Chemical companies have been slow to reap the benefits that digitalization has to offer. Many firms in this traditional industry realize that new developments in digital technology have the potential to help them bring about improvements in their businesses and serve their customers with greater efficiency.
The business model of a chemical manufacturer is usually based on a large volume of investment that has a long gestation period. Due to this reason, decision-making is often slow and deliberate. Digitalization, on the other hand, requires a relatively lower financial commitment, but decisions need to be taken much faster.
Online platforms that offer buyers the facility of sourcing their raw materials from a range of listed suppliers provide chemical firms with the opportunity to greatly increase the efficiencies of the buying process.
How an online platform can help a chemical company stay competitive
Raw materials form a significant portion of the cost structure of chemical companies. Most firms place great importance on reducing costs so that they are in a position to offer their customers lower prices. Research conducted by Accenture has found that a majority of chemical firms would like to lower their costs:
Ø 69% of chemical companies view cost reduction as a crucial component of their strategy to remain competitive.
Ø When entering a new market or introducing a new product, 79% of firms consider that costs will play a key role in determining their strategies.
Ø 69% of firms hold the view that technology can help to reduce their cost structure by half.
Chemical costs can vary on a daily basis. The manufacturer who has access to low cost raw materials stands at a tremendous advantage. An online marketplace permits buyers to track prices on a continuous basis and buy when rates are at their lowest.
A firm may decide to lower its selling prices based on the cost reduction that it is able to get on an online platform. This will strengthen its competitive position and help it to increase its market share.
New technologies could change the way chemical companies conduct their business
The number of physical devices with embedded technology is growing at an extremely rapid pace. According to Intel, there will be 200 billion connected devices by 2020.
Why are all these devices needed? While many of them will be smartphones and computers, large numbers of connected devices will be deployed in manufacturing industries, including chemical plants and at the sites of the customers of chemical companies.
These devices will be connected to the cloud and will generate enormous amounts of data in real time. Remote servers will process the massive volumes of information that is available and provide companies with actionable analytics. Firms will use this data to make decisions that will have the potential to bring about vast improvements in the manner in which they conduct their business.
Innovative firms will prosper, others will lag behind
According to Rachael Bartels, Managing Director – Global Chemicals & Natural Resources Lead at Accenture, “… chemical companies will need to pursue more disruptive innovation.”
She explains that firms in the chemical industry will have to explore new ideas that may not be related to their current products at all. As a result of adopting this approach, their existing products may become obsolete. If a firm is to prosper, it may need to develop alternative products, even if this is at the cost of reducing sales from its regular lines of business.
Online platforms can help chemical firms in their efforts to adopt digital technologies
By sourcing their raw material requirements from an e-commerce marketplace, chemical firms can take a significant step towards adopting digital practices. This shift away from their traditional procurement process can help them to lower costs and gain a competitive advantage.