International business in manufacturing
The development of industrial enterprises in the current conditions means nothing more than innovative development, since it is only possible to achieve competitive advantages in the context of an intensifying competition through new products and methods of organizing production. The reason for this is that as a result of globalization, transnational corporations and companies predominate in the world market, whose activities largely determine the economic situation of individual countries.
The relevance of this topic is due to the fact that in the context of the digitalization of the world economy, the requirements for the survival of companies in all sectors are becoming more stringent, but it is still necessary to pay special attention to the development of key industries, which include the chemical industry (hereinafter abbreviated as "chemical industry"). This industry produces products especially used in the real sector: metallurgy, agro–industrial complex, military–industrial complex, oil refining and petrochemistry, mechanical engineering, as well as in pharmacology and medicine.
The aim of the study is to analyze the current level of digitalization of the key chemical producers in the Russian Federation. The introduction of digital technologies is changing the global chemical industry beyond recognition, transforming all major business processes. Successfully implemented adequate digital strategy and adaptive digital processes throughout the company are the most important success factors in solving the problem of the survival of chemical industry companies in the course of digital transformation.
To achieve this goal, the following tasks were set and solved in the work:
Research object : the competitiveness of Russian industrial enterprises in the world market.
Subject of research : an innovative component of increasing the international competitiveness of industrial enterprises in the Russian Federation.
Innovation and innovative development as a factor of economic growth have been studied by many Russian and foreign scientists, such as: V.V. Glukhov, B. Santo, V.M. Geets, V.L. Makarov, S.B. Korobko, A.A. Danykin and S.Yu. Glazyev, B.A. Raisberg, R.A. Fatkhutdinov, I.E. Frolov, V.V. Janowski, K. Freeman, J. Schumpeter. The theoretical analysis of the competitiveness of the economy is based on the research of M. Porter, P. Heine, E. Heckscher, J. Tinberg, R. Cooper.
The development of innovations in the Russian chemical industry should contribute to stimulating the active development of those sectors of the Russian economy that depend on the chemical industry. It is precisely because of the synergistic effect of the development of interconnected sectors of the economy that developed countries invest colossal amounts of money in the development of R&D in the chemical industry. For example, the rate of funding for these developments in the pharmaceutical sector in Japan is 14%, and in Germany – 3% [ 1 ].
According to Cefic Facts & Figures, the top 10 chemical producing countries in 2020 had a combined turnover of € 2,901 billion, representing 86.7% of global chemicals sales. Six of the top–10 producing countries are Asian countries (China, Japan, South Korea, India, Taiwan and Saudi Arabia), whose total sales of chemical products amount to EUR 1,886 billion, or 51.5% of the world market. Sales in China are higher than in the EU and US markets (1,198 billion euros versus 565 billion euros and 468 billion euros).
Two of the Top–10 are European manufacturers (EU–28 + Russia), whose chemical sales revenue amounted to 640.5 billion euros (19.1%). Thus, sales of chemical products grew by 2.8% from 2017 to 2018. In most European countries, sales revenue increased in 2018.
Another two countries of their top 10 were American manufacturers – the United States and Brazil, whose sales of chemical products amounted to 537.6 billion euros (16.1%). Revenue from sales to the US chemical industry grew less than 1% in 2018 compared to 2017. Business development in Brazil did not improve in 2018, with sales revenues falling by about 2% [ 2 ].
The vector of the global chemical industry's value chains is increasingly moving to the Asia–Pacific countries, which contributes to the formation of a new competitive environment for the world economy, where Asian growth is a key trend, which also actively stimulates regional economic integration. The change in the share of regional chemical producers in the total volume of manufactured products is shown in Fig. 1.
Figure 1 – Share of key regional chemical producers in 2008 and 2018
It can be seen that the dynamics of trade flows between the Asia–Pacific region and Europe will lead to the dominance of Asian states. The inevitable consequences of such a tectonic shift towards Asian countries make it important to quickly and comprehensively adjust the business models of key regional chemical companies and Russian companies in particular. The latter should ensure that the existing organizational structures are fully prepared for the likely challenges of the digital age for the company in the domestic and global chemical market.
For each individual country, the digitalization of the economy and its individual industries is a necessary measure that will allow it to remain at a competitive level, revise the parity of shares in the world economy and maintain sovereignty [ 3 ].
Today the world chemical industry is in a phase of change. Manufacturers here intend to actively invest in the digitalization of their processes and business processes. For example, the importance of digital business models for the future viability of the German chemical industry has been recognized, and such business models are dynamically expanding: 30% of SMEs in the chemical industry in Germany already achieve 5% of their income through digital business models, and another 40% intend to implement them in the future. Over the next three to five years, chemical companies plan to invest more than € 1 billion in digitalization projects and new digital business models. Therefore, digitalization will become an integral part of the chemical industry success model [ 4 ].
