies allow manufacturers to explore innovative applications for high-value materials (such as high-performance composites) with little to no waste or inventories, for example. 

• An open digital platform can transform a manufacturer into a network orchestrator. For example, instead of funding construction of a new recycling plant, a group of investors could create a collaborative trading platform, enabled by a blockchain, to trade derivatives that represent a physical amount of a chemical product. Once a critical threshold of investment in a buyback program has been reached, initial investors are repaid at a premium for the assets that they currently hold, with compensation being either monetary or in an equivalent of the chemical product. Platform owners retain full ownership of their business.

• A digital platform with embedded and regularly updated safety and compliance requirements can enable manufacturers to monitor and measure the impact of changes in regulatory requirements on their products and services in real-time, allowing them to design products, formulations, and composites to meet prevailing regulatory standards in specific markets — and to rapidly adjust those products or find acceptable alternatives as regulations change. Using machine learning tools, manufacturers also gain the ability to rapidly simulate the impact of new regulatory policies and laws on sales in certain regions or countries.

Whether the market is Europe, China, the U.S., or elsewhere, digital technologies figure to play a key role in helping chemical manufacturers develop the low-carbon innovations they’ll need to thrive in the Circular Economy. When earlier this year the CO2Value Europe Consortium launched the H2020 BioRECO2VER project to pursue more efficient, sustainable processes for commercially producing platform chemicals like isobutene and lactate from carbon dioxide, it acknowledged facing formidable technical and economic barriers. “To name a few: gas pretreatment costs are still too high, gas transfer in the bioreactors is suboptimal, product recovery costs are still too elevated, and the scalability has not sufficiently been proven.”

Overall, companies setting the foundation now for operating with visibility, focus, and agility through becoming “intelligent enterprises” are predestined to gain a first-mover advantage in addressing the circular economy and help the world to become a safer, cleaner, and better place.

Learn more about to turn your company into an Intelligent Enterprise!

This article was originally published on ChemInfo.

When it first emerged, 3D printing was revolutionary, changing the possibilities of our world and the manufacturing industry. Yet this technology has quickly become mainstream and already proven its relevance to the chemical industry. Now the next innovation on the horizon is 4D printing. What will this technology hold for chemicals?

Emergence of 4D printing

While 3D printing has broadened the capabilities of the manufacturing industry, it still has limitations. This is where 4D printing can come in, giving manufacturers the ability to do more than they could before. Manufacturers could program printed materials so they can later self-assemble or change to fit what’s needed when reacting to heat, water, or another stimulus.

How 4D printing could impact the chemical industry

First and foremost, think about new feedstocks, composites, or formulations developed in chemical labs along with innovative process technologies. Think about items used as laboratory or plant equipment or even spare parts that could start out compressed and expand or self-assemble after being exposed to specific conditions. Imagine pipelines in remote areas that could go back to their original shape after being damaged.

If plant or manufacturing equipment has the capability to (re-)assemble itself, skilled technicians in remote areas may no longer be needed. Moreover, 4D printing could overcome 3D printing limitations, such as large items that are too big to be fully printed.

Looking to the future

4D printing is still being researched and developed, but it could change the way supply chains in our world run. This technology can be part of the broader digital transformation, used alongside AI, the IoT, blockchain, and robotics. Many use cases are showing promising results, so stay tuned to see where this technology takes the chemical industry.

Be prepared: New Problems Require New Solutions In Chemical Manufacturing.

The circular economy is getting more and more traction across the globe as leading players work to reduce waste and maximize resource use. Here are the major reasons why:

• Resource scarcity is becoming a serious issue. Essential raw materials like lithium, cobalt, and rare earth metals are either limited in availability or concentrated in critical countries.

• Environmental pollution and waste are reaching critical limits. According to the Ellen MacArthur Foundation in 2017, the oceans could have more plastic than fish by 2050. Moreover, waste already exceeds the capacities of landfills and recycling. This serious situation worsened when China decided to stop all imports of foreign waste in 2017.

• Consumer expectations are changing. Consumers are becoming more environmentally conscious and demanding ecologically labeled food and goods. Large global players like Walmart have started certification programs for suppliers to ensure the environmental compliance of raw materials.

These elements are coming together to create a perfect storm prompting company executives and government authorities to embed these factors into their strategies and risk assessments.

Major initiatives

In response to these issues, multiple consortia have formed around the circular economy, such as:

• The UN launched its 17 development goals to transform our world.

• The European Community kicked off an ambitious circular-economy initiative.

• The Ellen MacArthur Foundation is working with industry, government, and academia on a framework for a regenerative and restorative economy.

