Small, mid-size compounders keep value, agility, service 'in the mix'

In the world of custom mixing, bigger is not always better.

Maintaining a diversified customer base, agility in product turnaround time and flexibility to make large and small runs of products are virtues for small- to mid-sized mixers. Conversely, these custom mixers understand that with smaller margins, they must add inimitable value for customers—the larger a company, the more room there is for error.

For LMI Custom Mixing L.L.C.'s Jim Nixon, general manager of the mid-sized compounding facility in Cambridge, Ohio—a joint venture between Lauren International and Meteor GmbH with 120 employees—the market is growing rapidly.

At LMI's size, the privately held company is able to offer manufacturing flexibility, product lead times, technical support and a repertoire of recipes, from sponge and color compounding to general purpose extrusion and molding.

"2021 is off to a very good start," he said. "We're unbelievably excited about where our business is headed. After a year like we had in 2020, it's difficult to say what normal should look like. What we know is that if we stay true to our customers, suppliers and the core values that got us to where we are today, we will continue to find ways to be successful."

As a smaller compounder, Rainbow Master Mixing L.L.C. cites many of these same advantages, understanding that its size is its strength, especially when it comes to serving other small- and medium-sized companies.

"The market really is open for small players and custom mixers for the niche market," said Bill Stahl, technical and marketing development director for Barberton, Ohio-based Rainbow Master Mixing. "A lot of small molding shops don't really have the big orders for the big players. They need something small, or a medium-sized order that needs to be filled. And that is where places like Rainbow come in handy."

For Lora McCambridge, technical manager and research and development chemist with Polymerics Inc. of Cuyahoga Falls, Ohio, it is important to maintain a personal touch to customer relationships.

"Our actual motto is 'Keeping service in the mix.' You get a much more personalized experience," McCambridge said. "We know everybody by their first name, we know their kids' names, we know what they like to do for fun on the weekends. We have a much more personal relationship with our customers.

"We're a small company. We work with small companies and big companies alike. And we treat every customer like our No. 1 customer, because that's how it is."

Likewise, Chardon, Ohio-based Chardon Custom Polymers L.L.C. sees a place for smaller players in the custom mixing market.

"My speech is always the same," President Marian DeVoe said. "We can't rest on our laurels. We have to be nimble. We have to be very responsive. We certainly don't have the buying power of the elephant in the room, but we have the ability to respond in other areas.

"We have quite a tight-knit team of very committed people. They really make it happen and are always focused on how to make it happen, differently or better. That's how I think the smaller players can succeed."

No two custom mixers are alike, and Alttran, a smaller custom mixer of 40 employees in Northeast Ohio that specializes in color and black rubber compounds, is evidence of that.

"One of the advantages of a company of our size is the customer's ability to get things done quickly," said Dave Topliff, president of the Hudson, Ohio-based Alttran. "We don't have layers, which gives us the ability to make decisions quickly and help our customers gain opportunity now."

This gives Alttran a quick turnaround time, allows the company to offer novel formulations for a customer's product and enables timely technical advice to customers throughout the development process—from idea, to function, to process, to form.

"To me, the biggest advantage is that I get to know and interact with our customers," Topliff said. "I love talking to our customers, finding out what they are doing or in need of and then helping them get there, through our technical capabilities or our mixing of product. I don't just want to mix for people, I want to have a relationship with our customers whereby we have to count on each other. I love customers who truly want to improve their product, the discussion and work to make that happen is very rewarding."

COVID, other challenges persist

Challenges coming into this year continue to be the labor market—finding and retaining good workers—and raw material supply chain management, according to industry leaders.

And it goes without saying that the coronavirus pandemic still is much more visible in the front windshield than the rearview mirror.

"For us, it slowed down starting in April last year, but it didn't affect us too much," said Stahl, of Rainbow Master Mixing. "We aren't focused on just one market segment. That is how we have really tried to operate through the years and that has helped us out a lot."

That versatility helped Rainbow weather the worst of the COVID-19 slowdowns last year.

Alttran's Topliff said there is no telling when the uncertainty wrought by the pandemic will end.

"I don't think business does well with uncertainty and we are certainly, globally, having a lot of that in the last 12 months," Topliff said. "Looks like there is light at the end of the tunnel, though I am not sure what those dates will be."

Juxtaposing these precarious times with those of the Great Recession of 2008-09, Topliff said the big difference "is that back then, the phones just stopped ringing."

