Five challenges that chemical companies must address in 2020

New technologies and new business models will mature to a scalable extent, while the industry still faces traditional challenges such as volatility. Dr Andrea maesen and Jan haemer, senior partners at Simon kucher & partners, have provided guidance on how chemical companies can deal with these challenges.

The chemical industry will face global macroeconomic trends and events, such as trade war, political disputes and recession risks throughout 2020. Simon kucher & Partners' chemical industry practice has identified five industry specific additional challenges that manufacturers must address.

1. new technology: by 2020, some technical improvements may eventually reach commercial level.

"R & D and technology may be ready, but manufacturers need to ensure that their business processes and teams capture the full value of these opportunities," maesen explained. Examples include emerging recycling solutions and improvements in EV Batteries. "

"Some companies have exciting innovations that will help fundamentally change the industry," Jan haemer added. Monetization of innovation and value pricing is not new to the game industry, but the existing opportunities are huge. The right pricing and sales will bring about significant differences. "

2. fast customization: there has been strong technical progress here. Manufacturers can use supercomputers to analyze the properties of materials and predict their interactions in the formula, while physical testing of samples and products takes a short time. Companies can develop better, faster, and more effective solutions.

According to maesen, this creates two opportunities: "the first is efficiency. If you have a lot of ongoing efforts in your research pipeline, you can now quickly test thousands of potential customer solutions. The second opportunity is to optimize marketing and sales resources to effectively commercialize the results. "

"Money is an objective way to decide what solution to pursue or what issues to prioritize," Hamel added. The ability to identify and quantify the value of these solutions is a key success factor. This requires greater cooperation and integration in sales and R & D processes than in the past. "

3. planning in the fluctuation: the vast majority of the revenue and profit of the chemical industry comes from standardized products. The more mature the product, the more vulnerable it is to the fluctuation of demand, which is caused by inventory and inventory removal.

Dr Andrea Mason clarified: "changing capacity, uncertainty around trade wars and the pursuit of lean supply chains worsen the situation, making pricing in these markets a challenge. Companies need better demand and price planning to manage volatility in a more disciplined and forward-looking way. This is another area of more advanced science and technology that can replace the "intuitive" decision. Advanced analysis and machine learning can now reduce the risk of being too radical in price and volume decisions. "

"The challenge in implementation is to provide better visibility and pricing and sales guidance to the sales team," haemer said. These technologies are assets used for sale, not replace them or reduce their responsibilities. "

4. digital market: digital market provides one-stop shopping services, such as Alibaba in China or chemondis in Europe. However, for chemical companies, digital market may be a double-edged sword. "The reasons for growth are very good because of this listing. In addition, they reduce the service costs of standardized products by substantially reducing transaction costs. However, if manufacturers are not clear about their market entry strategy, define their portfolio strategy, or calibrate their prices in a way that balances quantity and profit appropriately, they may amplify the impact of commercialization. " Heme said.

Andrea maesen said it was a huge opportunity: "preparing for this additional market channel will enable chemical companies to carefully arrange and shape their commercial products for customers in a more differentiated way and ensure a stronger and effective organization."

5. "chemicals as services": sensors and the Internet of things (IOT) generate data to improve customer and manufacturer visibility in process management, system application and use. For example, Yikang said they would not price by quantity, but would manage customers' wastewater. At the same time, paint manufacturers are committed to managing the surface of customers.

It is time for chemical suppliers to look to Industry 4.0

In the post coronavirus era, investment in industry 4.0 technology may pay off

The external impact of coronavirus on chemical suppliers will bring a unique impetus, which may push you to innovate. Usually, economic recession will force enterprises to innovate new business models. Maybe it's time to focus on digital transformation and technology in the form of industry 4.0 to improve the state of the supply chain.

After coronavirus infection, your enterprise needs to be competitive and achieve greater success with less resources. If you're not already on this path, you need to think deeply about what your business can gain from digital transformation.

For example, digital transformation can support the reliability and efficiency of the supply chain. It encourages systems that are easy to integrate, operate and audit, improve availability, production, efficiency and quality, thereby saving you money.

You may need to view systems that can plan, forecast, and process inventory, as well as financial information related to the supply chain. You will need platforms that can help you make influential decisions, making complex processes (such as expanding into new markets) less complex. With systems that control data, you can take advantage of emerging technologies like artificial intelligence, automation, and machine learning,

As a chemical supplier, your business may need to focus on technologies in the post coronavirus era, which can help you:

Demand planning - the ability to predict the demand for chemicals so that you can deliver them to customers in an effective way. You can use analysis to examine information such as sales data and customer orders to make informed decisions about inventory and production levels.

