Although it's not at the bottom of the group, the chemical industry has advanced digital transformation more slowly than the average industry. COVID-19 has significantly accelerated the momentum of digitization among chemical facilities, as it has with every vertical industry.

Even reluctant facilities were forced to acknowledge the need for digital transformation due to adapting to remote and hybrid work practices, coping with a fractured and occasionally broken supply chain, and meet shifting customer demands.

A KPMG survey found that 48% of manufacturing CEOs said that their companies' digital transformation had advanced by a few years and also that 96% of them have seen it accelerate. The Manufacturing Leadership Council (MLC) recently conducted a survey, and 82% of respondents agreed that the pandemic had "generated a new sense of urgency," driving investment in new technologies and digitalization.

As they progress towards digital maturity, various manufacturers are at different stages and are driven by different motives. This piece is a part of a series exploring how various process manufacturing industries have been impacted by digital transformation.

The State of Digital Transformation in Chemical Manufacturing

Digital transformation and innovation have only been gradual over the past ten or so years, but they are now accelerating. Customer demand, supply chain operations, workforce interactions, and maintenance routines were all shaken by the pandemic, while demands for sustainability, personalization and higher efficiency grew in the background.

Currently, digital transformation is considered essential. According to one survey, digital transformation is more essential to 64% of chemical CEOs than innovation, portfolio review, cost reduction, and cash flow protection as their top strategic priority for the next two years. According to another study, 66% of executives in the chemical manufacturing industry anticipate radical change during the next three years, up from 31% in 2019.

Over the next five years, chemical businesses anticipate spending an average of 5% of their annual revenue on digital operations solutions, and 75% believe they will have advanced digitalization by 2026. The digital maturity profile for the manufacturing industry is 39%, but the chemicals vertical is slightly ahead at 42.2%.

However, there are indications that chemical plants are having difficulty moving beyond the pilot stage. 30% of chemical plants are still conducting pilot programs, 30% are preparing to implement digital transformation strategies, and 35% are already doing so. According to the overall industry average, 41% are in the launch stage.

The difference between the more technologically proficient plants already using digital transformation strategies to more complex use cases is widening. According to Gartner, there is a widening gap between chemical plants that are digital leaders and those that are not; the latter group is more likely to fail.

Regionally, Asia-Pacific plants are more advanced and are taking advantage of strategic opportunities brought on by digitization. In contrast, plants in Europe and North America are currently just concentrating on making operational improvements. Only thought leaders in this area claimed that cost savings were the main advantage of digitization, as opposed to plants in other regions that pointed to enhanced market and customer access.

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Key Trends in Digital Transformation in the Chemical Industry

The chemical industry is complicated, with numerous sub-sectors dealing with various challenges. Some sub-sectors, including those serving the automotive, aerospace, and oil and gas industries, saw demand decline due to the spread of COVID-19. In contrast, others, like those serving the pharmaceutical industry, saw demand grow and change.

As a result, specific disparities exist in the sector's primary digitization areas. For example, while specialty chemicals with smaller batches but higher profit margins focus on improving quality, large plants focus on increasing throughput speed.

To respond to quick and frequent changes in demand, supply, and working circumstances, however, every plant must optimize output, reduce waste, improve safety and sustainability, and become more agile. The three most popular applications for digital transformation are expected to be the Industrial Internet of Things (IIoT), AI, and cloud computing during the next two years, with 67%, 64%, and 61% of the market share, respectively.

  • Optimizing Production
    The first and most valuable use cases of digitalization in chemical plants focus on production optimization through improved equipment performance, process automation, remote and predictive monitoring, and simplified maintenance.
    Advanced analytics is essential, and according to a survey, the three most significant challenges to digitalization are.
    • Better data analysis (43%).
    • The integration and optimization of systems and processes (33%).
    • The enhancement and integration of data management (29%).

