How Digitization is Transforming the Chemical Industry

Digital and technology transformation are two of the most popular buzzwords around today. However, beyond the industry jargon, there is a real need for next-gen technology that pushes businesses, industries, and boundaries. Known to be one of the most conservative and slow industries, there is a real need to innovate and produce outcomes faster than ever. In today’s digital world, speed has become a strong competitive differentiator that even chemical companies cannot ignore.

The chemical industry is known for their systematic approach to business and because of this, it faces a unique challenge to use strategically digitize their process and business model.

Did you know?

“Over 50 percent of chemical enterprises lack a digital strategy and transformation roadmap”

Source: Deloitte Global 2016 Global Digital Chemistry Survey

How digitization will benefit chemicals industry:

As per industry experts, digitization promotes innovation and thus it can transform the chemical industry. Digitization also enables faster innovation and predictive analytics could reduce costs – as enables less waste from trials, and less mistakes Currently, the chemical enterprises are struggling to streamline their processes and M&A activities. When backed with the right strategies and required digital capabilities, digitalization can provide significant value to the entire supply chain process. Here are some potential benefits that digitization can bring to the chemical industry:

Profitable operations

Manufacturers can upscale their operations and gain end-to-end financial visibility through digitally enabled chemical plants. Such integration offers further benefits including better waste management, optimization of production network and a better workforce safety. BASF is a great example who used computer modeling to reduce energy and waste. They developed software solutions to handle the complex requirements of batch and semi-batch systems. By building a detailed kinetic model of its batch expanded-polystyrene process and applying dynamic optimization techniques, BASF was able to achieve a 30% reduction in batch time that resulted in significant energy savings.

Better supply chain management

Managing the supply chain has always been a major problem for the chemical industry. However, with digitization, companies can enjoy unimaginable transparency. They can have an easy access to the sources of chemical supply and other intermediaries. The digital supply chain also benefits the suppliers by allowing them to reach customers in the new market and geographic regions.

Reach new levels of productivity

Digitization offers great opportunities to increase efficiency and productivity throughout the industry’s value chain. Today, with immense competition and margin pressure, operational excellence has become an important goal for chemical industry companies. To be specific, companies with structural cost disadvantages are bound to achieve operational optimization. Digitization promises to achieve operational excellence!

Innovation

Digitization enables faster innovation that assists companies boost their R&D productivity and design new offerings and solutions.

Digitization offers a bundle of opportunities for innovation, expansion and growth. The chemical industry is still lagging behind in adopting digital agenda due to its inherent cyclical nature and mostly commoditized existence. Companies are required to adopt operating models that synchronize their business plans and digital solutions. They really need to focus on streamlining processes and position their value chain in this new ecosystem to achieve higher levels of efficiency and transparency.

Be a part of The Chemical Innovation Conference (CIEX) 2018 which is scheduled to be held on September 19-20 in Frankfurt and find out how Next-Gen digitization is transforming the chemical industry. Hear from and discuss Innovative Business strategies with industry leaders, international experts, and innovative thinkers from around the globe.

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How to enhance innovation workflows – Interview with Dr Ali Hussein of PatSnap

“Current chemical data analysis is currently too isolated, requires too much training, or is limited to manually reading through journals. A scalable solution means more brains can find more scientific nuances and design more solutions that tackle more problems, which disrupt more markets.”

R&D is full of unknowns. By the time you learn that a competitor has brought a new product to market, your team could already be months – or even years – behind. At the ideation stage of R&D, your team might pursue thousands of potential projects. How can you tell which one will be your next blockbuster? Moreover, The pressure to deliver positive, measurable ROI for innovation activity has never been more intense. But as with every challenge worth taking on, there are game plans that make winning immeasurably more likely.

By making patent search and analysis accessible and usable for non-IP experts, PatSnap provides scientists with a new source of information for use during research. The company has brought together the biggest IP dataset in the world – more than 120 million patents – which also includes licensing and litigation data, economic data, patent valuation, image and chemical formula search, trademark recognition and more. Moreover, by making this data accessible and relevant to all – whether expert in IP, or completely new to the world of intellectual property – scientists can follow the latest developments and multiple strands of previous research, and avoid wasting time on previously unsuccessful avenues.

