Market outlook: Rich pickings in easy reach

Although new digital technology is now available, few companies are using it to improve their plant operations, as a recent ICIS/Accenture survey discovered

The possibilities offered by digital and internet technology ought to be driving up the operational performance of chemical plants, increasing onstream availability, making them more energy and materials efficient and improving safety.

The rewards to the bottom line are significant. But many, if not most, companies are lagging in their implementation of digital solutions or are not ambitious enough when they do adopt what is available.

Digital technology could help automate many monitoring and communication tasks on the modern chemical plant Copyright: Alamy

This gap emerges from a reader survey carried out in March this year by ICIS, in association with international management consultancy Accenture, to discover how companies are investing in this area of plant technology. At the same time, it points to opportunities for capturing value on a significant scale.

Asked to estimate the potential impact on the bottom line of “operational perfection” from digital plant solutions, 50% of respondents, all senior managers, indicated that it would be worth between 4% to 10% on the bottom line – with an average figure over all respondents of 7.6%.

LOST PROFITABILITY
Given the profitability of the $5.2 trillion turn-over industry, says Rich Clos, Accenture’s Chemicals and Natural Resources Digital Plant Lead for North America, this a staggering $50bn in potential profitability for the industry, assuming an average industry margin of 12%.

The process industries have invested in digital process control at the plant level for many years, which makes it a bit surprising that newer digital technologies have not received more interest. Perhaps it is because technologies such as the Industrial Internet of Things and device mobility largely enable improvements to business and work processes, such as predictive maintenance, emission monitoring and safety practices, rather than the physical processes where traditional digital process control has been applied.

But there is a desire to do something about plant performance. The top priorities for the 750-plus companies that responded to the survey cluster around reducing plant operational costs, improving procurement efficiency and costs and at the same time developing sound revenue and income growth. In other words, achieving both top- and bottom-line growth.

Plant security came very far down on the priority ranking, showing clearly that it is not seen as a big issue.

FINANCIAL DRIVERS COME FIRST
On plant operation, the main priorities are reducing energy consumption – still a clear leading concern after decades of effort – increasing throughput and reducing product variability/increasing product quality. Again, improving plant safety performance and plant physical security were well down in importance, along with reducing plant emissions. The drivers here are clearly financial rather than EH&S-based.

This is reinforced by the answer to the question, what would drive your investment in leading operational technologies? Holding down operating costs was the key driver – cited by 39% of respondents. This is followed by a cluster of drivers all at between 25% and 30%, based on improvements to process innovation, plant reliability, product quality and product innovation, and maximising throughput.

There is plenty of scope for putting new technologies into action. A third of respondents indicated they are investing right now in new production capacities, and a further 40% have plans to make investments in the next five years. And a full 70% of those replying said their company did have a strategy or plan in place to achieve operational excellence.

But when it comes to investing in new capacity expansions and actually doing something about enabling leading performance, only a quarter of respondents said they would describe their approach as “industry leading”, while a majority – 55% – indicated they were happy to make “incremental improvements” and close to 20% admitted they aspired to nothing more than the “status quo”, with highest priority given to installed cost and minimal start-up risk using proven process technology and controls/automation.

This is despite the fact that no less than 88% of those replying to the survey said that it was extremely important or important to be a leader in the industry in operations performance for survival over the next 10 years. Industry-leading in this context was defined as giving highest priority to long-term competitive position using a mix of proven and unproven technologies – with a higher level of risk accepted to achieve step change improvement.

So just what are companies doing on the digital plant front? The answer is not a huge amount and certainly not much in the way of ground-breaking technology.

Camera and video monitoring around the plant was viewed as the most important “new” technology that might be implemented, by 43% of respondents, and in fact 42% said they were active in this area. The second most important (36%) was given as leak detection equipment – but only 25% were actively installing this at present as part of an advanced digital plant operational programme.

RFID UPTAKE STILL LOW
The least important areas of interest included wireless technologies to eliminate “blind” and “dead” zones around the plant, cloud computing and radio-frequency identification (RFID) technology, with uptake of the latter two reaching just 15% and 11%, respectively. The low uptake of RFID is particularly surprising given the maturity of the technology.

Wearable computing, wearable air quality monitors and communications gear and augmented reality were all seen as of lower importance, despite safety benefits.

What is most revealing, however, is that no less than a quarter of all respondents said they were doing nothing in terms of implementing advanced digital technologies.

In terms of the critical success factors for implementing new operational technologies, a large proportion of respondents pointed to proper workforce training (70%), and senior management support (65%), with plant worker support also a key element (56%). Software and hardware vendors were not seen as a crucial aspect of successful implementation.

Most of the operational challenges, says Clos, centre around talent as the biggest issue, in terms of training, quality and availability. “This indicates that training is the biggest hurdle to implementing new technologies.”

Control over the harnessing of digital technologies at the plant resides mainly with the engineering department, yet the impacts are largely going to fall on business and work processes that lie outside the normal domain of engineering organisations.

TALENT AND TRAINING ARE KEY
The key take-aways from the survey? Most participants recognised the importance of the digital plant and the benefits increased operational performance can bring – but there are not many early adopting, leader companies out there right now.

Problems around implementation are largely rooted in talent and training, but there are many small steps that companies can make to start taking advantage of the financial rewards that digital plant capabilities have to offer.

For more information on Accenture and its expertise in the chemicals area, go to accenture.com/us-en/industry/chemicals

Most significant trends and challenges to business in terms of operation:

■ “Reliability is significantly reduced due to giving more and more money to shareholders instead of maintaining assets”

■ “Need for state of the art technology and processes, in combination with the right talent management”

■ “Attrition, as it is hard to keep good people”

■ “Getting the right balance between quality, cost and price of the end product”

HIGH LEVEL RESPONSE TO SURVEY

The ICIS/Accenture Digital Plant survey was conducted in March and attracted over 750 replies from senior industry executives around the world.

Replies came from the pet- rochemical and polymer sector mainly (48%), with specialty chemicals (14%) and fertilizers (11%) and inorganics (10%) also well represented. In terms of revenue, 11% of companies had turnover of above $10bn, and 24% had sales between $500m and $5bn. Average turnover was $2.64bn.

A quarter of respondents were vice president/executive vice president level and above – with another quarter at gen- eral manager level.

Respondents did business mainly in Asia (75%), europe (42%) and North America (28%), with the Middle east and Africa at 27%, indicating a good global spread of markets served.