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SAPPOV: Why Chemical Companies Need The Cloud

Stefan Guertzgen

At around $3 trillion, the chemicals sector is one of the biggest and most important in the world. And while the largest companies take the lion’s share of this pie, there is a thriving, 

S&OP process for chemicalsfast-moving market for small and mid-sized players in the industry.

These companies typically have the same needs as the big guys – HR, finance, all of the standard line-of-business functions – plus chemistry-specific operations. But to find a competitive edge, they also need to be able to do flexible batch operations and rapidly set up new equipment and processes at a small scale.

Traditional operational models only go so far. To fight for a share and win it, they need every advantage they can get. In short, they need the cloud.

I can think of five compelling reasons why:

  1. Mobile workforce. Whether on the floor at a processing plant, with a client or on the move, empowering employees to sift real time data and make decisions on the fly revolutionizes their potential across the board.
  1. Minimize disruptions.Chemicals companies operate across a huge spread of regulatory environments. These aren’t all compatible and they often change. The right sort of cloud setup means that problems can be anticipated – and stakeholders informed – with time to do something about them.
  1. Scalability. A cloud-hosted solution available at short notice and on a hosted monthly subscription basis does not need the up-front capital back-up that larger players enjoy. If there’s a peak in business in an emerging market, for example, you can meet that need quickly and easily.
  1. Collaboration.In a flexible, fast-moving operation (and indeed many larger ones), not all of the key team members will use the same technologies. With the right technology, collaboration – as well as transparency and accountability – are easily managed.
  1. Differentiation through Innovation.Product life cycles are shrinking, customers get more and more demanding and competition gets tougher in today’s global world. Product innovation, but also rapid business model or process innovation are powerful weapons to survive or thrive in such an environment. Here cloud solutions can help to secure rapid access to latest technology innovations without going through time consuming and costly (re)-implementation projects.

While cloud computing has yet to fully penetrate the chemicals industry, other sectors, such as retail and healthcare, have picked it up enthusiastically. You don’t have to look far to see some intriguing examples of best practice and unprecedented agility. Amazon, for example, in its warehousing, or UPS in its logistics, not to mention much of the technology you use without even thinking on a smart phone.

It’s no great leap to see that the technology is relevant to more than one sector. The real revolution cloud-based solutions promise is not so much what they deliver as it is how they deliver it – with unprecedented speed, simplicity and scalability, plus reduced cost and risk.

To learn more about we can help you with your business challenges please have a look at SAP’s Solution Explorer for the Chemicals Industry: https://rapid.sap.com/se/#index?indids=i_chemical and find out more about our cloud solutions: http://www.sap.com/uk/pc/tech/cloud.html

What do you think about the issues discussed here? Continue the conversation in the comments below and on Twitter @SAP4Chemicals

Dr. Stefan GuertzgenDr. Stefan Guertzgen works for 6 years as Global Director for Industry Solution Marketing Chemicals at SAP. Prior to this assignment he has worked for 11 years in the chemical Industry (Chemtura) in various positions comprising R&D, Global Business Development, Sales and Business Process Management, and Sales & Operations Planning. In addition, he has 7 years experience in Presales and Management Consulting for the process industry (AspenTech, AT Kearney, and SAP Business Consulting) with focus on business operations.

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About Stefan Guertzgen

Dr. Stefan Guertzgen works for 7 years as Global Director for Industry Solution Marketing Chemicals at SAP. Prior to this assignment he has worked for 11 years in the chemical Industry (Chemtura) in various positions comprising R&D, Global Business Development, Sales and Business Process Management, and Sales & Operations Planning. In addition, he has 7 years experience in Presales and Management Consulting for the process industry (AspenTech, AT Kearney, and SAP Business Consulting) with focus on business operations. Join him in conversation @SGgaw29c or on @SAPIndustries .

Why 3D Printed Food Just Transformed Your Supply Chain

Hans Thalbauer

Numerous sectors are experimenting with 3D printing, which has the potential to disrupt many markets. One that’s already making progress is the food industry.

The U.S. Army hopes to use 3D printers to customize food for each soldier. NASA is exploring 3D printing of food in space. The technology could eventually even end hunger around the world.