Dr. Ali Hussein, Product Director of PatSnap has a deep focus on unlocking the insights that big data and empowering decision-making workflows for the “citizen innovator” by simplifying the analysis of big data. He is passionate about upgrading innovation workflows, and the application of disruption innovation that software can empower across technology areas. We spoke to him ahead of his presentation at CIEX – Chemical Innovation Exchange in Frankfurt on September 20th.

How do you define innovation?
Innovation is the entrepreneurial drive to understand the ‘consumer’ problems with current capabilities in the market, followed by inventing and marketing new concepts and inventions to advance towards a solution. Innovation is not limited to products, but can therefore be extended to business models, economic mechanisms, and social attitudes.

Where does innovation stand among your priorities and responsibilities?
We believe, like many others in attendance I’m sure, that innovation is of the highest importance to ensure long-term success, or even survival of our vision. By remaining in an innovation-centric mindset, companies continue to advance towards their visions and redisrupt their markets – providing more lucrative rewards and long-term stability.

As much as there are examples of how companies have fallen due to not continuously redisrupting their markets and innovating (Blackberry, Kodak, Blockbuster, etc.), there are examples of highly profitable companies that have continuously redisrupted markets and reaped rewards (Apple, TEVA, Amazon etc.).

What are the major challenges and opportunities facing the chemical industry / chemical value chain in 2018 – 2019?
One of the main opportunities within the chemical industry is learning from faster growing industries, and translating practices over. The history of the chemical industry is full of stories of serendipitous discovery of secondary uses for chemicals and the discovery of lucrative chemicals. A major opportunity, which many chemical companies present are already tapping into, is driving product development and discovery with the exponential data resources available.

How and why is it essential to bring together innovation data and scientific information into one single and easily searchable interface?
In short: Capacity, but in an innovator’s time, attention, and memory. When the workflow of chemical research is split across tens of databases with different designs and different database structures, understanding the bigger picture is incredibly difficult.

What is the one key point that attendees should take from your talk?
The key obstacle to letting engineers innovate bigger and faster is scaling this empowerment to as many of them as possible. Current chemical data analysis is currently too isolated, requires too much training, or is limited to manually reading through journals. A scalable solution means more brains can find more scientific nuances and design more solutions that tackle more problems, which disrupt more markets.

Along with PatSnap, several specialty chemical companies and consumer brands such as Air Liquide, Avantium, Biovia, BMW, Evonik, Henkel, Honeywell UOP, Oriflame, P&G, PepsiCo are confirmed to speak at CIEX 2017 on Sep 19-20 to explore innovation strategies and processes across the chemical value chain. Full details of the event can be found at ciex-eu.org.

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Japanese pioneer in anti-ageing skincare to speak about innovation at CIEX 2017

The beauty industry thrives on innovation. With global sales expected to exceed US$131 billion in 2019, skin care remains the beauty industry’s biggest category. Asia Pacific will be the one of the most important region in both value terms and as the key origin for skin care trends. Emerging markets in this region, including China, account for nearly 60% of absolute value growth in skin care products by 2019.

The industry has experienced a growing interest in natural and organic beauty products due to increased curiosity among consumers about the specific ingredients used. Meanwhile, consumers’ desire for high-efficacy skin care has helped niche brands to growth quickly, since they are seen as specialists in their field.

One of these specialists, Forlle’d is a high-technology professional cosmeceuticals company from Japan with leading products in anti-ageing and skin restructuring. Founded in 2004, the company has become a pioneer in developing and producing low molecular substances which are able to cross skin barrier and regenerate skin at dermal level.

Ahead of his presentation at CIEX – Chemical Innovation Exchange on September 19-20 in Frankfurt, we spoke to Dr. Mazen Raydan – R&D Director of Forlle’d about innovation and the future of the skin care industry.

Dr. Raydan defines innovation as the milestone of research and development, and sees it as a wide and diverse process that focuses on two main areas:
• Meeting customer needs, and
• Introducing new know-how that impacts positively the quality of life of an individual.

He adds: “As life is preserved through evolution, companies cannot grow and develop without sustainability – for which innovation is one of the main drivers. Hence, innovation naturally tops all priorities and responsibilities.”

