CONTRACT & TOLL MANUFACTURING
From ‘ just in time ’ to ‘ just in case ’
With enquiries booming , toll manufacturers are stressing logistics . Gregory DL Morris reports
Toll and custom manufacturing is taking on an even greater importance in the era of endemic logistical challenges , because most companies are shortening their supply chains . Whether it is called localisation , regionalisation or repatriation , security of supply has come to the fore . ‘ Just in time ’ has been proven to be a false economy and has given way to ‘ just in case ’.
“ Generally speaking , our external manufacturing partners are doing smaller-scale business with many customers ,” says Jessie Walters , global procurement director for external manufacturing at Evonik .
“ Those toll processors can be large , strategic customers for distributors , but often the tollers don ’ t have longterm volume contracts with their suppliers . They buy a load of this and a tote of that . Before the pandemic , that was fine , but we have seen through the pandemic , and especially after the winter storm across Texas , where our tollers have contracts and where they don ’ t .”
Walters is now pushing her toll manufacturers to be more strategic about logistics . “ The best partners are the ones who think about their own security of supply ,” she says . “ I like to see them mirror our agreements with our suppliers when they can . Otherwise , we end up using our own supply chain . We can do that , but it ’ s better when the tollers handle their own .”
Price is not key
While security of supply has a cost factor , Walters hastens to add that it is one of several in the equation . “ Simply buying on price cuts you off at the knees . There is a value in security of supply and that value is being calculated on a quantitative basis . There is a preference for the reliable , known partner as compared to the low-cost supplier .”
At a fundamental level , Walters believes that competing on price alone is almost antithetical to partnership . “ We use external manufacturing partners more and more - and for strategic reasons , not as a one-off or an expedient ,” she explains .
“ It ’ s a reciprocal relationship , not simply a transactional one . Internally , I work for them to be viewed as full partners . That means I expect them to get into the boat with us and make safety , quality , productivity and supply chain security their priorities .”
The importance of supply chain security extends into decisions on what chemistries to pursue . “ We are having those discussions often ,” Walters adds .
Stiers – Companies need logistics specialists
“ I am asked , ‘ We are developing this ; where and how can we have it made ?’ I have a list of all the precursors and intermediates that are difficult to get or ship , and , if used , will make the finished formulation ten times more expensive when the time comes to scale up to commercial production .”
While those determinations are most important for materials that are difficult to ship , the broader trend is localisation : shorter and more secure supply chains . “ No matter where something is being made , I favour regional domestic suppliers whenever possible ,” says Walters . “ By that I mean supply within North America for North America , or within Europe for Europe , especially .”
Another important way that logistics is a factor in development and commercial operations is in
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