The chemical industry, like the rest of the global economy, has been buffeted by an extraordinary confluence of economic and regulatory factors over the last several years—war, inflation, fluctuations in oil prices, supply chain perturbations, and the push towards decarbonization and sustainability.
Unlike many other industries, however, the chemical industry emerged relatively strong from the last few years, placing companies in the enviable position of taking a measured look inward at their IT systems and assessing how well-prepared they are for the next crisis or opportunity. That measured look includes understanding how to manage business changes in light of current and pending technology changes.
As will be discussed further at the ASUG Best Practices: SAP for Chemicals conference (June 21-22; at The Woodlands, in Texas; register here), the technology changes that chemical industry companies can expect will come in five major buckets:
- Upgraded customer experiences. While most chemical companies don’t contend with the same business-to-consumer (B2C) requirements that exist in other sectors, these companies still need to upgrade the experiences they provide to business partners and customers. In many cases, new business-to-business (B2B) capabilities follow the lead of B2C functionality, providing greater levels of service, interactivity, and visibility. This, in turn, requires a reassessment of the technology and business processes that underlie customer interactions.
- Platform changes, such as upgrades from SAP ECC to SAP S/4HANA and adoption of SAP Business Technology Platform (BTP). The changes in how chemical industry companies interact with customers, among many other key initiatives, mean that SAP customers, like their counterparts, must plan for software upgrades and net new implementations. These processes will likely extend over several years as the technical requirements for supporting innovation and moving to the cloud come up against the practical issues of time, budget, and change management. Will a pending upgrade come under a RISE with SAP contract? Will it run in SAP S/4HANA, private cloud edition, or in a public cloud environment? Will my company need an interim hybrid platform strategy? For many chemical companies, particularly those with decades of SAP software infrastructure in their cores, the question of how to manage the switch from on-premises to cloud and hybrid cloud/on-premises systems will require an important level of strategic planning.
- Industry-specific product upgrades and enhancements. The good news for SAP chemical industry customers is that SAP is committed to continuing its leadership in support of industry-specific functionality. It’s a blessing that comes wrapped in complexity, however: SAP Road Map Explorer lists over 1,000 enhancements slated for 2023 alone that target chemical industry customers running SAP HANA, SAP S/4HANA, SAP SuccessFactors, SAP Sales Cloud, SAP Fiori, and other SAP products. This requires at least a cursory understanding of what all these enhancements mean. Not every enhancement needs to be assessed in great detail, but every customer will need to know where SAP plans to place its bets, how those bets translate to a given company’s business objectives, and what they will need to do about optimizing this new functionality. This is particularly important for companies that have heavily customized their on-premises SAP systems—whether a particular customization can be sunset in favor of net-new “fit to standard” software as a service (SaaS) technology will have a huge bearing on costs and complexity moving forward.
- Large-scale functional changes, such as building more resilient supply chains and logistics networks, and supporting sustainability and other compliance and regulatory requirements. The chemical industry has learned the hard way the lessons of broken supply chains, clogged ports, and backups in rail shipping over the last couple of years. While some of the biggest problems have diminished, there is a clear imperative to look for better ways to function in an increasingly interconnected and interdependent global economy. That global economy also requires increased monitoring and reporting of myriad factors relating to sustainability, supply chain visibility, track and trace, and regulatory compliance, among many other factors. For many companies, this means revamping complex business strategies relating to on-shoring and off-shoring, for example, and then realizing those changes in their supply chains and supplier relationships. The good news is that SAP and its partners are bringing to market considerable new functionality that runs natively in SAP S/4HANA or on the SAP Business Technology Platform (BTP) as an industry-specific extension. But some key business functionality can’t run under the SAP banner, which means careful decisions will need to be made regarding the mix of technology and the composition of the business processes that new and old technology can help realize.
- Data quality, governance, and usability. Business transformation needs looming in the chemical industry are highly dependent on fixing what in most companies is a complicated and often messy data infrastructure. Rapid growth in some lines of business and rapid technology change across the board have made the issue of data quality, governance, and usability across the enterprise of paramount importance. All business transformation strategies live and die by the quality of the data they produce. Data transformation is part and parcel of business transformation. One without the other simply isn’t enough.
Technology changes impacting the chemical industry promise to have a profoundly positive effect on business success, provided they’re provisioned correctly. Getting it wrong isn’t an option in this fast-paced, increasingly competitive global economy. But it takes careful planning and a critical eye toward what is both necessary and possible for your company.
Despite the “fit to standard” promise of SaaS, staying competitive still means making technology fit your business needs and not the other way around. A lot of changes are coming down the pike in the next few years, and while most, if not all, will eventually be relevant, picking which ones to start with and which ones to set aside for later may be the most important strategy of all.
Joshua Greenbaum is principal at Enterprise Application Consulting.