Consumers in Europe and worldwide are more conscious of the effects and impacts of their purchasing choices. This allows them to make buying decisions with a knowledge of raw materials. The market also requires the highest levels of effectiveness and innovation in the value proposition. Consequently, companies are working on developing natural materials that overtake the performances of conventional ones.

Dr. Raydan says: “As developers for skin care products, we always face challenges related to developing new actives, delivery systems, product forms and enhanced product quality and texture. However these are common challenges. If we look into the question globally, the main challenge lies in the lack of fundamental research that can open the door to new areas, impact skin health and quality immensely and take the industry to another level.”

He continues: “At present, the industry is moving very fast and time plays a very crucial role. In order to develop high quality products that fill a niche in the market and meet customers’ demand, R&D must work closely with marketing and sales departments; have good networking; search for, increase and exploit accessible resources. Encouraging the R&D team to take initiative, share and introduce new ideas or concepts has always paid well for Forlle’d.”

When asked about what makes a good product a successful one in the market, Dr Raydan narrows it down to 4 key factors:
1. Efficacy
2. Product properties
3. Presentation
4. Market Needs

Given the outlook of the chemicals industry and global mega-trends, Dr Raydan’s strategy to increase Forlle‘d‘s innovative position is through focusing on implementing new approaches that make R&D work fast, enhance and maintain these 4 key points.

He believes that at the present, the skin care industry is passing through a static state and that competition is high. To be more successful and minimize risks, Forlle’d will focus its R&D department to work faster, study the market and introduce products that cover a niche or promise high growth potential. At the same time the company keeps an eye on the future by encouraging the research team to address new skin concerns, introduce new approaches and search for new actives.

Dr. Raydan concludes: “At CIEX, I will be highlighting the question how we can move the skin care industry, and mainly anti-age science, to another level. Hence, I am looking forward to hearing the opinions from our partners in the industry, share ideas, and seek opportunities for future collaboration.”

Along with Forlle‘d, several international brands such as Air Liquide, Avantium, Biovia Dassault, BMW, Evonik, Henkel, Honeywell UOP, Oriflame, P&G, PatSnap, PepsiCo are confirmed to speak at CIEX to explore innovation strategies and processes across the chemical value chain. Full details of the event can be found at ciex-eu.org.

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Innovation is about the ability to spot opportunities and take advantage of them

Image courtesy of Merck

Merck, the world’s oldest operating chemical and pharmaceutical company, as well as one of the largest pharmaceutical companies in the world, has been around for almost 350 years. Its 50,000 employees in 66 countries work together on innovative solutions and the newest technologies. In 2016, the company invested a total of 2 billion euros in research and development.

Prof. Dr. Klaus Griesar

Our latest interview features Prof. Dr. Klaus Griesar, Head of Science Relations department at Merck whose responsibilities include strategic partnerships and cooperation with leading universities worldwide, start-up companies and research institutes. His portfolio also includes the elaboration and analysis of science & technology based megatrends.

He is a member of numerous scientific and industrial committees (President of the Association of Chemistry & Economics (VCW) within the German Chemical Society (GDCh) and a Member of the Editorial Board of Angewandte Chemie) and author of more than 50 publications in the topics of innovation management, business development and strategy.

How do you define innovation?
Innovation is always driven by the ability to see connections, to spot opportunities and to take advantage of them. Moreover, innovation is a result of curiosity. When one is willing to undertake risks, create change, and “shake-things up” due to curiosity, that will lead to innovation and therefore, unravel new markets. However, innovation is not just about opening up new markets, it can also offer new ways of serving established and mature ones. Consequently, innovation represents the core renewal process in any organization.

Where does innovation stand among your priorities and responsibilities?
Innovation is the key question for management. Every company has its own culture in which they define the level of innovation and the connection between success and innovation. Proper management of innovation will result in building and improving new/current routines over time. It is of great importance to manage and incorporate innovation into daily tasks, responsibilities, and essentially make innovation a part of your routine. Innovation is a process, not a single event, and needs to be managed as such, and therefore the influences on the process can be manipulated to affect the outcome.

