Investing for a Digital Future

Article by Ian Elsby

With digitalisation – the technology focus of Industry 4.0 – set to impact the UK chemicals sector, we outline the all-important financing options available for chemical companies looking to fund their own digital revolution.

IF SUCCESSFUL, the adoption of industrial digitalisation solutions could, within ten years, boost UK manufacturing by £455bn, drive sector growth by 3%, and create 175,000 new jobs. This is according to the recently-published, Made Smarter industrial digitalisation review, which aims to set out a roadmap on how best UK companies can adopt digital technologies.

Digitalisation is the technology focus behind Industry 4.0. However, if the chemicals sector is to benefit from its widespread takeup, a number of challenges must be overcome.

If they are, it opens up opportunities for enhancements in a number of key areas such as increased competitiveness, better operational efficiency and flexibility, enhanced productivity performance, improved plant availability, and the analytic use of intelligent plant data to inform current and future strategic decision-making.

New digital technologies can drive many areas of day-to-day chemical plant operation, including tackling the high energy levels prevalent in the sector, allowing energy consumption in the face of ever-rising utility costs to be measured, monitored and, ultimately, controlled for bottom-line benefit.

Likewise, efforts to connect, optimise and integrate plant-wide control and automation systems at all levels from raw material intake to process stages, as well as provide process visualisation and scheduling can be positively influenced by adopting digital tools.

They will enhance performance efficiencies, provide data-driven business insight, and enable operational assets to be maintained safely and securely. Indeed, issues of operational safety and cyber security threats remain top priorities for the sector, and digitalisation offers many proven solutions.

Finance the future

Whilst the various challenges of undertaking a digital culture change within organisations, sourcing experienced technology partners and upskilling employees within what is a traditionally conservative sector must be recognised, a primary concern for many looking to embark on a digital journey is that of finance!

Should they invest? How best to invest? What are the options available?

For those chemical companies already preparing for a digital future, it is clear that many have strong ROI expectations when it comes to investment payback. According to recent research, 48% of chemical companies expect to see digitalisation-linked ROI of two years or less, while just 10% forecast a ROI timeframe of over five years.

This emphasises the need not only to partner with a trusted and long-term technology vendor, but also to ensure that chemical companies seek out the right kind of smart financing solution that matches their particular need and secures the best option to underpin significant and far-reaching digital aspirations. By doing so, it also removes the immediate need for large capital outlay and increases the availability of CAPEX funds for other much-needed expenditures.

Some current and innovative financing options to suit a wide range of situations include: 

  • Performance-based (outcome) financing – investment in new or upgraded technology and equipment can be made on the basis that it will deliver defined and measurable business benefits such as improved profit and productivity, energy savings or efficiency improvements. This emerging solution allows a company to align its payments according to a defined set of business outcomes, rather than paying to use technology regardless of what it achieves for the organisation. Performance contracts enable payments to be predicted on the basis of expected levels of business benefit.
  •  Financing total cost of ownership (TCO)  this is already a well-known solution in the manufacturing sector. It is designed to embrace the full costs of using technology, not just its acquisition. It satisfies demands for financial agreements to encompass service, software, maintenance and consumables, as well as the simple technology acquisition. For digitalisation strategies, it provides a financially reliable package ensuring that running costs will not escalate unpredictably over the lifespan of the technology. 
  • Financing aligned to operational use – on occasions a manufacturer needs to acquire innovative technology that either takes time to install, delivers accelerating revenue or cost-saving benefits over time, or only produces commercial advantages on a seasonal basis. Financing arrangements can be made where the flow of payments is matched to the expected patterns of use. 
  • Financing energy efficiency – as an energy-intensive sector, eliminating waste is a key concern for chemical companies. There is a broad range of technology solutions that can cut energy consumption and, with it, cost. But often access to affordable finance to invest in energy-efficiency initiatives is problematic, especially for SMEs. Today schemes can match the financing period and the level of monthly payments to the projected energy savings. This makes the investment effectively zero cost for the business. 
  • Financing for future needs – digital technology change is accelerating rapidly and developments around the Internet of Things, big data analytics, predictive modelling and automation are refining process, resource and supply chain management. Financing arrangements can be made with built-in points of technology refreshment if the company wishes.

Exciting times

The digital revolution is an exciting time for the UK’s chemical industry as it looks to compete on a global stage. It is the technology foundation that will enable the chemical sector to plan asset and plant management more intelligently, link together disparate elements of plant processing operation to maximum effect, and support ambitions to gain a technology and commercial edge over the competition. Those that fail to invest in their digital futures risk being left behind. 

No longer do chemical companies have to fear the finance barrier when it comes to implementing digitalisation strategies alongside a trusted technology partner. The range of flexible financing options now available means that the largest operator to the smallest SME can specify the right financing package for them, safe in the knowledge they will be investing smartly in their future.

Article by Ian Elsby

Head of chemicals, Siemens UK & Ireland

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