Digital Strategies for Petrochemical Industry
Pranjal Kumar Phukan
Chief Manager - Contrac ts & Procurement
Brahmaputra Cracker and Polymer Limited

Digital transformation has emerged as key to business services to improve customer experiences, operational efficiency and agility by fundamentally changing the way business services are delivered across industries. The article describes how the new and emerging Digital Technologies can transform the Petrochemical Industry for not only optimising the production but the entire supply chain. The author emphasises on the right strategies to implement these technologies for a true digital core through continuous agility, adaptability, and innovation.

"There is no project without close customer interaction - even to the extent of co-innovation. This increases the quality and the customers get what they need."

Digital Transformation in Business Services refers to improving customer experiences, operational efficiency and agility by fundamentally changing the way business services are delivered using digital technologies as the enabler of holistic transformation". New and Emerging Digital Technologies are: Smart Automation: RPA, Cognitive, AI, Machine Learning, Algorithms, Block chain and Virtual, Augmented, Mixed Reality.

Petrochemical companies can use advanced analytics to extract management -relevant information from the large amounts of unstructured data that they generate. This information can then be used to improve how plants are run and to make better-informed and speedier decisions across the full range of a chemical company's business processes. In the wider world, the chemical industry is an essential supplier to myriad other industries, and so the ways these industries are being changed by digital is in turn translating to opportunities and challenges for chemical companies.

There are three main ways in which digital will affect the Petrochemical industry. The first is using digital- enabled approaches to improve companies' business processes, which we call functional excellence. Second is the potential for digital to affect demand patterns in end markets, with implications for the chemical industry's value chains. The third is where digital developments lead to changes in the business models through which chemical companies capture and create value for customers.

Besides this advanced-analytics-based opportunity, there are other digitalenabled advances that may create significant value in the manufacturing operations area. Examples include the use of automated guided vehicles, such as self-driving forklifts, and the use of robots to fill big bags. These advances should reduce costs and improve process stability and safety performance. At the same time, deploying an automated and centralized plant performance-management system should make it possible to steer operations better and to react faster when corrections are needed.

For many subsectors of the chemical industry, this oppor tunity extends beyond production to the entire supply chain, including inbound and outbound logistics and warehousing. Advanced analytics will make possible more accurate forecasting, leading to improvements across the entire sales- and operations-planning process. This will also make possible better scheduling of batch production, shorter lead times, and lower safety stocks with a higher level of flexibility. Integrated 'no touch' ordering and scheduling systems will help to stabilize production planning even further.

Sales and marketing also offers major value -creation potential through digital. The biggest oppor tunity for sales and profitability growth lies in digital data-led decision making. We estimate that digital-enabled initiatives in marketing and sales could improve the industry's average return on sales (ROS) by two to four percentage points. Specialty chemicals could see higher ROS gains in the range of three to five percentage points, with chemical distribution seeing one - to one-anda- half-percentage-point gains.

Digital initiatives in marketing and sales include applying advancedanalytics-enabled pricing systems, generating growth opportunities from data, and using algorithms to predict churn at the individual-customer level and then suggesting countermeasures to the sales force. The impact of these initiatives can be significant. One leading global nutrition player used internal and external data sources to create transparency at a detailed customer-product segment level. Advanced analytics then scanned these millions of lines of data to develop suggestions for additional sales to individual sales reps, with the suggestions delivered via an easy-to-use app. The company saw 8 percent growth in pilot markets, after experiencing no organic growth in the previous five years. A large specialty-chemical company used advanced analytics to reset prices for hundreds of thousands of product-customer combinations in seven core countries, based on individual risk and willingness to pay. By combining analytics, capability building, and change management, the company was able to achieve price increases of 3 to 7 percent, compared to 1 percent increases in previous years.

The second area that will gain impor tance is customer experience and digital go-to-market channels. Our latest proprietary research shows that 85 percent of B2B chemical purchasers would prefer digital channels when reordering a product rather than interacting with a salesperson. Combining a digital channel with process digitization will create an improved customer experience, while lowering cost to ser ve. Again, how much of that potential will actually become bottom-line impact will vary, depending on the competitive situation in specific chemical markets.