What is the relationship between R&D expenditure and new developments?
R&D expenditure exhibits a significantly positive effect on the long term economic growth and therefore, new developments. At the firm level, R&D contributions are associated with the willingness to collaborate and create networks. On the one hand, with increasing novelty of the innovation more R&D input is required, but it is associated with greater market uncertainty. On the other hand, novel innovations are those that bring new developments to the surface.

How important are employees and cooperation for innovation?
Organization of innovation is more than just a structure or a process, it is a cohesive set of components that work together to create and strengthen the type of environment which stimulates innovations to flourish. Innovation is about learning, embracing change, and accepting the risks, costs, and disruptiveness. Moreover, innovation cannot be achieved without the ‘people’, the employees and members of other cooperation. Innovation is increasingly about teamwork and the creative combination of different disciplines and perspectives. Therefore, it is essential to coordinate the right teams together in order to be on the right and most efficient path towards innovation.

What are the major challenges and opportunities facing the chemical industry in 2018 – 2019?
Society experiences a rapid change from an industrial to a knowledge-based focus. For the chemical society, this transformation results in a shift “from materials and molecules to systems and solutions”. Hence, the challenge lies in the incorporation of material with complementing services, or even in creating new business models that back away from being a pure product manufacturer to become a value-creating solution provider.

As the often-cited Harvard chemist George M. Whitesides stated: “This prolific era is over, and chemistry is now facing classes of opportunities, and obligations to society, that are even more interesting, but entirely different.” (“Reinventing Chemistry” in Angewandte Chemie, 2015). With this statement, he predicted the ongoing shift from pure component and material innovations towards integrated system and novel all-in-one solution development. This alteration, of course, involves certain challenges but offers ample potential in re-creating a new chemical industry with the objective to become an integrator of the entire value chain.

Given the outlook of chemicals industry and global mega-trends, what is your strategy to keep and increase your company’s innovative position?
Innovation in our company already takes place on a level of integrated solution creation rather than single component or molecule development. To further amend this process, we need to concentrate on the value proposition of our innovations in an early phase. This can be done by early, strategic segmentation and efficient market selection. Often, the real value of the product is not the most obvious property of the material but a combination of characteristics which is beneficial for a specific market segment. Conducting this segmentation rigorously will help to improve the product’s value proposition and penetrate markets systematically.

What do you think your company should next focus on regarding innovation?
Our CEO, Stefan Oschmann indicated a significant business advantage: “If you think about the healthcare, then we’ve already got everything at Merck that Google would love to have.” (FAZ, July 4, 2016). Trends like personalized medicine, where treatments can be perfectly aligned with the patients’ needs, require novel technologies like Big Data analysis and self-learning algorithms. Also, in the laboratory business, the systematic digitalization will provide pioneering innovations regarding the interconnected workspace. Our mission is to further develop and sensibly apply novel technologies to foster digitalization throughout all our businesses and thereby enable groundbreaking innovations.

Prof. Dr. Klaus Griesar will be speaking at the upcoming CIEX 2017 Conference on September 19-20 in Frankfurt, Germany. He will talk about “The 4Ps of innovation: Old wine in new bottles?“.

Along with Merck, several international brands such as P&G, PepsiCo, BMW, Oriflame are confirmed to speak at CIEX. Together with leading pharma and specialty chemical manufacturers, they will explore innovation strategies and processes across the chemical value chain. Full details of the event can be found at ciex-eu.org.

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Sustainovations – Merging Sustainable Development with Consumer Insights

Third from Left: Dr. Thomas Förster, Image courtesy of Henkel

A new international study¹ revealed that a third of consumers are now choosing to buy from brands they believe are doing social or environmental good, and more than one in five respondents said they would actively choose a brand if it made their sustainability credentials clearer on its packaging and in its marketing. This represents a potential untapped opportunity of €966 billion out of a €2.5 trillion total market for sustainable goods.

Ahead of his presentation entitled ‘Sustainovations in FMCG: Merging sustainable development with consumer insights’ at CIEX 2017 in Frankfurt on September 19th, we spoke to Dr. Thomas Foerster, Henkel’s Corporate Vice President of R&D for Beauty Care. Dr. Foerster believes that sustainability is becoming one of the most important drivers for innovation.

