Major challenges such as increasing globalization, disruptive technologies or environmental preservation affect all industries and thus also chemicals. Departments like Supply Chain, Resource Planning or Life Cycle Management will experience a significant boost in efficiency throughout this and the following years.
Have a look at these three major trends particularly relevant for the chemical industry.
1. Accelerated Globalization
The first component relates to a continuous shift in supply centers caused by the advent of shale gas in the US or the move from coal to olefins in China. But not only the supply, but also the demand centers are shifting due to a growing Middle class in emerging markets in Latin America or the Asia Pacific region.
On top of that, globalization allows a relatively easy and fast market entry for small and innovative businesses that are especially competitive in their speed and responsiveness to develop new products and react to changes in the market. Consequently, life cycles get shorter and force chemical businesses to rethink their business models and discover modern ways with cutting-edge technologies to stay competitive.
2. The Circular Economy
The environmental impact of emission and waste cannot be denied anymore which is also why the chemical industry needs to deal with the increasingly strict regulatory requirements. The introduction of the circular economy, however, does not only bring opportunity but also challenges and a huge investment. So what is the Circular Economy and how does it contribute to a sustainable business strategy?
“A circular economy seeks to replace today’s linear “take-make-dispose” approach to resources, in which materials are made into products, the products are used and then the materials are thrown out. A circular economy aims to continuously keep products, components and materials at their highest utility and value. With this model, the materials are constantly cycled back through the value chain for re-use, resulting in less energy and resource consumption.” (Elser & Ulbrich, 2017)
One aspect of circularity in chemicals is to increase the durability of goods or the creation of shareable products to maximize utility in the end user stage. Another, more complex aspect is the so-called circulating molecules which imply the reuse of existing molecules such as PET bottles.
According to Accenture, there are five fundamental molecule/circulating loops in the chemical industry.
- Substituting Raw Materials such as fossil feedstock with renewable feedstock like biomass material.
- Increased re-use of end-user products through partnerships with suppliers and manufacturers
- Mechanical Recycling of molecules to develop reverse logistics capabilities.
- Chemical Recycling whenever molecules cannot be reused in their original intact structure.
- Energy Recovery and Carbon Utilization which involves a complicated process of recovering the energy contained in molecules by oxidizing hydrocarbons to CO2.
None of these five solutions alone is a guarantee for success and most companies would most likely choose a mix of approaches, nevertheless, everyone is encouraged to start somewhere and in the long run, the circular economy is going to show results.
Digitalization is a complementary trend that naturally evolves together with the circular economy and globalization. Buzzwords such as the Internet of Things, Blockchain and machine learning play an important role for achieving innovation in the chemical industry.
Areas such as Supply Chain Management currently face a lot of challenges in handling the numerous suppliers and different raw materials in need of special storage and temperature. Blockchain Technology, for instance, could significantly facilitate the monitoring of these processes as well as the general environment, materials themselves and also employees or equipment. This connectivity of objects and people will positively contribute to automatization, data collection, and a more efficient work environment with reduced costs. According to the IOT Institute, it is estimated that by 2020 between 30 billion and 50 billion objects will be connected.
In addition, installed sensors do not only collect and store data but they also identify patterns and gaps causing inefficiencies and energy loss. This data analysis will play a crucial role in optimizing future energy usage.
Summing up, the chemical industry has to prepare for major changes in their business environment that require not only relatively huge financial investments but also patience and above all the willingness to question or changes strategies that have prevailed for decades.
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