    Advanced data analytics, such as predictive maintenance, are the main focus areas for 71% of manufacturers. Machine learning (ML) and AI-based predictive analytics can identify abnormalities that point to fouling, impending component failures, bottlenecks, or other problems that may impact product quality or quantity. They generate early warnings that frequently call for a quick fix. Still, if the issue had gone undetected, it might have been necessary to replace the component, perform a labor-intensive repair, or even stop production. Early warnings also let maintenance crews schedule repairs for the most reasonable periods.
    Chemical facilities, which often provide basic chemicals for use as end products in other industries, have a special responsibility to maintain consistently high product quality. However, doing so can be challenging, given the significant variations in raw material supply and quality. As process engineers can change the mix on the fly in response to fluctuations in quality, feedstock, or ambient temperatures, better data and analytics enable finer and more frequent adjustments.
    In addition, end-to-end (E2E) digital transformation enables plants to use data and analytics to forecast low demand, push lower-margin volumes into the market to fill capacity and cut fixed costs, or more efficiently distribute demand throughout the plant. They can quickly scale up production in the most efficient methods when demand increases.
  • Supporting Remote Operations
    The COVID-19 pandemic compelled plants to reassess their capacity to accommodate remote and hybrid operations. Remote teams can collaborate and communicate more effectively in manufacturing chemicals, just like in any other industry. A Deloitte survey shows 61% of CEOs plan to create a hybrid production strategy during the next three years.
    Digital twins, which replicate specific systems, procedures, or the complete plant in digital form, are also produced by chemical plants. Digital twins allow for remote diagnostics, maintenance, frequent remote repair, and remote visibility into processes and equipment. With AR technology, maintenance workers may routinely look into and resolve issues remotely, hastening the resolution process and minimizing plant downtime or production delays.
    Additionally, plants can reduce the number of onsite staff required without impacting production output because of the advanced use of sensors to assess corrosion, fouling, and changes in the quality of raw materials.
  • Reducing Waste
    The primary benefit of digitally transformed plants so far has been cost reduction. The price volatility of raw materials is a problem for the chemical production industry because customers naturally want continuous low prices. Minimizing waste is critical since plants must deal with rising energy costs.
    Early warnings of inefficiencies and prospective part failures can allow maintenance crews to perform affordable repair work rather than replacing a part, increasing the lifespan of the equipment. Process efficiency is related to how little energy is used throughout a process and how little raw material is lost.
    Analytics tools that monitor fluctuating raw material prices aid factories negotiate the best deals with suppliers and preparing in advance for price rises. The risk of oversupply is reduced since plants can prepare the proper quantities of various products thanks to more precise demand predictions.
  • Unlocking New Growth Opportunities
    Although the original use cases for digital transformation focused on improving operations, more technologically advanced plants now embrace digital technologies to open up new potential growth, promote innovation, and boost their competitive advantage.
    To design new materials or chemical structures and create new synthesis pathways, AI is used in chemical research to enhance sustainability. With the help of multivariate analysis, scientists can more precisely pinpoint how each ingredient in the mixture affects the final product. Automation improves R&D for new products from two to three years to roughly four to six months, allowing manufacturers to satisfy demand quickly.
  • Opening Up Visibility into the Supply Chain
    The pandemic's disruption of supply lines brought attention to the vulnerability of chemical plants. As a result, companies have concentrated on enhancing supply chain integration and visibility. More than 60% of manufacturing leaders indicated they would emphasize the resilience of their supply chains.
    Plants are implementing digital twins to gain a single perspective of the whole supply chain, from raw materials to manufacturing to market forecasts. They can react to changes and bottlenecks more quickly in this way. Additionally, manufacturers are nearshoring and reshoring their supply chains, integrating their new suppliers into a digitally integrated ecosystem.
    Companies can create and produce the right products that meet demand and the available materials when there is a seamless digital supply chain with complete data sharing upstream and downstream.
  • Safety, Compliance, and Sustainability
    The chemical industry is heavily regulated due to the number of hazardous chemicals and enduse industries that rely on them. Companies use digital transformation to boost safety awareness, reduce emissions and dangerous flare incidents, and guarantee a transparent and accurate audit trail.
    The frequency with which workers must enter dangerous circumstances to monitor operations or perform maintenance and repair work is reduced thanks to digital twins, remote monitoring, and solutions for predictive maintenance. The emissions decrease as the plant operates more effectively and smoothly.
    Additionally, paper controls and monitoring documents may not be accepted in the event of a safety or compliance audit, whereas digital documentation is more accurate and trustworthy.

Challenges Facing digital transformation in the chemical industry

The digital transformation of chemical plants is progressing slowly for various reasons. The main one affecting most manufacturing companies is the need for more qualified talent. Even when the pandemic subsides, most US manufacturers claim they will still have trouble finding the necessary skills for the following 12 to 18 months.

Recruiting fresh digital talent to the chemicals industry is challenging since it is viewed as an older, less attractive industry. Only 15% of companies, according to the Gulf Petrochemicals and Chemicals Association (GCPA), have a successful approach to finding digital talent. 40% of companies worldwide regard a shortage of qualified workers as the most significant obstacle to digitalization.

Furthermore, chemical industries need more leadership support and an adequate understanding of the benefits of digitalization. Only 38% of GCPA members believe their company fully understands the impact of digitalization on the chemical industries, and 30% of global companies claim they still need clarification about the economic benefits of digital transformation.

As previously mentioned, several plants are having trouble growing from their pilots. They need to evaluate their work results or pinpoint the areas that will yield the highest rewards, preventing them from implementing digitalization across the entire factory.

The temptation to employ digital transformation only for the most obvious use case prevents companies from enjoying the broader benefits.

Benefits that digitization brings to chemical companies

In the chemical sector, digital technology is used to streamline production processes and improve yields, allowing greater flexibility. In particular, process manufacturing also benefits from the integration of development, production, and supply data, which allows manufacturers to respond to the wishes of each customer and react sooner to market demands.

Knowing the correct information at the right time and in real-time is essential to make quick and effective decisions.

Companies that adopt digital transformation will achieve notable benefits in the short, medium and long term: from the control and monitoring of projects to their application in manufacturing, facilitating collaboration between teams thanks to the integration of processes and communication tools.

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The COVID-19 pandemic makes it essential for chemical plants to embrace digital transformation. The difference between companies that have attained digital maturity and those still working to find the requisite talent and grasp its benefits is continuously expanding.

Plants that quickly adopt digital solutions for remote monitoring, supply chain visibility, waste reduction, production optimization, raising their safety profile, and opening up new opportunities will profit from higher profits and increased revenue, whereas those that hesitate for too long risk failing in the long run.

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