Analyst Insight: Every change-management consultant knows that effective transformation within a business requires a combination of people, processes, and technology. Global conditions, regulatory concerns, sustainability efforts, and the need to differentiate based on customer service instead of just price are major drivers for the chemical industry to digitally transform itself.
The chemical industry operates in a competitive and global environment. Currently it’s experiencing an intensification of trade and geopolitical conflicts, with repercussions to the price of oil. The volatility of raw materials and end products is driving chemical executives to seek visibility across their supply chains to mitigate risks and disruptions.
Due to the nature of its products, the chemical industry is strongly affected by regulatory concerns. Health and environmental issues, along with the need for improvements in sustainability, have resulted in more restrictive regulations, raising the bar for product safety and environmental protection. Chemical companies can better keep track of these requirements by removing paper-based processes and digitally transforming their organizations.
Equally important to today’s chemical marketplace is the need for product innovation and singular solutions. By digitally connecting suppliers and logistics service providers into a supply-chain network for orders, quality, and shipment tracking, companies can ensure product quality, reduce the cost of compliance, and support collaboration for safer products. Knowledge, not just data, is communicated upstream for product innovation, and downstream for customer safety.
Chemical manufacturing companies are highly susceptible to fluctuating prices of crude oil and natural gas, which account for 50% of production costs. Consequently, they have a significant effect on the bottom line. To stay on top of rising costs and sustain profitability, chemical companies are digitizing their multi-enterprise supplier procure-to-pay processes and associated documents for labeling, reordering, track and trace, and resource planning. Digitization makes for better contract and commodity-procurement decisions.
In a diversified industry that delivers products to virtually every other sector, customer service has a large impact on growth and operations. Improving on-time, in-full deliveries at lower working-capital costs and with higher customer satisfaction is paramount. Therefore, digitizing inbound customer orders, regardless of format, makes product information more readily available. Companies that provide updates on order status and invoicing across all customer touchpoints can increase differentiation in a commoditized market, and improve customer retention for specialty products.
Internally, pressures to drive margins and support growth in new products and geographies impact the bottom line. New business models are evolving the role of the knowledge worker and key processes for how we buy, sell, and move products and services throughout the supply chain. Digital transformation plays a crucial role in helping companies achieve supply-chain excellence and corporate leadership.
Although IT and digital tools have supported supply-chain processes for decades, today’s digital technologies provide opportunities for innovative answers to difficult challenges. New and emerging technologies such as the internet of things, digital supply networks, artificial intelligence, edge computing and blockchain are enablers in the grand scheme, and will be deployed more readily within the supply chains of chemical companies over the next decade.
David Cahn is Director of Global Marketing with Elemica.