Outsourcing development The Fifth Academia Industry Forum Sponsored by the Georgia Section of the American Chemical Society and Kennesaw State University Toll manufacturing Lab to pilot to production November 16th, 2016 KSU Center, Room 400 3333 Busbee Drive, Kennesaw, GA 30144

First and foremost, on behalf of Innovative Chemical Technologies, I wish to thank Mr. Terry Say, the American Chemical Society, and Kennesaw State University for the opportunity to address the group. We appreciate the opportunity. It is our intention to bring value. Mark Terry Vice President of Business Development Innovative Chemical Technologies, Inc. 103 Walnut Grove Road Cartersville, GA 30120

Innovative Chemical Technologies (“ICT”) is a specialty chemical manufacturer headquartered in Cartersville, GA with two manufacturing sites in Cartersville and a third in Augusta, Ga. ICT manufactures a wide range of ICT and React-Rite branded products as well as materials for a number of Fortune 100 companies. ICT operates in compliance with OSHA, EPA, DHS, and all other Federal and State regulatory agencies.

Outsourcing: What is it? “Toll Manufacturing” “Custom Manufacturing” “Contract Manufacturing” All are terms used, mostly interchangeably, to describe relationships between customers and manufacturers. Several variables exist including whether the customer supplies raw materials and / or packaging or other materials necessary for the manufacture. Other variables may include the details and costs of waste handling, shipping points and terms and well as payment terms. Customers may provide detailed processes or rely on the manufacturer to develop and manage the process. Details are generally contained in and controlled by legal contracts. For the purpose of our talk today, let’s use the term “toll manufacturing”.

Outsourcing: Why do it? Why does it exist? There are several reasons: 1.) The customer lacks the capacity, resources, space, equipment, or specialized facilities to carry out the manufacturing themselves. 2.) A smaller, more agile, company may be able to arrive at commercial production: a.) sooner b.) at a lower cost 3.) Tolled products are often very specialized materials and sometimes low volume materials

How is a tolling opportunity developed?

How is a tolling opportunity developed? Every tolling opportunity is exactly alike…

How is a tolling opportunity developed? Every tolling opportunity is exactly alike… …except for about a billion details.

Some of the details: Is the potential business established? Is the product or market new to the client? What is the expected volume of the product? What raw materials are involved? Who supplies raw materials? Are sources and relationships established? What are the hazards associated with the raw materials? ..with the process? …with the final product?

Let’s assume that the chemical desired is known, adequately described or specified, and a process is either generally available or provided by the customer. If the identity of the desired compound or composition is known but there is no process, then a potentially lengthy and expensive process development may be undertaken, generally at the expense of the client. If a process exists and is provided by a potential client, the process is undertaken first on a bench scale followed by full qualification of the resulting product. The costs of this work is generally supported by the toller.

More details: Is there a quality management standard required by the client? Are the “pots and pans” available? Are the materials of construction compatible? If not, is the client willing to support the cost to purchase and install the required equipment? Are we able to estimate costs and are those costs acceptable to the client?

In the case in which a client supplies a process, one critical determination is generally made during the bench scale work:

In the case in which a client supplies a process, one critical determination is generally made during the bench scale work: Does the process work?

In the case in which a client supplies a process, one critical determination is generally made during the bench scale work: Does the process work? Often, it is necessary to modify or adapt processes to operate in our equipment. Provided that the bench scale work is successful, a pilot batch will be carried out under very close supervision. Depending on the complexity, the costs of a pilot batch may be supported by toller or client or both. Commercial plant batches follow successful pilot runs.

Even more details: Environmental, Safety, Health, and Security Considerations Are raw materials, product(s), and any wastes listed on TSCA inventories? Process Safety Management, Risk Management, Clean Air Act, or Department of Homeland Security lists? Will current permits or filings be affected by execution of the process on a commercial scale? Are programs in place to manage risks and exposures? Considerations and costs for compliance have to be included.

Despite the apparent complexity, tolling arrangements often are carried out with great success. Clients enjoy confident supply of materials at a reasonable cost and tollers enjoy revenues to support their stakeholders including employees, owners, and their communities. Tollers must develop very disciplined approaches to quickly evaluating, carrying out, and managing tolling businesses. The successful development of tolling business requires chemists, engineers, planners, and commercial managers. At ICT, we have tolling businesses that have passed 10 years of continual success and we continually evaluate and add new business.