S T R AT E G I E S F O R F U T U R E S U C C E S S
2022 Issue 1
Product Liability in Component Manufacturing fSupply Chain Disruptions in the Rubber Industry fRetaining Employees in a COVID-19 World f Tax Thoughts and Policy Outlook
The Official Publication of the Association of Rubber Products Manufacturers
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CONTENTS 2022 ISSUE 1
FEATURES 6
Focus Product Liability in Component Manufacturing
13
Benchmarking
15
Outlook
22
View From 30
26
Talent
31
Strategies
33
Management
Feast or Famine in ’22 for Rubber Products Manufacturers?
6
Rubber Industry Supply Chain Disruptions Finding and Retaining Employees at Bruckman Rubber Rubber Product Manufacturer Implements ‘Hire to Retire’ Initiative
13
Year-End Tax Thoughts and Policy Outlook for 2022 What You Need If You Are Called to Lead
22
Departments 4 21 28 34 34
From the President Industry Member News Calendar Ad Index
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C
Chris Buhlmann Gates Corporation
ould 2022 come soon enough? I can speak from experience in saying that the strain put on people in the procuring of material, building to meet increased demand and dealing with inflation rates that have not been this rapid in a decade has made for quite the year. And that does not even take into account “He Who Should Not Be Named” (COVID-19).
The transition from one year to the next is something we humans make up. The universe keeps spinning or moving like it is just another day. This means that our supply chain challenges will continue as we transition from December 31 to January 1, while we hope they abate. Also continuing are the pressures of delivery and maintaining quality in how we check incoming supply of raw or WIP goods, complete production and send them on to their final customer destination. In this issue, we provide some insight to potentially help you work with current and emerging supply chain issues, as well as product liability and tax impacts. Running a business and/or enterprise is a demanding occupation, and you are in business because your solutions solve problems affecting the market.
7321 Shadeland Station Way, Suite 285 Indianapolis, IN 46256 Phone: 317.863.4072 | Fax: 317.913.2445 info@arpminc.org | www.arpminc.com © Copyright 2022 ARPM Officers and Board of Directors President Chris Buhlmann, Gates Corporation Vice President Travis Turek, Bruckman Rubber Corporation Treasurer Marel Riley-Ryman, Southern Michigan Rubber Secretary Joe Keglewitsch, Ice Miller LLP
4 Inside Rubber // 2022 Issue 1
ARPM Board of Directors
“
THE TRANSITION FROM ONE YEAR TO THE NEXT IS SOMETHING WE HUMANS MAKE UP. THE UNIVERSE KEEPS SPINNING OR MOVING LIKE IT IS JUST
”
ANOTHER DAY.
We hope this issue helps you gain some ideas to solve problems that you may be discussing in your production meetings, supply chain reviews and financial leadership groups. As always, if you are a member company of ARPM and you know of another organization in your business network that could benefit from being an ARPM member, please send an introductory email to Letha Keslar at LKeslar@arpminc.org, along with the name of the person you want us to talk with about association benefits. Let’s build a larger team that can help each other. u
Vice President, Editorial: Dianna Brodine Editor: Nicole Mitchell Vice President, Design: Becky Arensdorf Graphic Designer: Hailey Mann Published by:
Kirk Bowman, The Timken Group Charlie Braun, Custom Rubber Corporation Russ Burgert, MAPLAN USA Joe Colletti, Marsh Bellofram Randy Dobbs, Sperry & Rice Manufacturing Doug Gilg, Continental ContiTech Diya Garware Ibanez, Fulflex Inc. Dave Jentzsch, Blair Rubber Seth Johnson, Zochem Donovan Lonsway, BRP Manufacturing, Inc. Jon Meigan, Lake Erie Rubber & Manufacturing Mike Rainey, HBD Industries Inc. Mike Recchio, Zeon Chemicals L.P. Brandon Robards, Ace Extrusion Mike Smith, Basic Rubber and Plastics Joe Walker, Freudenberg-NOK Sealing Technologies James Wideman, MBL (USA) Corporation
2150 SW Westport Dr., Suite 101 Topeka, KS 66614 Phone: 785.271.5801 ARPM Team
Executive Director Troy Nix – tnix@arpminc.org Managing Director Letha Keslar – lkeslar@arpminc.org Marketing Director Marcella Kates – mkates@arpminc.org Analytics Tony Robinson – trobinson@arpminc.org Director of Publications Susan Denzio – sdenzio@arpminc.org Project Manager Kaitlyn Krol – kkrol@arpminc.org
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Product Liability in Component Manufacturing By Greg Vassmer, technical coordinator, ARPM, and Joe Keglewitsch, partner, Ice Miller LLP
T
here are very few Latin phrases known broadly in America, but – at least to some generations – caveat emptor is one: Let the buyer beware. With that phrase, high school children in the 1960s and ‘70s were taught that, when buying a product, they were responsible to understand any inherent dangers the product might pose. This principle originated in the industrial revolutions of the 19th century where the courts actively worked to make it difficult for injured parties to recover damages suffered due to product defects. Even cases of clear negligence were lost by injured parties because they lacked a written contract with the manufacturers of the defective products. As products became more complex and technological and the consumer became further removed from the manufacturer, state law began to recognize that there was an “implied warranty of merchantable quality” – in plain terms, if someone sells a product to provide a function, it needs to perform that function. A patchwork of state laws and competing interpretations of implied warranty and contract law confused the issue until 1963, when the Supreme Court of California ruled that liability should not be based on the manufacturer’s warranty, but rather on whether the manufacturer was part of the business enterprise responsible for causing injury. In 1964, this strict liability was extended to all parties in the supply chain, including sales representatives, retailers, subsuppliers and, in 1969, even injured bystanders could collect. As often is the case, the California laws established the direction taken by the rest of the US. Between 1960 and 1977, 42 federal laws were passed dealing with consumer and worker safety, and most states came to the same conclusion as California and passed similar liability laws during that same time frame. Modern product liability became a legal specialty and a mountain of lawsuits resulted. The struggle since then has been on how to define “defects” and to decide what constitutes a reasonable effort by the 6 Inside Rubber // 2022 Issue 1
supply chain to avoid those defects. The US has moved from caveat emptor to caveat venditor: Let the seller beware. Stated in one sentence, product liability is the responsibility of any or all parties in the supply chain for a product that causes monetary and/or physical damage to a user of the product or random bystanders. Everyone in the supply chain who profited by that product can be liable, even those with no manufacturing or design contribution. Before continuing, and with some irony, the authors must make this disclaimer: Liability laws are different state to state (and constantly evolving). While most follow the tenets outlined here, their case law is different, and one may see different outcomes though the issue is the same. Be sure to seek legal help from firms with experience in the state or country where the liability issue is being heard. So, what are the typical approaches taken by injured parties in liability cases?
