Digital Transformation in Chemical Industry

Digital Transformation in Chemical Industry: Market Definition

Digital transformation has gained the momentum in almost every industry vertical owing to the need of digitalization, though adoption of digital technology in chemical industry is relatively slower as compared to other industries. Through the current market scenario, the demands for sustainability and greater efficiency which can be achieved with the adoption of digital technology. The CEOs in chemical industries look at digital transformation as their foremost strategic concerns than innovation, reducing manufacturing cost, and updating their portfolios. Many of the manufacturing companies have already implemented digital transformation and are growing with more digitally mature plants. There is a gap between more digitally transformed plants and plants at early stage of technological transformation. The use of digital technology in chemical industry is majorly focused on optimizing production with the increasing equipment efficiency, streamlining maintenance, predictive monitoring, and process automation. The digital transformation draws tremendous potential in chemical industry as it has in other wide range of industries. The major ways in which digitalization is transforming chemical industry is by improving company’s business processes using digital-enabled approaches, by enhancing value chains and identifying demand patterns, and digital developments in the overall business models. 

Digital Transformation in Chemical Industry: Overview

Digital Transformation in chemical industry basically allows in optimizing production, supports remote operations, help reduce waste in the manufacturing process, creates growth opportunity, and provides visibility to supply chain. Digitalization in chemical industry has tremendous potential as that of the other industries. It can positively impact the chemical manufacturing with significant change in value chains, enhancing productivity, more innovation, and providing new market channels. 

As per the reports, industrial manufacturers face approximately 800 hours of unplanned outages on yearly basis costing them nearly US$50 billion. Also, equipment failure due to improper maintenance results into 42% of unplanned downtime. According to Precognize, a predictive analysis software company, the digital transformation during the next two years is forecasted to center around industrial internet of things (IIoT) at 67%, artificial intelligence (AI) at 64%, and cloud computing at 61%. 

Key Components of Digital Transformation in Chemical Industry

The industrial inclination towards digitalization for the betterment of services has opened new avenues for the chemical industry to move towards digitalization. It enables companies to extract relevant data from large amount of unstructured data using advanced analytics. This relevant information can further be used to enhance the performance of manufacturing plants and taker informed decisions.

Chemical Industry plays a vital role in overall functioning of other industries business as it is an essential supplier of products to other related industries such as automotive, aerospace and defence, personal care and cosmetics, electronics, white goods, and construction including many others. Chemical industry has to deal with stringent government regulation related to environment and human health. In the time of steady competition, digitalization is helping chemical manufacturing companies to streamline operations and provide growth opportunities.

Benefits of Digital Transformation in Chemical Industry 

Restructuring Regulatory Compliance

Chemical industry comprises of wide range of sectors which are subjected to government and environmental regulations. The companies have to comply with these regulations in order to keep-up consumer’s and environmental safety. With the surge in safety awareness and guidelines along with constantly changing regulatory guidelines, it has become challenging for manufacturers to keep-up with the technical progress. Digital transformation allows manufacturers to overcome these challenges with the help of digital technology. It facilitates the chemical manufacturers to improve compliance practices across multiples sites. It helps the company to apply best quality practices, standardize compliance practices, and operational training for operator. 

Connecting Stranded Assets 

Chemical industry owns broad range of asset inventories and varying communication capabilities. The manual transfer of asset information is time taking and does not provide any safety of data. The adoption of digital technology enables to record and share unstructured information also with enterprise systems. It also helps to streamline maintenance strategies which are based on data rules, models, and machine learning. 

Enable Scheduled Downtime 

Chemical industry is experiencing tremendous shift in the competitive landscape during the fast few years. It is paramount for the companies to invest in asset management in order to maintain the market share. Digitalization helps companies in predictive maintenance and prescriptive maintenance, thereby reduce the excess maintenance cost of scheduled downtime.

Product Lifecycle Management (PLM)

Digitalization in chemical manufacturing also helps in the management of product lifecycle. It assists chemical manufacturers to develop the specialized products in order to meet the specific requirements of customer. It enables manufacturers to achieve digital collaboration with regulatory bodies, customers, and feedstock suppliers. It facilitates the chemical manufacturers to effectively employ digital product lifecycle management to develop product faster and manage data efficiently which helps the companies to go ahead of their competitors with lower costs.

Improved Safety 

The adoption of digital technology improves the operating procedures thereby improves data safety. The added features in digital transformation helps to reduce human error, improves speed, and task efficiency. It allows operator to perform different tasks and maintain products with the technology’s visual instructions.

Digital Transformation Trends in Chemical Industry

ata Analytic

Internet of Things (IoT) 

The internet of things (IoT) technologies such as connected devices, robust network, and servers facilitates data capturing from multiple sources such as raw material supply, sales, production department, and order fulfilment. IoT enabled solutions gather data from machines and govern product quality and performance of processes. It facilitates system automation that empowers employees, offer super customer experience, achiever better productivity, and provide improved asset utilization. It further helps chemical manufacturing companies to streamline operations and promote strategic growth. It provides faster decision making on quality and productivity, optimize utilities consumption, and extend asset life with reduced downtime. 

