Global chemical companies need innovative solutions to resolve conventional issues
Published: 25 August 2015
With the market becoming less forgiving and more challenging, chemical companies can no longer rely on their traditional approaches such as cost reduction and balance sheet clean-ups to boost business performance. To survive, companies need to know the unknown and expect the unexpected. This requires the adoption of advanced analytics techniques, which enable companies to identify growth opportunities, realize cost savings and shape their portfolio, according to the latest report from Deloitte.
Titled “The feedstocks prism: unveiling value in volatile and complex petrochemicals”, the report reviews how chemical companies can benefit from advanced analytics and highlights the emerging trends of the sub-sectors of the chemical industry and in different regions. It also provides an overview of the analytic techniques, digital applications and exponential technologies.
“The market is ever changing in the chemical industry. Asia and the Middle East are expected to play a more important role in global chemical production. Another prevailing trend is the constant shift of choices in energy underpinned by breakthroughs in renewable sources. Only the fittest will survive; companies will always need to review their business strategies to adept to unpredictable changes in the marketplace,” said Yann Cohen, Chemicals Sector Managing Partner, Deloitte China.
The report said most chemical companies continue to revel in the past when they counted on fundamental strategies for positive results. The reality is that these strategies which they had mastered over the past 25 years have produced stubbornly slow performance. To move ahead this one-way journey, companies need to turn to multidimensional thinking, implement proactive and strategic structural changes, and give due attention to megatrends.
"Transformation, which is necessary for global chemical companies to navigate the increasingly volatile and complex environment, can be attributed in large measure to how changes in information technology, digital design and discovery, materials systems commercialization, biotechnology, manufacturing technology, and trans-ecosystem collaboration are being deployed and by whom," said Cohen, noting that such transformation is made possible in the presence of a strong and comprehensive multi-disciplinary data sharing platform which supports companies to monitor and make sense of several complex layers of variables in addition to considerations around investment, relative cost position, raw materials spreads and transportation costs.
To elaborate with an example, Cohen said, "We have witnessed the recent trend of low oil prices and the subsequent impact on the global economy, which have been driven by weaker demand in both Europe and Asia, and increased production in North America. However, oil price fluctuation is almost unpredictable, which also increases uncertainties for chemical companies worldwide. The use of advanced analytics can help companies to gain a more precise understanding of the potential of emerging trends, including their broader complexities and interdependencies.”
The report said chemical companies will need constant attention and re-evaluation of cost positions, fuel mix and feedstock strategies because of their peak performance over the coming decades. To repeat their success stories, companies will need to unlock exceptional performance. Data mining and advanced analytics combined will be a good starting point to help find practical answers to questions of volatility, uncertainty and a rapidly changing competitive environment.
“Deep data analyses are now possible on the back of heavy corporate heavy investment in origination and servicing systems to streamline processes over the last two decades. This has significantly increased the amount of organized data that permits deep analyses. Now, the focus is shifting from 'what needs to be done' to 'what needs to be known'," said Jiaming Li, Strategy & Operation Director, Deloitte China.
The report said creating operational excellence is also enabled by what is collectively called the “digital applications – a combination of multiple applications across data capture and management, analysis and data science, technology and process optimization through machine learning, and the evolution of the "Internet of Things". At its most basic tier, digital applications will be employed for broad and deep complex data analyses.
“But, it is more than that. A continuous digital thread is set to redefine all aspects of chemicals production from product development through manufacturing, with digital disruption already starting to take hold as companies employ new tools and techniques across the value chain. Companies are migrating to what is commonly known as 'Industry 4.0', where big data analytics and more will be adopted for optimizing how products are designed, made, and distributed, and how work processes are designed and executed,” Li said.