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【Evonik】Manufacturing Industry in the Times of AI: A Perspective from the Chemical Industry

The term Chemistry 4.0 represents a new phase of development in the chemical industry. After the foundation of the industry and the era of coal chemistry, the emergence of petrochemistry, and increasing globalization and specialization, the chemical industry is entering a new phase where digitalization and the circular economy, and the interaction between them, is of prime importance. They will fundamentally change the way in which we work, and they promote sustainable management. While the digitalization of chemistry offers new opportunities it also presents risks. It will transform research and development, production, and business models. It is not easy here to separate the myths from the real opportunities and risks, take the right measures, and so gain a head start over the competition. This transformation offers great opportunities for the highly developed chemical industry in Germany to strengthen its global competitiveness. The innovative processes, products, and services of the chemical industry contribute decisively to the sustainable development of society.

It is evident here that in important business areas of the chemical industry, such as the automotive, construction, and packaging sectors, many innovations will occur stepwise. Specific examples of such innovation fields are lightweight construction using polymers and composite materials in the automotive industry, and energy-efficient construction materials.  These incremental innovation processes are part of the business and success models that already exist in the chemical industry in Germany.

However, an unusually large proportion of the changes expected in the years to come will be of a disruptive nature for the chemical industry.  Many of these expected developments are closely related to the increasing digitalization of business models.  Moreover, many of the changes have obvious links with sustainability issues and circular economy concepts. While these disruptive changes offer chemical companies opportunities in new growth fields, they also present challenges. They affect the process technologies, product portfolios, value structures, and business models of the chemical industry as well as its customers and suppliers.

A 2017 study titled “Chemistry 4.0: Growth through innovation in a transforming world”, produced by the German Chemical Industry Association (VCI) in conjunction with Deloitte, examined trends relevant to the chemical and pharmaceutical industries for the time horizon up to 2030. The answer to the major strategic and structural challenges of the chemical industry lies in the digital transformation and the circular economy—in short, in the era of Chemistry 4.0.

Digitalization is evidently not a new issue for the German chemical industry; many companies have already automated their plants and are using digital processes for control. However, as the VCI study points out, the use of digital mass data not only allows efficiency gains in production (by, for example, predictive maintenance by means of sensors) but also leads to more innovation through, for example, virtual reality, and advanced simulations for research and product development.  The linking of digital services with products of the chemical and pharmaceutical industries is the key to additional value creation.

The potential for increasing efficiency through digital processes and data-based operating models differs from one segment of the chemical industry to another. For segments close to raw materials and energy, marked efficiency gains in production are achieved by, for example, remote preventive and predictive maintenance and corresponding operation of plants, while efficiency gains in segments closer to the consumer lie rather in the improvement of sales, marketing, and administration.

In Germany, chemical companies plan to invest more than €1 billion in digitalization projects and new digital business models over the next three to five years. Evonik also recognized early on that digital processes and innovations are of great relevance—in research and development, production, logistics, and sales and marketing over the entire value chain. This was the reason for establishing Evonik Digital GmbH, a unit dedicated to all aspects of digitalization. Working in conjunction with technology companies and promising startups, Evonik’s digital experts develop new business models and digital expertise. Strategic partnerships with IBM and the University of Duisburg-Essen have also been forged for this purpose.

Evonik aims to lead the chemical industry in realizing potentials for future growth and efficiency gains through digitalization. To this end, Evonik has made about €100 m available throughout the Group up to the year 2020 for the development and testing of digital technologies and to build up expertise. For Evonik, as a leading global specialty chemicals company, digitalization brings a wealth of opportunities. It will be necessary in the future to identify these, put them to the test, and use them meaningfully.

The digitalization initiatives already started at Evonik address precisely those strategic and corporate culture levers identified in the VCI study. On the basis of the digital strategy developed in 2016, the founding of Evonik Digital GmbH, along with other measures, created structures that promote the targeted expansion of resources and expertise and aim to exploit opportunities. In regard to the integration of resource efficiency, the circular economy, and sustainability in relation to digitalization, Evonik’s product portfolio offers a variety of starting points as suggested by the results of the study.

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