As for Russia, it historically has fundamental prerequisites for ensuring high competitiveness of chemical products on the world market. The chemical complex of the Russian Federation plays a significant role in the implementation of the most important socio–economic programs of the state, being at the same time a driver of innovative development of industries that consume chemical and petrochemical products. All this allows the Russian Federation to provide for itself and to export ammonia, tire products, mineral fertilizers, polymers, plastic products and much more. The state has a much larger number of economically beneficial prerequisites for the innovative development of the chemical industry than countries with large petrochemical and chemical industries, such as Singapore and the Republic of Korea.
The main prerequisites for the high competitiveness of the Russian chemical industry include:
The modern hyperturbulent nature of world economic relations testifies to the transition to a new stage of development, when the knowledge intensity of all sectors of the economy is increasing. The implementation of the Industry 4.0 concept during the 4th industrial revolution plays a critical role in strengthening the competitiveness of industrial companies and will open up new horizons for the global economy. Digitalization of basic industries, for example, chemical, allows companies to achieve several strategically important goals at once (which was previously achieved as a compromise): reducing the cost of products while improving their quality, increasing the profitability of production and increasing efficiency from foreign economic activity in the world market. It also takes much less time for businesses to develop and bring new products to market.
In the chemical industry of the Russian Federation, the digital revolution is led by large companies: SIBUR, URALCHEM, FOSAGRO, Eurochem, Uralkali, Nizhnekamskneftekhim. It is these companies that create exemplary enterprises in the context of industrial digitalization. The rating of these companies among the Top–400 largest companies in Russia in terms of product sales, according to RA Expert, is shown in Fig. 2
Figure 2 – Positioning of the chemical industry in the rating of the Top–400 Russian companies in terms of sales volume for 2019 (RA Expert)
We will start the analysis of the digital transformation of the production process with PJSC SIBUR Holding, which, in addition to using ready–made innovative mechanisms, also creates them independently. PJSC SIBUR Holding is included in the list of the largest domestic companies, the field of activity of which is petrochemistry and gas processing. According to the consolidated statements of the holding for 2017, revenue amounted to 454,619 million rubles, EBITDA – 160,851 million rubles, and net profit – 120,245 million rubles, which exceeds the net profit of the previous year by 6.3%.
The start of digitalization of the company was given on December 1, 2017, and already at the beginning of 2018, a department was created that ensures the development and implementation of innovative digital solutions in all business processes: from the supply of raw materials for production and operation of equipment to sales of manufactured products [ 6 ]. The use of Industry 4.0 technologies in all business processes is a priority strategic goal of the company. The company sees widespread digital transformation as an opportunity to use the latest inventions and technologies to optimize production processes and continually improve production activities. Also one of the priority goals of the company is the dynamic expansion of production. At this stage of digitalization of production, the company has already implemented systems such as:
A significant advantage can also be attributed to the widespread use of an automated process control system (APCS), which allows accumulating a large amount of data that can be used in the future to deepen the digitalization of the company's production activities.
In 2017, the company launched a large–scale project to switch to electronic document management (EDM). According to the experience of global business, digitalization of workflow can increase staff productivity by 20–25%, and the cost of storing documents in electronic form can also be reduced by 80% compared to paper.
Documentation of sales was the first project to digitize workflow. Already in February 2018, SIBUR entered into agreements with the three largest Russian operators, which allowed customers to switch to EDI as conveniently as possible. For 2019, Ruslan Bronichev, the head of the SIBUR project "Implementation of Electronic Document Management", planned to transfer interaction with all buyers of SIBUR products through EDM. The use of this function can increase the efficiency of the company's interaction with customers due to the instant exchange of documents, reduce the likelihood of illegitimate signing of documents, loss of data, reduce the costs of registration, delivery, printing, archiving and return of documents during sales. The results are clear: In less than a year, the company sent 88,000 electronic documents, saving time and transaction costs, and reducing paper consumption by 2 tons.
In the application, the foreman is able to chat to the crawler about actions and checks at each stage of the bypass. The program automatically generates reports on the performed rounds, and then sends them to a common database, which allows you to save staff from paperwork, saving time. The company purchased augmented reality glasses to provide consultations on equipment diagnostics and repairs with experts located remotely. This opportunity allows you to reduce the time and money spent on the travel of foreign and domestic specialists, and also speeds up the process of restarting the equipment. The company plans to transfer up to 70% of all contacts to a remote form.
