Toll manufacturing
Complete set of reliability elements is strong asset
Given Proviron’s technological background, creating value from this expertise for third parties is a logical option in the company’s strategy. Toll manufacturing guarantees predictable cash flow and is an essential mainstay for Proviron, contributing about two thirds of the company’s activities.
The customer may find it interesting to have a product manufactured as a test case by means of toll manufacturing. This avoids the usual new investment at a time when the economical viability may still be uncertain. Proviron argues that it can build certain production units cheaper than the customer can where in-house process technology know-how is used. The customer knows very well what his return is when working with Proviron.
The toll manufacturing approach also enhances “quick time to market”, a speedy market entry when the time is right in terms of profitability. The customer enjoys a reduced production risk; can make an accurate cost evaluation in advance, and can agree clear prices. On top of that the customer gets a total service which includes raw materials procurement, processing, intermediate storage, legal aspects (REACH) and lab services.
Evolution contribution
Long-term relationship
The existing multi-purpose installations – with versatile technology – remain a great plus for Proviron. The same is true for its infrastructure, piping, storage capacity, and other utilities. This enables Proviron to turn the make-or-buy decision to its advantage and become an attractive long-term partner. A fine example is the silicon based product which improves car tire rubber, resulting in considerable fuel savings. Another important aspect: in some cases Proviron will look after the “licence to operate” matters on behalf of the customer.
Long-term alliance
The toll manufacturing approach is very interesting for major chemical manufacturers. Examples are the manufacturing of universal building blocks (where companies may hesitate to build extra capacity in Europe), intermediates and even end products belonging to the core task of the multinationals. The total package of reliability factors (“overall reliability”) offered by Proviron is well known and appreciated in the European chemical industry. An additional plus is the cost reduction when building, operating and maintaining the unit. Minimum variable costs are twinned with a maximum operational reliability. This overall reliability strengthens a long-term relationship to a long-term alliance, sometime resulting in contracts of over 10 years.
Challenges
The European REACH legislation about the safety and environmental friendliness of chemicals must be clarified further for toll manufacturing activities. As long as the toll manufacturer is considered to be the producer, he is as such essentially responsible for all costs, procedures and administration. Several options are possible and Proviron has reached sound agreements with a number of good and regular customers. Thus, the bulky REACH administration becomes an important part of the service agreements.
The quickly increasing energy and material costs complicate the system of clear price agreements beforehand.