• The Alliance to End Plastic Waste formed with 30 companies, including four of the five biggest global chemical players.

• The Ocean Plastics Leadership Summit, sponsored by SAP and Dow Chemical, provides emotional, relational, strategic, and tactical pillars to develop three core solutions to the ocean plastics problem: new business models, better global recycling options, and improved chemical recycling and waste management within the supply chain.

Here are some concrete-industry initiatives in progress:

• In raw material sourcing, activities geared towards reuse and recycling of conflict minerals are helping companies become independent from countries that are politically unstable or using unethical practices.

• In research & development, collaborations are in development to use modular concepts to ensure proper dismantling and reuse of materials after products’ end of life. Terms like Development for Compliance, Build to Last, or Build to Repair are fostering open innovation and suggesting the use of blockchain.

• In production and asset management, joint ventures are recycling waste polymers and feeding them back as monomers into polymerization processes. Predictive maintenance is anticipating the failure of asset parts (e.g., pumps, engines) and initiating early backhauls for repair instead of scrapping them. In addition, companies including Covestro are using carbon dioxide as valuable raw material and turning it into plastics in production processes. BASF invested in a company called Lanzatech that owns a fermentation technology for converting carbon monoxide and hydrogen-containing off-gases into ethanol.

• In supply chain management, initiatives on waste collection and trading, as well as “cradle to cradle” concepts for battery components, rare earth, and precious metals, are being pursued. Moreover, “material passes” for construction and building materials are being discussed to document via blockchain the quality and quantity of substances that have been used in buildings, along with guidance for decomposition and recycling.

• In services, leasing models are using hazardous chemicals in a closed loop. The company SAFECHEM, for example, offers solvents, risk-management solutions, and services for reliable industrial parts (e.g., wafers) cleaning. Also under discussion is using leasing models for more expensive batteries with a longer lifespan than e-vehicles.

The path forward

An Accenture study suggests two options for the chemical industry to contribute to the circular economy:

• Enabling circularity: Driving maximum utility in the end use (e.g., higher durability of goods, making products suitable for sharing, and increasing energy efficiency)

• Circulating molecules: Maximizing utility of existing molecules (e.g., reusing/recycling molecules, such as reusing PET bottles)

A roundtable discussion at Sapphire/ASUG 2019 determined that local prerequisites for collecting and processing waste, commercial viability, and educational and political aspects will determine the pace of adoption, and business networks will play a pivotal role for success. Platform providers and network orchestrators are destined to drive new business models, enable innovative business processes, and provide the underlying IT framework in support of the circular economy.

Read how Intelligent Enterprises enable new strategies and business models for the chemical industry.

This article was originally posted on ChemInfo.

Over the past few years, we’ve seen a lot of buzz around blockchain. Billions of dollars have been spent, thanks to “inflated expectations,” in Gartner’s terms. The company’s 2018 Hype Cycle for Emerging Technologies saw blockchain moving down towards the “trough of disillusionment,” and it does not foresee a “plateau of productivity” within the next five to 10 years. Only a few applications have reached commercial viability, such as the SAP Information Collaboration Hub for Life Sciences, driven by the U.S. Drug Supply Chain Security Act (DSCSA).

Why is that? An article from McKinsey compares it with “Occam’s razor problem.” In other words, the most effective solution must be the simplest solution available to solve a business problem, and there must be a clear business case and a strong commitment to make it happen.

In a recent round-table discussion at SAPPHIRE 2019, participants brought up the following possible use cases for the chemical industry:

• Procurement: Tracking and authenticating raw materials supports overall compliance with ethical and sustainable standards (e.g., no “conflict” materials associated with child labor, unfair trade practices, etc.).

• Research & development: Real-time information sharing protects intellectual property in open innovation networks or consortia.

• Production and asset management: Sharing information between manufacturers, operators, and service providers, for example on Asset Intelligence Networks, tracks an asset’s entire history to prove maintenance, use of original spare parts, etc., in support of warranty or insurance claims, proof of ownership, book value, and as a foundation for pay-per-use models. Recovery of plants after disasters can be managed using retrieval of blockchain records for warranty claims and the like.

• Supply chain management: In energy trading, onsite chemical power plants become part of a “prosumer” blockchain. In international trading and shipping, blockchain facilitates document exchange and tracks changes in product ownership. Tracking and tracing the physical integrity of products (e.g., BASF’s smart pallet startup investment) identifies physical damage to products or pallets and prevents counterfeit. In agriculture, blockchain increases the transparency of the supply chain from “farm to fork” and facilitates product recalls.