Investing into sustainability

In 2016, Henkel employed around 2,700 people on average in R&D and invested €463 million in R&D activities. When asked about the importance of employees and cooperations for innovation, Dr. Foerster explained: “Innovation is at the heart of R&D – and probably the strongest growth driver for the business. So, it is our number 1 priority. But innovation is the responsibility of all employees. And very often teamwork and cooperation is needed to come to brighter ideas and faster developments”.

At Henkel, sustainability is a required element of the innovation process and is continuously reviewed. The Beauty Care business unit has linked this goal strategically to its innovative strength. As a result, every new product makes a positive contribution to at least one of six focal areas identified by Henkel, and impacts at least one stage of the value chain.

The strategic goal of sustainability combined with innovative strength sets Henkel Beauty Care apart from its competitors. The focus is on innovations that will help customers and consumers to reduce their energy use and thereby their own carbon footprint. Since 2011, Henkel has reduced the CO2 footprint of its raw materials by an average of 4 percent per year, relative to total sales. By using readily biodegradable raw materials the company also reduces wastewater pollution. Henkel’s aim is to save 50 million metric tons of CO2 emissions by 2020.

Henkel products are both innovative and sustainable in terms of raw materials, formulation and use – which forms the basis of the sustainovations concept. The comprehensive integration of raw material data into the development process has enabled the company to determine the CO2 footprint of over 165,000 product formulas. Based on the success of the raw material-based method, a comparable application is now being introduced for all packaging materials. The application, which is in the development stage, aims to help reduce the environmental footprint of cosmetics packaging and make it fully transparent as of 2017.

Managing the innovation pipeline

Dr. Foerster says that there is definitely no linear correlation between R&D expenditure and new developments. He continues: “You have to spend your money in an efficient – but even more important – efficacious way, betting on the right horse. It is well known that the innovation pipeline is more an innovation funnel. At the fuzzy front end you need enough input so that you get a constant flux of consumer relevant innovations out of the process”. In order to keep innovation and R&D pipeline healthy, Henkel manages 2 stage-gate processes; one for the mid-to-longterm advanced research, one for the launch initiatives. “Our focus has been more on product innovations; however, processes and services are becoming more important, especially in the digital world” he adds.

Fostering collaboration by rewarding suppliers

Henkel collaborates closely with its strategic suppliers to fully exploit its innovative potential and ensure the procurement of smart, sustainable raw materials. A number of awards help to recognize these efforts and to motivate suppliers. Henkel’s Adhesive Technologies business unit presented its sustainability award in 2016 to Evonik Resource Efficiency GmbH for its ongoing contribution to the sustainability of the product and project pipeline at Henkel. The Beauty Care business unit recognized chemical company Lonza in 2016. A collaboration with Lonza resulted in the development of more environmentally compatible ingredients for Dial brand antibacterial soaps. The Laundry & Home Care business unit presented BASF with an award in 2016 for the development of unique, high-performance ingredients that have gone into the development of phosphate-free automatic dishwashing products. As a result, Henkel premium brand Somat now contributes to a reduction in water pollution.

Given the outlook of chemicals industry and global mega-trends, Dr. Foerster says they are working with their marketing colleagues looking for evolving market trends, but of course also to upcoming technological trends: “We try to match them and validate our concepts with consumers to make our customers the centre of our innovation efforts”.

Along with Henkel, several international brands such as P&G, PepsiCo, BMW, Oriflame are confirmed to speak at CIEX. Together with leading specialty chemical manufacturers, they will explore innovation strategies and processes across the chemical value chain.

CIEX 2017 – The Chemical Innovation Exchange – will take place at the Jumeirah Frankfurt on September 19&20. See full details at ciex-eu.org.

¹ Unilever: Report shows a third of consumers prefer sustainable brands

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Innovation is PepsiCo’s first priority – interview with Dr. Maria Velissariou

Consumers and industry needs are changing fast and we must stay ahead of the curve, says PepsiCo VP Nutrition R&D.

Innovation is about creating value. And since nearly every item manufactured (in fact 96% of all goods) is touched in some way by special ingredients, innovation has a profound impact on the daily life of consumers. In order to produce new and improved products, consumer goods companies go through an increasingly complex and competitive innovation process.

