Business and Digital Trends in the Chemical Industry: Asset Management
by Oliver Neuberger and Robert Weber
Chemical companies are faced with significant technology disruptions in the operation and management of their assets. But this also offers them a huge opportunity to transform to intelligent asset management. With offerings from SAP® Services and Support, specialist teams with insight into the chemicals and life sciences industries can advise and support chemical companies, helping them gain a competitive edge through the adoption of intelligent technologies.
In this blog, we discuss industry-specific topics in enterprise asset management associated with the major business trends affecting the chemical value chain as discussed in the white paper “The Intelligent Enterprise for the Chemical Industry.” For details on overall processes, please refer to the initial article, “Business and Digital Trends in Chemical Industry,” which introduced the overall value chain. We focus here on the following major trends and address the challenges they pose from both a business and SAP perspective:
- Margin pressure and ongoing commoditization
- Digital as new norm with rising technologies
- Competition in complex ecosystems and the need for business networks
We discuss these trends in a business context to provide insight into how you can achieve operational excellence for asset management and how SAP can support companies like yours who face this challenge.
2. Business and Digital Trends and Their Impacts
2.1 Business Model Innovation to Tackle Margin Pressure
The margin erosion and ongoing optimization of portfolios lead chemical companies into overthinking their customer experiences. That’s why in the chemicals industry an outcome-driven business model as well as the focus on co-innovation and collaboration is gaining in importance.
The new business models range from simple customer service offerings to complex outcome-as-a-service models. The goal is to monetize intellectual property, corporate knowledge, and data within these new approaches. These new business models will increasingly rely on real-time data sharing and collaboration with customers on new platforms supported by an expanded partner ecosystem. Managing Big Data through production, operations, collaboration, access, and analytics will require intelligent technologies such as AI and machine learning. Connected machines and business processes can help realize the aspirations of Industry 4.0 within asset management just as they do in in production.
The adoption of even more digital technologies within operations will help chemical companies analyze production process variables and asset and equipment performance in real time and simulate their impact on the production processes. Predictive analytics will enable chemical companies to anticipate disruptions in the downstream supply chain and take preventive actions in real time. By creating digital twins and IoT connectivity of assets, chemical companies can continuously monitor asset health, process quality, throughput, waste, and emissions. With the combination of asset information and predictive analytics, companies can predict the likelihood of failures in their plants, optimize their planned maintenance, and adjust production schedules accordingly.
2.2 Rising Technologies Affecting Asset Management
The “next big tech-thing” of asset management is nothing more or less than the intelligent combination of different existing Industry 4.0 innovations. For example, IoT data can be analyzed using artificial intelligence (AI). AI is able to decide whether to order external workforce to handle an issue before an asset experiences failure. Furthermore, a technician can consume live data – for example, augmented or extended reality (A/X-R) – to get the virtual information from a digital twin in real time if needed to get the job done.
Although a high level of automation has already been achieved over the last decades, many chemical companies still suffer from siloed data and lack of integration in their manufacturing and supply chains. This prevents them from further automating processes in those key business areas. The vision is that by the middle of this decade, chemical companies will be able to automate key components of their back-end systems by making extensive use of machine learning, AI, and predictive models. This will help them enable scenarios such as lights-out manufacturing or touchless order fulfillment, bringing them closer to the long-term vision of the autonomous enterprise and Industry 4.0. In the context of assets, Industry 4.0 includes the ability to monitor remote conditions and provide real-time data from the machines to predict their maintenance needs. That makes it possible to identify and fix potential problems in manufacturing processes before they occur.
2.3 Business Network Collaboration Extending Traditional Value Chains
In various sectors, the trend to compete in complex ecosystems is gaining attention. In these ecosystems, the companies that will succeed are those that take advantage of the opportunities provided by business networks. A broad partner ecosystem will enable chemical companies to increase supply chain transparency and optimize processes, whether suppliers, logistics partners, or equipment partners are connected. On the other hand, competing in ecosystems in the context of asset management involves enabling a circular economy within your ecosystem. This entails planning the full lifecycle of your assets to include taking, making, using, and disposing or returning and reusing the assets. Please see Figure 1.
Figure 1: Asset Lifecycle – Simplified
In this schema, chemical companies will require connectivity and collaboration with customers, suppliers, and service partners, both upstream and downstream. Assets can be jointly managed as digital twins by manufacturers, customers, and partners, which can improve asset data and modeling.
