Chemical Industry

Introduction

Government regulations, trade wars, blocked shipping ports and more than 4.43 million dead worldwide as a result of Covid-19 are sure to make the rest of 2021 a difficult year. For organizations in the Chemical industry, these challenges include:

• Ongoing global transportation disruptions
• Reducing greenhouse gas emissions and meeting climate change requirements
• Refining the definition of per- and polyfluoroalkyl (PFAS) “forever” chemicals
• Increasing commoditization of chemical products
• Rising trade tensions caused by feedstock supply disruptions
• Integrating acquisitions to release promised synergies and onboard new revenue sources
• Reducing complexity and streamlining workflows across the globe
• Rapidly entering and winning new markets

Sources: Deloitte, C&EN, CNN, McKinsey & Company

Ongoing Shipping Disruptions

Shipping ports, especially those in China, have been dealing with backlogs and delays since the start of the pandemic. Today, these problems still continue to display. For example, the Ningbo-Zhoushan Port near Shanghai was shut on Aug. 11, 2021 after a dock worker tested positive for Covid-19. This is the world’s third-busiest port and affects Yantian, which closed in June after coronavirus infections were found in dockworkers before gradually reopening. Also affecting the chemical and pharmaceutical supply chains are container shortages, factory closures in Vietnam and after-effects from the week-long Suez Canal blockage earlier this year, CNN reports.

“We currently expect the market situation only to ease in the first quarter of 2022 at the earliest,” Hapag-Lloyd shipping company chief executive Rolf Habben Jansen told CNN.

Delays and container shortages are contributing to much higher shipping prices. Drewry Shipping in London said the composite cost of shipping a 40-foot container on eight major East-West routes was up 360% ($9,613) the week of Aug. 19.

All of these issues impact deliveries to and shipments from US ports. In August, 36 container ships were anchored off Los Angeles and Long Beach alone. Normally there would be none or one, CNN stated.

Backlogs at these main ports often lead to delays at air terminals, overstocked warehouses and thinly stretched logistics networks.

Environmental Concerns are Taking Their Toll

Shipping delays aren’t the chemical industry’s only headache. Increased government regulations designed to reduce greenhouse gas emissions, particularly carbon dioxide (CO2), is another pain point. Add in the effects of chemical industries on the environment plus hazardous material control and it’s easy to see the industry is facing challenges on several fronts.

Among the environmental challenges facing chemical and pharmaceutical firms are setting and meeting public targets for greenhouse gas (GHG) emissions in-line with the 2018 Intergovernmental Panel on Climate Change (IPCC) report.

The report’s goal is persuading all industries—and all countries—to cut CO2 emissions by 45 percent from 2010 levels. According to a C&EN report, the largest number of 25 companies surveyed are looking at a 35% reduction from 2010 levels. The largest firms—Dow, DuPont, Eastman Chemical, Mitsubishi Chemical and others—are looking to become carbon neutral by 2050.

Carbon dioxide is the biggest issue but not the only chemical contributing to global effects of chemical industries on the environment. PFAS “forever chemicals” are also causing problems. They include the toxic perfluorooctanoic acid (PFOA) and a chemical formed by hydrolysis from its replacement, hexafluoropropylene oxide dimer acid (HFPO-DA).

Both are dangerous and long-lasting. Chemical companies around the world are looking for ways to address the handling of both substances.

Business Effects of a Changing World

A McKinsey & Co. report noted that in 1970, about 10 percent of the world gross domestic product (GDP) was in India and China. The two countries alone represent about 36 percent of the world’s population. Fifty years later, China alone represents 30 percent of the chemical demand and supply right now. That number is rising and could top 40 percent, the report warns.

Combined with the continuing U.S. – China trade war and the effects of Covid-19, “regulation and geopolitical considerations may be much more relevant factors than what management teams have experienced in the past,” the report warns.

Many of these issues are forcing businesses to change how they work. Flexibility in terms of partnerships, cooperation, broadly designed research programs, and the design of smaller and more flexible production units will increase over time, McKinsey predicts.

One way of meeting these challenges, and countering the pitfalls is through technology.

Using Tech to Combat Challenges

Technology in the form of artificial intelligence, “can provide incremental and relevant benefits” in terms of asset and commercial productivity, the McKinsey report states. Four key areas where AI can help chemical companies include:

• Dealing with large data sets, such as production, marketing and sales plus research and development.
• Providing earlier access to real-time information to let decision makers respond more quickly than the competition.
• Increasing performance transparency around equipment and employees, such as chemical specialties. The transparency will help educate shareholders on the companies’ performance.
• Boosting process automation in terms of scale.

Labeling and Regulation Compliance

Today’s enterprise technology, specifically Microsoft Dynamics 365 Supply Chain Management, has the ability to generate labels in accordance with current FDA requirements.

These labels allow organizations to track materials throughout every step of the supply chain. For example, barcodes scannable by cellphones and other handheld devices can ensure temperature-sensitive raw materials are properly stored. They also can keep track of expiration dates, letting warehouse managers know which items need to be shipped out first.

Enterprise Resource Planning (ERP) products such as Microsoft Dynamics 365 (D365) let chemical and pharmaceutical companies avoid compliance mistakes. How? By creating and constantly updating a large database stored in the cloud. With real-time data access, one that can be modified to include alerts showing when a part needs replacing or the stock of a particular precursor chemical is running low, companies can ensure quality standards are met. Keeping accurate track of production processes also lets them provide regulators with required data.

One Xcelpros product specifically created for the chemical industry is Integrated Chemical Management (iCM). Working with D365, iCM includes integrated systems, infrastructure for the maintenance and distribution of Safety Data Sheets (SDS) and compliance with globally harmonized system (GHS) label requirements.

Integrating with D365 Finance and Operations iCM benefits include:

• Removing the cost of integrating with third-party labeling and SDS systems
• Providing consistent SDS and label data management
• Reducing the total cost of ownership by removing the need to maintain product safety documentation and data in-house

In addition to Xcelpros’ iCM, some D365 programs also accept AI modules. Working with internet of things (IoT)-enabled production machines, they provide decision-makers with critical business insights that can help them overcome today’s many challenges.

Summary

AI is just one digital technology that can help chemical companies meet increasing environmental and safety regulations. This same tech lets companies diversify their supply chains, bypassing some of the worst shipping bottlenecks or finding closer suppliers.

Using AI to generate barcode labels for everything from individual products to license plates for pallet loads is one of the key features of D365. Labels produced in D365 can provide electronic readers with everything from the chemical composition of a product to its expiration date. This makes labeling one of the most important FDA compliance requirements. Being able to fully track materials, including finished products, is another.

References: The state of the chemical industry: it is getting more complex