Chemicals companies are moving more aggressively to further digitize and embed digitization within their organizations. While sales and customer relations were the initial focus for digitization efforts, chemicals industry professionals now expect to adopt digital solutions for core activities — production and operations, strategy and business intelligence, and outbound logistics.
Spending on digital is becoming more widespread. About half of chemicals manufacturers and distributors across agrichemicals, industrial specialty chemicals and consumer specialty chemicals increased investment in digital tools over the past three years, and ~75% are expected to increase investment in digital initiatives over the next three years. Companies of all sizes are now recognizing that competing effectively in a changing landscape requires tools such as artificial intelligence (AI) and automation, in addition to customer relationship management (CRM) and lead generation software.
These findings on digitization trends in the chemicals industry are sourced from L.E.K. Consulting’s 2021 U.S. Specialty Chemicals survey that polled 260 chemicals sector professionals across a broad range of industries and executive functions in late 2021. The first-annual survey examined how the industry is addressing pressing concerns including the supply chain, sustainability and market disruptions in the wake of COVID-19 and ongoing global upheaval.
Below, we describe what chemicals companies’ leaders had to say about their past and planned future investments in digital tools and which tools are being most utilized and for what applications.
Digital tools investment is up across companies of all sizes
Industry professionals report they are increasing investment in digital tools and will continue to do so. About 50% of survey respondents increased digital investment from 2018 to 2021, while about 75% expect to increase investment by 2024. This is true for companies of all sizes, although the increased investment is driven by companies at opposite ends of the spectrum, in particular — both small companies making under $10 million in annual revenue and large corporations making more than $500 million expect to increase digital adoption equally, by 31 and 30 percentage points, respectively, over the next three years. Companies across both segments appear to recognize the need for digital capabilities in order to remain competitive and help their businesses scale. The middle market expects to increase its spend as well, but not by as much — 26 percentage points for $10 million-$99 million in revenue and 19 percentage points for $100 million-$499 million (see Figure 1).
Companies increase use of digital tools for core operation needs
Chemicals companies are not just planning to spend more on technology; they’re also looking to use it for a wider variety of applications that reach more deeply into operations. Chemicals company professionals report the most interest in adopting digital tools over the next three years for strategy/business intelligence (68%), core production/operations (66%) and outbound logistics (63%). Most respondents indicated they either “probably would adopt” or “likely would adopt” digital tools for those functions over that time. That is higher than their interest in adopting tools for customer management (54%) and customer engagement (53%) (see Figure 2). The sole focus on a customer lens appears to be shifting.
Chemicals companies are predictably adopting operationally focused digital solutions for their core areas — but they are also making use of existing CRM tools to support strategic and operational objectives. When asked about current use of digital solutions, survey respondents most often reported they are leveraging tools such as AI/machine learning and automation/robotics in core functions including strategy/business intelligence (39% use AI and 32% use automation for this application), core production/operations (33% use AI and 40% use automation) and outbound logistics (31% use AI and 37% use automation). But it’s also worth noting that professionals report they are using lead generation software and CRM tools for these functions — for instance, 39% use lead generation software to support strategy and business intelligence goals (see Figure 3). It seems likely that customer data will be used in the future to support strategy and operations as much or more than for CRM and sales.
Overall, expect digitization to be an even bigger factor in the industry as companies become more reliant on digital tools and use them to achieve an increasing number of the most critical business objectives. With companies such as specialty chemicals and food ingredients distributor Azelis reporting a twofold efficiency gain from digital tools, it’s clear that digitization is gaining traction within the chemicals industry and is benefiting the bottom line.
What other priorities are top of mind for chemicals companies? In our final article on the 2021 U.S. Specialty Chemicals Survey, we will explore the impact of COVID-19, labor shortages, government regulations and other recent market disruptions on the industry.