Warranty, Negligence and Strict Liability
The most straightforward approach is a breach of warranty. Warranties can be either express or implied. A breach of an express warranty is directed at the statements, advertising or other promises (verbal or written) that the product will accomplish a certain action or be capable of a certain function. As an example, a local restaurant buys a mug washing device with multiple rubber seals to exclude water. The device is promoted as safe but with express warnings about dipping the electronics in water. A year later, a worker turns the device on and is injured by an electric shock. Since it was promised the item would be safe, he can claim the company breached the warranty (and, in this case, lost when it was discovered he removed the rubber seal over the switch). An implied warranty is the indirect promise or promises made just by selling the product or service. A product or service must be under certain circumstances fit for the particular purpose it was sold – like buying paint intended to be used on products exposed to high heat, but receiving paint that flakes when exposed to 100 degrees or more. It must be done with workmanlike quality, meaning that the work meets the level expected of someone with proficiency in the area. And last, the product must be merchantable – that is, it must perform like products sold to do similar things. An icemaker should make ice, an oil seal should seal oil, a new power steering belt should not snap when someone starts her car and so on. Another common claim is negligence. A manufacturer has a duty to consider potential customer safety issues during the design and manufacture of the product. The manufacturer is expected to take reasonable care and reasonably foresee anything that might cause harm or injury to others using the
product or equipment. This obligation extends to include the equipment in which the component might be built. Notice the word “reasonable” shows up several times. In these cases, “reasonable” means “for those who are experts in manufacturing similar products.” Some negligence is obvious – for example, not following a law or regulation. Other types are more indirect, such as not taking sufficient care and protecting against well-known causes of failure. Another element of negligence deserving comment is foreseeability. Foreseeability is the requirement to reasonably anticipate the potential uses of a product, including damage or injury that may happen if one is negligent or breaches a contract; for example, using an unapproved supplier. In manufacturing, failure mode and effect analysis (FMEA) tools are used to anticipate exactly those conditions by examining all possible ways a product or manufacturing process can fail when used or executed as intended. Many manufacturers apply FMEA techniques to their operations, but product liability should compel them to understand activities at their customers. For example, this could include handling and installation of the component, and if critical, of the end-consumers potential uses that may impose safety constraints on the component. The last and most common claim is strict liability. In simple terms, the person who made it can be liable if the product causes injury, even if that person was not negligent in the manufacture of it (in fact, even if the manufacturer exercised great care) and even if the manufacturer did not design it. For instance, if a power tool has an unexpected tendency to kickback and injure the user, the manufacturer would be found liable notwithstanding the fact that it was well-designed and flawlessly manufactured. All links in the supply chain can be included in a liability case; however, the most targeted companies are the OE manufacturer and its sub-suppliers. They are considered to have the best ability to pay back the injured party and have provided most of the design, manufacturing and marketing material relied on by customers to operate a product. So, where in an organization are liability issues most likely to be generated? Liability from Design Defects If the design of a product does not perform the task intended or is inherently and foreseeably dangerous to use, that design can be considered legally defective. Rarely is it as clear cut, and language like “reasonable” and “foreseeable” become the source of most of the arguments. Most products can be dangerous even when used correctly. Proving responsibility page 8 u
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for a defective design can be very complex since the materials, components and final assembly each have specifications, testing and management decisions from several levels in the supply chain. As an example, in the mid-1980s, fluoroelastomer o-rings were used to seal the solid fuel rocket boosters of the space shuttles. The Shuttle Challenger explosion in 1986 demonstrated that the specific fluoroelastomer compound used in these o-rings lost flexibility at about 32° F and did not seal the gap between rocket booster sections during launch, subsequently burning through the wall of the rocket and nearby components, becoming the proximate cause of failure. Ultimately the o-ring joint design failed and was dangerous. But who was liable? NASA made the decision to launch, Marton Thiokol assembled the rocket booster and o-ring joint as well as confirming the o-ring would work under cold conditions and Hydra-Pac Inc. made the o-ring from fluoroelastomer cord provided by Parker Seal Group. The cord met all specifications set by Morton Thiokol, which included performance at cold temperatures. A final complication: A Thiokol engineer anticipated and reported the potential failure mode of the o-ring before launch to his management. The case was never tried. Morton Thiokol settled with all interested parties. However, a shuttle did not launch again for 32 months and did so with a completely redesigned o-ring joint, new sub-supplier specifications, new test procedures and a new set of application criteria. To establish liability, some jurisdictions now require the plaintiff (the injured party) to show that it was practically and economically feasible to use an alternate design that would have been safer or that the risk was greater than what an ordinary consumer would expect. For example, putting a blade guard on a circular saw is a good, low-cost alternate design considering the high risk of selling a saw without one. Manufacturing Defects With a design defect, all products coming off the manufacturing line have the defect. If the defect is in the manufacturing itself, then typically the failure is due to poor quality workmanship, mistakes in assembly or raw materials, which fall outside the manufacturer’s specification or design. Products produced outside tolerance, or with sub-standard materials from a new, less costly supplier are examples. Consider a rubber mold that, with age, becomes misaligned between top and bottom. If that alignment affects performance, and the product fails prematurely because of it, the customer can claim (rightfully) that the manufacturing defect was the source of injury. Marketing Defects This last type of liability arises from all injury following from poor instructions, inadequate packaging or lack of warnings 8 Inside Rubber // 2022 Issue 1
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THE MORE INTERACTION THE COMPONENT SUPPLIER HAS WITH THE CUSTOMER IN THE DESIGN PROCESS (FOR EXAMPLE, IF THE SUPPLIER SUGGESTS CHANGES FOR MANUFACTURABILITY OF COST REASONS), THE MORE THE SUPPLIER BECOMES PART OF THE END-PRODUCT DESIGN AND CAN BE CONSIDERED LIABLE.
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about potential product dangers. It does not matter how well the product is designed or manufactured. There is a duty to inform the customer of all potential safety issues that are inherent in the product. The result at one end of the spectrum may be warnings, such as, “This drink is very hot” and “Do not trim hedges with this lawn mower.” But for component manufacturers, this can extend to storage and handling instructions, installation guidelines or providing packaging that keeps a product clean or undamaged.
Examples for Component Manufacturers
For a component manufacturer in the middle of a supply chain – such as a gasket manufacturer selling to a hydraulic pump manufacturer that in turn sells to a construction equipment maker – certain liability scenarios occur more often than others. It makes sense to review these variations and how courts have responded. Consider the situation where the end-customer designs a component and the supplier builds it. The relevant statement from current product liability law says that if the supplier substantially participates in the integration of the component into the design of the product and the integration of the component causes the product to be harmfully defective, the supplier is liable. When the component supplier is named as liable, two avenues of defense have developed. First, the component manufacturer can argue that it is a bulk supplier, where the product is sold in bulk to a third party and where it is
impractical to know all potential end uses of the product. If the bulk product itself was not defective, the component manufacturer is safe. The second avenue is the “sophisticated purchaser rule,” which provides that the component manufacturer owes no duty to warn “sophisticated” purchasers where the purchaser has a sophisticated knowledge of the product and of the types of risks associated with the product. The component supplier is not required to monitor the development of products and systems into which its components are to be integrated. The more interaction the component supplier has with the customer in the design process (for example, if the supplier suggests changes for manufacturability or cost reasons), the more the supplier becomes part of the end-product design and can be considered liable. Another common situation is the improper use of the component part due to either poor handling and installation or by being put into an application different than one expected. In these cases, the supplier has a duty to provide instructions on use and warnings related to safety. If little or no instruction is given on use and handling and injury occurs, the supplier can be held responsible. Guidelines – such as ARPM OS-7, which outlines best practices with radial lip seals – are an
example of instructions that can be used as part of customer documentation. Additionally, if a customer uses a product in an unexpected way (for example, using a high-pressure seal in a lowpressure application), the supplier could expect an argument that it had a duty to warn the customer of the operating limits of the component, especially if an injury occurred.
Strategies in Product Liability Risk Management
While product liability claims certainly represent the kinds of exposures that keep manufacturers up at night, the good news is that there are strategies that can be employed to manage and minimize the risks of being named in a product liability claim. Transfer Risk through Management of Suppliers and Supply Contracts A strong sub-supplier network can help strengthen the message that the product design was well executed and that the raw materials came from well-controlled sources. After all, the best defense against a product liability claim is no defect in the first instance, and a well-vetted and supervised supplier is the most effective avenue to that result. page 11 u
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10 Inside Rubber // 2022 Issue 1
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When things do go sideways, a supplier network (if responsible in whole or in part for the issue) also can be a source of recovery that allows claim costs to be distributed more widely. However, one must be certain that the relevant commercial terms are well documented. Some items to include in a well-constructed supplier contract are as follows: • Hold harmless agreements, where sub-suppliers are contractually responsible for their own negligence and/or errors. • Indemnification provisions with clauses requiring vendors to reimburse the costs, expenses, obligations and liabilities resulting from product, component or material failure and any associated litigation and claims. These provisions also should address who will handle and how they will handle the actual defense of third-party claims. • Robust warranties of sub-supplier product or component. • Statements of financial responsibility with confirmations that sub-suppliers have appropriate insurance in place. Ask suppliers to name subsuppliers as Additional Insured to allow the supplier’s policy to be primary and the subsupplier’s policy to be secondary.