Real time decision making - with data support from the Internet of things (IOT) connected to devices, you can combine historical and real-time sensor data for analysis. By combining these data with machine learning algorithm, we can create prediction model and pattern, so as to accurately point out the possible fault points.

Purchasing - when it comes to supply, you want the right technology that can help you analyze what you buy, from whom, at what price, in what quantity. With the cost soaring, you need to meet your needs at the same time, let your money get the maximum return. Having the right technology can help you find reliable, affordable and high-quality suppliers who can find a balance between the quality of materials and affordable prices.

Production technology can help you plan, develop, manufacture and deliver goods or services effectively. The right system can help you understand the production process deeply and make wise business decisions

Inventory management - chemical suppliers can make detailed and real-time records of their products, including information used in sales, procurement, warehousing and production, so as to achieve comprehensive quality control.

Logistics - the right system can help you transport your products effectively and help you package, transport, distribute and deliver through multiple channels.

Big data and artificial intelligence

Like other industries, chemical suppliers generate a lot of data, which enables them to better understand the business and improve operational efficiency. You can collect data through computers and manufacturing systems, as well as IOT sensors in the factory floor.

You can also use the Internet of things technology to maintain the equipment, which can continuously update the mechanical status in real time and provide notification when a component may fail. IOT device data helps optimize performance and reduce waste.

The R & D and quality control team can screen the data of each stage of the manufacturing process from the starting raw materials to the final stage of product packaging and distribution. Throughout the manufacturing life cycle, you can store a large amount of useful data, and technology can manage it in a practical, efficient and effective way.

Today, we have computing technology, interconnected systems, automation and artificial intelligence (AI), which can analyze a large amount of factory data generated by the environment and the Internet of things. All of these enable you to build optimized and integrated end-to-end production processes, enabling you to create better products and bring high-quality chemicals to market faster.

Brexit has had a huge impact on chemical companies in the UK

In 2018, 60% of the UK's chemical products will be exported to the EU and 75% of its raw materials will come from the EU. A close relationship with the EU is crucial. The UK chemical industry needs frictionless, tax free trade, regulatory consistency and access to skilled personnel.

The chemical industry has repeatedly expressed no interest in brexit without an agreement. However, given the high probability that this will happen, market participants are preparing for the day when it will eventually become a reality.

After the end of the transition period on December 31, 2020, brexit will bring a series of challenges to the chemical industry.

A new era of trade

No agreement means that all exports to the 27 EU countries will be subject to tariffs. Tariffs on chemicals are expected to range from zero to 6.5%, averaging about 4%. British enterprises will no longer be able to enjoy preferential tariffs when exporting to some countries that have negotiated free trade agreements with the European Union.

One of the major challenges facing the chemical industry is the determination of rules of origin. Products and raw materials in chemical industry are usually stored, mixed, mixed and transformed on the basis of original raw materials. Once the UK leaves the EU, it will need to prove that it has not been used by other countries in order to obtain low tariffs to enter the EU 27 market.

The EU-27 is unlikely to allow the UK to import foreign goods, repackage them and sell them to the EU as if they originated in the UK. As a result, exporters will need to comply with EU rules of origin, which is both time-consuming and expensive.

Can the UK chemical industry enter the EU?

In the event of brexit without an agreement, the EU chemical registration, assessment, authorization and restriction (reach) will immediately cease to apply to the UK. After brexit, the UK's exports to the EU will still have to meet the reach standard, while its imports will be subject to the new UK legislation.

Chemical companies can provide the latest list of substances supplied in the UK and other parts of the EU, as well as the latest list of UK and EU importers. They can then determine the level of supply in the UK and the EU, respectively, to determine which substances need to be registered in one or both systems.

human capital

Among the non UK born EU employees, the proportion of professional scientific work is the highest, followed by contract workers and a small part of non professional labor force. Some companies expressed concern that replacing non UK professional workers would be a challenge.

Chemical companies must encourage their employees in the EU to apply for pre settlement or settlement status. They should also identify any potential skill gaps or shortages resulting from brexit, ensure that skills are in place within the company, and consider whether they can train and improve the skills of existing employees.

The future of the world after brexit

No agreement brexit seems to be the most likely outcome that chemical companies have to prepare for, and they resent the event. Its ultimate goal is to simplify its chemical and industrial decision-making.

However, the chemical supply chain is highly interdependent, so delays at the border will bring additional challenges, which translate into capital losses.

Only time will tell whether brexit is good or bad for the EU and the UK.