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VOLUME 38 • NUMBER
interest in how Industry 4.0 will affect the petrochemical supply chain. Opening the session Johan Devos, outgoing chair of EPCA’s Supply Chain Programme Committee, recalled discussions at the 2016 meeting, after which the Committee had set up a survey on the impact of ‘Logistics 4.0’ with the Vlerick Business School (VBS) in Belgium.
Professor Ann Vereecke, faculty dean of VBS, gave the audience a ‘sneak preview’ of the survey results, commenting that it was pleasing to find that several logistics service providers (LSPs) are already progressing digitalisation in their operations. Awareness of the issues is high, with most of those taking part in the survey expecting a large impact on the chemical supply chain, not least in terms of the flow of information and cash. Just over half are expecting to operate under a new business model, indicating that Logistics 4.0 is not just the next innovation in industry but a real step change, Vereecke said.
There is, too, a growing sense of urgency. Of those surveyed, 73 per cent thought the petrochemicals sector is lagging behind other industries in terms of digital transformation – though 95 per cent of its customers think the same. Those customers want transparency, they want better service levels, they want new solutions. This is all driving innovation, which is being hastened by the arrival of new competitors in the business, including those offering digital solutions.
An interesting analysis showed that, on a barometer of ‘digital ambition’, proximity to the end user makes a difference: 65 per cent of traders and distributors and 58 per cent of LSPs expressed their ambition to be an early adopter of new technology, but this figure was 41 per cent for chemical producers and just 28 per cent for their upstream partners. Digitisation is being pushed into the supply chain from the end user, Vereecke said.
Vereecke also identified six key capabilities for digital innovation, beginning with a strategy and high-level governance within the organisation. Defining the right process and attracting the right talent is just part of the transformation; it also involves defining a different culture within the organisation. And choosing the appropriate technology is just the end point.
Happily, Vereecke said, while LSPs are only at average levels in these six key capabilities, they are further advanced than petrochemical producers. But there is a clear need for investment in building those capabilities.
LSPs and their partners need to throw off the shackles and get on with it, was Vereecke’s message. Current investments are being targeted at those technologies that are expected to have the biggest impact – cloud computing, ‘big data’ management, shared logistics, low-cost sensor technologies, and so on – but LSPs should “dare to experiment”, she said.
So far the main benefits of digital implementation seem to be in terms of internal efficiencies, productivity and »
ANN VEREECKE - PLEASED TO SEE THE LOGISTICS
customer service. There is less evidence of better asset utilisation and lower inventory levels, but it may be that more time is needed for these advantages to make themselves felt.
DIFFERENT VOICES ‘Supply Chain 4.0’ was also discussed by Luq Niazi, global managing director for the chemicals and petroleum industries at IBM, who began by noting that customers, aware of the opportunities offered by digitalisation, are expecting transformation. He described the four key innovations that form the foundations of the current revolution: • Use of Cloud-based open-access tools to integrate data analysis and management both within and outside the organisation • Use of the Internet of Things (IoT) to generate more data, in real time • Development of cognitive computing (augmented intelligence) to unlock vast quantities of intelligence from unstructured data through machine learning (something that IBM is already doing successfully in the healthcare sector), and • Use of Blockchain technologies to drive trust in digitised transaction workflows.
This last point was new to the conversation at EPCA but it is in fact fundamental to the potential to unlock self-governing cognitive business networks by streamlining the handling and transfer of documents and payments, Niazi said.
The tools are there, so what is holding industry back? Business leaders need to realise that they need a new focus, they need to recruit new types of expertise, they need to re-think corporate structures and adopt new ways of thinking and new investment strategies. Some businesses have already embarked on that journey.
Vereecke and Niazi were joined in a subsequent panel discussion by Klaus Rud Sejling, CEO of Damco, and Dr Frithjof Netzer, chief digital officer at BASF. Sejling advised petrochemical producers to be more demanding of their LSPs, saying: “You need to be on the Blockchain train”. Netzer agreed that Blockchain is a powerful tool, one that is revolutionary rather than evolutionary.
Vereecke brought things back to practical considerations, noting that the difficulty lies not in the technology being used, but in companies’ willingness to be open and collaborative, as this is the only way that the new tools can generate the promised benefits. Sejling agreed that managers need to be prepared to move with speed and to accept failure along the way; this is crucial if innovation is going to happen. Also looking at things from a practical point of view, Netzler said that there is no way to stop the water level in the Rhine from rising or falling. What digitalisation can do is to make information on water levels available to all participants in the supply chain more quickly; cognitive computing will also be able to understand the implications of the information and make adjustments to the supply chain automatically.