Manage Imported Products, Raw Materials or Components The US-based receivers of imported components may end up being held fully responsible and considered the manufacturer of record. Be sure to gather all design and related information regarding the material or component in advance. Be sure to develop proper warning and instruction documents since foreign suppliers may not be familiar with US requirements. Finally, utilize letters of credit to ensure foreign suppliers have sufficient assets in the US to support their indemnification obligations. Build in Safety at the Design and Manufacturing Stage Create a product safety policy and, where possible, a committee that builds and oversees corporate culture for safety. These policies encourage operator reporting of potential product defects on the factory floor and ensure the FMEA results lead to mitigation actions. The committee will manage the communication with legal counsel in the event of a product claim and ensure all necessary documentation and information is retained for both defense purposes and internal remedial steps to avoid the same issues going forward. In addition to a FMEA of the supplied component, also gather similar FMEA information from the customer on page 12 u
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the installation and handling of the supplied component, as well as the final application of the product. Use the FMEA results to identify risk mitigation actions, such as warning labels, process changes, vendor upgrades and product improvements. Getting out in front of issues before they occur is the most effective risk mitigation strategy. Make sure that the products and processes strictly comply with industry or government standards, such as those published by oragnizations like ARPM, ASTM and ISO. Have and follow a certified quality system (such as ISO 9001), with well-structured documentation and product development and engineering change processes. Conduct audits of customer returns, complaints and other feedback. Early action on this information will help avoid claims in the future. Once a field issue is identified, move to contain and limit the issue quickly. Finally, communicate potential safety issues to the customer early to expedite remedial action and mitigate damages. When investigating an issue, follow a systematic root cause analysis as soon as the issue is known, even before there is a liability claim. Industry troubleshooting guides like ARPM OS-17 can assist the investigators through all failure modes and identify the source or sources of a potential issue. All the analysis of failure modes and causes also must lead to comprehensive warning documentation and clear use and handling instructions. Warranties and Limitations of Liability One of the most valuable tools available to a manufacturer is a well-crafted product warranty. Tie a warranty to meaningful, objective standards, rather than nebulous concepts like “good quality,” “workmanlike” or alike. Further, disclaim those warranties that are implied by law into the sales of goods, namely, the implied warranties for merchantability and fitness for particular purpose. Also, do not take on risks for which the company is not compensated and be certain when possible to expressly waive liabilities associated with design, material and related guidance provided customers as a gratis, value-add benefit. Next, be sure to limit the scope of recovery if there is a breach of warranty. When possible, disclaim indirect, consequential, special and punitive damages. This step can take some bigticket exposures off the table. Finally, capping damages under a supply agreement (when the leverage exists to make it happen) to some finite number (such as a certain period of sales) is a meaningful way to create an identifiable and manageable exposure.
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Keep Important Records As a final point, be sure to keep all product orders, design specifications, customer signoffs and emails. Follow written manufacturing procedures and quality control steps, retaining all quality control information. For example, keep a sample of product used for production part approval for later reference if a deviation from specifications is suspected. Furthermore, establish a document retention policy and structure to reliably have and be able to find information needed in a liability claim.
Summary
Receiving a product liability claim can be disruptive and expensive. It also should be treated as inevitable if a company is supplying components to products that eventually will be used by a public consumer. Simple strategies used by companies to deflect responsibility, such as “I didn’t design it,” or “I made it to their specification,” are inadequate if the supplier could have foreseen the failure with a reasonable amount of diligent effort. The robustness of the design and manufacturing processes can minimize the chance of a claim. Know what the company is making and how it will be used. Ensure the manufacturing processes are well-governed to reduce their variation, and communicate with the customer the limitations of the product. Even with all this care, claims still may be filed against a company. Be sure to have optimized the relationship with suppliers, financially and legally, to participate in the claim as needed. Assistance is available both through independent law firms and insurance carriers. Involve them early in the claim process. u Greg Vassmer is a semi-retired engineer and owner at Fluid Sealing Science, a consulting engineering firm for the rubber industry. Vassmer’s long experience in the sealing, hydraulics and brake industry, along with his operational improvement and six sigma practice, allow him to help companies improve their profitability. He also supports ARPM as its technical coordinator on the Dynamic Sealing Committee and writes the Technical Standards Update page for the Inside Rubber. He can be reached at gvassmer@arpminc.org. Joe Keglewitsch is a partner at Ice Miller LLP and handles complex corporate and business law issues for both private and public companies, with a focus on and extensive experience in the following areas: mergers and acquisitions, general corporate counsel and complex commercial relationships. He can be reached at: 614.462.2279 or josef.keglewitsch@icemiller.com.
Feast or Famine in ’22 for Rubber Products Manufacturers? By Tony Robinson, Analytics Director, ARPM
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eaders in the rubber products industry have their individual forecasts for 2022, but what does the nearterm future hold for the industry as a whole? At this time last year, rubber process executives were viewing 2021 with great optimism. The pandemic supposedly was winding down, production was reaching pre-pandemic levels and there was tremendous momentum moving into January.
Unfortunately, the year did not live up to expectations, with new COVID-19 variants disrupting plans and a barrage of supply chain issues hammering processors throughout the year. With this said, processors are bringing optimism into yet another new year and hoping that 2022 will be the proverbial light at the end of the tunnel. But will this year truly be any different than last? To answer this question, the Association for Rubber Products Manufacturers (ARPM) conducted its annual industry analysis and has published its 2022 State of the Rubber Industry Report, which shares trend data on many key indicators. Examining several elements of the business development cycle, it appears that most rubber processors are performing very well. When comparing third to fourth quarter of 2021, performance in quoting, sales, backlog and shipments have improved or remained consistent for about 85% of processors. These indicators have outperformed themselves consistently throughout 2021, based on data from ARPM’s Quarterly Pulse Reports, showing strong growth in the industry and demonstrating great potential for success in 2022. Top line sales forecasts also are showing promise for many processors, as 73% of processors reported increased sales in 2021 compared to 2020. The sales increases in 2021 primarily are due to new programs or increased volume in current programs from existing customers. Processor forecasts solidify optimism moving forward as 77% of respondents anticipate increased sales in 2022.
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...ONLY 46% OF SURVEY RESPONDENTS INDICATED THEIR RAW MATERIAL PRICES HAD INCREASED FROM THIRD TO FOURTH QUARTER 2020. HOWEVER, THAT NUMBER HAS SKYROCKETED TO 96% IN THE FINAL QUARTER OF 2021.
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In last year’s State of the Rubber Industry Report, only 46% of survey respondents indicated their raw material prices had increased from third to fourth quarter 2020. However, that number has skyrocketed to 96% in the final quarter of 2021. In addition, 90% of respondents also indicated increasing raw material lead times make it much harder to plan production and meet customer delivery requirements.
Chart 1. Raw Material Lead Times – 3rd Quarter to 4th Quarter 2021
Although several top-line indicators appear to have strong momentum, rubber processors still are faced with major supply chain challenges and increasing raw material prices that continue to plague bottom lines throughout the industry.
Processors can pass along some of these increases and adjustments to customers, but these challenges will indubitably hinder performance for rubber processors across the country. One business leader reported, “Some of our raw material suppliers are rationing quantities to sell and distribute with longer lead times and, combine that with long page 14 u
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shipping delays, our business definitely is being affected.” Most processors (84%) do not expect the supply chain to return to normalcy until at least third quarter 2022, showing more pessimism compared to the outlook one year ago.
at <50% due to lack of staffing has required outsourcing more production. Outsourcing takes a lot of time away that could be spent on internal improvements. Additionally, we had to drop several product areas, including automotive, due to lack of staff.” Even when a processor can get its hands on raw material, it sometimes does not have the employees to manufacture the parts, causing serious strain on fulfilling customer orders on time.
Overall, the data from ARPM’s 2022 State of the Rubber Industry Report reveals similar top-line momentum Chart 2. Raw Material Prices – 3rd Quarter to 4th Quarter 2021 compared to the beginning of 2021, but severe supply chain issues and labor shortages could stifle bottom-line profits. Rubber processors also are facing continued labor shortages, If processors can gain access to labor and materials, which was a pre-pandemic issue. The situation has remained 2022 could be extremely profitable. Will this year difficult, with processors continuing to have many open be the light at the end of the tunnel the industry is hoping for? positions, high turnover, training difficulties and rising Only time will tell. u pressures to increase entry-level wages. As one executive indicated, “We lost some significant talent and have had For more information or for ARPM’s full 2022 State of the great difficulty hiring new people. Production performing Rubber Industry Report, visit www.arpminc.com.
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Rubber Industry Supply Chain Disruptions By Liz Stevens, contributing writer, Inside Rubber
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s 2022 gets underway, rubber processors are facing enormous pressures. An increased demand for their products is crashing head-on into the lingering worker shortage and a crippling supply chain crunch. Processors have struggled to find trained workers during a period when fewer workers are seeking manufacturing jobs. Add to that the current tight material supply and rising prices, logistics madness and a booming market for products, and it is no surprise that processors are lying awake at night, wondering how to meet these challenges.
How Did the Supply Chain Jam Transpire?
