Digitization comes with various benefits in the chemical industry, such as facilitating innovation and growth, optimizing performance and costs, and creating a sustainable future.
FREMONT, CA: The question of whether chemical players should invest in digitalization for growth and efficiency is now a rhetorical one. From R&D to customer interaction, digital technology is an integral part of the value chain. Chemical players have accelerated their digitalization investments as the global industry recovers from the Covid-19 pandemic.
For the chemical industry, digitalization is more important than ever: Globally, the second-most important capital issue for chemical companies is digital transformation, according to the EY CEO Outlook Survey 2022.
Due to recent uncertainties such as the Covid-19 pandemic and geopolitical challenges, supply chain constraints and inflation in material and labor costs have hampered chemical players' growth and profitability. In the past three years, more than 40 percent of chemical players have reported a disruptive or revolutionary impact of digitalization across functions.
More than 65 percent of chemical players expect digitalization to have a more revolutionary or disruptive effect on their businesses in the near future.
Embedding digitalization across functional areas is essential because of the following reasons:
Developing resilient supply chains through digitalization: Supply chain constraints have emerged as a key challenge for the global chemicals industry due to recent geopolitical disruptions and fluctuating fuel prices. In spite of the volatility, supply chain planning remains a key application area where digitalization has had a huge impact — almost 60 percent of respondents said digitalization has greatly impacted their supply chain planning in the past three years, and more than two-thirds believe this impact will continue. As the need for more resilient supply chain networks increased, chemical players saw the value in leveraging digital tools for demand estimation, tracking raw material to sources, tracking orders in real-time, automating warehouses and ports for sorting and safety, and optimizing supply chains.
Security through digitalization: The risk of cybercrime against businesses increases as they digitalize their operations. Therefore, digitalization or cybersecurity is one of the themes most widely implemented across chemical players, especially in petrochemical and basic chemical companies.
Digitalization in the chemicals industry: what drives it or hinders it?
A key benefit of industry 4.0 was perceived to be cost reduction. However, chemical players have moved beyond this and are benefiting from digitalization not only through cost reduction but also through e-networking (53 percent) and customer centricity (51 percent).
It is imperative for chemical players to move to a more sustainable business model in light of changing customer preferences and increasingly stringent regulations. Environmental, social, and governance (ESG) and sustainability are as important to chemical companies as revenue growth, according to the EY CEO Outlook Survey. Digitalization can be a huge boon at such a time and facilitate the pursuit of sustainability.