What does that have to do with your supply chain? Quite a bit — because 3D printing does more than just revolutionize the production process. It also requires a complete realignment of the supply chain.

And the way 3D printing transforms the supply chain holds lessons for how organizations must reinvent themselves in the new era of the extended supply chain.

Supply chain spaghetti junction

The extended supply chain replaces the old linear chain with not just a network, but a network of networks. The need for this network of networks is being driven by four key factors: individualized products, the sharing economy, resource scarcity, and customer-centricity.

To understand these forces, imagine you operate a large restaurant chain, and you’re struggling to differentiate yourself against tough competition. You’ve decided you can stand out by delivering customized entrees. In fact, you’re going to leverage 3D printing to offer personalized pasta.

With 3D printing technology, you can make one-off pasta dishes on the fly. You can give customers a choice of ingredients (gluten-free!), flavors (salted caramel!), and shapes (Leaning Towers of Pisa!). You can offer the personalized pasta in your restaurants, in supermarkets, and on your ecommerce website.

You may think this initiative simply requires you to transform production. But that’s just the beginning. You also need to re-architect research and development, demand signals, asset management, logistics, partner management, and more.

First, you need to develop the matrix of ingredients, flavors, and shapes you’ll offer. As part of that effort, you’ll have to consider health and safety regulations.

Then, you need to shift some of your manufacturing directly into your kitchens. That will also affect packaging requirements. Logistics will change as well, because instead of full truckloads, you’ll be delivering more frequently, with more variety, and in smaller quantities.

Next, you need to perfect demand signals to anticipate which pasta variations in which quantities will come through which channels. You need to manage supply signals source more kinds of raw materials in closer to real time.

Last, the source of your signals will change. Some will continue to come from point of sale. But others, such as supplies replenishment and asset maintenance, can come direct from your 3D printers.

Four key ingredients of the extended supply chain

As with our pasta scenario, the drivers of the extended supply chain require transformation across business models and business processes. First, growing demand for individualized products calls for the same shifts in R&D, asset management, logistics, and more that 3D printed pasta requires.

Second, as with the personalized entrees, the sharing economy integrates a network of partners, from suppliers to equipment makers to outsourced manufacturing, all electronically and transparently interconnected, in real time and all the time.

Third, resource scarcity involves pressures not just on raw materials but also on full-time and contingent labor, with the necessary skills and flexibility to support new business models and processes.

And finally, for personalized pasta sellers and for your own business, it all comes down to customer-centricity. To compete in today’s business environment and to meet current and future customer expectations, all your operations must increasingly revolve around rapidly comprehending and responding to customer demand.

Want to learn more? Check out my recent video on digitalizing the extended supply chain.

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Hans Thalbauer

About Hans Thalbauer

Hans Thalbauer is the Senior Vice President, Extended Supply Chain, at SAP. He is responsible for the strategic direction and the Go-To-Market of solutions for Supply Chain, Logistics, Engineering/R&D, Manufacturing, Asset Management and Sustainability at SAP.

How to Design a Flexible, Connected Workspace 

John Hack, Sam Yen, and Elana Varon

SAP_Digital_Workplace_BRIEF_image2400x1600_2The process of designing a new product starts with a question: what problem is the product supposed to solve? To get the right answer, designers prototype more than one solution and refine their ideas based on feedback.

Similarly, the spaces where people work and the tools they use are shaped by the tasks they have to accomplish to execute the business strategy. But when the business strategy and employees’ jobs change, the traditional workspace, with fixed walls and furniture, isn’t so easy to adapt. Companies today, under pressure to innovate quickly and create digital business models, need to develop a more flexible work environment, one in which office employees have the ability to choose how they work.

SAP_Digital_Emotion_BRIEF_image175pxWithin an office building, flexibility may constitute a variety of public and private spaces, geared for collaboration or concentration, explains Amanda Schneider, a consultant and workplace trends blogger. Or, she adds, companies may opt for customizable spaces, with moveable furniture, walls, and lighting that can be adjusted to suit the person using an unassigned desk for the day.

Flexibility may also encompass the amount of physical space the company maintains. Business leaders want to be able to set up operations quickly in new markets or in places where they can attract top talent, without investing heavily in real estate, says Sande Golgart, senior vice president of corporate accounts with Regus.

