Regulatory changes, raw material volatility and supply chain fluctuations continue to dominate product development and resource planning for the chemical processing marketplace.
Chemical production is often described, understated as it might be, as a “harsh” operating environment. Machinery, components and workers are subjected to extreme temperatures, pressures and substances as they generate end products that can be used in a multitude of ways. Currently, the processing market, and in particular the harsher chemical, petrochemical and resins sectors, are seeing growth due to an influx of homegrown energy resources that have helped lower production costs. This growth shines a spotlight on the need for equipment, operational approaches and ERP systems that are scalable, reliable and efficient.
Few know these dynamics as well as Don Mahoney, global head of SAP’s Chemicals Industry Business Solutions. “Of the top 100 chemical companies, 97 run SAP ERP and we work with about 4,500 other chemical companies,” he explains. “So we’ve developed a unique perspective of the industry.” Mahoney sees a number of trends impacting the marketplace, including:
- The challenges of continuing to grow and innovate while managing regulatory issues. “Some of our chemical customers are facing four times as many regulations as there were five years ago,” offers Mahoney. This includes a growing number of unique state and local regulations that can impact material handling, labeling and packaging.
- Big data. “Chemical companies have vast amounts of current and historical data from labs and production centers,” states Mahoney. “More and more we see chemical companies needing a way to bring all that data into one place and then establish standards for reporting and metrics to help increase margins through operational excellence.”
- Many people still think negatively about the chemical industry. “The chemical processing industry is kind of like heating and air conditioning – nobody notices until something goes wrong,” offers Mahoney. “Almost every product starts with chemicals of some sort, but there’s never any coverage of the amount that’s produced without incidents. When it comes to safety, what companies need to do is what they’re already doing – focus on responsible care, sustainability programs, non-regulatory SIN (substitute it now) lists and programs for subbing in less volatile chemicals, and getting more involved in the communities in which they operate. “
- “Many raw material prices have increased, while finished products are seen more and more as commodities. These dynamics are really pinching profit margins,” continues Mahoney. “This puts a premium on finding ways to optimize inventory, analyze and manage pricing and leverage data analysis for operational excellence.”
- Gas and oil booms in the U.S. have shifted the global chemical supply chain. “The North American chemical processor has always had advantages in terms of proximity to customers, intellectual property and process know-how. However, the Middle East always held the most significant advantage – proximity to the feedstock. Now, North American processors are not as reliant on oil imports, so production can be done quicker and more cost-effectively. So the supply chain is changing, again reinforcing the need for proper inventory, production data and supply chain management.”
Translating The Need
Being as close to the chemical community as Mahoney and SAP are has produced strong insights for developing their latest ERP package, which is specifically focused on mid-market chemical companies. The “chemical company in a box” package is designed to simplify the integration of an ERP system, with features that include:
- The SAP HANA platform with analytics and applications on a single, in-memory platform.
- Industry-specific business process pre-configuration and documentation to help accelerate implementation.
- A cloud-based environment to help control costs.
- A single contract for all software licenses, services and fees for the hosted or cloud-based environment, with partners providing testing and evaluation within two business days.
“This offering allows us to use the market-specific knowledge we have in developing as close to an off-the-shelf offering as possible for chemical processing,” states Mahoney. “There will always be some customization, but based on our knowledge of the marketplace, many of the pre-packaged elements allow for companies to implement an ERP system more quickly than in the past.”
Mahoney feels that by simplifying nearly every facet of this ERP offering, mid-market chemical companies can focus more on the core competencies of their business, and the unique challenges associated with them. “We feel this can allow a company to be more competitive by improving their IT platform without having to invest in more complex elements that they don’t need,” he cites. Mahoney feels this “chemical company in a box” can help reduce capital spending, simplifying licensing agreements and speed integration schedules.
“Our most successful customers are, from the top down, focused on enterprise value, as opposed to individual value points that do not allow for change,” states Mahoney. “In this ERP package, we feel there is just enough customization to ensure value without excessive complexity and rigid protocols.”