Challenges of achieving value chain optimization in the refining and Petrochemical industries

Posted: March 10, 2020

Every organization seeks to streamline processes that can optimize their value chain and increase profitability. Technology is driving a series of innovations, bringing concepts such as big data, cloud, analytics and digital twins that promise a transformation to the way companies run their business.

Several oil and gas companies are leading this fourth industrial revolution, and many are acknowledging its importance by setting up teams to define a digital transformation strategy. But why are there still many companies that fail to obtain economic return from their investment in digitalization?

In this post we address three main aspects that when underestimated, can result in low adoption rate and minimal return on investment of new technologies tied to refinery or petrochemical value chain optimization.

1. Diversity of goals and objectives across the value chain

Teams in an organization work towards specific objectives that can be different or even conflicting from other areas, as it is presented in the article Understanding Refining and Petrochemical Value Chain to Drive its Optimization.

From one perspective, this can motivate the achievement of local results that don’t maximize the overall business value. On the other hand, if individual objectives are not considered, there is a risk that important constraints or requirements are missed out, which could cause loss of production, logistic problems, or unsafe operations, to name a few.

2. Disconnection of processes create silos of information

Companies create departments to address different objectives and functions of the organization, but a common side effect is the disconnection between teams, resulting in silos that operate with limited visibility of the rest of the organization. This often causes misalignment of information and delay in decision making, leading to loss of value that could be used to increase the company profitability.

A significant contribution to this disconnection is the segregation of systems and technology used by each department. Even though the flow of information between departments is heavy, often it relies on people that manually take data from one system and send to the next department. This is very timing consuming, has a high risk of error, and creates a tendency of working with outdated information.

To understand the way people work and the existing limitations across teams – so you can begin a structured digital journey that optimizes the value chain, ask yourself these questions:

• Where is the most up-to-date information that my team needs?
• Can they easily access it, or do they need to contact a different team?
• Is the available information easy to understand?
• How easily can teams send feedback and collaborate?
• If someone has more up-to-date information, how does this person share with the rest of the business?

3. Business changes are tough, costly and disruptive, with a high chance of failure

Digital transformation is a big trend and it brings limitless possibilities for process improvements through exciting leading technologies. It is easy to be amazed by software capabilities and how it has the power to transform the value chain.

The fact is that technology is only one piece of the puzzle. You need the right technology, but to realize the expected benefits, you also need your people and teams willing to support the change – and this is the toughest part.

It is generally quite difficult to make people do things differently. In a business perspective, there is the additional fact that changes may be perceived as threats. A new system that brings traceability and enhanced visibility for management can be seen by users as an invasive supervision of their work. Systems that automate workflows and reduce time to execute an activity can concern professionals on whether they will no longer be needed. Such aspects can cause resistance to adopt new technologies and can amplify disruption during its deployment.

It is so important to see the digitalization of value chain processes as a business transformation, taking into consideration the existing culture, business workflows and perceptions of the individuals inside an organization. There is no shortcut – any change will be challenging and will demand a lot of employee engagement. Organizations must properly set the journey steps, so the chances of failure are reduced.

To understand how these challenges can be overcome, read our white paper VALUE CHAIN OPTIMIZATION FOR REFINING AND PETROCHEMICAL INDUSTRY: A guide for digital transformation to enable enterprise collaboration across the entire value chain.