Dr. Maria Velissariou

PepsiCo, one of world’s most powerful brands, is in the process of reshaping its product portfolio to capitalize on consumers’ increasing interest in health and wellness. We had the pleasure of speaking with Dr. Maria Velissariou – Vice President Nutrition R&D of PepsiCo, and a keynote speaker at CIEX 2017 to find out how she manages innovation processes and what‘s next for PepsiCo.

Where does innovation stand among your priorities and how does innovation drive company growth?

Innovation is my first and foremost priority. It drives the top line via core and new breakthrough innovations. Innovative solutions also drive productivity and bottom line growth that in turn fuels innovation.

What is the relationship between R&D expenditure and new developments and what are your thoughts on new-product versus business-model innovation?

Investment in R&D is investing in the future of the company during a time of digital transformation and the race for competitive advantage among a changing competitive landscape and a global “democratization” of innovation and e-commerce.

We need both especially in a digital economy, global trade and global human capital. Our consumers are more and more digital natives and innovation change happens very fast through conventional channels and fast emerging e-commerce.

How do you steer your new-product innovation approach?

It is consumer focused through and through – from the consumer and for the consumer. We develop advantaged and affordable product & packaging formats that can be customized for various countries/consumers speedily and effectively. We also focus on the delivery of nutrition, authentic/locally relevant food and beverages, and in a sustainable way.

How important are employees and co-operations for innovation?

Human capital and cooperation networks will determine the speed of innovation and the competitive edge. We aim for global cooperation but locally grounded.

Given the outlook of chemicals industry and global mega-trends, what is your strategy to keep and increase your company’s position?

We are focusing on 3 key areas to serve articulated or non-articulated consumer and customer needs. These are:
•   Value end innovation
•   product advantage
•   competitive edge in technology

What do you think your company should next focus on regarding innovation?

The ability to innovate across the value chain, anticipate consumer trends and regulatory shifts as well as delivering sustainable products through traditional and new channels. Consumers and industry needs are changing fast and we must stay ahead of the curve.

You will be speaking at the upcoming CIEX – Chemical Innovation Exchange. What is the one key point that attendees should take from your talk?

The importance of extracting and multiplying value from “interfaces” (cross-functional, cross-disciplinary, cross-cultural, cross-sector) and collaborations through internal and external ecosystems and partnerships.

Along with PepsiCo, several international brands are confirmed to speak at CIEX. Together with leading chemical manufacturers they will explore innovation strategies and processes across the chemical value chain.

CIEX 2017 – The Chemical Innovation Exchange – will take place at the Jumeirah Frankfurt on September 19&20. See full details at ciex-eu.org.

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Innovation: Raison d’être of chemical industry or old wine in new bottles?

Image courtesy of Evonik Industries

Innovation has become a long-term driver of financial performance and value creation in the chemical industry, and it can provide enormous competitive advantage for companies. However, in a challenging business environment it is always difficult to find the resources and commitment for long-term and transformational innovation – especially for projects that pay off only after extended periods of research. We spoke to Professor Dr. Stefan Buchholz – Managing Director of Creavis – Evonik’s strategic innovation unit and a confirmed speaker of CIEX – Chemical Innovation Exchange 2017 about innovation.

How important are employees and cooperation for innovation?

The most crucial assets are both employees and an innovation culture that allows them to thrive. In 2016, approximately 8% of Evonik employees were working in R&D. We are dedicated to finding the right mix of people and skills. But we are also willing to invest fundamentally in the development and education of our people. Even so, no single company can harbour all the skills needed to succeed in an increasingly complex world. This is especially true at the fuzzy front end of innovation. One key point the attendees of CIEX 2017 will take from my presentation is that chemical innovation will increasingly require a company to master both the fuzzy, anarchical front end of ideation, and a tough, structured, persistent implementation toward business.

What is the relationship between R&D expenditure and new developments?

The chemical industry has historically been about material innovations – new products, new substances. But the world is changing with entire value chains moving or merging. Any successful approach to innovation needs to be open to all opportunities. Evonik invested EUR438 million in its R&D activities in 2016, a number that has increased by 4% per year since 2011. Creavis has a clear focus on transformational, mid- to long-term innovation. At the same time, all our innovation projects need to generate a positive impact not only to our balance sheets, but also to society and the environment.

What do you think your company should focus on next when it comes to innovation?