The rubber supply chain quagmire stems from several factors. Prices for imported rubber and ingredients already had risen in 2018 due to the Trump Administration’s trade and tariff wars. Then COVID-19 hit, sending shock waves that resulted in factory slowdowns or shutdowns in China that spread to the US and the rest of the world. The start of the COVID-19 crush affected rubber and polymer suppliers but not in the ways that the suppliers expected. In the Spring of 2020, suppliers faced an entirely new and unpredictable future; many (or maybe most) of them feared that the entire US economy would shut down due to the dramatic “shelter in place” orders issued in many states. Suppliers scrambled to sell what stock they had on hand and then radically cut their production. But, at the start of the summer, suppliers were shocked by the unexpected: Consumer demand surged rather than tanking. The pandemic caused a surge in demand for medical-oriented products like ventilators, rubber gloves, PPE and coronavirus test kits. But the scope of the demand surge was much more widespread than this – nervous citizens began buying up all sorts of household supplies. Then, with the pandemic hobbling activities and travel, home-bound Americans began a consumables and home improvement shopping spree that upped traffic along global trade routes.
At the start of 2021, when rubber and ingredient suppliers thought that the balance of demand and supply finally had evened out, along came unprecedented winter storms in the US. A calamitous deep freeze in Texas crippled petrochemical plants and polymers were once again in short supply. The still surging import traffic flow then was hit by a whammy as cargo shipping was upended after the ship Ever Given wedged itself in the Suez Canal. Meanwhile, the US consumer buying spree continued and the incoming goods – on ships finally able to navigate the Suez Canal – began overwhelming US ports, rail transport and trucking, all of which also impacted the import and delivery of rubber and ingredients to manufacturers. As of January 2022, the Omicron variant of COVID-19 began blanketing the nation with skyrocketing contagiousness but milder disease than the Delta variant. And everyone, in every industry, in every nation, was waiting to see what would happen next. page 16 u
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For a look at the current situation, advice for dealing with the challenges and some predictions for the future, Inside Rubber talked to representatives from two equipment manufacturers, along with a custom polymer compounder and a rubber processor. Dave Jentzsch, former chairman of the board at the Association of Rubber Products Manufacturers (ARPM) and now a consultant to Blair Rubber/Hyload, Seville, Ohio, gave us insight from his perspective as a former producer of rubber linings for industrial use in 20 countries. Paul Callitsis, director of purchasing at Chardon Custom Polymers, Chardon, Ohio, offered his view as a maker of elastomeric rubber compounds for North America. Russ Burgert, director of after sales, MAPLAN of South Elgin, Illinois, and Derek Williams, vice president of sales at REP Corporation, Kodak, Tennessee, contributed their insight as equipment manufacturers for the global rubber industry.
The State of the Rubber Industry
From Paul Callitsis’s vantage point at Chardon Custom Polymers, the polymer and ingredient supply chain situation exists in a market that is extremely tight and with numerous significant price increases. “Most suppliers,” said Callitsis, “have instituted some form of volume sales control or allocation – based off historic usage or approved forecasts – which cannot be exceeded.” Already long lead times have been extended, and freight costs have soared. The culprits, Callitsis said, include “strong demand, high energy costs, lack of containers, delays at port, ongoing COVID-related labor shortages and resulting production delays.” In Callitsis’s estimation, the pandemic factors, the skyrocketing demand for rubber-related products, labor shortages and transportation delays are the main factors impacting compounders and their customers. Recent and pending anti-dumping lawsuits also have contributed to higher prices and shortages as well. Derek Williams, REP Corporation, explained how the supply chain disruptions have affected his equipment manufacturing company’s ability to source parts and materials to build rubber processing equipment. “As all manufacturers utilizing electronic components face delivery issues related to chips and electronic cards, we are not immune,” he said. “Thankfully, we use a proprietary operating system, and our components are made specifically for us. Those impacts have been fairly limited, but nonetheless clearly felt.” REP’s machinery is made in Europe and Asia, and logistics snarls have affected deliveries and installations. “REP machines are made in France,” said Williams, “and our secondary line of machines are made in Taiwan. The shipping from France has been fairly stable, though higher shipping cost is a factor as prices for standard containers have increased.” Williams explained that for equipment shipped from Asia, availability remains a problem and high cost is becoming prohibitive. “Rate increases of 300% for shipping become untenable to 16 Inside Rubber // 2022 Issue 1
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...THE PANDEMIC FACTORS, THE SKYROCKETING DEMAND FOR RUBBERRELATED PRODUCTS, LABOR SHORTAGES AND TRANSPORTATION DELAYS ARE THE MAIN FACTORS IMPACTING COMPOUNDERS AND THEIR CUSTOMERS. RECENT AND PENDING ANTI-DUMPING LAWSUITS ALSO HAVE CONTRIBUTED TO HIGHER PRICES AND SHORTAGES AS WELL.
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our customer base,” he said, “and some projects have been delayed in order to wait out the exorbitant increases.” Despite the challenges, REP has been able to continue installations, training and repairs for its US customers. “REP Corporation in the US has been fully flexible in the field service area and has not missed one installation or service call due to the pandemic in 23 months,” Williams said. The company’s team has traveled to Canada during lockdowns since is it considered an essential service for industry to maintain production levels. “We have been all over the US,” said Williams, “installing, servicing and training new and existing clients to ensure that our products and services keep them running.” Williams credits a team that remained agile, flexible and proactive to maintain this essential part of REP’s business model. “Customers that had a ‘no visitors’ corporate mandate,” noted Williams, “quickly changed their minds when they needed help with a piece of equipment. And we were only too happy to assist.” MAPLAN’s Russ Burgert spoke for another equipment manufacturer that has stayed busy with installations, service calls and customer training, but Burgert’s company has been hit hard by the semiconductor chip shortage. “It is coming close to shutting us down,” Burgert said. “We are having a hard time getting PLCs and HMIs for the last four months
due to the chip situation. We are taking drives from one machine to the other so that we still can build them, but we can’t deliver because we are having a hard time getting the electronic components, like pressure transducers. Beyond that, everything else is pretty good.” Beyond the chip situation, everything for MAPLAN is not just pretty good; it’s really good. “This year, we are having an all-time historical year,” said Burgert, “and we sold out 2021 in May. That has never happened before.” Burgert sees this as a confluence of rubber manufacturers having unexpected downtime in which to consider expansion, a surprisingly robust economy and financing that is available at low interest rates. The rebound, said Burgert, has been dramatic. “Machine suppliers – we always are the first to go and the last to come back when we have a situation such as we just went through,” he said. “As soon as the economy shuts down, everybody has extra machine time, so nobody is in the market to buy. We then are usually the last to come back, but this time we came back like gangbusters.” For context, Burgert explained that three years ago MAPLAN exceeded its machine building capacity, and the company opened up new factories in China and the Czech Republic. The company modified its machine building gameplan to meet demand, but it has exceeded capacity once again. The supply chain issues that have affected MAPLAN, however, are logistics costs and the labor shortage. “Every MAPLAN machine is built in Austria,” said Burgert, “and everything goes by boat. We had two machines coming in for a customer of ours and, because lead times have had to be extended repeatedly, this company actually chose to air freight the machines to meet their project’s start date.” How much did it cost to send two 45,000-pound machines by air freight? “It cost the price of a third machine!” said Burgert. MAPLAN’s challenge for hiring traveling service personnel, already difficult during the long-standing workforce shortage, now is compounded by the pandemic. “It is very difficult just to find somebody who wants to work in this field; finding the person who wants to travel today is even more difficult,” said Burgert. Prospective employees especially are reluctant to sign on with COVID-19 still raging. “A service person who travels puts himself in harm’s way by jumping on an airplane every week,” said Burgert.
From what Burgert has heard, rubber processors are having problems getting enough compound. “Some of the small and mid-sized shops don’t even know if they can get compound in the future,” he said. “I have heard stories of some shops being told ‘no, we are allocated out and you will not have compound for the next few months’. People seriously are scrambling to rectify that situation.”