Thinking about the workspace like a designer elevates decisions about the office environment to a strategic level, Golgart says. “Real estate is beginning to be an integral part of the strategy, whether that strategy is for collaborating and innovating, driving efficiencies, attracting talent, maintaining higher levels of productivity, or just giving people more amenities to create a better, cohesive workplace,” he says. “You will see companies start to distance themselves from their competition because they figured out the role that real estate needs to play within the business strategy.”

The SAP Center for Business Insight program supports the discovery and development of  new research-­based thinking to address the challenges of business and technology executives.

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Sam Yen

About Sam Yen

Sam Yen is the Chief Design Officer for SAP and the Managing Director of SAP Labs Silicon Valley. He is focused on driving a renewed commitment to design and user experience at SAP. Under his leadership, SAP further strengthens its mission of listening to customers´ needs leading to tangible results, including SAP Fiori, SAP Screen Personas and SAP´s UX design services.

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Digital Technology Drives Innovation Processes In Chemical Industry

Don Mahoney

The early 1990s heralded the dawn of the Information Age. The rise of the Internet transformed the way we exchanged information. Phone calls were no longer the only way to communicate in real time with people across the globe. The Internet allowed us to send and receive data in the blink of an eye. Online publishing, email, and later videoconferencing made the world a smaller place.

The consequences for the business world were enormous. Order-to-delivery times diminished. Companies gained the potential to reach a more widespread customer base than ever before. With more available information and products, consumers grew more critical and more demanding. This goes both for end consumers and businesses in supply chains.

New technology is a game changer for companies

Now a new stage in the Information Age has begun: the era of the Internet of Things (IoT). Gartner explains the IoT as a worldwide web of physical devices with embedded technology. Using this technology, devices can sense and communicate data. They can also interact with their external environment or internal states. In other words, humans used to instigate and manage the exchange of information. Today, smart devices and artificial intelligence do it for us.

These new technologies combine with a deluge of devices to create hyperconnectivity. Intel estimates that by 2020 there will be 200 billion connected devices. This doesn’t just include smartphones, tablets, and computers. It includes consumer products such as cars, security systems, and health monitors. And it also includes assets used in the chemical industry. For example, many machines and other equipment come with embedded smart technology.

Another significant development is the cloud. The cloud is a term used to refer to data centers made up of servers and connected to the Internet. Because the cloud has no physical limitations, it can store enormous amounts of data. But that’s not the only remarkable thing about the cloud. It also provides vast reserves of computing power. Because it requires no physical storage, the costs are low. Plus, with sophisticated cybersecurity, companies can connect their entire network to the cloud. That means they can not only back up their data, but also use the cloud for processes that demand a lot of computing power.

Doing more thanks to advanced technology

Consider the immense potential of these new technologies for chemical companies. At any point in the production cycle, smart assets can collect data on a wide range of variables. (As an example, a machine can measure how much waste chemicals it generates per unit. Or it can record how much time and fuel it takes to produce a single unit.) The machine can continuously collect this data while it operates, then send the data to the cloud. Depending on what the chemical company wants, it can store the data or use it to generate analytics. These analytics can provide insights into every aspect of a company’s operations. Companies can then use these analytics to streamline existing processes and develop new ones. Their goal is, of course, the maximization of uptime, as well as optimization of their products and services.

In the 1990s, order-to-delivery time declined as Internet use became more widespread. Just like then, today’s technology can scrape off even more time. The Internet of Things connects assets, systems, and companies. Sensors in assets can automatically send data about supply levels through the network. They can then order new supplies when needed. This “no-touch order-to-delivery” system eliminates the need for human process management.

The prices of raw material vary from day to day and even from hour to hour. Chemical companies can integrate real time financial information and procurement opportunities with their systems. This means they can immediately provide their customers with the most up to date pricing. As a result, they remain more competitive.

The digitization of plant operations has a far-reaching impact. Companies can now improve safety, as well as enhance quality and increase output. The SAP report CEO Perspective: The Internet of Things for Chemical Companies mentions intelligent assets. This refers to equipment that performs diagnostics for maintenance and safety. That means the chances of accidents are reduced. Or they can adjust production schedules according to external events and material availability.