"This time most people have continued to do a lot of research and development and trials," he said. "We have been grateful to our customers and prospective customers for allowing us to work with them on so many different projects."

Topliff said he is all too aware of the loss of human touch during the pandemic, essential to business relationships in any industry.

"Hopefully we can start seeing each other again in the third quarter somewhat like it used to be," he said. "But we have a lot of uncertainty in our economy right now once we get past the COVID issues. I'm not sure what normal is going to look like or when that will happen. Business will certainly be done a bit differently from now on.

"We have been very lucky this past year under very trying circumstances. We have a wonderful group of customers that have helped us maintain our plans of continuous improvement."

DeVoe said Chardon has rebounded from the COVID-19 hit.

"For us it was almost like waves," she said. "We had some East Coast customers who just went from 100 to virtually zero overnight by the end of March, and then rebounded within about a month, when much of the automotive world was just falling apart and other areas dropping down quickly. And then things picked up."

Outside of COVID-19, there have been some tight supply line issues as well. Nitrile rubber and EPDM have been impacted with cost increases, and natural rubber also has seen supply become tighter and prices rise, DeVoe said.

Topliff noted that raw material costs (including freight) and availability are weighing on Alttran as well.

"Since last fall, pricing has been going up on almost all materials and there have been problems making sure materials from our suppliers are there," he said.

Topliff added that it can be difficult for some suppliers to find timely ocean freight, as ports are jammed with containers and it is a slow-go to get material to a warehouse. Consequently, suppliers are increasing inventory and pricing is increasing with what Topliff calls a "perceived lack of supply."

In addition, work force retainment and hiring remain a clear and present problem.

Topliff said attracting the brightest minds to make the best formulation for a customer's application is not always easy.

"As we all know, there is a huge void in technical knowledge in the rubber industry today, and it's not getting better," Topliff said. "That's got to be a scary proposition for a lot of companies. So we want to collaborate with companies to help them get to where they feel better informed about the decisions they are making and then maybe we mix for them too."

DeVoe echoed this trend from the perspective of the factory floor, saying it has been difficult early in the year to find hourly employees.

"We have several open positions, and are working quite a bit of overtime," she said.

Stahl said the biggest challenge on the horizon will be the long lead times from suppliers.

"The supply situation from the major polymer suppliers, that is going to be the biggest obstacle to overcome," Stahl said. "Our main market is fluoroelastomers. I don't want to say there is a shortage, but there is a long lead time to get material in."

Stahl is an optimist when he looks to the year ahead. Both January and February have been busy months for Rainbow Master Mixing, and he said he expects that to continue throughout the year, especially as businesses find their footing in the wake of COVID-19.

"I think a lot of people are starting to play catch-up from last year," Stahl said.

A slowdown to M&A?

In spite of the issues facing custom mixers, the future looks both prosperous and competitive.

As for market growth, the automotive and building and construction markets are returning at a rapid pace, Nixon said.

Merger and acquisition activity continues to be strong as well, and is expected to remain that way for the next year or so.

But that could be changing, Nixon said.

"Favorable business policy and low interest rates have been key factors until now," he said.

DeVoe said Chardon gets approached occasionally from players interested in buying the custom mixer or partnering with it, and added there is no interest from her company's perspective. DeVoe said she is intent on keeping the company independent.

"There's a lot of capacity out there," she said. "I think competition is going to continue to be tight."

Topliff added that mergers still will take place, "but at a reduced rate."

It may be innovation that helps these smaller- and mid-sized mixers overcome industry challenges.

LMI counts innovation as a core value, since product development drives just about every other facet. When the customer is happy with their consistent, stable mix, they are satisfied.

"New product development is the heart and soul of our business," Nixon said. "Our product design and engineering teams are constantly coming up with something new—and pushing boundaries. When they do, our customers benefit."

Nixon said that ownership has been supportive of LMI's growth strategy over the last 20 years.

"That's going to continue, and we are committed to being even more aggressive in the market," he said. "We want to continue to find ways to leverage our strengths, which will ultimately mean additional expansion in capacity at our current facility or elsewhere. That may come internally or through partnership or acquisition.

"But there will always be a place for small and specialty custom mixers in our industry. Bigger isn't always better. Companies can successfully stay focused in niche markets or by concentrating in an area of expertise. The smaller you are, the more of a value proposition you need to create."