Businessman analysing the data

Ian Elsby, Siemens Digital Industries Head of Chemical Industry, explores new Siemens’ research into the challenges and opportunities facing the chemicals sector with the advent of Industry 4.0

The competitive environment for chemical manufacturing is fierce.

As a result, in recent decades the sector has invested heavily in automation and process optimisation to keep up with competitor economies that are either rapidly developing, such as in China, or are highly efficient, such as in the USA.

Bulk chemicals, and some speciality product processes, are also being squeezed between high energy consumption and rising energy costs.

In response Siemens Digital Industries recently conducted research among over 30 industry commentators and frontline chemical manufacturers.

The resulting white paper – Chemical Industry 4.0, a formula for investment – underlines the urgent need for the sector to digitally transform to maintain and grow a competitive position in local and global markets.

And while our research demonstrated that chemical manufacturers understand that there is a clear need to upgrade to Industry 4.0 in order to remain competitive, operationalising 4.0 is rather more challenging and complex.

There is also the issue of how to implement Industry 4.0 in a commercially sustainable way, with investments focused on digital transformation that truly deliver measurable financial and competitive benefits over time.

Maximisation of digital data was seen by most interviewees as holding the greatest commercial potential for the sector, offering the key to developing a more customer-service oriented culture that can drive customer retention and business growth.

Service (ease of doing business, transparency of order/supply process through digital linkage, speed of customer response, etc) is also increasingly regarded as a main differentiator – both in the heavy chemicals and the speciality segments.

Further, our research revealed that customers’ experience of digital service in other aspects of their business and personal life is having a growing influence on their supply chain expectations and, as a result, the less agile and less responsive business culture of yesteryear is likely to wane.

In the past, product innovation and ‘discovery’ was often seen as the key to success but now service is increasingly regarded as an equally important point of differentiation.

Siemens distilled the research findings into five sequential building blocks for the digitalisation of chemical manufacturing.

The first of these is the digitalisation of the physical environment, so that equipment, plant and logistics can be controlled and automated through a single, smart dashboard.

And while many such feeds already exist in the chemical industry, interviewees agreed a robust audit is needed to identify any gaps. Further, with regards to cybersecurity, companies need to evaluate the risks, as a cloud-based ‘big data’ chain is only as strong as its weakest link.

The second stage is based around standardising data protocols so that digital data feeds can be easily combined, analysed and deployed via a common standards data pool.

Legacy systems – including even the more recent automation initiatives from the last two decades – operate via a range of protocols, standards and formats, some open and some proprietary.

Therefore, once the physical environment has been digitalised as described in phase one, formats and protocols need to be standardised to allow for effective analytics.

The third is focused on investing in applications and processes enabled by the new, standardised data pool, as outlined above.

What was interesting here was a commonly held view among interviewees that to secure the investment step-up to 4.0, applications which could generate ‘reliable ROI’ were the ones which got the most support internally.

Interventions which could help mitigate the financial impact of universal manufacturing issues – such as predictive maintenance which can help reduce downtime, predictive quality that can help with batch consistency, and plant monitoring which can reduce ‘fixed’ costs such as energy, throughput and logistics – were the benefits which got the most buy-in at board level.

The fourth is around how companies are looking outside of their own business and considering their supply chain. This we describe as the ‘flow data exchange’ where information generated by the digitalisation process is shared upstream and downstream to drive efficiencies.

Interestingly, this particular benefit was not viewed as being primarily financial, but more as an enabler for improved competitive positioning through enhanced customer service and creating a more responsive structure to meet client demands.

Another advantage of having the entire supply chain plugged in to the data flow is that of improvements to ‘track and trace’ capabilities, generating both commercial benefits and meeting regulatory requirements.

This was seen by many as a key business driver going forward, especially as clients begin to demand more evidence of legal, ethical and environmental credentials and compliance from its supply chain.

The customer factor also informs the fifth stage, which looks at how a disappointing digital experience will serve to undermine customer relationships, not build them.

To that end chemical businesses need to ensure they get the first four stages in place and working well before attempting to integrate the new systems with the customer’s own processes.

Here is also where digital accountability – both internal and with the customer, coupled with predictive analytics – would be used to set clearer KPIs and drive competitiveness.

Such performance-based contracts were also seen as a natural development of a more service-oriented culture in an industry where customer satisfaction is becoming as important to commercial success as new product discovery.

Of course, one of the key considerations to this exciting and dynamic Industry 4.0 vision for the chemical industry is the issue of cybersecurity, and the fact that IIoT comes with risks as well as rewards.

Siemens is acutely aware of this, and through the development of our own cloud-based operating system called Mindsphere (which has military grade encryption), and our global Charter of Trust initiative which we have developed with our own suppliers and our global industry partners, we are leading the world on this issue.

We also cover cybersecurity from a chemical manufacturing perspective, and our five building blocks towards digitalisation, in much more detail in our White Paper.

For a copy visit