A significant opportunity in research and development is to create higher -value-added, higher-margin products at a fas er pace, in particular in specialty chemicals and crop-protection chemicals. Chemical companies will be able to use high-throughput optimization to develop and adjust molecules that offer more value. They will also be able to deploy advanced analytics and machine learning to simulate experiments, to use digital’s predictive power to systematically optimize formulations for per formance and costs, and to data-mine information available from past successful and failed experiments. Not least, they will be able to identify the best possible resource allocation to enhance the per formance of R & D teams and the innovation pipeline. Many of these practices are already established in the pharmaceutical industry but were largely unaffordable for chemical companies. With the emergence of inexpensive computing power on a massive scale, this is likely to change.

Digital and New Business Models in Chemicals
Will digital change the ways that chemicals are sold and distributed, and as a consequence, how value will flow? Will we see a shift from sales of products to sales of ser vices and solutions? Will attackers emerge that disinter mediate established producers from their customers, as we have seen with B2C platforms in other industries? Different segments of the chemical industry will have different answers to these questions: as a general statement, while crop-protection chemicals and some specialtychemical segments are at risk of business-model disruption and some chemical distributors see themselves as potential actors' in future possible disruptions, petrochemicals will probably be less affected.

First, business models that remain connected to the product in use might provide a substantial opportunity in some areas of the chemical industry-for example, through systems that monitor chemical applications in industrial processes. One example drawing a lot of interest is catalysts, where process catalyst manufacturers are increasingly moving toward "performance pay" models, instead of simply selling the product. Staying connected to the catalyst in use allows the catalyst manufacturer to optimize the production process of its customers and presents the opportunity to build a large and valuable knowledge base that can be used to improve catalyst use across its customer base and charge for the service. A number of such models have been in development for more than a decade in parts of the specialty-chemical industry, and there is the potential for an acceleration in their adoption linked to digital. But such approaches will not be applicable for all of the chemical industry: the main focus is where a specialty chemical does a particular job, such as a catalyst or water-treatment chemical.

Second, opportunities for intellectual-property-based business models that generate licensing or consulting fees appear to be emerging. Under this model, a company could charge a fee for providing guidance on how best to use its product, or it could license production of a proprietary molecule to another producer. But examples so far appear to be isolated and as yet unproven.

There is a huge potential for the use of these solutions. IIoT is the key to gathering information, and to automate the physical processes. In terms of Industry 4.0 paradigm, it is the base for a fully digitized facilitysince this technology combined with cloud, analytics, and AI can enable new operational models based on automation and augmented human activities, that rely on predictive analyses for operations and maintenance, production and inventory monitoring, and improving security.

One of the key factors to keeping the downstream business profitable depends on the adequate handling of Safety, Shutdowns, Turnarounds and Outages. This is the result of being proactive with regard to different decisions and IIoT is the basis to achieve such success.

This technology can help prevent human and monetary loses, reduce costs and improve performance. According to Accenture research, IIoT could help increase productivity by as much as 30 per cent due to the introduction of automation, saving up to 12 per cent in scheduled repairs, reducing maintenance costs up to 30 percent, and eliminating breakdowns by up to 70 percent. The US Department of Energy identified that 92 percent of the maintenance related shutdowns from 2009 to 2012 were unplanned, and some researchers estimated a daily cost per refinery in between USD 340,000 and USD 1.7M5. In the safety arena, the explosion of a Petrochemical Plant in the Czech Republic in 2015 cost about USD 177 million, while a similar event in Canada in 2005 cost USD 870 million.

Digital technology, and the data it brings, holds tremendous promise for the chemicals industry. These technologies can all play a role in driving business value.
  • The Internet of Things (IoT), leveraging sensors to capture data from manufacturing, storage, and distribution
  • The cloud, a platform to support a common system of record for both suppliers and customers
  • Analytics, to correlate supply data to product quality and customer satisfaction
  • Machine learning, to assist in predictive maintenance of operational equipment
  • Block chain, to better track transactions for assets, materials, and products But technology alone isn't the answer. In the chemicals industry, it's the use of technology against the right digital strategy that holds the real value. This requires a focus on implementing a true digital core that enables a common system of record through the business. It also requires a corporate mind-set that embraces agility, adaptability, and innovation. It requires a mind-set that is driven by a customer-first, design thinking perspective.