At the current stage of digital transformation, SIBUR has automated production processes up to 90% and has a significant IT foundation for further digitalization of business processes, but the degree of integration of all company systems needs to be increased. Other giants of the Russian chemical industry are actively engaged in digitalization. For example, URALCHEM UCC focuses on: accelerating production processes; customer orientation; reducing costs. The company has set a strategic goal for 2020 to introduce an integrated system for automation of labor protection and industrial safety processes, as well as intelligent management tools for work in highly hazardous areas, such as behavioral video analytics. To improve the quality, the company is improving the CRM system by developing a functional client's personal account. The company also plans to implement LIMS, MES, APC systems, which will reduce production costs. They plan to reduce electricity consumption with the introduction of intelligent energy management. The digitalization of the company also consists in the gradual optimization of all links of the production process: ensuring equipment repair using AR, VR technologies, as well as predictive analytics, which allows you to monitor the current state of the equipment, bring it to the optimal operating mode, and in case of failures – to timely adjust the mode equipment operation. The use of IIoT allows the company to collect up–to–date data that is used to analyze production processes and adjust them if necessary [ 7 ].
Another of the leading companies in the Russian chemical industry, PhosAgro, has introduced control over the location of 70–ton dump trucks carrying ore. This allowed the company to reduce the colossal costs of downtime. Moreover, this technology makes it possible to timely identify an impending breakdown, optimize the order of spare parts necessary for timely maintenance, and also reduce the number of dump trucks used. PhosAgro also became the first company in the Russian chemical industry to launch an online trading platform that allows customers to find out all information about the company's products, buy the necessary fertilizers, and also clarify information on how to use these products [ 8 ].
At the end of 2018, SIBUR launched a test project to automate mobile walk–throughs at production sites. The use of Near Field Communication (NFC) technology, which is embodied in NFC tags, as well as Bluetooth, in an application specially developed by the company, allows to reduce the amount of routine work of the crawler. This application is able to keep statistics of rounds, fix problems that have arisen in production, control the timeliness and thoroughness of rounds, and, moreover, maintain operational communication with the workers in charge at the site and the foreman. This application tracks the location of the crawler and, as you move, reminds you of the need to check objects in the current area.
In the application, the foreman is able to chat to the crawler about actions and checks at each stage of the bypass. The program automatically generates reports on the performed rounds, and then sends them to a common database, which allows you to save staff from paperwork, saving time. The company purchased augmented reality glasses to provide consultations on equipment diagnostics and repairs with experts located remotely. This opportunity allows you to reduce the time and money spent on the travel of foreign and domestic specialists, and also speeds up the process of restarting the equipment. The company plans to transfer up to 70% of all contacts to a remote form.
At the current stage of digital transformation, SIBUR has automated production processes up to 90% and has a significant IT foundation for further digitalization of business processes, but the degree of integration of all company systems needs to be increased. Other giants of the Russian chemical industry are actively engaged in digitalization. For example, URALCHEM UCC focuses on: accelerating production processes; customer orientation; reducing costs. The company has set a strategic goal for 2020 to introduce an integrated system for automation of labor protection and industrial safety processes, as well as intelligent management tools for work in highly hazardous areas, such as behavioral video analytics. To improve the quality, the company is improving the CRM system by developing a functional client's personal account. The company also plans to implement LIMS, MES, APC systems, which will reduce production costs. They plan to reduce electricity consumption with the introduction of intelligent energy management. The digitalization of the company also consists in the gradual optimization of all links of the production process: ensuring equipment repair using AR, VR technologies, as well as predictive analytics, which allows you to monitor the current state of the equipment, bring it to the optimal operating mode, and in case of failures – to timely adjust the mode equipment operation. The use of IIoT allows the company to collect up–to–date data that is used to analyze production processes and adjust them if necessary [ 7 ].
Another of the leading companies in the Russian chemical industry, PhosAgro, has introduced control over the location of 70–ton dump trucks carrying ore. This allowed the company to reduce the colossal costs of downtime. Moreover, this technology makes it possible to timely identify an impending breakdown, optimize the order of spare parts necessary for timely maintenance, and also reduce the number of dump trucks used. PhosAgro also became the first company in the Russian chemical industry to launch an online trading platform that allows customers to find out all information about the company's products, buy the necessary fertilizers, and also clarify information on how to use these products [ 8 ].
Thus, most of the leading large companies in the chemical industry of the Russian Federation are gradually introducing various digital solutions to optimize their business, which gives them a competitive chance of survival in the "toxic" environment of the modern global chemical industry.