The Effect Of Global Mega Trends On The Chemical Industry

Stefan Guertzgen

The global economic situation is extremely volatile, especially for the chemical industry. Chemistry teacher doing experiment with students --- Image by © Peter Muller/CorbisAccording to the 18th Annual Global CEO Survey from pwc, there are five global trends that are expected to create profound and sweeping changes in the way companies operate.

Savvy chemical company CEOs are watching these global megatrends to try to stay ahead of the competition, and many are turning to technology to help them address the changes.

Increased competition requires agility

Staying ahead of traditional competitors is challenging, but for the chemical industry, new competitors are coming from outside as well as from inside the industry. Emerging competition is coming from nontraditional sectors such as energy, utilities, and mining, and it’s especially heavy from healthcare, pharma, and life sciences companies. Chemical companies hoping to retain or grow market share are looking for ways to become more agile. Companies find that their IT teams are torn between strategic initiatives to increase agility and tight budgets. As a result, many are adopting a cloud strategy. Using the cloud can relieve IT from mundane day-to-day tasks so they can focus on streamlining business processes to increase agility while controlling overall costs.

Customers—even B2B customers—want more intimacy

Customer behavior is changing rapidly. Customers of all types have a stronger desire for more information and intimacy than ever before. They want to see information about their orders and track delivery status to the minute. They want to interact and consult with development and service teams on upcoming projects, and they expect advice and input from their chosen suppliers.

To address the customer’s desire for connection, it’s no longer enough to have just a website, no matter how informative it may be. Today, companies are fielding their own mobile apps so that customers can have constant connection. In fact, Gartner predicts that by 2016, use of mobile apps will exceed Internet access to domain names. The best apps will include product specifications, guidance on applications, and customer-specific inquiries. Many in-house IT teams will need to strengthen their expertise to tackle this challenge, which has not been part of the traditional operational role.

Chemical companies strive to keep pace with rapid regulatory changes

The chemical industry must show compliance with a complex tangle of overlapping regulations governing everything from labeling, handling, and manufacturing to shipping and storage of the products. Every country–and even many localities–enacts its own rules, and U.S. chemical companies alone spend more than $12 billion a year on compliance. Yet the changes keep coming, and companies must respond quickly to the required reporting as well as the mitigation processes. Here aspects like real-time simulations of the impact of new regulations in certain countries or regions become pivotal to success.

Also many companies have found that running their business systems in the cloud help them manage the cost of compliance. Unlike complex on-premise systems that are costly and disruptive to upgrade, cloud solutions are typically updated on a frequent basis. As report formats change or new requirements are added, cloud-based reporting systems mean companies have faster access to solutions that conform to the latest regulations.

Business is happening in real time

Business is moving faster than ever, and business systems need to keep up. New transaction processing systems that run completely in memory have raised expectations for how quickly information can be available. Chemical companies are hungry for the fast insights they can get from big data, IoT (Internet of Things), predictive analytics, and in-memory databases. As technology advances, companies are using more data sources to help hone their predictions. Plants monitor production in real time using sensors that feed quality and performance data to dashboards in real time. Weather patterns or politics on the other side of the world may affect demand for products, and chemical companies are tapping into both structured and unstructured data for insight.

Preparing for distribution channel changes

Trends like mass customization and “lot size 1” have also reached the chemical industry and are expected to have a pronounced impact on chemical manufacturing and supply chains. Rather than shipping product to a few manufacturers that create their own products and manage the distribution, chemical companies may soon begin shipping directly to a variety of new customers who will use the chemicals to create products or formulations with distinguished properties right at their facilities rather than buying finished products from suppliers. In the near future, companies might be selling the information about how to make a product rather than the product itself. Physical supply chains might evolve to consist primarily of raw materials and chemicals, while the bigger supply chain will shift to becoming more about moving and accessing information.

Chemical companies will need to gear up for both types of supply chain challenges. More customers will be placing smaller orders, so distribution will need to be much more efficient. The information supply chain will require major enhancements to ensure that information flows as quickly and seamlessly as customers require.

Rising to meet the future challenges can be a challenge in and of itself, but you don’t need to solve every problem on your own. Having the right systems and technology in place can make everything simpler. Contact us today to find out more about how the chemical industry of the future will use technology as the cornerstone of global growth.

Here’s why simplification is crucial to your business’s path forward: Taking Charge of Business Simplification: Why Simplification Initiatives Succeed Only When Executives Lead.

About Stefan Guertzgen

Dr. Stefan Guertzgen is the Global Director of Industry Solution Marketing for Chemicals at SAP. He is responsible for driving Industry Thought Leadership, Positioning & Messaging and strategic Portfolio Decisions for Chemicals.