Six Ways Blockchain Impacts the Chemical Industry

Changes in technology provide an opportunity for growth and development in any industry. The challenge is identifying the right tools to obtain the goals of the business. By understanding the impact of a blockchain on the chemical industry, you have a tool to help with the growth of your company.

What is a Blockchain?

According to Investopedia, a blockchain is a public ledger used to record transactions or keep track of data. The Harvard Business Review suggests that it may also refer to a type of database of information. It is not limited to transactions and may focus on information that benefits a business.

Since the data or ledger is not owned by any individual, each person in the chain has the opportunity to keep track of data, or mine the data, and follow the transactions. It limits the risks of inaccurate documentation and keeps individuals honest in their transactions.

Innovating in the Chemical Industry

Innovation in the chemical industry is more important than ever before since new competitors and technologies are entering the market and product cycle times are continuously reduced driving to faster commoditization of products and services. By using blockchains, a chemical company may improve their ability to innovate and create interesting solutions for their customers. A blockchain facilitates close collaboration in an open or closed community (dedicated community of experts) via sharing information safely with all stakeholders in real-time following the rules set by this community without need for validation or authorization by third parties. As everybody works from the same data and information costly and time redundant work can be avoided, hence overall Return on Innovation will be increased while reducing Time to Market.

Fostering Commodity Trading

Trading is a key part of particularly commodity chemical value chains. It allows the business to buy and sell a greater amount of products through networks at best prices and margins leveraging current market conditions. In the chase of the chemical industry, a blockchain provides a new way to engage with potential clients. As chemical manufacturers produce as well as consume electricity machine to machine integration and interaction is an innovative vehicle to safely and efficiently (Science Direct) trade electricity with each other utilizing data produced by process flow sheet models of industrial equipment.

Another example is the ZrCoin Network. A group of Russian scientists has developed a new manufacturing process for Zirconium Dioxide using waste material as feedstock instead of the traditional mining process. Instead of funding the construction of the new ZrO2 plant, the group founded a ZrO2 trading market on a blockchain platform called ZrCoin. Here investors will trade ZrCoins, a derivative representing a physical amount of ZrO2. After having reached a critical threshold of investment a buyback program will start where the initial investors will be repaid at a premium for the assets that they currently hold, with compensation being either monetary, or in an equivalent of ZrO2. The ZrCoin team can retain full ownership of their business. The blockchain platform will offer the speed, transparency, and safety that is inherent in its design, but most importantly, it will enable the creation of a market without the need for a third-party organization to regulate and facilitate trade. This has the potential to dramatically cut down on trading fees since all trades will be B2B.

New Avenues for Manufacturing

3D printing, also called Distributed Manufacturing, is proving to be another revolutionary technology that is moving manufacturing closer to mass customization. In particular, the chemical industry can benefit developing tailor-made proprietary formulations and systems. However, a much-discussed but unresolved issue is intellectual property protection. Similar to the way digital music is shared, 3D printable digital blueprints could be shared illegally and/or unknowingly either within a company or by outside hackers. In addition to digital files, users can print molds from a scanned object and use them to mass-produce exact replicas that are protected under copyright, trademark, and patent laws. The problem will continue to grow as companies move to an on-demand manufacturing network, requiring digital blueprints to be shared with independent fabricators. With blockchain, data and rights holders could store metadata about any substance, from human cells to powered aluminum, on the blockchain, in turn opening up the limits of corporate manufacturing while also protecting intellectual property. New markets could enable buyers and sellers to contract more easily in an open market.

Validating Asset History and Employee Qualification

Blockchain can be used to prove ownership when procuring or disposing of an Asset. It can also help to track the history of an assets and related maintenance activities. Furthermore, it can serve to validate qualification of employees and certifications of contractors in chemical plants. The latter is particularly important since with new technologies and millennials entering the plant floor completely new skill sets are required. Those skill sets need to be certified to ensure safely operating plants and assets.

Tracking Information for Improved Integrity and Accuracy

Some segments in chemicals (e.g. pesticides) are threatened by counterfeiting. Blockchains single ledger verifies the integrity of a product as the record can be traced back to the product manufacturer and even the manufacturer of its precursor agents.

Also, as complexity in chemical supply chains increases tracking products and shipments becomes more and more important. Contemporary logistics solutions must deal with transportation, location services, regulations, hazards, packing requirements, security, customer engagement and more. Accounting for these variables requires a lot of planning, and complex expensive systems. Even with extensive planning, billions of dollars of goods are lost each year through mismanaged transportation or fraud. Chemical and logistics companies are beginning to turn to blockchain for a solution.

Competing as an Ecosystem

In the stream of multiple M&As companies are spun off their parent but still may have the R&D know how, business relationships and brand recognition of parent companies. These organizations will compete as part of an ecosystem rather than a single business with broad coverage. They will have minimal inventory and will therefore apply products, made by organizations with a core competency around manufacturing, into their overall “solutions.” So how does block chain fit in? Blockchain technology provides an agile commerce platform in which these next generation of chemical companies can compete. The new ecosystems fit nicely into the consortium blockchain model, providing a platform for safe, efficient, traceable resource trading. These trades will also be done without the need for a third party and will be pure B2B transactions.

About your Guest Blogger:

Stefan Guertzgen has worked for 8 years as Senior Director for Industry Solution Marketing Chemicals at SAP. In this function he is globally responsible for driving industry thought leadership, strategic portfolio decisions and overall positioning & messaging as well as executive messaging programs for key stakeholders along SAP’s entire Chemical solution portfolio.
Prior to this assignment he has worked for 11 years in the chemical Industry at Chemtura in various positions comprising R&D, Global Business Development, Business Process Management and Sales & Operations Planning. On top he has a 7 year experience in Pre Sales and Management Consulting for the process industry with focus on business operations, working for companies like AspenTech, AT Kearney and SAP Business Transformation Consulting.
He holds a PhD degree in Chemicals from the Max-Planck-Institute for Coal Research at Mülheim/Germany and has been granted a 1-year post-doctoral fellowship for the University of Berkeley/California from the Alexander von Humboldt Foundation.