Data Analytics

Digital transformation is significantly impacting various aspects of the chemical industry. Suitable data collection improves the manufacturing performance with the help of computation power. It collects the data from numerous sources and optimize plant operations using analytical tools such as machine learning and visualization platforms. The major analytics techniques used in chemical industry are descriptive analysis, predictive analysis, and prescriptive analysis. Preventive maintenance helps to avoid asset failure and keep industrial plants on top of their equipment operations with the employment of suitable data analytics tool. The equipment performance such as hours in operations, bearing temperatures, and vibrations can be monitored with the sensors connected to servers. Advanced analytics improves the level of understanding of manufacturing operations in chemical plants. It facilitates to identify the solutions of problems, finding out the bottlenecks, and unprofitable production lines. 

Virtual Reality (VR) and Augmented Reality (AR)

AR and VR helps in product prototyping, provide real time visibility into plant operations, and optimize R&D results and product designs. It provides real time information to the enterprises by identifying key performance indicators (KPIs). Human errors cause around 80%-90% of the industrial mishaps and unplanned downtime. AR and VR help to enhance the efficiency of chemical manufacturing processes, maintenance, and training and quality assurance. AR is beneficial in chemical industry for purposes such as data related to equipment including output, performance, temperature, etc., real-time feedback, remote assistance and training, and work order information. 

Blockchain

Blockchain is one of the latest technologies used in chemical industry that uses cryptographic principles and acts as a distributed repository. Data is recorded in inpidual blocks and capturing new data and transactions is confirmed by a compliance algorithm and added to the blockchain, So the blockchain grows with each transaction. It offers secure and transparent methods to material, product, and supply-related transactions. Blockchain in chemical industry utilized to tack processed chemicals and ensures product quality for customers. All the data from the raw material to the manufacturing of finished product at the customer’s site can be tracked continuously. Thus, blockchain helps chemical companies with supply chain visibility, product innovation, new revenue models, and data integrity. 

Artificial Intelligence (AI)

AI is transforming wide range of industries such as finance, healthcare, transportation, and chemical industry is no exception for this. Adoption of AI in chemical industry has started gaining momentum during the past few years. The key goal of any manufacturing units in the chemical industry is to offer large number of products with improved quality and reducing costs. AI provides the optimized solutions by automating the repetitive tasks, detect downtime and leakages, monitor resource and energy consumption, and regulate the quality of production process with advanced analytics. Chemical manufacturers need to comply with several government regulation and follow the quality management protocols, thus, the automation is required for the standardization of processes. Machine Learning enhances the manufacturing processes and facilitate the development of optimized solutions. It helps to reduce the errors from error-prone tasks, speed up the research and increase its effectiveness, and reduce waste in manufacturing operations. Machine learning provides the suitable answer from the available data, helps in scheduling maximum cost efficiency, and identify increased and decreased demand periods 

Digital Transformation in Chemical Industry – Implementation Overview 

According to World Economic Forum, the estimated cumulative economic value of chemistry and advanced materials industry of the period 2019-2025 ranges from nearly US$ 310 billion to US$ 550 billion. The digitalization has the potential to reduce CO2 emissions by 60-100 million tonnes and avoid 2,000 to 3,000 injuries over the next decade. The statistics shows that, around 90% of the everyday products used by the companies contain chemicals and currently there are nearly 100,000 chemicals available in the market. More than 10 million employees are employed in this industry in order to meet the increased demand for the product.

 The above figure exhibits the percent share if each country in terms of chemical sales in the year 2020. China accounts for 44.6% of the global chemical sales and owns the significant growth opportunity for the digital transformation in the chemical industry. China is followed by EU and USA with the percent share of 14.4% and 12.3% respectively. 

Above figure represents the sales of top chemical companies in the year 2020. According to the World Economic Forum and Accenture, the global chemical sales is expected to increase to US$ 6.9 trillion by 2030. With the increase in chemical industry output, many of the chemical manufacturing industries are implementing digital technologies in their business operations. For instance, BASF, a leading German petrochemical company which operates in chemicals, plastics, coatings, crop technology, and natural gas has an active interest in the artificial intelligence. It has recently announced its membership in Systems That Learn (STL), a research initiative which is a part of MIT Computer Science and Artificial Intelligence Laboratory (CSAIL) at a North American Center for Research on Advanced Materials (NORA) conference. 

Sinopec Corp. has promoted integrating digital technology and industrial technology. In 2021, the company has mainly focused on artificial intelligence and big data for the development of innovation platform of R&D centre. SABIC has started its digital transformation journey in 2019, with the design and roll-out of a five-year digital transformation strategy in order to transform the core business areas. Further, in 2021, SABIC has entered into a partnership with Baker Hughes in order to drive the digital transformation. This partnership includes the delivery of Bently Nevada’s plant-wide condition monitoring and machine asset protection services across 1,200+ asset at 16+ SABIC sites in Saudi Arabia. Bently Nevada offers critical plant-wide asset health monitoring, data protection for industrial customer, and analytics. 