Dave Jentzsch said that the rubber lining industry has not experienced this type of widespread compound shortage. “Because most processors in this sector of the industry had enough in stock,” said Jentzsch, “they have been able to manage that situation pretty well. Most of these processors try to anticipate four months with the possibility of an uptick of 15% or 20%.” He did note that the extreme weather in Texas, which caused petrochemical plants to shut down, translated into some shortages. “Those processors that produce roofing material using PVC (from Texas) experienced some serious shortages,” he added. The rubber lining industry’s main headaches revolve, however, around logistics and the labor shortage. “The problem isn’t too much about getting material,” said Jentzsch. “The issue is trying to get the orders to the customers.” Many processors ship rubber linings for storage and transport vessels to customers worldwide. “It really is a struggle to get it out there,” he said. “Some companies are sending via air freight because it can get there a little quicker; sometimes it is easier to get it on a plane than it is to get it on a ship.” page 10 u
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Some processors have reported having outgoing shipments that have been sitting in the port for months. “Los Angeles is all tied up,” he said, “and even Savannah is tied up. A lot of things now have gone out through the East Coast. It just ties up everything, plus you can’t get shipping containers.” Jentzsch also cited difficulty with domestic trucking, especially LTL (less than truckload) shipping. “The biggest problem, though, is labor,” Jentzsch explained. “If these companies had the labor that they need to run production, then maybe they would have a shortage of materials. Some that usually have a two-week turnaround saw this jump – up to seven and eight weeks – but now it is back to about five weeks.” Jentzsch described the situation as a complicated push-me pull-you situation, or a sort of spring effect in which a strain here translates into a problem there, and a problem there triggers a headache over yonder. “The processors are not having troubles with materials, but they can’t get anything shipped because they just don’t have the labor to fulfill the orders,” he said. “They just can’t get people back to work,” said Jentzsch, although he admitted that the real issue could be that the baby boomers retired. “Many are down 25% of their labor force,”
he said. “If they had all of those employees back, there would be no trouble filling orders.” Some companies have had to cut, for example, from five lines down to only two lines.
Advice from the Trenches
Inside Rubber asked the contributors for advice for rubber processors dealing with the supply chain disruptions and the unpredictable nature of business these days. Jentzsch’s advice centered on materials stock – have plenty on hand and identify usable alternatives, make good choices about production lines and have good relationships with suppliers. “It is necessary to carry some inventory,” Jentzsch said. “I suggest trying to carry four months’ worth or even probably 20% more. Some processors think that a month is enough, but I would go for more so that a processor has room to surge or taper off.” He also pointed to the wise practice of having alternative ingredient options. “Along with multiple approved ingredients,” said Jentzsch, “make sure to have more than one active supplier.” Jentzsch warned against having multiple approved suppliers but buying from only one of them. If a processor has two approved suppliers but only buys from one, due to cost or some other issue, the “backup” supplier may not be willing to do business in a pinch. It may or may not be feasible to line up approved alternate compounds, depending upon the formulations used and the performance characteristics required of the rubber. “It is good to have more than one supplier for alternate compounds, or to have more than one grade of rubber compound that can be used because they all will behave the same in the chemical resistance arena,” said Jentzsch. “But that is a tricky situation. For some things, alternatives can be used; for other things, they can’t. Some companies, after running into shortages of crucial chemicals, now stockpile plenty of it so they don’t face another shortage.”
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“The other thing,” said Jentzsch, “is to reduce product lines; go with the most profitable lines.” He advised that if processors cannot meet the demands of all customers during this period of relentless disruption, it is important to identify the most profitable customers – the most profitable lines – and make reductions elsewhere. “You can’t be everything to everybody when things are too tight,” Jentzsch said. He also pointed out the value of close, friendly and collaborative relationships with suppliers. “You are staying close to them because it is harder to say no to a friend,” he said. “You want to keep that relationship strong so that if they can get a scarce but needed item for you, they’ll work extra hard to try to get it.” Burgert advised rubber processors to keep a close eye on the mixtures being sent out by compounders that are facing raw material shortages. “Lately, unfortunately, my customers page 20 u
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have seen massive variations batch to batch,” said Burgert. “It seems that one day the compounders have this available and one day they have that available. They are mixing as they can, with the materials they can get.” To address the compound shortages, Burgert urges processors to move toward more waste-free molding. “Processors that are using hot pots or hot runner molds should be looking at going into cold pack technology,” he said “as well as looking at other options where there is no runner or where the runner is reduced by maybe 90%. Try to get as much out of a batch of rubber as is possible.” As processors consider changes to equipment, Burgert notes that MAPLAN offers fully automated equipment cells, which can be extra attractive in light of the workforce shortage. “What we are doing now is creating fully automated cells to take the operator 100% out of the equation,” Burgert said. “We have our own automation department so we can design everything in-house with robots in mind. MAPLAN has expanded into programming, developing the cells, and accommodating the processes that happen downstream from the cell.” Callitsis had several suggestions to help rubber processors weather the supply chain disruption storms. “Buy safety stock whenever possible, order well in advance and work with suppliers to develop alternative materials,” said Callitsis. “Keep close communication with suppliers on foreseeable shortages or delays, and also keep close communication with customers on their forecasts, and factor in the new required lead times.” Callitsis stressed the value of strong relationships with suppliers, noting that the price of goods is not the only aspect to consider. “Price always is important,” he said, “but the quality (reliability, customer service, sales support, technical support, communication) of a supply base is just as important, if not more important, than price.” For lining up alternative ingredients and compounds, Callitsis offered this perspective: “Having options always is safer than a single supply source or material. It helps to have a good internal technical staff, and to have capable, reputable suppliers that offer good technical support. Aside from matching the performance, it is important to select viable alternatives from a long-term availability standpoint, too.”
An Eye on the Future
When asked about a prediction for the next year on the availability of rubber polymers and ingredients, the response from Callitsis was succinct: “Very tight with little relief forecasted this quarter or next, and too many pandemic and economic uncertainties to predict beyond that.” The forecast from Jentzsch for the supply chain to get straightened out in the near term similarly was cautious. 20 Inside Rubber // 2022 Issue 1
“Initially, everybody thought it would happen by the third or fourth quarter of 2021, but it didn’t,” he said. “We are hoping by sometime in the first quarter of ’22 things will start to balance out.” His prediction on improvements in logistics was not optimistic. “The ports hopefully can get a little less congested, but there also is a problem with the shipping containers,” said Jentzsch. “And maybe trucks will be more available or maybe they won’t because truckers can’t find chassis.” Logistics also remain hobbled by the labor shortage. Jentzsch noted that the ranks of baby boomer long-haul truckers have been slashed by retirements, and retirees are hesitant to return to a such a punishing job. Jentzsch expects ongoing price increases for materials. “At the end of 2021,” he said, “we had not seen prices increase much but from what the industry says, it looks like rubber additives could go up 25% in 2022. Inflation really is going to hit hard in 2022. We haven’t seen much of that; some things went up, but then they came back down. But processors are getting ready for that. They already have told their customers. Discounts that used to be offered probably aren’t going to happen.” He continued, “Everybody is sitting on their hands, waiting and wondering what the future holds. Projects are on the books and demand is high, but it is just really hard to meet it right now. Prices go up and then back down. Finally, prices settle for a little bit and then we wait for the next market upset.” Williams offered this forecast about the pandemic and its impact on business. “COVID’s Omicron variant was a surprise to all,” he said, “but as we learn more about its communicability and behavior, we feel this is a new normal and that all of us will be forced to adjust permanently to this normal.” Williams felt that eventually the disruption caused by the pandemic will run its course and businesses will either adapt or get left behind. “2022 will be more of the same,” he said, “and hopefully, by year’s end, we will emerge with a general acceptance of living with COVID-19 and just mitigating the personal risks.” For Burgert, who was headed overseas to MAPLAN’s Austrian factory during the potentially brief window after the country cancelled its pandemic lockdown and before the next COVID-19 lockdown might be declared, the future for logistics and the workforce looked quite unknowable. “What happens next is entirely up in the air,” he said. “Everybody is scrambling.” u
ChemSpec Welcomes Jackon as Managing Director
ChemSpec Canada, Toronto, has appointed David Jackson as inaugural managing director. Jackson has spent more than 35 years working in the chemical industry and has previous experience navigating mergers and acquisitions. He will be responsible for steering the organization’s vision and strategy and implementing plans that align with the broader mission of ChemSpec and its parent company, Safic-Alcan. Most recently, Jackson offered leadership support in the industry as an independent consultant. Prior to this, he was president and CEO of Ferguson Chemical Innovations and held senior executive roles with Unipex and Azelis. For more information, visit www.chemspecltd.com.
AGC Chemicals Americas Inc. Expands
AGC Chemicals Americas Inc. (AGCCA), Exton, Pennsylvania, announced an expansion at its Thorndale, Pennsylvania, production facility that will add up to 50% more manufacturing, quality control lab and office space. The facility will be configured to accommodate future production increases and new capabilities. In 2021, AGC Japan established the Global Compounds business unit to manage customer needs over multiple markets in various geographical regions that the Thorndale sit services. AGC designed the Thorndale plant for expansion and execution of its business continuity plan because of its strong technical capabilities in compounding fluoropolymer resins and large presence in transportation, aerospace, energy, industrial, semiconductor and coatings markets. For more information, visit www.agcchem.com.
