Catalysing transformation through operations improvement and business growth
By Stefan Van Thienen, Andrew Clinton, Monika Mahto & Brenna Sniderman
With more than 20 million people employed and annual sales of $5 trillion, the global chemicals industry serves as the backbone of many end-market industries such as agriculture, automotive, construction, and pharmaceuticals. Changes in the chemicals industry — such as the rise of the fourth industrial revolution, or Industry 4.0 —are thus likely to have a ripple effect on a number of other industries.
Industry 4.0 brings together a number of digital and physical advanced technologies to form a greater physical-to-digital to- physical connection—and it can potentially transform the chemicals industry by promoting strategic growth and streamlining operations.
The time is ripe for such a transformation: Advanced technologies relevant to the chemicals industry—such as the Internet of Things (IoT), advanced materials, additive manufacturing, advanced analytics, artificial intelligence, and robotics—together have reached a level of cost and performance that enables widespread applications. For example, BASF is using Industry 4.0 applications in its deployment of connected systems and advanced analytics models for predictive asset management, process management and control, and virtual plant commissioning. Beyond these traditional applications, the company completely automated the production of liquid soaps at its smart pilot plant in Kaiserslautern.
Once a user places an order for a customised soap, the radio-frequency identification tags attached to the soap containers inform the equipment on the production line via wireless network connections about the desired composition of the soap and packaging—thus enabling mass customization without human involvement.
More importantly, these technologies are now advanced enough that they can integrate with chemicals companies’ core conversion and marketing processes to digitally transform operations and enable “smart” supply chains and factories as well as new business models.
What can Industry 4.0 do for chemicals?
Organisations focused on business operations can use Industry 4.0 technologies primarily to improve productivity and reduce risk, while those focused on growth can apply Industry 4.0 to build incremental revenue or generate wholly new income streams.
Improving business operations: Productivity and risk
Improving business operations manifests in two ways: improving productivity and reducing risk.
While the productivity of chemicals plants can be improved by various smart manufacturing techniques, reducing risk involves managing supply chains and in-house operations to respond to changing customer needs and to improve safety and quality.
Smart manufacturing: Marrying IT and OT to improve productivity
Also known as “smart factory,” smart manufacturing combines information technology (IT), such as the IoT, artificial intelligence, and advanced analytics, with operations technology (OT), such as additive manufacturing, advanced materials, and robotics. This process can benefit chemicals companies in several ways:
• Predictive asset management: By combining the continuous feed of data collected from sensors with smart equipment, plant operators are able to evolve from reactive repairs to predictive maintenance.
• Process management and control: Industry 4.0 technologies such as real-time analytics and automated control actions bring together the digital and physical realms, thereby enabling greater control over the batch consistency and quality.
• Energy management: Industry 4.0 technologies such as soft or virtual software sensors can help improve energy efficiency.
• Safety management: Connected technologies can help companies in continuously monitoring products, byproducts, as well as any waste generated, thereby reducing production risks.
• Production simulation: By using technologies such as 3D visualisation and virtual reality, plant operators can train staff, be prepared before plant operations start, and benefit from prognostics.
Supply chain planning: Predicting changes to reduce operational risk
Industry 4.0 helps chemicals companies plan their supply chains in two ways:
• Supply chain visibility: By monitoring chemicals in transit, chemicals companies are able to better manage their supply chain planning. Further, several players in the supply chain — ranging from transport operators to technology providers —can work toward a common business objective.
• Demand forecasting: Chemicals companies can achieve capacity optimisation through demand forecasting and responsive scheduling. By doing so, they can identify demand indicators, and expand or contract their production capacities accordingly.
• Growing the business: Incremental and new revenue.
The transformational plays Industry 4.0 offers related to business growth lie on two ends of the value chain.
Research and development: Developing new products to expand revenue
R&D is perhaps the most critical stage in the value chain: It shapes not only how the products will be manufactured but also informs subsequent improvements. Because R&D demands heavy investment, chemicals companies are looking at big data and other tools to predict the outcome of an investment. In the field of material genomics, for example, advanced analytics helps researchers use the available data to understand the chemical properties of available materials, and consider possible combinations in order to develop new materials with desired properties for specific customers.
Technologies relevant to this transformation include:
• Additive manufacturing for testing or developing new products
• Advanced analytics for selecting materials
• 4D printing for developing advanced materials
Smart products and services: Making products intelligent and creating new data services
Advanced technologies such as the IoT could allow chemicals companies to add intelligence to their existing products and deliver better customer service. In addition, chemicals companies could complement their traditional pay-by-the-ton revenue model by offering value-added data services. By forward-integrating into their customers’ operations, chemicals companies can deliver value propositions and even build new business models.
Products and services in this transformation include:
• Product recommendations for chemicals applications
• Data services to augment existing revenues
• New revenue models by forward integrating into customers’ operations
The solutions layer architecture: Enabling Industry 4.0 technologies and capabilities
In Industry 4.0, data play a key role in connecting IT and OT. However, it is difficult for organisations to know where to focus and what to prioritise, or even what capabilities should be put in place, to achieve their specific objectives.
A structured series of capabilities, or a solutions layer architecture, can help executives plan and implement Industry 4.0 technologies. The goal of this architecture is to enable the company to build a digital DNA—the underlying sequence that brings together capabilities in different domains—required for a digital transformation. The layers in this structure begin with technology integration, data management, and advanced analytics, which in the physical realm are manifested in the form of digital interfaces that are used to drive digital capabilities and, finally, the strategic imperatives of the business.
Climbing the pyramid: Where to start
As chemicals organisations seek to build an Industry 4.0 solutions architecture, the following actions might help them:
• Start with what you know or do best: Use the organisational ability to absorb changes in mature chemicals processes, traditional products, and supply chain operations where there is good visibility, then move onto relatively newer, more complex applications.
• Enable a cross-functional Industry 4.0 team: The competencies required in the architecture sit in different business functions, and hence it is important that chemicals executives create a cross-functional team to focus on Industry 4.0 opportunities.
• Build and be a part of a pervasive ecosystem: Companies need to build diverse capabilities in big data infrastructure, management, integration, validation, and analytics to be able to deploy Industry 4.0 applications. This requires chemicals companies to partner with technology vendors, analytics providers, and universities, among others, to manage operations at each layer.
• Manage your cyber risk: With greater interaction with ecosystem partners, chemicals manufacturers should focus on a risk management policy and technologies.
Industry 4.0 will likely impact the way chemicals companies operate and grow their businesses, as they shift away from the pay-by-the-ton revenue model to provide value-added products and services to their customers. How fast and well companies perform will depend on the decisions they take today and the initiatives they commit to for the coming years. As changes in chemicals affect related industries, time is of the essence: Industry 4.0 is no longer a topic of the future.
Authors: Stefan Van Thienen is a partner and leader of the Chemicals and Specialty Materials sector at Deloitte Belgium.
Andrew Clinton is a senior manager in the Supply Chain and Manufacturing Operations practice at Deloitte Consulting NA.
Monika Mahto is an assistant manager with Deloitte Services India Pvt Ltd, affiliated with Deloitte’s Center for Integrated Research.
Brenna Sniderman is a senior manager with Deloitte Services LP, affiliated with Deloitte’s Center for Integrated Research.
© Chemical Today Magazine
Good to find this article. This blog never fails to share amazing articles about the chemical industry. Actually, I was looking for an article about Manufacturers Of Heavy Chemicals, then happened to read this one. This is a descriptive article about Industry 4.0. In this article, one can find many points on what Industry 4.0 can do for chemicals.
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