Unlike some toll compounders, Subhash Pahuja isn't embarrassed to say what he does for a living.
``I wouldn't be buying another company and doubling our size if I didn't believe that toll compounding is a vital part of the supply chain that end users need, even if they don't appreciate it,'' said Pahuja, who is president and chief executive officer of Alloy Polymers Inc. in Richmond, Va.
Pahuja, who bought Alloy in 1982, spoke at Performance Compounding 2002, a conference held April 11-12 in San Antonio.
In January, Alloy announced plans to buy a plant with 110 million pounds of annual capacity in Gahanna, Ohio, from Basell NV. Basell, which needed a larger site to grow its business, will continue to consume about half of the plant's output for the next four years.
The Basell acquisition - Alloy's first - will move the firm into polypropylene compounding. To date, most of Alloy's work has been in engineering resins such as nylon, polybutylene terephthalate and polycarbonate. The firm compounds about 100 million pounds annually on 13 twin-screw lines in Richmond.
The toll compounding market - in which compounders produce material based on formulations provided by their clients - is maturing, moving beyond a second-class reputation it may have had in years past, Pahuja said.
``Some [toll compounders] are still `garage shops,' but some are very professional,'' he said. ``Gone are the days when you could run an extruder with the roof leaking in one corner of the building just because you needed to get the order out.''
Because of its low barrier to entry, a large number of people try their hand at toll compounding - but many of them don't last long.
``As companies grow, toll companies have the most casualties,'' Pahuja said. ``Anyone can buy or lease an extruder. When the market's down, [machinery] companies will even give one to you. And before you know it, you're in business.''
But toll compounders looking for continued business have to be professional by focusing on safety, quality, technology and confidentiality, as well as logistical support and environmental issues, he said.
``You have to be willing to receive calls at 4 Friday afternoon from a customer who wants the order there by Sunday,'' Pahuja said. ``We look forward to those calls.''
And in spite of tollers' reputation for surviving on razor-thin margins, price wasn't a top subject mentioned in a recent independent, Alloy-commissioned study that asked customers what they were looking for in a toll compounder.
``A successful toll compounder isn't price-based,'' Pahuja said. ``If a customer asks you for a penny less, you should move away from him. He won't be there when you need him.
``It's hard to do when you don't have a lot of customers, but that's part of the challenge. You need to be more than just a tactical solution to a short-term problem.''
Alloy recently opened a 10,000-square-foot addition in Richmond that will house 15 million pounds of production for compounds that meet stringent food, medical, pharmaceutical and personal-care guidelines, including those required by the Food and Drug Administration.
Pahuja said Alloy was profitable in 2001, although he declined to disclose sales figures. He said the firm did not lose any customers from 2000, but did lower volumes overall.
He added that he sees a continued need for toll compounders, even if they labor in the shadow of high-profile companies.
``We're like a nurse who wakes you up at 3 a.m. to give you a pill to take the pain away,'' he said. ``We're something nobody wants, but everybody has to have.''