How Industry 4.0 can transform chemical manufacturing

Oct. 23, 2017

A successfully executed digital transformation can help manufacturers improve in-house operations and enhance customer and supply chain relations.

Today, chemical manufacturers face no shortage of challenges. Confronted with slowing growth, regulatory hurdles, fierce competition for talent, and mounting pressures from customers, chemical manufacturers need to rethink their business processes and technology to maintain competitiveness.

The good news is that technological innovations can help organizations confront their various challenges head-on. Industry 4.0, the manufacturing segment of what is more broadly known as the fourth industrial revolution, provides a solid foundation for organizational innovation. With the erosion of barriers between the physical and the digital, chemical manufacturers can improve operations and compete more effectively with new, digitally enabled strategies.

There is no single Industry 4.0 product, though. Manufacturers can choose from numerous new technologies that will help them stand out from their competitors. For example, companies can integrate disparate front line and back-office technologies to become more agile, use mobility and the cloud to streamline their operations, and find new value for customers in the interconnectivity provided by the Industrial Internet of Things (IIoT). The latest technology offers new ways of engagement with customers, suppliers and employees. As a result, the opportunities abound for forward-thinking manufacturers.

However, individual technologies alone don’t constitute the digital transformation that is at the core of Industry 4.0’s promise for chemical manufacturers. Instead, companies need to make strategic use of digital assets and integrate these technologies into their operations. Business processes need to change if companies hope to maximize the effectiveness of technological innovation.

In the end, a successfully executed digital transformation can help chemical manufacturers improve in-house operations and enhance customer and supply chain relationships, all of which can help them improve profitability in an increasingly competitive marketplace.

Optimize processes in the plant

The real-time data procured through Industry 4.0 technologies can help chemical manufacturers enhance operations and boost efficiency within the four walls of their plants. This data offers manufacturers increased insights, which can help them avoid wasting materials, make better procurement decisions schedule shipments more easily and automate testing – and ultimately improve overall equipment effectiveness and output quality.

For example, sensors placed on machines can track conditions that may slow production or cause them to break down. These systems can also alert managers via their mobile devices if they need to closely monitor the situation or take action. As more data is collected, companies can begin to recognize patterns and proactively address machine maintenance without negatively impacting production schedules. Further, sensors on the equipment or in the building can track fumes, temperatures and other conditions to ensure a safe environment and the best quality products.

Additionally, a manufacturer can feed equipment data into its financial management system to analyze the costs of maintenance and breakdowns, and calculate the returns of improving operating efficiency. For a chemical manufacturer carrying out a digital transformation, these insights can help determine if it is on track with efficiency improvements and better understand the longer-term cost savings associated with implementing new technologies.

Another key internal benefit of Industry 4.0 for chemical manufacturers is its ability to enhance recruitment. Like the rest of the manufacturing industry, chemical manufacturers face a pressing need to attract highly skilled, younger workers. These workers grew up using mobile devices and advanced computing systems. As a result, they want to work for companies that are innovative and that offer advanced, collaborative and responsive technology.

Therefore, cutting-edge technology is essential to helping companies appeal to the tech-savvy workers manufacturers need to ensure long-term competitiveness. The manufacturers that embrace the IIoT, mobility and other aspects of Industry 4.0 will put themselves in an advantageous position when it comes to talent recruitment and retention.

Improve customer service and experience

In addition to helping enhance efficiency within the manufacturing operation, Industry 4.0 can also help chemical manufacturers cope with changing customer demands and needs. By leveraging real-time data and enhanced connectivity, a digital transformation can enable a manufacturer to get closer to its customers and more effectively address new requests or issues with products.

Customers are often less interested in the product than what it enables them to accomplish for their own customers. Prior to Industry 4.0, a manufacturer could do little to address this dynamic beyond optimizing its product and responding promptly to customer requests to the best of its ability. With an Industry 4.0-enabled operation, however, chemical manufacturers can pull insights from real-time data and add more value to their customer interactions. This can include sharing intelligence and analytical services with customers to help them improve equipment performance and meet important key performance indicators in their operations.

For example, a manufacturer can install gauges on its product dispensers to monitor use in real-time. With this data, the company could then help its customer maximize efficiency by letting them know if they are using too much or too little product or using it too often or not often enough.

Chemical manufacturers can also take this one step further and formalize this approach by transitioning to a service-oriented business model with their customers. A service contract could commit the manufacturer to delivering not only the product, but also the benefit of the product.

