The chemical industry is a behemoth of a business. Its net worth is $4.8 trillion, and it impacts almost every facet of our daily lives.
The technology industry has similar powers. The five largest technology companies (Apple, Alphabet/Google, Amazon, Facebook, Microsoft) combined are valued at $3 trillion. None of these companies could have existed before the digital age began.
These two worlds are about to collide, and the explosion will be enormous.
As Amazon and Alibaba have shown us all, technology is changing markets, and over the coming decade none will be more effected than the chemical industry.
If you would like to read the first part of this article click here.
The latest technology is already changing the chemical industry, with more changes to come. Only those chemical manufacturers or suppliers who embrace the changes will be successful.
To keep you up-to-date, here is a brief summary of the technological changes and chemical industry trends that are being adopted now. Will your chemical company be ready for them?
4. YET Analysis
In the same way that advanced maintenance analysis is being used to maximise the uptime of a specific chemical-production asset, ‘Yield, Energy, and Throughput’ (YET) analysis focuses more on streamlining bottlenecks at a specific part of the chemical manufacturing structure. By doing so, chemical processes can be improved, inefficiencies removed, and profits increased.
YET analysis is also based on big data, as the processes involved may contain millions of ‘data points’. These individual pieces of information alone would mean nothing, but together with the correct computing tools they are able to keep a process operating at maximum efficiency.
Furthermore, because the analysis can focus on a key part of chemical production, even small percentage improvements in operational efficiency can significantly enhance performance.
As McKinsey & Partners observed, “One specialty-chemical company was having output problems at a monomers furnace that makes a key intermediate at its largest site. The furnace’s unstable production rate and low overall output meant that it represented a serious bottleneck for a high-margin segment of output. The company decided to undertake an advanced analysis of the data the furnace’s sensors had collected over 615 days of production, comprising 600,000 samples, each with 63 tags—almost 40 million data points. This analysis identified critical throughput drivers and made it possible to build a model of the production process. The model quantified the interdependence of key variables, where the company had previously only been able to see qualitative correlations, and this provided a more accurate understanding of the process; a test run of the furnace confirmed the model’s findings.”
5. Continued Globalisation
While globalisation has been growing slowly since the 18th century, its spread has been limited by the pace of technology. But what was once limited by the pace of a sailing ship has now been accelerated to the speed of electrons bouncing off a satellite.
Everything has become global, as markets open and close in a rolling wave of commodity trading around the planet. Chemical prices in Europe are affected by chemical deals done in Vietnam. Shale gas fields opening in South Africa are impacted by Chinese environmental policy; worker efficiency on a petrochemical plant in the Middle East affects economic policy in Japan.
As the technology journal DigitalistMagazine, notes, “Accelerated globalization will increasingly impact the chemical industry. Supply centers are shifting due to the advent of shale gas in the U.S. or coal to olefins in China. Also, demand centers are shifting thanks to a rapidly growing middle class in the emerging countries. In addition, new market entrants drive shrinking lifecycles and rapid commoditization of products.”
6. Value-Maximization Modelling
The vast complexity of a chemical company’s business and product lines means that there are thousands, if not hundreds of thousands of variables to consider. The volatility of feedstock costs, long-lead times, by-product flows, international logistics, regional and local legislation, a highly specialised workforce, and ever-changing product pricing all combine in various ways to create impossible to calculate economics.
However, the latest economic thinking and business modelling may have simplified all these factors into a manageable format. It is what Valerio Dilda, a masters graduate of mechanical engineering from the Polytechnic University of Milan, who also holds an MBA from INSEAD calls ‘value-maximization modelling’. The idea that, “The economics of specialties production [such as chemical manufacturing] may demand maximizing output of a high-value product, while commodities production may prioritize holding down costs, but the former is typically built on the latter. Put simply, the businesses may have two separate profit and loss accounts, but they are connected to the same pipes.”
Describing this in more detail he writes, “Value-maximization modelling can optimize the interaction of pieces of equipment across processes. This modelling is an advanced analytics–based technique that shows in real time how to maximize the rate of profit generation in complex production systems and supply chains, encompassing every step from purchasing to manufacturing to sales.
Unlike the limitations of human planners, this advanced-analytics approach typically factors in as many as 10,000 variables and one million constraints to help producers figure out what to buy, what to make, and how they should make it to yield the most profit in each period.”
He further adds that, “The diverse nature of chemical companies’ activities—frequently including both commodity and specialty manufacturing—suggests they can be prime beneficiaries of the value-maximization modelling approach.”
Naturally, this list of how technology is impacting the chemical industry is both simplified, and scary. Like all change, it can be hard to accept. It makes us feel unsettled, but it needs to be embraced. Many chemical manufacturers resist new technology, but as you have read, this can have a disastrous affect.
We may not like it, but technology industry will be impacting the chemical industry greatly over the next decade. And while this may seem unfair, it is worth remembering that the chemical industry has been impacting the technology industry since … well … forever.
If you are interested in reading about other chemical industry related topics click here.
Photo credit; Bravochemicals, Bizjournals, McKinsey&Partners, Carcabin, ITRI, ChemicalsTechnology, Fuelfix & Slideshare
