Compounding: Stretching the Services

The widespread consolidation of suppliers and manufacturing capacity that took place throughout the ’90s has permanently changed the face of the custom compounding industry. Yet, even before this merger mania began, processors had already felt the effects of a monumental transition within the wider resin distribution network, as large primary resin producers centralized operations in order to cut costs, greatly reducing regional and local sales and technical support service. The result of both of these trends is that restructured compounders with a global reach are now often filling a service niche once filled by the resin producers themselves.

“Many mid-size processors structured their companies around the expectation of technical support from the large resin companies,” says Dan Bishop, director of e-business, North America for DSM Engineering Plastics. “When they no longer received that support, it opened up opportunities for compounders.”

Bishop believes compounding companies have successfully responded to this need, but only by rationalizing their business resources.

“Compounders have to be very clear who their key customers are and what market they serve. You can’t be everything to everyone.”

DSM supplies various grades of filled nylon and other engineering thermoplastic compounds. In order to enhance sales and service support for its customers, the company has made the strategic decision to decentralize marketing efforts away from its North American base in Evansville, IN. Regional offices located in Detroit, Philadelphia, Atlanta and Los Angeles are staffed with customer support teams consisting of an account manager, technical support people and application development specialists.

Thinking global, acting local

An offspring of the merger between vinyl producer Geon and resin distributor and compounder M.A. Hanna, PolyOne recently celebrated its first anniversary as a manufacturer and distributor of compounded engineering resins, vinyl and color concentrates.

“PolyOne is committed to serving customers of any size, anywhere in the world,” Lance Mitchell, group vice president, PolyOne Plastic Compounds and Colors business reports.

PolyOne has announced it will invest $45 million in compounding equipment over the next two years. The investment, according to Mitchell, “will cover the entire gamut of known compounding technology.”

The company has also launched its Center for Manufacturing Excellence, which Mitchell describes as a resource for new, cutting-edge developments related to compounding technology and manufacturing.

Mitchell says both of these initiatives will enhance PolyOne’s ability to deliver customized solution to processors, both large and small. The company, he affirms, is also committed to servicing the Canadian market.

“We have significant compounding capacity in Canada with four manufacturing plants, as well as warehousing in Mississauga,” he says. “Canada has some unique service requirements and we’re aware of it.”

Ingenia Polymers Corporation president John Lefas believes there is still a place in the market for the smaller custom compounder. The Toronto-based company, with manufacturing plants in Calgary, Brantford, ON and Houston, TX, has achieved double-digit growth in recent years. Its recently introduced Superblend line of compounds, which are pelletized formulations of additives in very high concentrations, thus reducing blending steps, has been especially well-received in the market, according to Lefas.

“In comparison to some of the larger compounding companies these days, we have the ability to be flexible and respond quickly to the customers needs and evolving markets.” Lefas reports the company will soon be adding an additional line at its Houston plant, and will be de-bottlenecking its Canadian plants to improve throughput.

E-business could help smaller processors

In today’s consolidated compounding industry, says DSM’s Bishop, there is a risk that the needs of the smaller processor can fall through the cracks as companies devote most of their resources to mid- to large-size processor.

“In the past small custom compounders had one-to-one relationships with customers,” says Bishop. “When this proved no longer possible (because of consolidation), companies began to use distribution networks for some of the servicing functions.”

Bishop thinks that electronic commerce could hasten the return of personalized contact between compounder and customer.

“It is assumed that e-commerce will even further de-personalize service but I disagree with that scenario. I think e-commerce will help broaden relationships and allow compounders to have better contacts with their customers.”

It remains to be seen if the potential of electronic business-to-business commerce will pan out in favor of the smaller processor. Yet compounders that only pursue business with medium to large processors may lose out, in the long term, on the chance to establish business relationships with many smaller companies on the high-growth fast track.