Digitization: From Technology to Impact
Digitization will affect the chemical manufacturer in three main ways. The first is to use digital methods to improve the company's business processes, which we call functional excellence. The second is that digitization may affect the demand pattern of the final market, which has an impact on the chemical manufacturer's value chain. The third is the change in business models that digital development has led to, through which chemical companies have gained customers and created value for them.
Achieve new levels of functional excellence
Chemical companies' business processes, including manufacturing, marketing and sales, and research and development, provide opportunities for performance improvement based on data capture and interpretation. Over the past two decades, superior functionality has greatly increased productivity. Digital technology offers the means to raise productivity to new levels.
Manufacturing is one of the largest and most accessible areas of opportunity, spanning all sectors of the chemical manufacturer, from petrochemicals to pesticides. By adopting digital technology in our production operations, we see the potential to increase ROE by 3 to 5 percent. Most chemical plants continually generate large amounts of data, but discard most of it. Instead, managers should collect and interpret the data to reveal ways to achieve higher yields and throughput, lower energy consumption, and more efficient maintenance. For many companies, these goals can be easily achieved using existing IT and process control systems, while companies that expand the types of data they collect may benefit more.
The contribution to profits can be substantial. A major polyurethane manufacturer performed an advanced analysis of a billion data points collected during the main manufacturing process at one of its plants. This enabled it to identify ways to adjust operations that could increase the plant's isocyanate production by 10% without any capital investment and achieve cost savings by reducing the plant's high-pressure steam usage by 25%. A leading specialty chemical company in the main factory in a step, it USES advanced analysis techniques will produce process modeling accuracy to a new level, and then use the model by the method of specially designed to provide detailed application of real-time guidance applies to plant operators, introduce how to adjust process parameters to optimize performance. It was implemented for only a month.
For many sub-sectors of the chemical manufacturer, the opportunity is not limited to production but extends throughout the supply chain, including inbound and outbound logistics and warehousing. Advanced analysis will enable more accurate forecasting, leading to improvements in the overall sales and operational planning process. This also allows for better timing of mass production, shorter lead times, and lower safety stocks with greater flexibility. The integrated "contactless" ordering and planning system will help further stabilize production planning.
Sales and marketing also offer tremendous potential for value creation through digitalization. The greatest opportunity for growth in sales and profitability lies in data-driven decision-making. We estimate that the industry's average return on sales (ROS) can be increased by 2-4 percentage points through digital marketing and sales planning. The increase in ROS for specialty chemicals may range from 3 to 5 percentage points, while the increase in ROS for distribution chemicals may range from 1 to 1.5 percentage points.
Digital planning in marketing and sales involves applying pricing systems that support advanced analytics, generating growth opportunities from data, and using algorithms to predict customer churn at the individual customer level, and then proposing countermeasures against the sales force. The impact of these moves could be big. A leading global nutrition company uses internal and external data sources to create transparency at detailed customer product segmentation levels. The advanced analytics program then scans those millions of rows of data to make recommendations through a single, easy-to-use application, providing additional sales recommendations for individual sales reps. After five years of no organic growth, the company's pilot market grew 8 percent. A large specialty chemical company uses advanced analytics to reprice hundreds of thousands of product-customer portfolios in seven core countries based on individual risk and willingness to pay.