ChemTrend Releases Sustainability Report
ChemTrend, Howell, Michigan, released its latest sustainability report, which spotlights the company’s current progress through the perspectives of ChemTrend’s Global Sustainability Advisory Team (GSAT) members. Goals for emissions and material waste – including a 99% reduction in water usage by 2025 – are highlighted in the report. Other findings shared in the report include new technology that sets limits and monitors product concentration levels, minimized water waste and closed-loop recycling of concentrated purging compound grades into new products. ChemTrend’s GSAT was founded in 2017 with the mission to create pathways to a greater sustainability and is comprised of ChemTrend employees from around the world. For more information, visit www.chemtrend.com.
Yoloha Uses TPE Biobased Material in Yoga Mats
HEXPOL TPE, Malmö, Sweden, developed a customized material from the Dryflex Green family of biobased thermoplastic elastomers (TPE) to support sustainable yoga mat company, Yoloha. The TPE has 55% biobased content, as well as a high melt strength and the drawability to produce foamed materials with a uniform foam structure. The foaming allows cushioning in applications such as mats, protective clothing and seating. At the start of the company, Yoloha founder, Chris Willey created a yoga mat out of the most sustainable materials he had on hand, combining cork with recycled rubber. For more information, visit www.hexpol.com.
SI Group Appoints Jilla as Chief Financial Officer
SI Group, Schenectady, New York, recently shared the appointment of Rustom Jilla as its senior vice president and chief financial officer. Jilla succeeds Patrick Weinberg, who previously held the CFO position with SI Group, provider of a high-performance additives for the rubber industry. Jilla joins SI Group with nearly 20 years of experience as the CFO of public and private equity-backed global manufacturing and distribution businesses. Most recently, Jilla served as CFO for International Flavors and Fragrances, Inc., leading it through a global merger with DuPont’s Nutrition & Biosciences division. For more information, visit www.siigroup.com.
Bolder Industries Announces New Facility
Bolder Industries, Inc., Boulder, Colorado, announced the purchase of the former Pyrolyx facility in Terre Haute, Indiana, which had ceased operations in March 2020. The new facility is 66,000 square feet and will be retrofitted with Bolder Industries’ proprietary solution, utilizing the currently permitted facility to increase Bolder’s manufacturing capacity within the first year of operations. The initial phase is expected to be completed in early 2023 and is estimated to divert approximately three million tires from landfill or burning. Bolder’s charter products’ (BolderBlack® and BolderOilTM) production level will see an overall increase of nearly three times its capacity. Bolder Industries has previous experience retrofitting existing manufacturing operations with its proprietary extraction technology, as it did when it purchased a facility in Maryville, Missouri, in 2014. For more information, visit www.bolderindustries.com. u www.arpminc.com 21
Finding and Retaining Employees at Bruckman Rubber By Nicole Mitchell, editor, Inside Rubber
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iring and retaining employees is a tough assignment for every industry – especially within the last two years. Unemployment rates are high (currently at 3.9% in the US, according to the Bureau of Labor Statistics), workers expect more from their employers and companies are competing more than ever to hire employees – raising wages and offering other progressive ways of enticing potential team members to apply and stay. Compared to the national average, the unemployment rate in Adams County, Nebraska, where privately held manufacturing company Bruckman Rubber is located, is 1.5% – which certainly makes hiring and retaining quality employees much more difficult. Founded in 1961 in Hastings, Nebraska – a small town with just under 25,000 people in 2019, according to the US Census Bureau – Bruckman Rubber compounds its own rubber; molds products for industries as diverse as agriculture, food, medical, landscaping and automotive; and also builds its own tool and die sets. Currently, 70 employees are on staff and 10 more are needed. Caption: The Bruckman Rubber team celebrated the company’s 60th anniversary in 2021.
Bruckman competes against a heavy number of manufacturing companies in the county: PaperWorks, Eaton, L-H Manufacturing Co, Inc., and more. Pair that alongside manufacturing competitors like Case New Holland, located in Grand Island only 25 miles away, and the company has plenty of challengers for talent when hiring. “We’ve increased wages to become more competitive, of course,” said Travis Turek, president of Bruckman Rubber. “But we really have focused on the benefits pieces, giving immediate access to any benefit we legally can provide.”
Finding people to interview and hire
With so many options available to those looking to enter the workforce or change jobs, Bruckman has gotten creative, while also taking a hard look at some policies that needed to be amended. Active hiring One of the biggest struggles when it comes to hiring is getting people to walk in the door to fill out an application. Bruckman Rubber currently follows an “active hire” approach, asking applicants to bring their work boots to the interview because if the company hires them, they can go to work that day. “If we get them in the door, we page 24 u
22 Inside Rubber // 2022 Issue 1
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want to keep them,” said Turek. “We start them watching safety videos right away.” Removing diploma and GED requirements Turek said it’s important to consider all of the people available for hire and has removed the minimum education requirement for job applicants. “I need people to come in and run presses, and by requiring a high school diploma or a GED, there was a talent pool that we were missing,” he said. “Just because someone didn’t see the need to take the test doesn’t mean they aren’t capable of working here. Some of those people are our best employees.” Removing the requirement for applicants to hold a high school diploma or equivalent not only opens up the number of applicants eligible to apply for a position, but it allows individuals to apply who may not have many other options; taking talent away from competing manufacturing companies that still may have an education requirement. Interviewing individuals with criminal records Bruckman recently has updated its employment application form to remove the question that asks if the applicant has had a felony in the last seven years. A halfway house for those with a criminal conviction and under supervision from the court system is located across the street from the manufacturing facility, and “sometimes, we’re the only company that will give them a chance to work,” Turek said. “We still do background checks, but a lot of young people have drug charges and when they get another chance, they’re absolute rock stars.” Increased and immediate benefits Alongside an active hiring policy and opening the doors for unique job applicants, Bruckman Rubber has looked at the benefits offered to employees and updated them to increase the value of the benefit offered and, when possible, to make it immediately available to new hires. These include earned time off (such as an extra day off with pay after 30 days with no absences), immediate vacation accrual and an increased 401k match. While most manufacturing companies have been forced to play the wage increase game in order to hire new employees, Turek believes an employee who understands the value of benefits is more likely to stay. “We’ve increased wages to stay comparable to others in the area,” he said, “but I don’t think wages are our biggest selling point when we’re trying to bring on new employees. It’s the explanation of what we do for our employees beyond the paycheck and what the value of those benefits are for them. The majority of people are uneducated in the realm of benefits.” In-house physical therapy and prescription benefits Other, more unique benefits, offered by Bruckman include 24 Inside Rubber // 2022 Issue 1
weekly visits from a physical therapist and paying for employees’ preventative medication. The physical therapist is available two times each week, and all employees are allowed to use the resource, no matter the cause of their pain. “It doesn’t have to be work related,” Turek said. “But it’s a good resource for our employees – it’s access to a free physical therapist to help them get back to normal.” Bruckman Rubber also pays for preventative medications for its employees, such as those for high blood pressure or cholesterol. Knowing those medications aren’t an expense that needs to come from their paychecks is a relief to some employees, and it also ensures they are taking the medications necessary to maintain good health. As a side benefit, “Our claims have dropped significantly,” Turek said. “Our property and casualty people are asking us what we’re doing, and it helps me keep health insurance costs down, too.”
Keeping employees past the first year
The first three to six months are the danger zone for employee retention in the manufacturing industry, and Bruckman is no different from the rest. However, in the last two years, Bruckman Rubber has dropped its turnover rate by 15%, thanks to a combination of smart hiring practices and an effort to reward employee loyalty. Re-education on the value of benefits Benefits from the company start as soon as each employee is hired. However, those benefits may be easy to forget after work begins, so Bruckman Rubber works to keep them top of mind. “We call it re-education,” Turek said. Throughout the year, the company continues to have conversations with its employees about the value of what they are offered. As an example, the health insurance providers come in and speak to Bruckman employees. “It costs the company a lot of money to provide these benefits for our employees,” he said, “and I want them to understand why these benefits are important for them and their families.” Incremental rewards in the first year To encourage loyalty and longevity, employees are rewarded and thanked at their three-month, six-month and one-year anniversaries. Raises are given to each employee on those dates, and employees also are gifted a small, personal-sized cake and a handwritten card from Turek. Encouraging company pride – and recruiting, too Bruckman also provides company gear to its employees at the six-month and one-year mark. Employees are able to choose from items such as a hat or t-shirt containing the company logo. “It’s both an incentive and advertising,” said Turek. “They have the pride of wearing something that tells everyone where they work, and maybe someone else is interested enough to apply.”
