The operating model determines whether a chemical company will continue to be successful in the future or will lag behind the competition. A current CAMELOT study shows that digitization and modularization will lead to stronger differentiation between the operating models of chemical businesses in the future.
The operating model comprises the production and distribution networks, distribution channels and value flows across the corporate structure.
Most chemical companies are divided into strategic business areas, which generally design their operating models independently. And in our opinion, this principle of independent business areas should remain dominant in the future. At the business unit level, on the other hand, customer and technology developments will bring about major changes. The following example of typical specialist chemicals companies in Europe illustrates the consequences this has for operating models.
Example special chemical industry
The profitability of traditional core businesses – such as organic pigments, dyes and additives – has been under pressure for years. At the same time, the complexity of the product portfolios has increased. As a result of this, manufacturers have started to split up their portfolios:
- Standard products in the portfolio are being placed in “efficiency” business models with lean cost structures.
- Products with customer-specific characteristics are covered by “customization” business models.
- Innovative, customer-specific developments with high added value are components of solutions developed together with the customer and are managed in “customer solution” business models.
In contrast to the differentiation of the business models, the realignment of the operating models has not yet been carried out consistently. However, this will change with the utilization of existing technologies or technologies currently under development. In the scenario described here, the operating models for the sub-businesses in the supply chain and logistics areas have common features, but differ significantly when it comes to production.
Distribution, Supply Chain and Logistics
In order to defend the position in mature markets for as long as possible using optimum cost structures, the “efficiency” business model relies on automated settlement processes. The central sales channel is a webshop, via which the majority of the sales activities take place. The back-office processes (order processing) are automated (“zero-touch-order”) and are supported via a European shared service center. With the introduction of a new ERP system, a cloud solution will be introduced.
There are clearer differences between the operating models in the production area. Specialty chemicals, with the associated multi-purpose facilities and batch production, offer greater potential for efficiency and process quality in production than highly automated continuous operations, for example. The consistent implementation of the different operating models is therefore crucial for competitiveness.
Efficiency business model
For the commoditized business, further consolidation will take place, which will result in only a few or even just one central production site in Europe. The existing approaches to automation and comprehensive in-process control will be continued as long as they are economically viable. This will lead to a standardization of product quality and a significant increase in facility efficiency and yield.
Customization business model
In the “customization” models, the use of artificial intelligence comes into play, which, together with automation and in-process control, enables a quantum leap in the production of precise customer-specific products – also in small batches.
Customer solution business model
The model for customer-specific solutions goes even further. With regard to new investments or new markets, the focus is placed on decentralized, standardized and thus “modular” small-scale production. Wherever possible, production modules will be moved closer to the customer.
The scenarios described here show that the levers of “Chemistry 4.0” will lead to stronger differentiation between operating models within chemical business areas. The strongest lever for change will be the modularization of production wherever this is technologically possible and supports the business model.