Chemicals Industry Transformation: SAP’s Foundation for Strategic Growth – Part 1

The chemicals industry navigates a complex landscape of volatile costs, intense competition, and evolving regulations. Organizations must continuously optimize operations, enhance decision-making, and foster strategic growth to thrive. This first part of our exploration delves into how SAP, implemented by partners like NTT DATA Business Solutions, helps chemical companies establish a robust foundation for cost management, strategic investment, and initial data transformation.

Optimizing the Value Chain

Cost management in chemicals demands surgical precision across the entire value chain. In production, for instance, advanced planning and scheduling (APS) systems combined with predictive analytics align output Precisely with real-time demand, drastically cutting changeovers, waste, and idle capacity. “The adoption of digital twins and IoT-enabled process monitoring further minimizes energy and material losses, ensuring continuous optimization,” says Brandon Evans, VP, Customer Transformation at NTT DATA Business Solutions.

For inventory, AI and machine learning are pivotal for precise demand forecasting, ensuring optimal stock levels and preventing costly overproduction or disruptive shortages. Procurement strategies extend beyond simple price negotiations to strategic sourcing and supplier consolidation, balanced by diversification to mitigate risk. Collaboration with suppliers on demand forecasts and logistics also unlocks significant operational and cost efficiencies.

“Leaders can enhance production efficiency by implementing APS systems and leveraging predictive analytics to align output with real-time demand, thereby reducing changeovers, waste, and idle capacity,” Evans explains. This integrated approach, supported by robust ERP integration and advanced data analytics, drives end-to-end transparency for sustainable cost reductions.

SAP: Your Strategic Compass for Growth

According to Evans, SAP’s cloud infrastructure helps lower the total cost of ownership so that companies can pivot or scale per their needs and demands. A few key SAP solutions that support this are:

• SAP S/4HANA Cloud for real-time insights across the business, cost control, and automation to enhance cost tracking, margin analysis, and cost-to-serve.
• SAP Business Data Cloud and SAP Business Transformation Platform (BTP) provide tools for forecasting and scenario simulation to support more strategic decisions about inventory reduction or improving overall equipment effectiveness. These can include custom analytics, predictive models, and workflow automation.
• SAP Integrated Business Planning (IBP) helps align sales, operations, and financial plans using real-time supply chain visibility and what-if analysis.
• SAP PLM streamlines product lifecycle and innovation while integrating regulatory checks early in the design phase.

“Once a company lays the foundation with SAP S/4HANA, they can continue to move forward with a roadmap focusing on modular deployments,” Evans notes. “Everything is designed to map back to driving bottom-line improvements.”

Data Migration for Seamless Transitions

Migrating vast amounts of legacy data into modern SAP S/4HANA systems is uniquely complex for the chemicals industry. Challenges include:

• Master data structures, such as material definitions, often encompass nuanced regulatory details—including hazard classes, batch classification, and formulation dependencies—that must remain intact through transition.
• Maintaining auditability for compliance-critical records like SDS, REACH, and TSCA documentation.
• Data cleansing to account for a range of data quality issues like outdated formats, incomplete fields, or duplicated records.
• Reconciling historical data from years of production, inventory, quality, and process across the business to reduce risks of business disruption or downtime.

Evans notes that NTT DATA Business Solutions guides chemical companies through these intricate migration processes. “Our methodology emphasizes pre-migration data cleansing and harmonization as fundamental steps, employing profiling tools and establishing robust governance standards,” he says. “Tools like SAP S/4HANA Migration Cockpit and SAP Data Services enable controlled extraction, transformation, and loading of legacy data.”

The choice of migration strategy—be it a greenfield implementation (new system), a brownfield conversion (system conversion), or a Selective Data Transition (SDT)—depends entirely on each company’s specific business needs and risk appetite. “NTT DATA Business Solutions provides rigorous validation through mock migrations, comprehensive QA testing, and cross-functional collaboration,” Evans adds. “This approach mitigates risks, ensures a smooth transition, and maintains thorough audit trails to ensure compliance is never compromised.”

What This Means for SAPinsiders

Foundational SAP is essential for dynamic growth. To meet anticipated growth, chemical companies need more than just an ERP; they need a scalable SAP foundation. Building on SAP S/4HANA and embracing modular deployments enables SAPinsiders in the chemicals industry to pivot and adapt their technology roadmap in sync with changing market demands, directly improving the bottom line.

Harmonize data for unmatched insight. Fragmented data from disparate legacy systems hinders efficiency and decision-making. Leveraging SAP’s capabilities for master data management and governance, combined with platforms like SAP BTP, allows chemical companies to unify real-time data flows, enabling accurate demand forecasting, precise cost control, and eliminating data quality issues.

Expert partnerships minimize disruption during migration. Implementing modern SAP systems from complex legacy environments can be daunting. However, SAP partners like NTT DATA Business Solutions specialize in guiding chemical companies through these challenges, offering rigorous validation, tailored migration strategies, and sector-specific expertise to ensure a seamless transition that mitigates risks and avoids operational disruption.