What’s to come? More flexibility.
Across the country, individuals who have stayed with their employer for years are leaving the workforce as they reach retirement age. With that comes a shift in employee mentality. “We’re seeing younger people who don’t want to stay in one job forever,” Turek said. “They instead want to jump around from one company to the next, and we have to know what entices that next group of employees who are coming in.” Flexibility will be key, and, for many manufacturers, COVID-19 paved the way for a change in mindset. “In my mind, as long as I know who will be here, it’s easy to schedule presses,” Turek said. “What throws me for a loop is when someone doesn’t show up.” To accommodate for the many challenges in the early days of the pandemic, Bruckman changed its working hours to provide four 10-hour workdays, allowing employees to choose which day they were off to accommodate shifts in school schedules, quarantines and illnesses. “Fast food restaurants schedule their work and let people pick their times. We’re not quite to the level of flexibility that others may be,” Turek said. “But we hope to be there in a few years. I truly believe flexibility will be the next tier of what we have to do to get people in.”
Bruckman also offers flexibility by offering crosstraining to its employees in one of three areas – compounding, molding and trimming. Not only does this give employees more experience within the company, but it provides a solution to the company when another employee takes a day off or doesn’t show up. “If employees were to get trained in all three areas, I can move them over to areas where we need more help on certain days,” Turek said. “This gives crosstrained employees the potential for flexibility in their schedules.” Crosstrained employees also earn a higher wage to reflect their increased value to the company. Turek said the company has additional benefit offerings under consideration, as the employment situation in Hastings won’t change anytime soon. “We always look at continuous improvement in our hiring process, but there’s been a heightened focus over the last two years, which correlates to the pandemic when we had to get aggressive,” Turek explained. “You’re always going to have turnover, but the goal is to eliminate as much as you can.” u
RUBBER IN MOTION
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Rubber Product Manufacturer Implements ‘Hire to Retire’ Initiative By Sarah Knight, marketing content manager, 180 Skills
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ith companies struggling to build strong, stable workforces, consider creating career lattices for employees to climb. That is what rubber product manufacturer R.E. Darling is doing as part of its Hire to Retire initiative to win the war for talent in Tucson, Arizona. R.E. Darling specializes in the manufacture of specialty rubber and composite products used in the aerospace and defense industry. Its largest business segment involves manufacturing solid rocket motor case insulators. The company employs approximately 200 individuals, from mill room operators and process engineers to support specialists and production supervisors. Like most manufacturers, R.E. Darling has been a revolving door of employee turnover for the past few years. But it’s hopeful that door will stop circling as the company prepares to launch a new talent management and retention strategy that centers around the career lattice model. “We would have employees start one week and quit the next because another employer was paying a dollar more an hour,” said Jen Johnson, HR specialist at R.E. Darling. “We
26 Inside Rubber // 2022 Issue 1
knew we had to do something, so we decided to revamp our learning and development efforts.” Compared to the career ladder model, the career lattice approach is much more adaptive, representing the multidirectional, flexible and expansive nature of how successful organizations work today. It is a strategy that creates a well-rounded understanding of the company and how each department contributes to its success. To successfully implement its new strategy, R.E. Darling needed a flexible training solution that could provide varied paths for employee growth and development – and 180 Skills fit the bill. With nearly 800 skills courses in its online content library, 180 Skills is a turnkey solution for deploying skills training in a variety of industry segments. It includes an intuitive learning management system (LMS) for assigning and completing courses, student study guides and instructor training plans. 180 Skills courses span four broad categories: workplace and soft skills, risk management and compliance skills, technical
skills, and quality and continuous improvement skills. R.E. Darling will take advantage of rubber training modules that include quality in rubber manufacturing, material mixing technology, extrusion technology and safety in a manufacturing environment. The online training platform also will provide R.E. Darling employees the opportunity to earn one of 13 industryrecognized certifications in areas such as advanced manufacturing, industrial automation, quality assurance and Six Sigma green belt.
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WE WOULD HAVE EMPLOYEES START ONE WEEK AND QUIT THE NEXT BECAUSE ANOTHER EMPLOYER WAS PAYING A DOLLAR MORE AN HOUR. WE KNEW WE HAD TO DO SOMETHING, SO WE DECIDED TO REVAMP OUR LEARNING AND DEVELOPMENT EFFORTS.
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“With 180 Skills, we can give each employee access to career growth pathways that allow for vertical, horizontal and diagonal movement,” said Johnson. “We don’t want our employees to feel they have to stay in the same department to advance within the company.” She also noted that online skills training was an easy sell to employees because when surveyed, most, if not all, of the R.E. Darling employees wanted access to new learning and development opportunities. Even the company’s office staff will benefit from 180 Skills, having access to a full suite of Microsoft® Office skills courses. Given that 180 Skills courses are short-term and on-demand, R.E. Darling employees will be able to learn around their work priorities and during scheduled downtime. “It’s important for employees to be able to learn at work,” noted Johnson. “It keeps them engaged and motivated. Our entire
workforce has access to 180 Skills by way of their desktops or our learning lab.” Employers may wince at the idea of taking an employee off the floor for training; however, online learning does not eat into productivity the same way as in-person training does. According to an IBM study, every dollar invested in online training yields $30 in productivity, mainly because employees can resume their work faster. Because everyone learns differently, Johnson appreciates that each 180 Skills course uses text, audio, graphics, animations and simulations to engage employees. So, whether an employee is a visual, auditory or kinesthetic learner, 180 Skills makes it easy for anyone to absorb the course material. To ensure each employee is learning the content, each skills course closes with a thorough assessment that requires a perfect score for completion. While R.E. Darling’s goal is to have the 180 Skills training platform fully up and running by April, Johnson said the company is taking its time and doing everything to ensure a successful launch. “To properly roll out any employee training program, you need to have a clear vision and strategic plan in place,” she said. In preparing for the roll-out, Johnson, who is the LMS administrator for the 180 Skills platform, has been working with department managers, reviewing employee job descriptions and identifying skills gaps. She is using the information to build personalized career pathways for employees in the LMS. Department managers also have access to the LMS to monitor employee progress, run reports and tweak career paths as needed. While the 180 Skills platform in and of itself is easy to use, Johnson said embedding learning and development into company culture takes time and energy, but the rewards are indisputable. When properly implemented, skills training makes employees more efficient and effective in their jobs, allowing companies to benefit from increased productivity and decreased job errors. Training opportunities also help keep employees engaged and loyal to their companies. u Sarah Knight is the marketing content manager for 180 Skills, which provides a turnkey skills training system that empowers manufacturers to create, grow and retain their workforce. The company’s library offers nearly 800 skills courses, including a variety of courses on rubber manufacturing processes that are exclusively available to ARPM members. Additionally, ARPM members receive a 10% user discount on the 180 Skills training system. For more information, visit www.180skills.com or call 317.735.3370.
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Bruckman Rubber Virtual Plant Tour | Febuary 16, 2022 Bruckman Rubber’s most recent project has been building and implementing its enterprise resource planning (ERP) system. An ERP system is a software that organizations implement to manage day-to-day business activities such as accounting, project management, quoting, sales processes, supply chain operations and more. Today, ERP systems have become critical for business operations, and any organizations that have successfully implemented their ERP system say they are as indispensable as the electricity that keeps the lights on. For the Bruckman Rubber team, implementing the fully customized ERP system has changed the way the company handles its operations. From the first contact with a potential new
2022 EHS Summit Speaker Callout
ARPM’s Annual Environmental, Health and Safety Summit will be held virtually in 2022. This day-and-a-half-long event, scheduled for April 27 – 28, will highlight best practices in safety that attendees can take back and implement in their organizations. The most important element of the EHS Summit is the educational component contributed by the industry experts. EHS professionals who would like to share their professional experiences and program successes with the EHS Summit audience are encouraged to respond to the Call for Presenters. The deadline for applications for speakers is February 18, 2022. All presentations must be nonproprietary and cannot mention specific goods or services. To present at this event or with any questions, contact Kaitlyn Krol at kkrol@arpminc.org.
ARPM Young Professionals Group
ARPM is excited to announce that the association is launching 28 Inside Rubber // 2022 Issue 1
customer to sending parts out the door, the ERP system has given Bruckman Rubber a place to store data and information that anyone can access. During this virtual plant tour, attendees will hear from President Travis Turek and Project Manager Stephanie Hulme about Bruckman’s ERP journey from conceptualization to implementation and take a virtual tour of the facility. To register for this event, visit www.arpminc.com/events.
a Young Professionals Group in 2022. This is a new benefit for ARPM members, and ARPM looks forward to growing the program. To get more information about the program, reach out to Kaitlyn Krol at kkrol@arpminc.org.