Four things: The ability to offer systems solutions when needed, a sound approach to digitalization, further focus on business model innovation, and the ongoing empowerment of our intrapreneurs.

CIEX 2017 will feature 25+ senior level speakers sharing real-life examples on how they turn the challenges of rapidly evolving chemical industry into opportunities. Our expert speakers will present leading practices and learnings gained from their daily quest for the effective execution of innovation processes.

Taking place in Frankfurt, Germany on September 19th and 20th, CIEX 2017 will present speakers including:

Dr. Maria Velissariou – Vice President Nutrition R&D, PepsiCo
Dr. Alain Mavon – Senior Director of Science & Innovation, Oriflame Cosmetics
Dr. Daniel Witthaut – Head of Corporate Innovation Strategy, Evonik
Stephan Altmann – Head of Innovation Excellence, BASF
Dr. Ralph Kleinschmidt – Head of Technology & Innovation, Thyssenkrupp
Andreas Ochs – Managing Director, Air Liquide Research Centre
Dr. Gert-Jan Gruter – CTO, Avantium
Dr. Jim Rekoske – CTO and Vice President – R&D, Honeywell UOP
Sudip Majumdar – CTO, Compact Membrane Systems; ICIS Alpha Innovator of 2016
Prof Dr. Klaus Griesar – Head of TO-Science Relations, Merck
Dr. John C. Warner – President and CTO, Warner Babcock Institute for Green Chemistry; known as the “Father of Green Chemistry”

Hear what past delegates say about CIEX:

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Creating Opportunities from Raw Material Price Volatility

Volatile commodity and raw material prices are affecting every industry from chemicals, supermarkets to white goods, electronics and automotive. Volatile and unstable global markets have widespread implications for manufacturing organizations. From rising energy costs to unexpected fluctuations in raw material prices and currencies, unforeseen obstacles are threatening to destabilize supply chains and make it difficult for manufacturers to manage their sourcing costs.

This is especially the case with the specialty chemicals industry as explained by Mr Wouter Hut, VP Procurement, Akzo Nobel Specialty Chemicals at the 2016 CIEX Europe conference held in Frankfurt, Germany. Hut sees the specialty chemicals market volatility mainly driven by oil price fluctuation and margin battles.

Wouter Hut speaking at CIEX Europe 2016

Innovating procurement processes
However, according to Hut, raw material price volatility can also be an opportunity if managed well. To take advantage of varying raw material prices companies need to innovate and adapt their procurement processes. This starts with the introduction of decentralized procurement functions that use new processes and tools and are more closely aligned with business needs.

Falling prices for one material do not necessarily translate into savings explains Akzo Nobel’s VP for Procurement, using the example of Ethylene. Even though prices for oil have dropped, the price of ethylene has not come down due to a continued underinvestment in new ethylene cracking capacity and also due to lower asset integrity of existing ethylene cracking units globally. This discrepancy in pricing is increasingly hard to explain and justify with customers.

Feeding price forecasts into margin management
Price forecasting has become a critical part of Akzo Nobel’s business processes. The company even took the step of making its 18 month advance price forecasting a KPI for its business units. Through a tight integration of PMM diagnostics, pricing methodologies and improved tools & processes, price points, margins and ultimately EBITDA can be managed and improved. To do this effectively, Akzo Nobel forecasts its entire chain using a combination of Stoichiometrics, Demand/supply mapping and market intelligence.

Even today, many manufacturers lack the flexibility to respond to market volatility. Hut recommends a two-pronged strategy that focuses on short-term mitigation of risk as well as a long-term sustainability goal. To achieve this, procurement departments need to become agile and adept in the full gambit of derivative instruments. Additional strategies can be the complete review of supply chains, with a focus on proximity to raw material and their value-to-sustainability quotient. Upstream investments can also be considered if capital permits. Last but not least, waste minimization technologies and programs can also create compelling cost savings.

Watch the full presentation at CIEX 2016 here (Wouter Hut, VP Procurement, Akzo Nobel Specialty Chemicals)

Editor’s note: Don’t forget to mark your calendar for CIEX 2017 taking place on 20-21 September, 2017 in Frankfurt! Let’s continue our discussions online on our CIEX Linkedin Group.

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