Chemical Industry
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Accelerate Your Growth Potential by
Digitizing Key Business Areas
A pragmatic approach
A Catalyst
for Change
While executives in the Chemical
industry see opportunities in digital
transformation, many are struggling
to develop a pragmatic Industry 4.0
roadmap. The need is to create a digital
´playbook´ that answers the key question
– what are the right opportunities that
create value for our business?
The Chemical industry already has a strong
pedigree in the application of advanced
information systems throughout the
organization. While companies expect the
level of digitization of the value chain to
increase 3-4 fold by 2020, and plan to
significantly invest in Industry 4.0, our
conversations with Chemical industry
executives reveal that they struggle to
balance short-term targets for productivity
and revenue growth with the longer-term
opportunities to further digitize the value
chain. A number of recurring questions
include: How can digitization improve
operational performance? How can big
data be exploited to increase production
efficiency? What would a structured
approach look like? How to stay focused on
a series of key, inter-related digital
initiatives? We have found that clients are
very receptive to a discussion that helps
them outline a path to realize the
transformative effect of Industry 4.0.
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Where to Start?
Delivering a first-class customer service,
with shorter lead times, reduced cost, a
greater number of product variants with a
faster time-to-market, remains today´s
challenge. Industry 4.0, however, is now
able to provide tomorrow´s solution by
connecting rapidly developing capabilities
(like data analytics, cloud computing,
sensor technology and other humanmachine interactive technologies) in new
and transformative ways.
Defining a long-term blueprint is not
straightforward, given the complexity of
market and technological changes that
businesses are currently facing. An
additional problem is that the “digital
agenda” is typically managed separately
from the daily business. A corporate project
group or the IT function is often left to
invent solutions in isolation, while
operational managers battle to solve daily
performance issues. It is critical to bridge
this gap, bringing together operational and
technology teams into a single plan of
action.
This is where a more pragmatic approach
can help. An approach of evolution rather
than revolution, where executives can map
out their roadmap, understand
interdependencies and set short-term
(investment) priorities for immediate
solutions that provide them with tangible
operational levers to steer the
transformation process.
A Digital Playbook for the Chemical industry
Hitachi Consulting has a track-record of
helping clients in the Chemical industry
improve operational performance across
the value chain. Through our hands-on
experience we have developed a
“playbook” of winning digital catalysts for
change which offer practical, short-term
business impact throughout the
organization.
The illustration indicates that there is no
“one size fits all” but that each company
needs to determine for itself which strategic
levers will provide the greatest benefits
going forward. These six digital ‘’plays’’ not
only match well with the overall strategic
imperatives to drive productivity and
revenue but they also support executives in
selecting the right in-road and making sure
that the solution and approach enable an
attractive business case.
In each of the areas, digitization challenges
the existing business model, enables the
design and implementation of a new
1. Digital
Innovation
R&D
2. Smart
Assets
Sourcing
operating model, with a concrete return on
investment, and aims to speed up the way
companies operate.
3. Predictive
Maintenance
Operations
5. Smart
Logistics
Logistics
Sales
Supply Chain
4. Energy
Analytics
6. Dynamic
SI & OP
Illustrations of the six digital plays in the Chemical industry
1. Digital Innovation
Challenges in product development in the
Chemical industry are centred on chemical
discovery, cycle times, documentation,
tracking and a global network of
developers. Digitization is a key enabler for
these activities.
Large amounts of data are collected during
research and lab testing. Automating
information delivery to streamline
processes and applying content analytics,
rules and information filtering to improve
data analyses are becoming increasingly
relevant. Platforms enabling not only
document sharing but also quick searches,
direct interaction, date stamps, security
levels and secure archiving are instrumental
in reducing cycle times and speeding up
approval processes. Avoiding double work,
long searches and document inconsistency,
and delivering effective risk and compliance
management are elements tackled by IT /
technology platforms that allow integration
of documents of various types and from
multiple sources. Hitachi Consulting has the
means of developing digital engines that
deliver integrated information from diverse
sources to provide deep decision-making
insight across the entire spectrum of
product development.