Forward-thinking chemical companies use predictive analytics to manage supplier risk and determine future spend. This way, they can establish digital procurement processes that aren’t open-ended. Instead, they can connect them to their cloud-based network of suppliers. This guarantees a closed-loop procurement process.

In the development of new products, companies can use predictive analytics to create models. Then they can analyze these models to find out what their qualities and performance are. That allows them to research the possible use and value of a new product before engineering it. Plus, they then can optimize it for cost, yield, sustainability, and compliance.

Technology leads the way to a brave new world

The digital transformation of the chemical industry offers exciting new potential to visionary companies. Companies can use their data to create safer, smarter, and more efficient processes. And that will allow them to move forward in a responsible manner that’s good for the bottom line.

Start your journey now! Understand more about the value digital transformation brings to your company and establish the right platform and roadmap for transition.

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Don Mahoney

About Don Mahoney

Don Mahoney is Vice President and Global Head of Chemicals, Industry Business Solutions at SAP. He is responsible for ensuring superior customer return on IT investment while driving profitable growth in SAP’s solution portfolio for the global chemical industry.

Digital Transformation Enables Agility In Chemical Industry

Stefan Guertzgen

In a volatile industry such as chemicals, the nimblest organizations prosper the most. Recent research from McKinsey and Company shows that those companies that frequently and strategically reallocate resources across businesses in response to changing conditions easily outperform those that don’t. The companies with the most frequent reallocations had a CAGR of 10.8 percent, with thos that reallocated the least had a CAGR of only a 2.5 percent.

The analysis spanned 23 years—from 1990 to 2013—and showed that companies that started the period with similar prospects had markedly different values at the end of the study, with the most frequent allocators having a market capitalization 6 times higher than the least frequent allocators. In addition, frequent allocators had a 30 percent higher chance of remaining independent in addition to better total return to shareholders.

Companies generally react to changes in market conditions rather than anticipate changes, so reaction time is critical to a successful reallocation strategy. When the shale-gas boom began in 2009, it took even the fastest companies two to three years to react. However, the companies with the fastest reaction times were able to pivot their strategy and reallocate resources to take advantage of the change in the situation. The fastest companies were able to begin building the required infrastructure well ahead of their less nimble counterparts, enabling them to lock down a lower cost structure that provided a significant margin advantage.

While companies must still take basic steps to clarify their business strategy, new technology has enabled a digital transformation that supports both rapid analysis of complex situations and the ability to quickly align budgets to strategy.

A successful business strategy should act as a road map to the company’s goals—covering at least five years, and including investment priorities and targeting business and portfolio composition. With this idea in mind, companies can use Big Data and in-memory analytics to combine large volumes of disparate data from multiple sources to provide insight in real time. The companies that undergo this digital transformation soonest will have an advantage over their less-agile competitors. As a result, they will be able to quickly move resources and reallocate budgets and priorities so that projects and businesses with the greatest growth potential receive the greatest share of the available resources.

This digital transformation enables rapid analysis and implementation of such strategies, driving enhanced business processes and creating fully empowered workforces that are able to make informed decisions at anytime, anywhere, and at any appropriate level.

Establishing the underlying foundation of real-time, in-memory analytics, flexible and adaptable business processes, and a culture attuned to digital transformation of business will help enable companies in the chemicals industry to quickly take advantage of business opportunities that reduce costs, return shareholder value, and increase competitiveness. Those companies that fail to adopt the tools for digital transformation will find themselves lagging their competitors in operational efficiency and every meaningful financial metric, while those that embrace it will prosper.

Start your journey now! Learn more about the value digital transformation brings to your company, and establish the right platform and road map for transition.

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About Stefan Guertzgen

Dr. Stefan Guertzgen works for 7 years as Global Director for Industry Solution Marketing Chemicals at SAP. Prior to this assignment he has worked for 11 years in the chemical Industry (Chemtura) in various positions comprising R&D, Global Business Development, Sales and Business Process Management, and Sales & Operations Planning. In addition, he has 7 years experience in Presales and Management Consulting for the process industry (AspenTech, AT Kearney, and SAP Business Consulting) with focus on business operations. Join him in conversation @SGgaw29c or on @SAPIndustries .