Over the years, we have been told that digitization will profoundly change the business model of the chemical industry. But has the world of chemistry 4.0 become a reality? Or is it just a fantasy? Or, as some people still think but rarely say, chemistry 4.0 is more of a hype, just like the e-commerce hype about 20 years ago. Once the business cycle deteriorates and companies’ willingness to spend money on fancy innovation disappears, it will implode?
Chemistry 4.0 is really on the rise, though slower than expected. Only now, the digital technology that has existed for many years or decades is mature enough to create added value for chemical enterprises. For example, it is not new to use it to guide the product configuration in the chemical value chain. Statistical programming languages like R or python, which have been around for nearly 30 years, can be used to model typical decisions in value chain management. But only today, with the help of users like Google or Facebook, can their libraries be powerful enough to model the entire value chain in all the complexity of the product and customer mix. With the management decision support based on the value chain statistical model, the profit can be increased by 0.5% with the minimum investment.
Blockchain and “hypertrust” applications
In other cases, different technologies need to be combined to prepare for daily business. Blockchain technology, which is not new, can be used to connect stakeholders in personalized drug networks, or to connect chemical producers, regulators and customers in regulated chemical value chains. However, in both cases, it is necessary to protect some information from being accessed by all participants, which is inconsistent with the principle of blockchain. These information need to be protected, such as sensitive patient data or patented molecular formula. In this case, the new “super trust” application can shield the information of unauthorized blockchain participants.
Demand driven supply chain management
Another example is demand driven supply chain planning. This planning concept does not mainly rely on the forecast data, but on the actual demand signals of the market, so as to better balance the capacity utilization, inventory and delivery time. Today, it is mainly used in pharmaceutical companies, some pioneers in the chemical industry, but with the development of a new generation of planning tools (such as SAP IBP), people’s interest is also growing. However, the full potential of these technologies can only be realized through artificial intelligence, which can help set buffer inventory parameters.
Although these examples may be enlightening, do they herald the arrival of a new business model for the chemical industry? Of course not. Digital enabling factors affect the operation mode of chemical companies, i.e. customer fulfillment activities, supply chain establishment, and transparency of products and value streams. Only by combining many digital enabling factors can the new business model become feasible. Specialty chemicals companies, for example, plan to provide new value-added services or want to supply end customers directly, will use a large number of digital promoters to help cope with the resulting complexity, such as online stores, artificial intelligence forecasting, planning or rhythm, and wheel based production scheduling will be more flexible. In short, these enabling factors are the cornerstone of the business model that can support the value proposition of the new business model. Therefore, it is not a single digital innovation that triggers the new business model, but a clever combination of mature digital promoters to support the operation model to ensure the realization of the new value proposition.