Client Success Story
Information in a healthcare environment comes from various sources, as diverse as in
chemical R&D laboratories. Hitachi Consulting has increased the efficiency and
consistency of information in a clinic by implementing the Hitachi Repository.
Documents of all formats can be placed on this platform, and searches on a given topic
can be made across all available documents, to which the person has access rights. The
Repository has features that allow “cleansing” of documents, i.e. eliminating personal
data and hiding certain information whilst still enabling access to the rest of the
document. Implementing the Repository has increased productivity by 12% through
reduction of double-work and the need to have a lot of interaction in order to clarify
status. It allows employees to access information in real-time from various departments
and transfer relevant information to tablets for discussions with patients. This is an
example where best-practices can be drawn to create value cross-industry.
Hitachi Clinical Repository (HCR) provides a single online repository that enables protection,
search and retrieval across all healthcare data content.
HTML
XML
PDF
XML
XLS
HTML
HL7
HL7
CDA
Hitachi Clinical Repository
Electronic Health Record
and Clincian Portal
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2. Smart Assets
The first real opportunity enabled by the
Internet of Things is creating asset visibility.
Studies indicate that a significant number of
the physical assets in chemical companies
are digitally disconnected. Connecting
these “dark” assets makes them visible,
enabling remote monitoring, tracking and
management. Today’s low cost solutions
and tracking devices make it increasingly
feasible to digitally connect many industrial
assets. Sensor data gathered from the asset,
and the surrounding environment, along
with current operating parameters provide
important diagnostics about the use of the
equipment and can be analyzed to
predictively model performance. Hitachi
Consulting has built applications,
supported by artificial intelligence, that
have had a huge economic impact by
changing the way assets are used and
managed.
Client Success Stories
A client asked us to help them optimize the
operating parameters of a complete mining
operation to improve availability of the
hauling truck fleet. By utilizing a proprietary
multi-variate correlation tool, developing
algorithms to identify the key areas that
influenced lower performance, and by
quantifying the magnitude of each
element´s impact on unplanned downtime
in each fleet, we were able to assess which
specific operating demands led to the drop
in availability. An improvement potential
was highlighted with a level of granularity
that would not have been derived using
conventional improvement techniques.
Complementing traditional operational
assessment with a data science driven
approach added tremendous value to the
client ; an approach that is easily
transferrable to the Chemical environment.
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Applying sensors can be especially relevant
for chemical companies in areas like
warehousing, where Hitachi Consulting has
made significant efficiency improvements
in optimizing the picking process by
analysing human routes vs order lines to
maximize multiple picking and reduce
travel time. Alternatively, innovative
technology like drones can be used to
support Operations and “patrol” large sites,
enabling accurate monitoring and
optimising deployment of valuable
technical resources. We have installed
different forms of surveillance system
architecture with clients across industries,
applying video analytics capabilities and
learning system technologies to meet
increasingly stringent SHE requirements,
improve operational safety, maintain high
levels of asset utilization and manage costs.
In a similar vein, a local utilities client
engaged us to deploy our smart water utility
solution to structurally reduce leaks,
breakdowns, safety issues and drive costs
down. A challenge currently for many
capital intensive companies that struggle
with aging infrastructure and a lack of
integrated information. Installing a
centralized consistent repository of
telemetry data and performance analysis
across all assets with KPI structures was the
backbone of the solution to support
predictive maintenance and develop an
energy efficiency solution. We deployed a
proprietary performance management
system that enabled real-time, reliable
tracking of operational results from the
treatment process assets, enabling quick
fast-based decision-making. In this case,
providing the timely ability to predict
energy usage accurately complemented
with pro-active alerts of potential reliability
issues with interactive drill-downs to
problem areas was instrumental in driving
up asset performance.
3. Predictive
Maintenance
We see most of our clients trying to
understand how they can move from
conventional maintenance to a predictive
diagnosis application (detect anomaly
before failure, intuitive monitoring,
automatic analysis, knowledge capture).
While condition-based monitoring and
predictive maintenance are already used on
vital production machinery, recent
advances in technology enable the
approach to be applied much more broadly.
