For each of our markets we have considered the business imperatives, business trends and the impact that emerging technologies and solutions may have in addressing these.
Imperatives
Economic Downturn
The slowdown of the global economy has reduced global sales and will—at some later stage—squeeze production levels in the Chemicals industry. The decrease in chemical sales is directly related to the level of downstream slowdowns.
Market slowdowns could not be countered by innovation in products and manufacturing processes to increase product functionality, efficiency, and cost-effectiveness. It has led to a direct reduction of exploited production capacities.
Globalization
Globalization is forcing continued restructuring in mature markets and investment in developing markets to maintain market share. This requires business models, organizational structures, and information systems to be continually developed and optimized.
Large chemical operations in Brazil, Russia, India, and China (the so-called BRIC countries) are becoming branded producers themselves, often via acquisition of Western firms. In return, Western companies have entered the BRIC markets through joint ventures and acquisitions, in an attempt not to miss the boat in these upcoming markets.
Compliance
Regulatory pressure and consumer expectations are making compliance and transparency a mandatory license-to-operate requirement. This includes health and safety, traceability, and carbon footprint information, amongst others. This also creates improvement opportunities. All companies manufacturing or importing chemical substances into the EU are accountable for compliance with REACH regulations that went into force in June 2008. It concerns approximately 30,000 chemical substances imported or produced in the EU. REACH requires the efficient management of large amounts of data on chemical production and distribution. This has also given rise to the need for a common approach to data standards to enable the industry to ensure compliance without disproportionate cost.
Sustainability
Sustainability and carbon emissions have become an ever more important topic in the Chemicals industry, although their relative importance has decreased as a result of the credit crisis. Chemical companies increasingly put effort into reducing their pollution through cleaner technologies and recycling, as well as through the reduction of energy and raw material utilization. These latter two examples in particular combine the desire to be sustainable with the desire to increase margins.
Sustainability issues generate new potential markets for the Chemicals industry as well, for example through new bio-fuels, new types of packaging, CO2 storage technologies, and white biotech, amongst others.
Business trends
Cost Leadership
Operational excellence has been a topic in Chemicals for a long time (for example, with Total Quality Management and Six Sigma). However, operational improvement in transport management or energy expenditure, for example, is still possible.
As commoditization and competition erode profitability, companies are under profit pressure and are looking for ways to drive flexibility into their cost base—through their hiring policies and alliances with others—in order to sustain their profitability across the business cycle.
Sourcing Strategies
Outsourcing is increasing in depth; it started with simple contract manufacturing, but now entire operations (including logistics, production, and, in some cases, R&D) are moving toward China and, increasingly, India. Moreover, there is an abundance of (mostly cheap) talent there, compared to the West.
Extended Supply Chains
Supply chains are becoming extended across continents as businesses seek efficiencies through new partners and suppliers to service customers across the globe. Supply chains increasingly overlap and form networks that create new relationships and patterns.
Chemical companies can leverage mature and harmonized planning and operational processes to move toward multi-enterprise business process integration.
As the supply chain becomes increasingly extended, the risk of disruption increases. Mitigating the impact of supply-chain disruption is now a key focus for companies with an extended supply chain. In this context, we have seen the rise of supply chain network management.
The visibility of inventory, especially in the context of the increasing use of alliances and subcontractors to both manage working capital and customer order fulfillment, is a key driver for the Chemicals sector.
Innovation
Many manufacturers are looking at innovation to enable them to sustain profitability and pass on costs through new products and services. New technologies are becoming applicable in products and processes: for example, nanotech, biotech, material tech, genomics, and proteomics.
Asset Management
Remote asset monitoring is key to ensuring assets are safe and operating at peak performance—including manufacturing facilities, vehicles, and particularly workers who need to be kept safe in remote and difficult environments.
Mergers , Acquisitions and Divestments
As a result of credit shortages, companies have postponed new divestments and acquisitions. In the longer term, an ongoing focus on market leadership (acquisitions) in core business (divestments) will remain important.
Mergers and Acquisitions (M&As) and de-mergers have left a wealth of legacy systems, leading to an increased need for effective integration or rationalization of supply chains and technologies. This is not all; there is, for instance, an increased need for blending of different company cultures.
Impact technologies
Vast assets from refineries to vehicles will benefit from new Next Generation Enterprise Asset Management technologies with asset condition and status available in real time. For companies operating largescale asset bases, this will be the key to enhanced efficiency.
As new product development activities become virtual, often across continents, there will be an increased requirement for effective Enterprise Content Management (ECM). This can ensure timely design reviews by engineers anywhere in the world, enhanced safety through mandatory reading of controlled documents, and correct version control of design documents when ordering spare parts to minimize downtime.
Remote workers in sales and service may benefit from new mobile applications that will give them vital remote access to information from anywhere and on any device.
The need for business agility will benefit from a Service-Oriented Architecture, impacting across many parts of the business―from e-commerce and Customer Relationship Management to Enterprise Resource Planning and Supply Chain Management.
RFID is becoming central to the tracking of parts in fixed assets, of components in the inbound supply chain, and of vehicle and other transport tracking in the outbound supply chain. This improved supply-chain visibility will also feed into enhanced customer service. Here, as with Sensor Networks and Positioning Systems, the main question is more about the integration side of these technologies than the technologies themselves.
Chemical companies are beginning to establish common standards for Manufacturing Execution Systems and Product Lifecycle Management (PLM) to enable easy exchange of data to speed up product development across functional, geographic, and organizational boundaries and help reduce the cost of manufacture. Furthermore, these systems are increasingly being integrated into ERP systems so that manufacturing and cost data is more transparent across the company.
The business needs to be able to take an educated view on future requirements in a number of areas including sales, inventory, and operations planning Business Intelligence (BI) in the form of predictive analytics and dashboards are of great value here. In fact, there is some convergence of BI with ECM that deals with ‘unstructured’ information.
ERP vendors support standard platforms and deliver additional modules. The trend is towards single ERP as a means of managing legacy systems.
ERP has often been a standardized core vehicle to achieve operational excellence and process harmonization in the Chemicals industry. In addition, ERP increasingly covers requirements for compliancy and sustainability, supporting REACH and GRC (Governance, Risk Management, and Compliance), amongst others.
A single view of information across all data sources by way of Enterprise Information Integration will give the business the on-demand intelligence that is required. Most companies have greatly progressed in information integration by domain, thanks to ERP and Enterprise Application Integration (EAI) solutions. The critical issues remain data standardization and harmonization, and their administration on a global scale (compared with master data management).
All these technology and application integrations should be reviewed in conjunction with Business Process Platform (BPP) strategies. This will drive decisions about when, where, and whether application integrations via ERP harmonization or EAI solutions add more value to the business.
Extended supply chains resulting from globalization, M&A, and supplychain partner collaborations create new levels of supply-chain integration challenges across internal businesses, suppliers, and customers. Chemicals companies can adopt best practices from other industries (like consumer electronics) to develop initial strategies to utilize Multi Enterprise Business Process Platform (ME-BPP) solutions.
The need for better efficiencies and collaboration across the supply chain may benefit from some of the latest Web 2.0 technologies, a powerful enabler for knowledge retention / collaboration as supply chains become more virtual.
)
CONSUMER PACKAGED GOODS >>
Email