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Digitalization of Procurement in the Chemical Industry

Michael Grimm
22 October 2018

Our individual lives have gone digital; one wonders how anyone can survive without a mobile phone and the internet, e-commerce, and social media. Digitalization offers unimaginable opportunities for chemical companies and helps solve the most daunting of challenges faced by the procurement departments in the chemical industry.

In Europe alone, for instance, digitalization offers up to 1.25 trillion Euros in opportunities for manufacturing companies and at the same time poses the potential loss of 605 billion Euros in foregone value added costs. It therefore only means that your company could grow with huge margins if digitalization was strategically applied in your organization.

The digital opportunity

Globalization poses the ‘uber’ threat! That one day a company from anywhere on the globe will completely take over another company’s market with a more digitized operational platform.

Chemical companies need to arise and seize the digital opportunities as well as leverage on them. Companies must use digital tools and capabilities to detect any market shifts, create agile and accurate plans, increase consumer awareness, and last but not least, collaborate with strategic business partners in the value chain.

Chemical companies need to shift from simple supplier portfolios to very complex ones; companies can be suppliers and competitors at the same time

It is not debatable that digital transformation brings opportunities that dramatically change and benefit companies. It transforms products, strategies, structures, processes and also our cultures. The future of the chemical industry is one where people, resources, and machines will communicate in real-time and rigid value chains will definitely be replaced with value-added chains. This would be possible because, with digitalization, value is not added subsequently and with lapse of time, but value is added within networks of units which are in constant communication with each other and are able to organize themselves.

Benefits of digitalization

1. Globalization could with digitalization offer the following benefits

  • Real-time access to experts on subject matters across the industry
  • Detect, and adjust more quickly to shifts and arising issues in the market
  • Have an optimized supply chain
  • Integrated view of production, distribution and consumption

2. Stricter regulations 

  • Compliance and monitoring of environmental improvements throughout the sector and optimizing on improvements
  • Trace, track and implement capabilities
  • Improved Document access and management

3. Volatility

  • Incorporate risk and trading in core business operations
  • Inventory management
  • Detecting, understanding, and interpreting shifts in customer needs and adjusting accordingly
  • Policy shifts; understand policies and how they affect the company and adopt safety measures as well as opportunities
  • Major event monitoring

4. Customer connections and intimacy

  • Improved customer sentiment awareness capabilities
  • New research and development for products and services insights
  • Enhanced downstream insights
  • Improved predictive analytics capabilities
  • Optimized inventory management

5. Major structural changes in industries

  • Redirect and allocation of capital across the product lines and business units strategically
  • Greater focus on margins, differentiation in non-commodity as well as customer innovation
  • Improve efficiencies and effectiveness in productivity for commodities
  • Increase joint venture, divesture and M & A activities

6. Capital projections & operations

  • Leverage on expertise from all geographical locations as well as from multiple projects
  • Centralize design and monitoring functions
  • Use analytics to prevent equipment failure
  • Operational capability, maturity analysis as well as improvement

Digital transformation enablers

Internet of things, the autonomy of production, high-speed broadband, and increased automation are some of the enablers of digital transformation. They facilitate and enhance the company’s ability to new market positions, predictive maintenance, fourth party logistics, and value propositions like smart fabrics.

There are four levels of digital transformation that work interactively to prepare the ground for disruptions as well as make them happen.

They include:

Digital Data

Through collection, processing and analysing of digital data, chemical organizations are better placed to make precise predictions and make proper decisions.

Automation

Enhancing traditional systems and technologies with artificial intelligence has increasingly been giving rise to superior systems that are able to work autonomously. They significantly reduce the rates of error; they cut on operational costs and enhance production speeds.

Connectivity

Connectivity avails great benefits to the value chains and networks; when the entire value chain is interconnected through mobile or high-speed bandwidth telecom networks, the supply chains are synchronized and production lead times, as well as innovation cycles, are shortened.

Digital customer access

Mobile Internet provides companies and new intermediaries with direct access to customers, to whom companies can offer full transparency and communicate new products and services.

3 steps to prepare your company for the digital future

  1. Analyse and determine the influence of digital technologies on your industry and company
  2. Analyse the digital maturity of your organization; where is your company at?
  3. Development and implementation of a roadmap

Bottom Line

Digitalization of procurement in the chemical industry remains a key source of solution to the myriad of challenges the industry faces, and it is a door to the many opportunities locked up from the companies. The use of available digital data, the interconnection of value chains, the automation of production processes and the creation of digital customer interfaces is key to transforming business models and disrupt entire industries. Such industries like the print media who have seen their importance wane should give us a clue of what will happen to companies which disregard digital capabilities.

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