Prescriptive maintenance models can
effectively reduce the outlays related to
unplanned downtime, “over maintenance”,
and spare parts inventory. Using advanced
analytics enables a shift from calendarbased maintenance to needs-based
maintenance. This can fundamentally
change the “what”, “when” and “where”
paradigm of maintaining critical assets.
Such projects that facilitate better forward
visibility of maintenance can deliver a return
on investment of 3 to 5-fold within a
relatively short timeframe. Critical to the
success of these projects is to put in place a
remote monitoring system (with
knowledge/experience-based threshold
judgement to detect level and rate changes)
and to configure a data mining function
(statistical data classification-based
judgement that detects anomalies based
on case learning) and to involve
maintenance engineers not only for the
knowledge capture but also to increase
their understanding of the new way of
working and the advantages of the new
system for their daily work as well. As an
example we recently implemented this
concept for a specific asset that is used
across 120 sites.
Client Success Story
A client, at one of their key chemical plants, was eager to reduce the number of emergency
repairs of their pumps by predicting anomalies and performing proactive maintenance.
The challenge was that they were not able to capture any signs of failure in advance just by
monitoring individual sensors. We succeeded in helping them by analysing the past log
data and developing a more holistic model to predict an anomaly. The degree of
anomalies sharply increased just before a sudden failure and that was reflected in a
contribution index that combined sensor data and highlighted to the maintenance
engineer how likely this combination was going to fail. Here Hitachi proprietary
technology was combined with well-known vector quantification clustering (VQC)
algorithms. A statistical distribution corresponding to the normal state was derived from
past data and from Hitachi´s original machine learning algorithm. Due to the
combinatorial effect of (typically) multiple sensors, this novel approach helped predict
anomalies with much higher precision.
Client Success Story
Consider a high-efficiency gas engine, critical for a co-generation system, where we
introduced a monitoring concept of 30 operational parameters at a sampling speed of 30
seconds. The client wanted to move away from a conventional maintenance service with
repair after failure to a prescriptive maintenance regime. The impact was profound.
Whereas previous failures were not detected nor understood until after the equipment
stopped, the client started to detect anomalies days before potential outage. This enabled
the maintenance engineers to perform preventive maintenance to mitigate any pending
failure. The influence of maintenance was automatically corrected by the analytics system
as the new ´normal´, driving a continuous learning loop.
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4. Energy Analytics
The current environment is ideal for a
transformational big data approach to
energy efficiency. Advancements in energy
efficiency software and Internet of Things
combined with the advent of cheap sensor
hardware present the ability to apply data
analytics to create operational insights into
asset energy usage and assist energy
management decisions, resulting in
significant savings in energy consumption.
Considering that one of the major cost
elements in a plant is energy cost, most
chemicals companies have already
undergone some exercise to harvest the
“low hanging operational fruit” through
increased behavioral awareness,
developing business intelligence models,
driving process improvements and
matching supply and demand. Hitachi
Consulting has successfully helped clients
move beyond this in the area of energy
efficiency by combining big data analytics
with the ongoing growth of renewables
and clean-tech innovations, advanced
change management methodologies and
an innovative commercial funding model.
This has resulted in an end-to-end offering
(Energy Savings as a Service) that
transforms our clients´ energy usage from a
liability into an asset.
The aim is to create an energy efficiency
portal to report and manage performance
but also to improve energy effectiveness by
facilitating collaborative approaches.
Additionally, adopting advanced energy
analytics to support renewables selfgeneration by focusing on the complex
relationship of both generators and
“prosumers” for buying and selling energy
in the market. The blue-print includes
technological solutions for supply side,
demand response linked to factory energy
management systems, and buildings
energy and asset management (BEAM)
software based on Internet of Things.
