The outsourcing of business support functions such as information technology and human resources is as common in the chemical industry as any other. Maintenance operations also are now regularly in the hands of outside companies offering financial guarantees that your plant will not suffer any unscheduled downtime. Acting as something of a corporate “comfort blanket,” these and other outsourced operations should allow the company to get on with doing what it knows best — producing chemicals.
However, there are times when it might be better to outsource even that core activity of producing chemicals. For instance, your plant might not have sufficient capacity at the right time, your operators and engineers may lack the necessary expertise to execute a particular chemistry, or you may not even have all the regulatory permits required — any or all of these might persuade you to consider taking your production out of house to a toll processor or contract manufacturer.
John Wetzel, director for fine chemicals with Rütgers Organics Corp., State College, Pa., has been involved with toll processing and contract manufacturing since 1980. “This was a time,” he recalls, “when there was a reluctance within chemical companies — certainly among their engineers — to believe that outsourcing could be better than their own in-house production. But their managers were soon amazed at the prices and speed at which their processes could be handled by contract manufacturers.”
One example he cites from those early days was a project that enabled a major manufacturer to bring a specific product to market a year earlier than it could have done using its own resources. That company is still a long-term customer of Rütgers, as are many of its other clients. “We go mainly for multi-year contracts,” says Wetzel. “Although some business involves process development — starting at the pilot scale and working through to full-scale production — more often it’s a case of taking over production of existing processes on behalf of the customer.” He sees this largely as a reflection of the changing face of the chemical industry itself: “Companies striving to cut costs, while maintaining production at the highest possible levels of quality.”
At its production plant in Augusta, Ga., and pilot plant at State College, Rütgers undertakes contract manufacture of a wide range of synthetic organics mainly for agrochemical and pharmaceutical companies, at production rates of up to around 1,000 ton/yr. This ability to offer various, though related, chemistries and process operations at varying levels of capacity is typical of many toll processors. Wetzel says that “whereas some companies undertake toll production merely to fill excess plant capacity, Rütgers’ plants are dedicated to custom manufacturing.”
This point is echoed by Dean Segal, vice-president of sales and marketing for Pope Scientific, Saukville, Wis., a company specializing in toll processing services for heat-sensitive materials. “Unlike many toll processors, who may make specific products for themselves and happen to have spare capacity to offer, Pope does not have any bulk product. We specialize in high-vacuum molecular distillation, evaporation and fractionation.”
Pope is, in fact, an example of that breed of toll processors that started out life as specialist equipment producers rather than chemical manufacturers. “We always did feasibility testing to support our equipment technology research and development,” explains Segal, “and then a dozen or so years ago customers started asking us if we could use our in-house facilities to process their materials. So we made toll processing a profit center within the company.” Underlining the attractions of toll processing, he says: “With the costs and risks involved in bringing products to market and the need to do that quickly, it makes sense for producers to come to us, as we are experts in that type of distillation.”
Getting extra help
This really is the essence of toll processing. Outsourcing your processing requirements can give you access to levels of expertise and equipment that might otherwise be lacking in your own organization. But first you have to find a processor with that right mix of technology, equipment, expertise and — probably the one thing you are most short of — time, to meet your processing requirements.
One point of reference recommended by Segal and others is their trade association, the Synthetic Organic Chemical Manufacturers Association (SOCMA), Washington, D.C., which runs the annual Informex exposition (next in New Orleans, Feb. 21-24, 2006). This gathering of nearly 500 manufacturing companies, many of which offer toll processing services, is a good source of “cross pollination” of ideas, expertise and business, according to Segal.
A regular exhibitor at Informex and a contract manufacturer of nearly 30 years’ standing is Nation Ford Chemical, Fort Mill, S.C. At its 19-acre site, the company produces a variety of organic intermediates, solvent dyes and pigments for customers worldwide to use as intermediates in their own operations. But the other side of the business — with totally separate processing facilities — is “typical toll processing,” says CEO Jay Dickson.
Nation Ford’s membership in SOCMA is “invaluable,” he notes, both in terms of helping generate business for his own company and also — as is the case with many custom manufacturers — in his occasional search for a toll processor himself. With a foot in both camps, as it were, Dickson has his own views on what you should expect of a toll processor. “We look for engineering know-how,” he says, “whether they have the ability to take a particular product, a particular unit operation, and make it work. In short, engineering capability.”
Rütgers’ Wetzel offers a similar perspective. “Reliability,” he asserts. “That’s the most important differentiator. You have to be competitive on price but this shouldn’t be the main criterion. A toll processor has to recognize just how much of a risk people take when they ‘go outside of their own shop.’ If the toll processor can’t deliver, then the cost becomes immaterial.”