Industry 4.0 and the chemicals industry
Catalyzing transformation through operations improvement and business growth
In one way or another, the chemicals industry contributes to almost every manufactured product. The industry converts petroleum and natural gas into intermediate materials, which are ultimately converted into products we use daily. With more than 20 million people employed and annual sales of $5 trillion, the global chemicals industry serves as the backbone of many end-market industries such as agriculture, automotive, construction, and pharmaceuticals.1 Changes in the chemicals industry are thus likely to have a ripple effect on a number of other industries.
Industry 4.0 brings together a number of digital and physical advanced technologies to form a greater physical-to-digital-to-physical connection—and it can potentially transform the chemicals industry by promoting strategic growth and streamlining operations.
The rise of the fourth industrial revolution, or Industry 4.0 (see the sidebar “An overview of Industry 4.0”), is likely to drive such changes. Industry 4.0 brings together a number of digital and physical advanced technologies to form a greater physical-to-digital-to-physical connection—and it can potentially transform the chemicals industry by promoting strategic growth and streamlining operations. The time is ripe for such a transformation: Advanced technologies relevant to the chemicals industry—such as the Internet of Things (IoT), advanced materials, additive manufacturing, advanced analytics, artificial intelligence, and robotics—together have reached a level of cost and performance that enables widespread applications.2 More importantly, these technologies are now advanced enough that they can integrate with chemicals companies’ core conversion and marketing processes to digitally transform operations and enable “smart” supply chains and factories as well as new business models.
For example, BASF is using Industry 4.0 applications in its deployment of connected systems and advanced analytics models for predictive asset management, process management and control, and virtual plant commissioning.3 Beyond these traditional applications, the company completely automated the production of liquid soaps at its smart pilot plant in Kaiserslautern. Once a user places an order for a customized soap, the radio-frequency identification tags attached to the soap containers inform the equipment on the production line via wireless network connections about the desired composition of the soap and packaging—thus enabling mass customization without human involvement.4
This paper assesses key Industry 4.0 applications across different stages of the chemicals value chain. With the help of use cases, the paper analyzes the opportunities that Industry 4.0 applications present, and discusses ways in which Industry 4.0 technologies could help chemicals companies achieve strategic imperatives, specifically in the areas of business operations and business growth. Because data play a key role and act as a connecting link between information technology (IT) and operations technology (OT), a solutions layer architecture for data management and use can help executives plan and deploy advanced technologies and address challenges related to Industry 4.0 applications.
An overview of Industry 4.0
As we explore the ways in which information is used to create value, it is important to understand this from the perspective of the manufacturing value chain, where organizations create value from information via the movement from physical to digital, and back to physical. Industry 4.0 combines the connected technologies inherent in the Internet of Things (IoT) with relevant IT and OT, including analytics, additive manufacturing, robotics, high-performance computing, artificial intelligence, cognitive technologies, advanced materials, and augmented reality, to drive the physical act of manufacturing.
Industry 4.0 incorporates and extends these connected technologies to complete the physical-digital-physical cycle (figure 1).5 The physical-to-digital and digital-to-physical leaps are unique to manufacturing processes; it is the leap from digital back to physical—from connected, digital technologies to the creation of a physical object or an improved process—that constitutes the essence of Industry 4.0.6
Broadly speaking, we identify two business imperatives for manufacturers:operating the business and growing the business. The focus on operations and growth can serve as a guide on which areas of the value chain merit greatest attention. Some areas can be readily addressed through Industry 4.0 applications. Deloitte terms these areas transformational plays: areas within the manufacturing value chain in which manufacturers can apply Industry 4.0 to achieve business imperatives.
For further information, see Industry 4.0 and manufacturing ecosystems: Exploring the world of connected enterprises.7
What can Industry 4.0 do for chemicals?
Of the two imperatives of business operations and growth, organizations focused on the former can use Industry 4.0 technologies primarily to improve productivity and reduce risk, while those focused on growth can apply Industry 4.0 to build incremental revenue or generate wholly new income streams.
Table 1 illustrates the Industry 4.0 transformational plays (see the sidebar “An overview of Industry 4.0”) for the chemicals industry. These strategic objectives can be pursued at different stages of the chemicals value chain, and in combination with each other.