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Digitalization in Chemical Distribution Winners & Losers f f Digitalization in Chemical Distribution | Winners & Losers The Chemical Industry moves in line with general industry trends 04 Operational Excellence 06 Profitable Growth 10 Commercial Excellence 16 Digital Trends 28 Why Deloitte 30 Your contact 34 03 The Chemical Industry moves in line with general industry trends Digitalization and Circular Economy are the Chemistry 4.0 issues Industry 1.0 2.0 3.0 4.0 Driver Mechanization Industrialization Automation Digitalization Time 1784 1870 1969 2012 Game Steam Engine, Conveyor Belt, Electronics, Big Data, Changer Water Power Electricity Computer Internet of Things Chemistry 1.0 2.0 3.0 4.0 Digitalization, Circular Driver Industrialization Substitution Globalization Economy Time 1865 1950 1980 2010 Synthetic Dyes,Fertilizers, Synthetic Fibres, Tailored Chemical Solutions, Hybrid materials, Products Soaps,Pharmaceuticals Plastics, Rubbers New Material Mixes spin electronics Large scale, Large scale, con-tinuous Scale economies, On purpose, Technology batch production production Gene Technology additive production Raw Sugar, cellulosics, Coal, tar, fat based Crude Oil Natural Gas, Renewables Materials C-cont. waste, CO2 Peer Vertically integrated, Internal and external Horizontal M&A, New eco-systems, Structure national companies Verbund structures global segment leaders Circular Economy 04 Source: VCI-Deloitte study on Digitalization & Circular economy (9/2017) Digitalization in Chemical Distribution | Winners & Losers Digitalization in Chemicals is the usage of data to boost „Operational Excellence“, „Profitable Growth“ and/or „Commercial Excellence“ Coman nternal Coman ternal erating normation echnolog echnolog Collect Analyze, interpret, Collect internal data network, visualize external data (ig data (Analytics Apply algorithms to take decisions and hsical initiate actions igital 1. erational cellence 2. „Profitable Growth“ Improve and connect Introduce new products, processes services and usiness models 3. Commercial cellence Improve and capture the customer interface Schematic overview 05 Operational Excellence Robot Process Automation (RPA) is already today increasingly used to substitute repetitive, standardized tasks carried out by employees Login into SAP and Create Excel file Check each VAT Move completed Send list of Accountant run VAT report; and paste in numers validity via Excel file to a customers with contacts customers copy customer customer and VAT a wesite and write defined location invalid VAT numers to otain valid VAT and VAT numers numers status to Excel file on a file server to accountant numers SAP X O ransition o rocess stes ith obotic rocess utomation Send list of Login into SAP Create Excel file Check each VAT Move completed customers with and run VAT and paste in numers validity Excel file to a invalid VAT report; copy customer and VAT via a wesite and defined location numers to customer and numers write status to on a file server VAT numers Excel file accountant Former human process step New robot process step Retained human process step When validating VAT numbers of our customers, we are using a zoo of different applications and spend hours copying values from one to another. The task is required, yet completely mindless and the risk of copy & paste errors is high. 06 Digitalization in Chemical Distribution | Winners & Losers Example: In the first wave of a project for a chemical company, 8 finance processes have been automated, saving 15+ FTEs Processes in scope of pilot project Invoice Creation and Verification of Contact critical verification with maintenence of Tax ID number creditors PO master data Invoice Intercompany Intercompany Manual verification w/o reconciliation netting payments PO Benefits realized Approx. 15 FTE* 2–3 times faster Reduced Higher value effort saved process execution overtime activities * FTE = Full Time Equivalents 07 Operational Excellence An investment into a robotics project will pay out quickly by exploiting many benefits of RPA 24/7 Operations Non-stop performance – not queues at peaks Internal control Avoiding human fraud, Cost reduction easily performed Control & Cost reduction net 30%–60% Compliance checks per automated process Scalability Capacity can be Speed increase increased – without Turn-around-time long build-up phase Benefits decrease (up to 80%) Short Payback period Quality RPA implementation costs Increase quality by avoiding human are paid off in < 12 months errors and focusing on exceptions Valuable Work Employees do not waste any capacity for routine tasks 08 Digitalization in Chemical Distribution | Winners & Losers Robot Process Automation (RPA) is the first proven solution on the way to more advanced