2.4 Operational Excellence by Managing OEPEX and CAPEX with a Holistic Asset Management Approach
To manage an excellent maintenance operation, the trends mentioned above serve as valuable incentives. However, to gain a holistic and seamlessly integrated asset management approach suited to more than just “firefighting,” your maintenance department must shift from ad hoc or short-term planning to proactive mid- and long-term planning. During our customer projects, we recognized that most companies have problems during process and information handovers due to their siloed structure.
As an example, if the plant engineering division has made plans for a construction or a shutdown, turnaround, overall (STO) project, those plans and the valuable information they contain must be manually entered into the operative system after project completion or the information will not be available for the maintenance department in a structured manner.
Within building information modelling (BIM), the trend is to support the whole asset lifecycle – from the first drawing, over years of operation and changes, until the demolition of either the single asset or the entire facility – with a so-called common data environment (CDE). This CDE not only captures technical data, but also the commercial aspects of this type of CAPEX project.
Furthermore, we recognize that there is great potential for information and process automatization within the operational phase of an asset’s lifecycle. Most of the companies in the chemical industry rely on the maintenance service of a specialized external workforce. This external labor must be managed so that they can access the asset location. The operator also requires access in order to audit the security and safety certificates of the external labor. In this process, a lot of overhead is involved in coordinating the process between the maintenance and purchase organization on the operator side and the customer contact and service execution team on the service provider side. Within such a diverse and complex service supply chain, an interaction, process, and data platform is needed to support an integrated and efficient maintenance, repair, and operation (MRO) process between all participants. Such a platform can support a business network between asset operators, service providers, and manufacturers and can be scaled. This interaction, process, and data platform also facilitates the setup of information exchange between partners.
The important thing in accomplishing a holistic asset management is to understand:
- What is to be decided?
- Which kind of asset requires what kind of support?
By mastering the “W’s,” we can build sufficient reliability into the production line while achieving continuous improvement of the decisions, which results in better maintenance strategies for the asset. With such closed-loop asset performance management and MRO management, you can implement and improve maintenance strategies in your daily work through IoT monitoring, predictive maintenance, or even preventive maintenance.
With a closed-loop approach to achieve centralized, reliable maintenance processes, companies will be able to integrate IoT, machine learning, and digital twins throughout their plant and operations. This will help them reduce processing time, increase throughput with predictive quality, and improve overall equipment effectiveness. In addition, through the use of predictive models and experience management software, chemical companies will be able to increase forecast accuracy for demand and balance it with supply in real time. They will be able to anticipate possible disruptions and simulate and implement contingency plans on an ad hoc basis to mitigate risks along the entire supply chain. Ultimately, chemical companies will get close to the vision of the autonomous enterprise by fully automating standard operations with machine learning and intelligent technologies that connect the plant.
Augmented and virtual reality – the use of digital technology to create immersive simulations – once belonged to the realm of science fiction. Yet augmented reality now enables users to interact with digital content that’s overlaid over the real world. Already in use to assist workers with difficult or infrequent maintenance tasks, the technology will become even more important in making maintenance activities more efficient, and even attracting and retaining new talent.
Figure 2: Asset Management Software from SAP
2.5 SAP’s answer to the needs of a holistic asset management approach
Based on customer feedback, SAP enhanced its solutions to manage these challenges. With SAP S/4HANA® Cloud for projects, project collaboration, we established a CDE for construction projects that integrates with your standard processes running on SAP S/4HANA. With SAP Business Network, you gain intelligent process integration with your external business partners. And the SAP Enterprise Asset Management solution supports you in your daily tasks, ranging from asset performance management and daily maintenance to large STO projects. These business-driven, cloud-based solutions can be integrated and connected on SAP Business Technology Platform (SAP BTP). But SAP BTP is not limited to simply integrating SAP and non-SAP solutions. SAP BTP supports different use cases to facilitate customer-specific innovation.
For further and more detailed Information we recommend the following:
“Achieve Maximum Value with Intelligent Asset Management,” SAP, May 2022.
Dirk Kempf, “Converge Asset Strategy and Maintenance Execution with SAP Asset Performance Management, SAP, February 9, 2022.
3. Conclusion and Outlook
In this blog, we discussed specific impacts of major business trends on asset management in the chemical industry. Proposals and ideas were presented to help chemical companies manage challenges regarding margin pressures, benefit from emerging technologies, and participate in business networks. Our proposals can also help chemical companies achieve a holistic view of the management of their assets with a closed-loop approach. In the next blog, we plan to show the impact of those major trends for chemical companies on sales, service, and marketing.Feel free to comment this blog, I hope this was a valuable read.