Take, for example, an industrial cleaning chemical. For this product, the ultimate customer value may be related to the cleanliness of their production lines or facilities. The service contract in this model defines how value will be delivered in terms of outcome rather than product consumption. It will also cover the communications and actions that should take place when the customer’s needs change, or when unforeseen circumstances make it difficult for the manufacturer to maintain proper service levels.

Connecting the service to the customer’s end goal allows a manufacturer to position itself as a more valuable player in the customer’s production process. It may also benefit the manufacturer by removing its dependency on certain key ingredients and raw materials. Under this service model, the manufacturer will have the flexibility to replace ingredients as needed, as long as its customer’s needs are met.

In addition to adopting this service-oriented approach, a chemical manufacturer can leverage data to anticipate restocking needs and provide materials to a customer at the optimal time – before the material runs out but not too early that it takes up space or spoils before use. Further, having insight into the sales cycle, shipment tracking and customer product levels means that a chemical manufacturer can effectively supply product, at the optimal time, for any customer in the world.

Another way manufacturers can use digital transformation to innovate their portfolios is through horizontal integration – or collaborating with other players in the supply chain to provide enhanced products and services. Cloud technology allows manufacturers to easily share data with vendors, allowing for better collaboration. For example, if a manufacturer produces a coating that goes on a conveyor belt, they can partner with the conveyor belt manufacturer to deliver a more complete and improved product to the customer.

Manufacturers that leverage Industry 4.0 technologies in an effort to more proactively engage with customers and partner with vendors will enjoy stronger client relationships.

Establish a solid foundation to make the most of Industry 4.0

An effective digital transformation will require a chemical manufacturer to not only adopt new technology tools, but also implement new business processes. This forces employees to alter routines and learn new skills. Therefore, to ensure company-wide buy-in and a successful initiative, it is vital that executives lead Industry 4.0 projects from start to finish.

A chemical manufacturer needs to plan its Industry 4.0 initiative so it connects with the company’s overarching vision and mission. Additionally, company leaders need to provide measurable milestones and proactively perform change management to ensure all necessary players in the business transition are on board with the strategy and the required steps.

Tactically, the first step in a digital transformation is to establish a solid technology foundation. Technologies such as modern enterprise resource planning and customer relationship management systems are necessary to underpin a successful Industry 4.0 operation. These advanced back-office tools, which include built-in business intelligence and analytics capabilities, can better enable manufacturers to fully leverage the front line technologies in their plants and capitalize on the potential of Industry 4.0.

Additionally, these modern systems are in the cloud. This frees chemical manufacturers from having to acquire and maintain complex and expensive hardware. It also enables chemical manufacturers to take advantage of IoT technologies and more easily capture, process and analyze data from the plant floor and customer sites. For example, a floor manager can see usage data from gauges on the company’s products in a client’s warehouse. Or, an equipment operator can use a mobile device to check floor temperatures from thermometers on the machinery. This real-time data can support improved visibility over previous data-capturing methods, such as spreadsheets, and allows users to form better insights and make more educated decisions.

The cloud is also scalable. Automatic updates and ease of expansion allow chemical manufacturers to continue to adapt new technology as they grow.

While cybersecurity is a concern for every industry today, it should not hold a chemical manufacturer back from embracing the cloud. The major companies behind Industry 4.0 technologies have committed to the cloud, and, as a result, have devoted significant resources to protecting company data. Manufacturers should have confidence in the cloud while also further bolstering their cybersecurity preparedness by conducting cybersecurity risk assessments, penetration testing and vulnerability scanning for their IT systems as well as connected devices.

The cloud underlies the myriad technologies that power Industry 4.0. As a result, it’s crucial that chemical manufacturers recognize the benefits of the cloud and embrace it fully in their operations to ensure maximum benefit from Industry 4.0.

Boost competitive standing

The chemical manufacturing industry has a key opportunity today to embrace the digital transformation and technological developments of the latest industrial revolution. In fact, it will be hard for companies that choose to ignore this trend to stay competitive as new innovations allow more advanced competitors to enhance products, improve efficiencies, attract top talent and better connect with customers.

It’s important to remember that embracing Industry 4.0 is not about a single software installation. Instead, it requires a long-term commitment from company leadership to alter the technological foundation of the company and key business processes.

Companies that truly embrace Industry 4.0 innovations will realize improved performance within their manufacturing operations and position themselves to add more value to customer interactions. This will, in turn, lead to sustained success and long-term profitability.

Debbie Altham, CA ANZ, is the industry director for process industries in Sikich LLP‘s technology practice. With more than 30 years of experience, Altham helps chemical and biotech manufacturers implement business application technologies and navigate toward digital success. She earned her bachelor’s degree from Manukau Institution of Technology in New Zealand.

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