Devos brought the session to a close, noting that EPCA is aiming to run a workshop on Logistics 4.0, including the use of Blockchain concepts, in the second quarter of 2018.
WHAT ABOUT THE WORKERS EPCA’s Annual Meeting has also addressed issues surrounding talent and diversity in the workplace in recent years; these sessions have usually been surprising in the insights they deliver and this year’s was no exception. Indeed, it was remarkable that the talent and diversity session had so much in common with those looking at Industry 4.0 concepts in the petrochemical and logistics sectors. In particular, as Tom Crotty said in introducing »
JIM FITTERLING (CENTRE) EXPLAINED THAT NEW IDEAS
the speakers, EPCA is now looking in particular at age diversity and cross-generational collaboration. “We need to push knowledge transfer,” he said. But companies also need to harness the IT skills found primarily among the so-called Millennial generation.
April Rinne, an “adviser and pathfinder”, took up the theme, noting that each industrial revolution has led to better productivity but also a loss of individual creativity. Companies are now beginning to break down the walls that keep their knowledge centres separate and to open up to creative networks. As part of that, there is a rapid increase in more “loosely attached” workers.
The petrochemical industry is well placed to benefit from Industry 4.0 changes, Rinne said. Its products will be needed by the new technology, which also relies on human innovation. On the other hand, the petrochemical industry has a reputation of being very conservative – it needs to overcome that and encourage today’s youth to study ‘STEM’ subjects (science, technology, engineering and mathematics). Sadly, only 18 per cent of chemistry graduates go on to work in the chemical industry, noted the impressively coiffeured Mark Wolstenholme, executive director at EY.
Wolstenholme provided the audience with some findings from a study EY has conducted on age diversity and inclusion in the workplace, and those findings point to a very different corporate structure in the future. For instance, 42 per cent of executives surveyed by EY said that ‘contingent workers’ – also referred to as the ‘gig economy’ – are leading them to change their employment strategies; further, 70 per cent of young people said that flexibility is very important. As a result, Wolstenholme said, 70 per cent of jobs as we know them today will disappear within the next 20 years.
“Transformation is happening – the question is what you do with it,” observed Ester Baiget, business president of industrial solutions at Dow Europe. Petrochemical companies need to look for the best talent – and not just the best talent within the industry.
VIEW FROM THE TOP EPCA’s Annual Meeting ends with a luncheon featuring a speaker from the top echelon and, once again, it came up trumps with Ban Ki-Moon, UN secretary-general for two terms from 2007 to 2016. He too addressed Industry 4.0 and what it means for the world: it is already creating new industries and making old industries more efficient and sustainable, he said.
But Ban concentrated his speech on sustainability issues: “Our climate is changing,” he said, “and much faster than expected.” The horrendous damage done to the US by Hurricane Harvey just before the EPCA meeting was in everyone’s minds and, as Ban observed, “The richest and most powerful country in the world finds itself helpless in the face of natural forces.” Ban said that all countries in the world need to pull together to achieve the Paris Agreement targets – and immediately. “There is no Planet B,” he said, “so there is no Plan B.”
Sustainable development goals rely on a partnership between public and private interests, especially multinational corporations. As such, Ban said, petrochemical companies have a big role to play. “If we all work together we will thrive,” he concluded, “despite the multiple threats we face.”
Bringing the event to a close, Tom Crotty announced that next year’s 52nd EPCA Annual Meeting will take place in Vienna from 7 to 10 October. Crotty also revealed that his successor as EPCA president is Marc Schuller, currently EPCA vice-president and executive vicepresident of Arkema.
“I am very pleased to take on this new responsibility and to continue the path Tom Crotty has brilliantly laid out as president of EPCA,” Schuller said. “I would like to build on the last 50 years and in partnership with EPCA’s member companies, we will continue to contribute to build sustainable and inclusive economic growth in the digital age.”
More details on next year’s EPCA Annual Meeting are already available on the Association’s website, www.epca.eu. HCB
TOM CROTTY (LEFT) HAD PLENTY OF FAREWELLS TO SAY
AT THE END OF HIS TENURE AS PRESIDENT OF EPCA