Energy
Management
Portal
Energy
Savings as a
Service
Big data,
Analytics &
Internet of
Things
PMO & Change
Consulting
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Innovation
in Clean Tech &
Renewables
Client Success Story
Hitachi Consulting successfully deployed
the BEAM value opportunity to large office
buildings. For a client with a large global
footprint site energy savings of up to
30-40% have been found to be feasible
across the various climate zones analysed,
with incremental savings coming through
space and maintenance management,
asset efficiency, and behavior &
compliance. Patent-protected algorithms
conducted optimization calculations,
sending recommendations back to the
Building Automation System on how to
minimize power draw throughout the
system. System efficiency was improved by
maximizing the performance of enterprisegrade HVAC equipment complemented
with Lighting-related enhancements:
starting with low-hanging fruit related to
motion-sensor and motor replacements
and lighting retrofits to more complex
lighting controls and sensors. Hitachi
Proprietary on-site operational modules
provided data-driven energy optimization
for chiller plants, boiler plants, and
air-handling systems. The compelling value
proposition here was that funding was
through service fees based on energy
savings. This allowed the client to fund the
improvement initiative from the existing
energy budget and reduced energy
expense without upfront capital outlay
(since assets that deliver the service were
owned by Hitachi Consulting).
5. Smart Logistics
Many industries such as Industrial Gas, Oil &
Gas or Waste Management face a similar set
of challenges: delivering or picking up the
right amount of product at the right place at
the right time. This requires a clear visibility
into how much product they are actually
consuming and forecasting demand in the
future. Considering that a fleet can´t be
everywhere at once and that suppliers need
to take customer constraints and fuel
consumption costs into account, the logistics
involved become quite complex. Using the
Smart Logistics and Asset Management
(SLAM ) solution we have worked with clients
on enhancing operations by helping monitor
consumption, forecast demand and manage
transportation. Accessing these applications
in the Cloud allows rapid deployment,
increased value chain productivity, lower
logistics costs and more satisfied customers.
Client Success Story
To provide visibility on customer consumption Hitachi Consulting worked with an
Industrial Gas client to capture and integrate real-time consumption data for their Chinese
operations. The solution on the Cloud collected customer tank data regularly, displaying
customer usage graphically and providing a global real-time consumption perspective
for all customers. It also provided early detection of supply issues before they turned into
urgent customer calls. Monitoring real-time consumption also allowed our client to
forecast demand based on data. The Smart solution included a collaborative demandforecasting platform that factored in available supply and automatically initiated new
supply orders. With this understanding, transportation planning became proactive and,
based on customer orders, acceptance windows and delivery constraints on vehicle types
and driver certifications, the system optimised routing, allowing for effective and efficient
service to customers. With real-time visibility of the fleet location, the system monitored
the progress of each delivery and could make immediate changes when required. This
client saw substantial improvements in forecast & order accuracy, shipment delivery and a
reduced workload for planners, dispatchers, along with lower freight spend.
6. Dynamic SI&OP
In the dynamic global landscape chemical
companies are increasingly relying on the
supply chain to help them manage a number
of critical challenges. These include the
agility and flexibility to respond quickly to
changing markets and business structures, a
dependency on correct master data to
enable fast analyses and decision making,
access to dynamic, real-time demand
planning capabilities as a prerequisite to
making all this happen and an alignment of
the supply chain footprint with the demand
profile. To cope with these challenges Hitachi
Consulting is increasingly using Sales,
Inventory & Operations Planning (SI&OP)
with clients as a vehicle for communication,
performance measurement and decisionmaking related to integrated supply &
demand planning and inventory
optimization. The challenge for executives is
to limit internal complexity, align the main
business processes to encourage flexibility
and agility and begin the move to a point
where real-time business planning is
available when needed. This naturally means
a greater dependency on big data collection
and real-time analytics. All this will help
speed up the review cycle.
Client Success Story
A global specialty chemicals company asked us to design and install a common, scalable
SI&OP process that would help them understand financial impact on decisions,
sustainably reduce inventory, increase delivery performance and remove the constant
firefighting to get the right products to the right customers. Their previous SI&OP process
was out of synch between demand and supply planning, with a lack of visibility and no
clear rules between organizations. Working closely with the client team Hitachi
Consulting designed a “fit for purpose approach” that helped simplify processes, scalable
to future acquisitions, and maximize benefits without impacting service levels. The results
speak for themselves: $70m cash savings, a common forecasting and capacity planning
process implemented, applicable to all business units, transparency of expected capacity
utilization over the mid-term to proactively manage bottlenecks and optimize utilization
across the global manufacturing footprint and more than 30% inventory reduction in less
than a year. To support all this a consolidation of the IT-landscape to eliminate “ad-hoc”
and “individual” tools, optimization of ERP (SAP) algorithms reducing processing time of
planning from 14 days to 2 (over the week-end), integration of all information into the
platform, thus allowing quick verification and alignment of inputs. Coaching users on how
to benefit from the advantages of one platform means that, for this company, daily
firefighting is a relic of the past – consistency and predictability across the value chain has
led to an increased in reliability and customer satisfaction.
