It is a known fact that a series of radical changes are reshaping the chemical industry: massive advances in technology and innovation, rapid changes in customer expectations, and strong pressures on costs and productivity. Faced with this, the only possible and appropriate response from this important industry is to accelerate a deep, end-to-end digital transformation.
The potential of digital transformation in chemical industry is enormous: according to Deloitte data, the Brazilian chemical sector is the eighth largest in the world, and accounts for 10% of the national industrial Gross Domestic Product (GDP) (or 2.5% of total GDP), at the same time that is responsible for employing around 2 million people (directly and indirectly).
With this in mind, new tools and digital technologies in the chemical sector present solutions not only to extract more efficiency from existing processes, but also to innovate in terms of new products, services and processes, and thanks to the convergence of these improvements - such as advances in sensors, Artificial Intelligence and Big Data, among others - we need to accelerate the digital maturity of companies in the sector, as the degree of digital maturity in the chemical industry is still not the highest: McKinsey's A&DQ Brazil survey points to a level of maturity of the basic industry (in which the chemical sector is inserted) of 33%, compared, for example, to 46% of the financial sector and 45% of retail.
At the same time, a 2021 EY survey titled "How long before the Digital Disruption reaches the chemical industry" demonstrates that the pandemic has created a sense of urgency to accelerate the transformation of the world. For example: 66% of C-levels surveyed say they anticipate "disruption" in the industry over the next 3 years (compared to just 31% three years ago).
Rafael Lopes, Global Head of Digital Transformation Project Management at Buckman, in an exclusive statement for this article, gave his point of view on the direction of the transformation of this industry: "Around 2016, the Brazilian Chemical Industry slowly started its digitalization journey. The first IoT applications and the first massive uses of Big Data and Artificial Intelligence were seen (although with other names such as "Advanced Control", "Virtual Sensors", "Smart Maintenance", "Manufacturing Smart", etc.). However, the shrinking of Brazilian economy and the COVID pandemic put a brake on this investment effort. Industries first thought of surviving and, as a result, higher-level investments ended up being deprioritized. This is paradoxical, because investment in the 4.0 industry is able to provide a very relevant return of productivity and efficiency gains (exactly what industries need to navigate in a crisis like this one). I don't see exactly a digital disruption for the next 3 years, but a resumption of the already existing (but slow) digitalization journey".
In fact, even beyond the economic crisis exacerbated by the COVID-19 outbreak, there are long-term challenges facing chemical companies. For example, barriers to entry in this market are decreasing and companies from outside the industry are joining the fray and competing with established industry leaders; end-market demand is changing due to consumer preferences, and changing policies and regulations; and the industry is being affected by decarbonization and other aspects of the energy transition, which is changing the prices of raw materials as well as the demand for materials themselves. In this environment, chemical companies planning their future must focus on realigning their innovation strategies and efforts.
Therefore, among the main transformation trends in the chemical industry, we list the following:
1. Chemistry 4.0:
The chemical sector is in the midst of a revolution caused by the implementation of the 4.0 Industry concept, and it must undergo many transformations even with the development and application of digital technologies - such as advanced robotics, Internet of Things, artificial intelligence and Big Data - the industrial production process of the sector.
If the moment is taken well, the Brazilian chemical industry can emerge from this revolution better prepared to compete with global players: new sensor technologies enabled with wireless and drones improve the Internet of Things infrastructure within factories and allow workers to remotely monitor, for example, gas leaks, and generally carry out regular inspections of equipment from factory.
The use of digital twins, holographic imaging, advanced video analytics, AR/VR and image processing technologies also enable live production process analysis, by being able to detect failures in real time and aim for immediate improvements. Rafael Lopes from Buckman confirmed to us that among the main trends of digital transformation that he sees in the chemical industry, there is precisely "the massive use of connected reality (VR) for the safety at work area (security technicians no longer need to be in the plant to conduct security audits and investigations).
In a more advanced and digitally mature stage, chemical companies will be able to operate autonomous plants that can be monitored remotely - using Artificial Intelligence to optimize assets and make instant decisions to optimize the entire value chain.
A consequence of "Chemistry 4.0" is that exponentially larger volumes of data are generated than in the past, which helps to simulate scenarios, predict results and take corrective measures (as we will see in the next part). An example is Air Products & Chemicals, which has developed a "patented, web-based, predictive monitoring and fault diagnosis platform" called ProcessMD, which is designed to monitor the health of assets in real-time and provides its engineers with a multi-layered view of operations.
2. Big Data and Analytics:
A study published by Accenture showed that 51% of industry executives see data as one of the three technologies with the highest potential return on investment for the next 12 months. This dimension also includes the use of Big Data analytics, and Customer Relationship Management (CRM) platforms to gather relevant customer insights and gain insights from this information. After all, optimizing the integration of the entire value chain by collecting new insights from customers, and sometimes even end consumers, can be extremely important.
