Business and Digital Trends in the Chemical Industry: Manufacturing and Quality Management
Business and Digital Trends in the Chemical Industry: Manufacturing and
Quality Management from Neha Kaipel and Jan Woelken.
In this blog, we discuss major business trends in manufacturing and quality management that industry. For details, we refer you to the initial blog where we introduced the overall value chain. We concentrate on the following areas, in which we address challenges from both business and SAP perspectives:
- Digitalization in manufacturing as a top-priority focus
- Supply chain disruption, which requires agility in manufacturing and logistics
- Needs and benefits of business networks to enable the next level in supply chain integration
- Sustainability as a necessary global topic and relevant for energy-intensive production processes
To achieve the goals of digitalization, quality must be managed in line with business needs. The business trends that are currently driving manufacturing processes are also impacting the means of quality control across industries. From sourcing through delivery and distribution, manufacturing and quality processes have been uplifted to align with the principles of Industry 4.0 and global digitalization. Some key areas in which SAP solutions are helping the chemical industry become more sustainable are:
- Supplier management, which aligns closely with the sustainably driven business
- Use of sustainable materials and packaging to support organizations with a systematic means to achieve their sustainability goals
- Intuitive nonconformance management to allow a robust means of capturing and analyzing nonconformities
- Improved trace and control for batches to eliminate cumbersome and erroneous data collection and evaluation and to improve the user experience
2. Business Trends and Their Impacts in Manufacturing
Digitalization in Manufacturing
A key element of business transformations in the chemical industry today is the adoption of Industry 4.0 as foundation for new business models and improved business processes. Industry 4.0 will make it possible to gather and analyze data across machines and business systems to enable faster, more flexible, and more efficient processes. Currently, machines and sensors are often not connected with the ERP systems, and paper processes are still prevalent.
The vision is to have a seamless data flow and a closed loop from design to consumption. Machines can deliver real-time consumption and order status to feed the planning function with actual data. This is only one example of how connectivity helps to improve the supply chain process. New cloud-based solutions such as SAP Digital Manufacturing Cloud will deliver the capabilities and technology to make this vision a reality.
Supply Chain Disruption
Supply chain disruptions are having a high impact on nearly all industries. How is manufacturing affected? Missing raw or packaging materials necessitate short-term re-planning of manufacturing orders. What is the right setup to mitigate and reduce the number of short-term planning changes? Data and planning information must flow downstream and upstream without delay or interruption. Manufacturing plants and suppliers are often in different regions. Materials have long lead times. Information about delays in the supply chain must be reflected into planning solutions. For example, if a ship carrying raw materials between Asia and Europe will not reach its destination on time, an updated delivery date is required to plan manufacturing and delivery of the customer order.
All business domains and partners involved in the supply chain must work jointly in an end-to-end process. The operations model and IT infrastructure must be aligned to capture all data for that process in a single source. Products such as SAP Business Network for Logistics and SAP Digital Manufacturing Cloud already support comprehensive integration scenarios.
Sustainability is another key topic for the chemical industry. This topic is not new, but with the current economic situation and global environmental concerns, it is again in the forefront. Chemical companies are under pressure from the public, investors, and governments to meet environmental demands. Among the current business challenges are:
- Emissions – calculating and tracking to reach regulations and corporate targets
- Product footprints – capturing and tracking of product-centric emission
- Circularity – reducing waste and natural resources to achieve decarbonization goals
- Value chain transparency – meeting the demand for “green” products and emerging regulations such as the EU Carbon Border Adjustment Mechanism
SAP’s strategy is to integrate sustainability data into business processes across all value chains to drive performance, new products, and new markets.
3. Business Trends and Their Impact on Quality Management
A balanced relationship with suppliers and ecosystem partners can provide
security and stability, and minimize the impact of sudden disruptions. Building local networks with suppliers is as crucial as building networks with customers, regulators, auditors, and other screening functions. An improved system of guided processes using quality information records from SAP enables organizations to capture early signals of triggering events, so they can effectively and proactively manage suppliers in the business network.
Sustainable Materials and Packaging
Sourcing environment-friendly and sustainable raw materials is critical for the chemical industry today. Business models are changing to support and encourage the circular economy in an autonomous way. This has taken center stage especially during the pandemic years when supply chains have been visibly disrupted. With solutions for quality management and product compliance from SAP, sourcing of raw materials can be tracked and used to achieve the preliminary level of transparency into their origin. Combining these with intelligent solutions such as SAP Product Footprint Management, organizations can consciously select the extent of change in their primary business models.
Intuitive Nonconformance Management
If not managed correctly, non-conformances or deviations can become one of the largest sources of loss of efficiency, productivity, and overall quality, resulting in a substandard product. Having a simplified data model to establish an intuitive, agile process to manage defects can be effective in improving the overall process quality. Moreover, when combined with artificial intelligence and machine learning, SAP’s improved solutions for nonconformance management can promote agility and support the continuous improvement of processes, products, and organizations.
Improved Trace and Control for Batches
Batch management is a central focus, especially for process-driven industries. For those involved in the batch release process, the SAP Batch Release Hub for Life Sciences solution provides the information needed to prepare, review, and make compliant release decisions.
By centralizing relevant data from diverse source systems in one place, the solution helps manage the complexity of the batch release process and detect any deviations early in the process.
The hub helps accelerate batch release decisions through smooth integration and automatic data evaluation of predefined release checks. The result is improved, more-effective processes and reduced chances of human error.
4. Conclusion and Outlook
In this blog, we discussed specific impacts of major business trends in manufacturing in the chemical industry. We presented current business trends, challenges, and ideas that can help chemical companies to set up transformation projects. We showcased some new and improved capabilities that SAP solutions offer to guide the transformation journey to digitalization. In our next blog, we plan to show the impacts of these major business and digital trends in the area of assets and supply chain.
Knut Alicke, Raffaele Carpi, Anna Littmann, Dinu Niculescu, and Georg Winkler, “End-to-End Digital Transformations for Chemical Companies,” McKinsey & Company, 2020.
Florian Budde, Obi Ezekoye, Thomas Hundertmark, Alexander Klei, and Jeremy Redenius, “The State of the Chemical Industry – It Is Getting More Complex,” McKinsey & Company, 2020.
“The Intelligent Enterprise for Chemical Industry,” SAP Industries White Paper, 2022 (www.sap.com/documents/2016/03/d2238cd0-627c-0010-82c7-eda71af511fa.html).