How is digitisation affecting the chemical distribution industry?

A Smithers Apex study takes a deep look into the way that digitisation is altering the landscape for chemical distribution and opening the door to new investment.

Digitisation is a key strategy being adopted by many companies involved in the chemicals industry and is particularly important for those involved in chemical distribution. The chemical industry has already toyed with digitisation in the past, with some established techniques such as electronic management systems and digital control systems.

The increasing processing power of computers and major advancements in smart devices are enabling the chemical industry to evolve. According to The Impact of Digitisation on Chemical Distribution to 2023, there are some large disruptive implications for the current distribution business model as a result of the increasingly digitised landscape.

Digitisation is changing the shape of the industry value chain, and chemical distributors are in a potentially precarious position if they do not react. They will need to develop new digital skills to retain current customers, find new customers and develop new business models, all of which will be improved by an early adoption of digital techniques.

Smithers Apex identifies four trends that are encouraging chemical distributors to adopt digital systems.

Track-and-trace of chemicals

This relates to the need to know where chemicals are during their use and where they end up after their useful lifetime. Digitisation can allow manufactures to track their products at each step of the lifecycle.

The chemicals industry is now having to pay even greater attention to this issue. For example, The EU’s End of Life Vehicles Directive already obliges automotive manufacturers to take back scrapped vehicles and recycle a minimum of 85% of the weight of the vehicle. This is causing manufacturers to look at problematic materials used to make chemically derived components in the vehicle.

Track-and-trace will have far-reaching effects, and will drive the growth of more acceptable chemicals – and in turn lead to stagnation of sales of unacceptable chemicals.

Persistence in the environment of chemicals

Lifetime analysis of chemically derived materials is in its infancy today, but will grow exponentially. The industry is now insisting that the chemical must be broken down fully, that the process should not need special conditions to occur, and that the residual by products are not harmful. Tests are becoming standardised, and will become more stringent.

The result will be a revolution in the materials that will and will not be acceptable. The chemicals sold today in large volumes will be replaced by more environmentally benign chemicals, and this shift is going to happen at a fast rate.

Recycling

The simple route taken by governments has been to encourage recycling with the public, but to date the strategies chosen have been muddled and often of low real impact. Large volumes of end-of-life chemicals still end up in landfill.

It is predicted that governments are going to have to create realistic approaches to recycling if they are going to see greater success. This is particularly relevant in countires, such as China and India, that have recently banned the import of crude household waste. It likely that they will impose the obligations to recycle on the manufacturers, as they have done with the automotive industry. Digitisation can assist in the monitoring of recycling applications.

Ecommerce opens the door for new entries

There are a number of different types of organisations actively exploring the possibility of entering into the chemicals market. The fact that the chemicals industry is large globally makes the market an attractive area to invest.

The major barrier to entry for new participants has been its complexity, and the relationships between different products is difficult to understand. Digitisation is going to simplify the whole space, and it is going to be easier to match a buyer with a seller using digital means.

Potential entrants are looking at the chemicals market and fully intend to develop a position. Their current offer is not yet perfected to allow large-scale transactions to develop but they are studying the market to better understand what they need to do to allow them to develop a dominant presence. The current chemical distribution participants need to take this threat very seriously. If they fail to do so there is a high probability that their current business model will not be able to resist.

The Impact of Digitisation on Chemical Distribution to 2023 provides a comprehensive scoring and ranking of digitisation’s impacts on chemical distribution to 2023. For more information and purchasing options, download the brochure here.