Conclusion

Despite the use cases mentioned above, it became very clear at the roundtable that we are a long way from making blockchain a viable option on a broader scale in the chemical industry. Here are a few stumbling blocks we see:

• Development of a compelling use case

• Formation of consortia with participants on an eye level with mutual trust

• Ownership of blockchain and nodes as well as data security and privacy

• Technology (e.g., limitations in scalability and management of Big Data) and interoperability (e.g., which type of blockchain, integration, legacy systems, etc.)

Government regulations can play an important role in overcoming these obstacles and paving the ground for commercially viable blockchain scenarios (e.g., the example mentioned above of DSCSA legislation).

Overall, innovative platform providers who have a strong position in chemicals have a unique opportunity to facilitate collaboration between suppliers, customers, and partners and orchestrate networks towards a common goal while disintermediating non-value-adding processes or entities.

Read SAP’s white paper The Intelligent Enterprise For The Chemicals Industry to master future challenges and delivering new customer experiences through innovative products, services, and business models.

Three analysts from McKinsey recently said it best: “Chemical manufacturers have already invested in IT systems and infrastructure that generate enormous volumes of data, but many have failed so far to take advantage of this mountain of potential intelligence.”

Mountains can be scaled. You just need the right tools and expertise. Data analytics tools have become exponentially more powerful and easier to use. Computational power is cheap. The most innovative data analysts are putting their mountains of process, product, and other types of data to work in the chemical industry to help navigate the significant changes and volatility that are the new normal.

Once, pulling in data from across and outside of a large-enterprise chemical company to power analytics was easier said than done. Now it’s happening.

Next practices

Based on our global experience working with the leading, most innovative chemical companies, here are three “next practices”– capabilities and outcomes to help chemical companies utilize data and analytics on a grand scale.

Integrate diverse data sources. Data is scattered. It’s in multiple applications, files, data warehouses, data lakes, and public and private clouds. Each silo walls off the data with proprietary rules and complexity. You need visibility into that data. Without it, you have a disjointed picture of the business. With it, you can do things like model the impact of geopolitical and environmental disruptions within hours. Run ad hoc simulations to determine the financial impact of sales and operations scenarios. Calculate differentiated prices based on bundling, value, and fully landed costs. And much more.

Next practice #1: Integrate your data by combining data sets – including Big Data, process data, product data, analytical data, etc. – as needed into a single data universe for much greater visibility.

Make data more useful. Your data comes to you structured, semi-structured, and unstructured. It may be spatial, chart, numeric, geographic, time-series, relational, JavaScript Object Notation (JSON), etc. Integrating all these different types of data is extremely complex. But without it, your company is at a competitive disadvantage, squandering available resources.

Next practice #2: Integrate your data sources using orchestration and governance solutions. Go from raw feed to intelligence with real-time analysis of vast data sets. How? With solutions to understand, integrate, cleanse, manage, associate, and archive data to optimize business processes and analytical insights.

Simplify your data landscape. Centralized. Easy to use. Automated. That’s what you want from your data analytics platform. And those features have been a challenge because of all the different databases, apps, and clouds in your IT environment. But now a centralized data management solution is available that manages all facets of an enterprise chemical company’s data universe. Represented visually, the architecture is easy to share and understand. Stakeholders assigned to an architecture team within your company can collaborate through a user-friendly Web application in the planning, design, and governance of the architecture.

Next practice #3: Create and maintain a complete landscape architecture that is easy to share and understand. Open this landscape to an array of company employees and managers to jointly manage your data environment as an agile, strategic tool.

A growing number of data analytics use cases for chemical companies

Data analytics is a vital tool for innovating faster than the competition, creating new markets and products, and attracting and retaining customers.

Chemical companies are using data analytics fed by an increasing array of datasets to analyze the cause and effects of complaints and manufacturing deviations and to scan through thousands or millions of documents to identify intellectual property and determine the return on investment of R&D and acquisitions. They are using it to ensure compliance of new formulations through data analysis, to institute condition-based maintenance to minimize risks and reduce costs and environmental impacts, to forge IoT strategy, and to do more accurate economic forecasting. The list goes on.

These are just some of the many, quickly evolving, creative ways that larger and diverse data sets are being put to work to guide chemical companies today. Some use cases are relevant to every type of organization within the chemical industry. Others are more suited to different types of businesses, geographies, markets, and other unique characteristics.

Learn how and start now to become a data-driven chemical company!

And please listen to the replay of our “Pathways to the Intelligent Enterprise” Webinar, featuring Phil Carter, chief analyst at IDC, and SAP’s Dan Kearnan and Ginger Gatling.