solutions and ultimately artificial intelligence RPA Cognitive Automation Artificial Intelligence Mimics human Mimics/augments Augments human Mimics human actions quantitative human intelligence intelligence judgment • Used for rule-based, sim- • Used for predictive During test definition: ple to complex (transac- • Used for judgment based decisioning „A test for intelligence in a tional) processes processes computer, requiring that • Dynamically self-adapt- a human being should be • Addresses priority busi- • Covers machine learning able and managing unable to distinguish the ness problems driven by capability machine from another process breakages human being by using the • Interprets human replies to questions to • Enables: behavior put to both“ – Faster handling time – Higher volumes – Reduced error rates and handling costs Proven solutions, Organizations explore possibilities, No current true AI large-scale rollouts started first showcases developed capability yet 09 Profitable Growth Chemical companies are struggling to capture the value of designing & building superior, resource efficient solutions e aterials Commoitization Smart connected products, Lack of Innovation multi-material mixes Deflation Dematerialization Disrutie echnologies Circular conom Declining unit prices, Low Digital Disruption, Additive Manufacturing, ustainabilit growth, Marginal returns Sustitution & New Business Excellence 4.0 Ressource Efficiency, Material cominations New Ecosystems “Old World” “New World” More is Better Sustainable is Smarter Leading producer of increasingly Leading designer and builder of superior, resource standardized chemicals & materials efficient solutions & ecosystems 10 Digitalization in Chemical Distribution | Winners & Losers Example 3D printing: Who is capturing the Design & Build Value Add? The Resin or Printer Producer? The Applier or a new 3rd (distribution) party? Resin Producer Printer Producer otare Design uil arare Material Additives Superior, resource efficient Printer Additive Manufacturing solutions & ecosystems Application Customer (example automotive Source: Local Motors; Daimler; Fraunhofer Institute; Deloitte 11 Profitable Growth Example Digital Farming: Will there be a closed (iOS) or open system (Android). Will AgChem Companies or other players drive it? . Product 2. Smart Product 3. Smart, interconnected 4. Product-System . Ecosystem Product armer etail mart ractors lanter + io an organic neenent armers alance o oer en share arm nnoation rorietar arester ublicall euiment integrate aailable oel solutions technolog Commoitization gChem an Digital + + + + an generics arming + + Cultiation gChem ee + + + + + + + + + + tene Digital roucts olution roier latorm ntegrator ntegrate cosstems Products with digital properties, i.e. sensors, Prolem solutions, comining physical Data analytics and data ased services; Integration of products and services of complementary partners a alue communication, etc. products and data ased services customer access via online platforms peers; complete management of ecosystem sset ntensit Data ntensit 12 Digitalization in Chemical Distribution | Winners & Losers . Product 2. Smart Product 3. Smart, interconnected 4. Product-System . Ecosystem Product armer etail mart ractors lanter + io an organic neenent armers alance o oer en share arm nnoation rorietar arester ublicall euiment integrate aailable oel solutions technolog Commoitization gChem an Digital + + + + an generics arming + + Cultiation gChem ee + + + + + + + + + + tene Digital roucts olution roier latorm ntegrator ntegrate cosstems Products with digital properties, i.e. sensors, Prolem solutions, comining physical Data analytics and data ased services; Integration of products and services of complementary partners a alue communication, etc. products and data ased services customer access via online platforms peers; complete management of ecosystem sset ntensit Data ntensit Source: ClimateCorp, now Bayer-Monsanto (2015), PWC Global Industry 4.0 Survey; Deloitte 13 Profitable Growth Example Re-usu / Recycle – Cannibalizing own business. Further commoditization or differentiation by specific product DNA? Using “Re-Design“ of products to balance the trade-off between Design-to-Recycling “design-to-performance” and “design-to- Design-to-Performance recycling“ Return of materials Clients and user of chemicals and materials Recycling of materials Enhance resource- and climate efficiency, not just for the chemicals and materials indus- try, but especially for clients / users of chemi- cals and materials Production of Recovery chemicals and of residues • Close material cycles materials • Reduce raw material consumption • Decrease production of waste Prevention and • Meet sustainability targets of clients Ressource efficient treatment of production