Overall, the volume, variety and velocity of data today is staggering, generating vast amounts of real-time information about products, devices and customers in the chemical industry, and can help both in production (as we talked about earlier in part of Chemistry 4.0), both in the supply chain (better understanding of supply chain operations, resulting in streamlined processes and better distribution channels), and even in the lab (more on that later).
An example of Big Data in the chemical industry is social market listening, integrated with predictive analytics – an approach Dow Chemical uses to identify cross-selling opportunities using its custom-built recommendation engine. Alcir Vieira, Head of Digital & IT, Brazil at Air Liquide, told us in an exclusive statement for this article that "a transformation was carried out in our ERP, reducing customizations by 73% - a few million lines of code - and giving space to Mobile and Web tools, focused on the customer and developed by our internal team composed of Developers, Designers, Product Owner among others, organized in squads dedicated to each Business Line, working together with the end user, thus reducing costs generating efficiency and increasing sales, directly impacting the company's results."
3. Technologies for R&D:
In general, digital technologies are changing the basis of competition in the chemical industry, generating added value and making markets more accessible. The applicability of advanced digital technologies takes on even greater importance in situations like the one the world is facing right now.
In response to the COVID-19 pandemic, digital technologies can rapidly help the engineering of products made to reduce costs due to changes in supply chains. New technologies such as Artificial Intelligence (AI), wearables, Augmented Reality (AR), Robotic Process Automation (RPA) and others, can accelerate the execution of repeated tasks, and this has an important impact on the laboratory. For example, embedding Artificial Intelligence and other machine learning algorithms in R&D knowledge management systems can help scientists and researchers spend more time on hands-on work in the lab, who can even more easily share information through collaborative platforms.
While the scientific method remains at the heart of the innovation process in the lab, the convergence of computing power and advanced learning algorithms is accelerating the adoption of a new digitally-enhanced research method. BASF, for example, has taken an integrated approach into digitizing R&D, which also involves a strategic focus on data science, and knowledge-sharing platforms. Also, startups that use artificial intelligence (AI) to innovate in terms of materials are discovering low-cost formulations in less than three months.
4. Customer Experience (CX):
In the industrial world, customer loyalty is a significant challenge - and the chemical industry is no exception. Buyers are often ready and able to abandon suppliers that don't meet their needs - and once you lose them, it's going to be hard to win them back.
According to the 2020 Global Buyer Values Study, the majority (78 percent) of chemical companies are concerned about losing customers - whether through attrition, loss of market share or enticing competitors - if they are not focused In the client.
And they have real reason to be concerned - perhaps more than they realize. A surprising number of buyers (58%) across all industries in the study said they could switch suppliers if their preferences weren't met - and many are considering doing so within the next year. Nearly the same number (56 percent) said they could switch to alternative materials, including those from outside the chemical industry, if a good Customer Experience is not met. Even because today, many B2B customers are using digital tools in their daily lives, and they expect the same self-service features that the main B2C e-commerce platforms offer. In other words, the customer is more demanding, and expects nothing less than the best experience.
But while digital tools facilitate better customer service, delivering a great customer experience involves more than using new technologies. Sinopec Chemical (Sinopec Química) seems to have realized this at an early stage and is creating a new interactive online platform called “One Customer, One Portal”.
This platform is designed to cover all direct selling customers, as well as connecting all factories and functional departments of Sinopec Chemical: in addition to enabling advanced customer services such as stock reminders, logistics tracking and product, the platform allows customer complaints or feedbacks to be reported directly to the relevant factories or departments. All in one place. And even though this project does not involve online shopping, in general, not only in the chemical sector, ecommerce is advancing rapidly in B2B, even more so in Brazil: the percentage of total sales made by ecommerce in B2B companies has increased during the pandemic of 42% to 62%, with Brazil reaching one of the highest percentages in the world.
5. Startups and Open Innovation:
When we consider the potential for innovation that exists in the chemical sector, we know that large companies do not always have the agility to innovate as quickly as the market and the customer need. Therefore, the role of start-ups is essential to accelerate this movement: with their agility, risk-taking, and digital mindset, start-ups represent an incredible potential partner for established organizations that want to bring innovations to their market.
Open innovation is precisely the term that defines these partnerships between start-ups and traditional organizations, which can have different formats (from hackathons to acquisitions), and enormous impacts. In this sense, BASF leads the industry: in 2020 BASF celebrates 6th place in the TOP 100 Open Corps – and TOP 1 in the Chemical Industry, a publication that is part of the Ranking 100 Open Startups and evaluates the engagement of large companies in the innovation ecosystem Brazilian.
“With the strategy of connecting, experimenting and developing technologies through co-creation, BASF has encouraged and promoted approximation with ecosystems, bringing innovation and agility in the development of solutions for customers in the markets where they operate” says Mirella Botelho de Aguiar Lisboa, Open Innovation and Digital Ecosystems Manager at BASF. Among the environments for co-creation are the Center for Scientific and Digital Experiences, onono, aimed at inspiring transformation, connectivity, innovation and collaboration, and the Startup Center.
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