Digital Transformation in Chemical Industry: COVID-19 Impact

COVID-19 has severely impacted a wide range of industries including chemical and materials industry was not an exception. It has affected global chemical industry in numerous ways by disrupting supply and production, affected transportation of raw materials, and in a away affected the cost of goods at different levels. The outbreak of this virus has impacted many areas such as commercial and passenger transportations, travel restrictions, closure of food chains, and restricted house events. Business confidence, stock market turmoil, uncertainty about the future, and growing panic among the people have caused the chemical industry to stagnate from the first quarter of 2020 to the fourth quarter of 2021.

The corona virus outbreak has impacted several countries which has huge impact on social and economic life of people. The closure of manufacturing facilities has also led to the shortages of laboratory equipment and raw material shortage for the production of required vaccines and medicines. During 2021, Delta and Omicron variant of COVID-19 continued to spread which increased the panic amongst people and further disrupted the supply chain and accelerated inflation. The lower rates of vaccination have worsened the market conditions. 

During the beginning of 2021, the market has slowly started to resume which helped to rebound the global trade volume. The global economy continues to recover; however, the growth has slipped to 4.4% in 2022, from 5.7% in 2021. The workers in the manufacturing industry have resumed their work which created need for more safety operations. However, digital and flexible work schemes become the new norm in several sectors of the chemical industry. Research shows that, 73% of the working population are preferring working form home and around 34% of the employees are planning to work from home at least once a week in the future enabled by automation, digital tools, and cloud.

COVID-19 has positively impacted digitalization by creating a need for digital technology in chemical plants. Digitalization has gained momentum in order to adjust to remote work practices, dealing with fragmented supply chain, and coping with changing customer demand. Many of the chemical manufacturing companies have invested in digital technologies to develop workforce interaction, managing supply chain operations, and following up maintenance routines. 

The chemical industry has a complex structure with the different types of sub-sectors and end users. For instance, during the COVID-19 pandemic, the chemical industry sub-sectors serving to industries such as aerospace, automotive, and oil and gas saw a significant decrease in the demand. However, the sub-sectors which were providing products to pharma clients has seen remarkable growth in the demand. Thus, digitalization is more focused towards the sub-sectors of the chemical industry according to the need of increasing speed throughput or enhancing quality. During COVID-19, chemical industry had to adopt digital technology in order to cope up with changing consumer preferences, supply chain disruptions, and severe drop in end markets. 

Digital Transformation in Chemical Industry: Future Outlook

The key trends in digital transformation in chemicals industry offers optimizing production, supports remote operations, reduced waste, help to unlock new growth opportunities, provides visibility into the supply chain, offers safety compliance, and sustainability. Chemical industry is in its early stage of the digitalization. The major factor that is holding back the digital transformation in chemical industry is the lack of qualified talent. Moreover, chemical industry is perceived as less exciting sector which makes it hard to attract young digital talent. The Gulf Petrochemical and Chemicals Association (GCPA) stated that around 15% of the companies owns an effective recruitment process for digital talent. The adoption of digital technology in this sector is currently uncertain, however, they provide several benefits for the greener future in the chemical sector. Many of the companies are adopting digitalization in order to improve innovation, cost optimization, growth and performance, and sustainability. Companies are opting for data scientists, robotics engineer, innovation specialists, and other technical specialist to help them implement digital technologies. 

In the next few years, the digital transformation in chemical industry would successfully address the following key requirements of this industry: 

• Providing clear target picture 
• Identifying specific business needs
• Specifying the required resources and capabilities 
• Designing focused organization 
• Help to develop digital culture

In the competitive and fast paced business environment, data can drive the growth of any industry from innovation to enhance existing processes. Technological development is useful for capturing real-time data on several parameters such as quality, operations costs, assets, processes, storage capacity, logistics, and inventory. Digital transformation enables efficient management of inventory and supply chain. Thus, digital transformation in chemical industry can improve decision making and enhance efficiency of the chemical manufacturing companies. The future of the chemical industry is largely dependent on the digital solutions in order to meet the changing consumer needs and comply with the complex business models.

The number of smart factories in manufacturing industries is expected to increase remarkably in next few years. Systems based on IoT are projected to adopt on a large scale in order to ensure the compliance with emission regulations. Moreover, hazardous material manufacturing facilities are expected to manage remotely which will gain more attention in near future. In order to enable the uninterrupted data collection and analysis, the advanced and standardized sensor systems would be used. Along with this, digitalization will facilitate companies to improve operations by re-utilizing materials and products throughout the supply chain. Currently, there is a huge gap in the adoption of digitalization between global companies and SME companies. However, increase in awareness towards the utilization of digital transformation is expected to drive the future growth of digital technology in chemical industry.

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