Why the chemical industry is prioritizing digitalization

This pace of digitalization is expected to continue as more than 65% of chemical players expect digitalization to impact their business in a more revolutionary or disruptive way.

Digitalization must be embedded across functional areas

As the need for an online model rose — for business operations as well as customer interaction — chemical players witnessed the maximum progress in digitalization of administrative functions and customer interface since 2020. Further, with technologies such as automated chemical synthesis, digital tools are expected to be increasingly leveraged for developing new products and services with 80% of chemical players leaning in that direction.

1. Digitalization to develop resilient supply chains

With the recent geopolitical disruption and fluctuating fuel prices, supply chain constraints have emerged as a key challenge for the global chemicals industry. Considering the volatility, it remains a key application area that reaps huge benefits from digitalization — almost 60% of respondents reported that digitalization has highly impacted their supply chain planning in the past three years, and more than two-thirds of survey respondents believe a similar impact would continue over the next three years. As the need for more resilient supply chain networks increased chemical players see value in leveraging digital tools for demand estimation, tracing raw material to sources, real-time tracking of orders, automation at warehouses and ports for sorting and safety and optimizing supply networks. 

2. Digitalization for security

As companies digitalize their operations, the risk of cybercrime against the business becomes an inherent concern. As a result, digital or cybersecurity is one of the themes with maximum implementation across chemicals players, more so in the case of basic and petrochemical companies with their huge production plants.

Chemical players look to develop a robust digitalized business

The wide plethora of technologies enhances the efficiency of chemical functions beginning from R&D to the end of the value chain in customer service and support. In this dynamic environment, the preference and potential of any particular technology depend on the pressing needs and priorities of the organizations. In 2020, the perceived potential by chemical players was highly concentrated on improvement and integration of data analysis (42%), while it is more widely distributed according to the 2022 survey — decreased to 35% for data analysis and increased to 30% for digital security (from 26% in 2020). However, despite this decrease, improved data analysis (35%) and integration (30%) are among the high potential areas for chemical players, followed by digital security (30%) as chemical players face increasing challenges such as data theft and malware which can not only compromise confidential data but also halt operations.

What drives or hinders the success of digitalization in the chemicals industry?

At the beginning of Industry 4.0, cost reduction was perceived as one of the key benefits of digitalization. However, chemical players have moved on from this and benefited from digitalization not only through cost reduction but also through e-networking (53%) and customer centricity (51%) — a trait essential to developing a resilient business in tough times.

As chemical players explore the length and breadth of digital solutions for their business, new challenges emerge. Lack of qualified personnel was a key challenge in 2020 for 47% of survey respondents; however, in the current survey, a little more than one-third cited this as an issue. Currently, companies face challenges to develop a robust technical infrastructure (40%), meeting the investment requirement (38%) and developing secure systems (38%).