07
Making it Happen - Step
by Step
Our experience highlights that, despite a
well-meaning desire to transform, many
companies are often still hesitant to take the
plunge, unsure how to move forward. We
believe that the six opportunities of the
digital playbook provide any chemical
company a practical approach on how to
start making this vision more tangible and
improve competitiveness. Hitachi
Consulting has shown that improvement
projects across these areas offer good
financial returns and that digitization is an
attractive and realistic business proposition.
Nevertheless, there are a number of
considerations to ensure that companies do
realize a solid ROI while integrating digital
projects within core operating models:
■■ It is critical to set priorities and
determine the business needs, rather
than reacting to the latest technology
trends. There is no one-size fits all and
aligning the 4.0 roadmap to operational
priorities helps determine where (not)
to invest. Implementation needs to
be a step-wise approach, with the
organization taking on bite-sized
manageable projects. Focusing on
what´s important and implementing
it first is a far better option than
trying to advance on all fronts.
■■ It is important to generate value from
the get-go. Companies that generate
the greatest short- to mid-term return
on investment from Industry 4.0 will
focus on clearly defining the operational
problems these new capabilities will
help to resolve. A business case will
help define expectations, articulate
the vision of success and focus
stakeholders on the objective at hand.
■■ Start on the ground. Engage people
in operations to understand the
current state. We typically find that,
at the outset of each of these plays,
executives are generally more optimistic
about their own operational maturity
than what we discover during the
diagnostic assessment. While this
ultimately serves to augment the
total benefits it does require a mental
recalibration for stakeholders.
■■ Leverage existing technology and
invest in systems and skills that
enable optimal analytics – most
companies collect significant amounts
of process data, but typically use them
only for tracking purposes, not as a basis
for improving operations. Often this
data is incomplete, limited in nature
and difficult to model. Executives will
need to make targeted investments to
unleash the power of advanced analytics.
■■ Consider that while everyone is
interested in talking about big data
and analytics, it is far tougher to
address challenges of behavioral
change. That goes hand-in-hand
with a major change management
drive. Legacy internal improvement
projects have often been very tool or
system-focused, tackling symptoms
rather than systemic root causes.
The Authors
Vivek Chaturvedi, Vice President
Chemicals & Life Sciences
Greg Kinsey, Vice President Industrie 4.0
Solutions
Roswitha Tertea, Vice President Chemicals
About Hitachi Consulting
Hitachi Consulting is the global
management consulting and IT services
business of Hitachi Ltd., a global technology
leader and a catalyst of sustainable
societal change. In that same spirit—and
building on its technology heritage—
Hitachi Consulting is a catalyst of positive
business change, propelling companies
ahead by enabling superior operational
performance. Working within their existing
processes and focusing on targeted
functional challenges, we help our clients
respond to dynamic global change with
insight and agility. Our unique approach
delivers measurable, sustainable business
results and a better consulting experience.
For more information contact:
[email protected]
www.hitachiconsulting.com
■■ In our experience, technology is
the straightforward part. Executives
tell us that the hardest part of digital
transformation is the transformation
itself. This includes building an
approach that really supports the
business operations, engaging people,
and leading change. Becoming
digital enables people at all levels to
perform better at their respective
roles and they became even leaner.
Hitachi Consulting is the global management consulting and IT services business of Hitachi Ltd., a global technology leader and a catalyst of sustainable societal change. In that same spirit - and building on its technology
heritage - Hitachi Consulting is a catalyst of positive business change, propelling companies ahead by enabling superior operational performance. Working within their existing processes and focusing on targeted functional
challenges, we help our clients respond to dynamic global change with insight and agility. Our unique approach delivers measurable, sustainable business results and a better consulting experience.
www.hitachiconsulting.com
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