New ARPM Board Members
ARPM is pleased to welcome three new Board Members in 2022. Brandon Robards of Ace Extrusion; Diya Garware Ibanez of Fulflex, Inc.; Seth Johnson of Zochem and Jon Meigan of Lake Erie Rubber and Manufacturing bring a new wealth of leadership experience and will be great additions to the association’s Board of Directors.
Welcome New Members
Please join ARPM in welcoming the following new members: Barwell Machinery USA Hexpol Home Rubber Company Shocktech Wabtec Rubber Products
ARPM Sponsor Spotlight: MAPLAN
MAPLAN is a leading manufacturer of rubber and silicone injection molding machines with an industry-best network of strategic partners. With 50 years of experience in a variety of application fields, MAPLAN machines are known worldwide for accuracy, performance and efficiency. INNOVATION. MAPLAN is an innovator in the industry. Its FIFO Injection technology incurs minimum pressure loss with negligible residual rubber. CoolDrive II technology is the benchmark in servo-hydraulics, maximizing power savings and efficient production. COMPETENCE. MAPLAN is the global leader in horizontal injection molding machines. It offers a wide range of solutions for semi- and fully automated production. MAPLAN is the largest and most successful manufacturer of two-component injection machines worldwide. SUPPORT. MAPLAN has the largest service team in North America to support and help users get the most ROI out of their MAPLAN equipment. The company offers the following services to increase OEE and service lifetime: • Preventive Maintenance (PM) contracts • Controller upgrades • Machine and process training • Machine retrofits and refurbishment • Spare parts packages MAPLAN will offer the following to members of ARPM: • 24-month warranty on new press purchases • Free MAP Remote Module + 24 months remote support • 10% discount on spare parts packages with new press purchase • 5% discount on spare parts and free oil filter set with PM contract u
Free ARPM Member Benefit Save on small package and freight shipping with the ARPM Shipping Program and PartnerShip® PartnerShip.com/ARPM Enter 8333 in the promo code field
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30 Inside Rubber // 2022 Issue 1
STRATEGIES
Year-End Tax Thoughts and Policy Outlook for 2022 By Michael J. Devereux II, CPA, CMP, Wipfli
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ith 2021 in the rearview mirror, rubber processors are beginning to close their books for the calendar year and looking ahead to tax filing season for tax year 2021. Processors are embarking on this process with a murky view of what taxes will look like in tax year 2022 and subsequent years. The following will provide some insights that rubber processors may consider as they determine what they owe Uncle Sam, along with an outlook on tax policy, driven by the current Congress and Administration.
Research and development
Prior to 2022, and since 1954, taxpayers have been allowed to elect to deduct their research expenditures in the tax year in which they were paid or incurred. For tax years beginning after December 31, 2021, the Tax Cuts and Jobs Act (TCJA) requires Section 174 expenditures (specified research or experimental expenditures) to be capitalized and amortized ratably over a five-year period. For tax years beginning before January 1, 2022, taxpayers can elect to deduct Section 174 expenditures. Since the TCJA was made law, there have been multiple bills introduced in direct response to the Section 174 capitalization/amortization requirements to amend, remove or change the TCJA law regarding Section 174 expenditures; however, likelihood of corrective legislation remains uncertain. The Build Back Better Act (BBBA), which at the
time of writing this article was stalled in the Senate, included a temporary fix to the research expensing regime by delaying the implementation of the TCJA provision until 2026. In addition to the deduction for research and experimentation, many rubber processors are eligible for R&D tax credits. The R&D tax credit is one of the most under-utilized tax savings opportunities for companies in the rubber industry. The R&D tax credit rewards companies that invest resources in innovation, product/part design and development, mold design, new materials or resins and process development/ improvement. In addition to Federal tax savings, over 30 states have a similar program that rewards companies for the development or improvement to their products or processes.
Methods of accounting
Even with the Tax Cuts and Jobs Act (TCJA) being passed more than four years ago, we still see value with rubber processors revisiting their methods of accounting. Prior to the TCJA, most processors were required to be on the accrual method of accounting for purposes of recording their revenue and related deductions. However, processors with annual average gross receipts of $26 million or less for the prior three tax years may use the cash method of accounting, regardless of the company’s entity structure. That is, the processor will recognize revenue when it receives the cash and claim deductions when the expense is paid. Further, page 32 u
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STRATEGIES t page 31
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WITH 2022 BEING THE LAST YEAR OF 100% BONUS DEPRECIATION AND THE POTENTIAL FOR LONGER LEAD TIMES GIVEN THE CURRENT GLOBAL SUPPLY CHAIN CHALLENGES, RUBBER PROCESSORS WILL WANT TO GET A HEAD START ON CAPITAL EXPENDITURE PLANNING.
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taxpayers meeting the same revenue thresholds also may look to changing their method of accounting related to inventory, including whether they are required to capitalize the cost of overhead into year-end inventory amounts. Processors considering whether changing their accounting method makes sense for tax year 2021 also should consider the potential for increased tax rates in future years.
Capital assets
Most rubber processors have taken advantage of the generous bonus depreciation provisions that were renewed in the TCJA. Absent a law change, tax year 2022 is the last year in which rubber processors can write off 100% of the capitalized amounts of eligible property, with the bonus percentage phased down from 80% in 2023 to 20% in 2026. With 2022 being the last year of 100% bonus depreciation and the potential for longer lead times given the current global supply chain challenges, rubber processors will want to get a head start on capital expenditure planning. Processors are eligible for the 100% bonus depreciation for both new and used assets, including qualified improvement property. Qualified improvement property includes improvements made to the interior of the building, such as cleanrooms, office buildouts and cell-specific improvements. Smaller and medium-sized businesses also are eligible for Section 179 expensing related to plant improvements, including roofs, HVAC systems, fire protection systems and security and alarm systems. The maximum Section 179 deduction is $1.05 million, with the maximum amount being reduced dollar-for-dollar for purchases exceeding $2.62 million for the tax year. 32 Inside Rubber // 2022 Issue 1
Employee Retention Tax Credit
The Employee Retention Credit (ERC) initially did not get much press when it was introduced by the CARES Act since those receiving Paycheck Protection Program (PPP) funds were prohibited from claiming the credit. But when the Consolidated Appropriations Act of 2021 (CAA) removed this restriction, many rubber processors found themselves eligible for the ERC. While the Bipartisan Infrastructure Framework (BIF) eliminated the ERC for the 4th quarter of 2022, many rubber processors find themselves still eligible for tax year 2020 and the first three quarters of 2021. The ERC is capped at $5,000 per employee in tax year 2020, but eligible organizations may qualify for up to $7,000, per employee, per quarter.
Business meals
Generally, food and beverage expenses associated with operating a taxpayer’s business are deductible, subject to a 50% limit. While the TCJA eliminated the deduction for entertainment (an expenditure regularly grouped and recorded with business meals), the Coronavirus Aid, Relief and Economic Security Act (CARES Act) provides for an exception to the 50% limit for any food or beverages provided by a restaurant for tax years 2021 and 2022. Worth noting, takeout and delivered business meals that were provided by a restaurant in 2021 or 2022 also are fully deductible.
Tax policy and potential legislation
As noted, the President’s Build Back Better Act (BBBA) is stalled in the Senate, but that will not stop theAdministration’s efforts to work with Congress to pass its spending and taxing priorities. As such, processors should monitor Congress’ efforts, as the changes being contemplated will have a significant impact on the amount of Federal income tax rubber processors will pay in future years. While the increased tax rates and estate tax changes did not make their way into the House-passed BBBA bill, tax increases impacting rubber processors, such as the 3.8% net investment income tax (NIIT) applying to ordinary S Corporation income regardless of whether the owner materially participates, still made their way into the House-passed BBBA. As such, processors should be cognizant that tax increases could be on the horizon, therefore impacting their decision-making as it related to 2021 tax year decisions.u Michael J. Devereux II, CPA, CMP, is a partner and director of Manufacturing, Distribution & Plastics Industry Services for Wipfli. Devereux’s primary focus is on tax incentives and succession planning for the manufacturing sector. He regularly speaks at manufacturing conferences around the country on tax issues facing the manufacturing sector. For more information, email mike.devereux@wipfli.com or visit www.wipfli.com
MANAGEMENT
What You Need If You Are Called to Lead By Dr. Rhea Seddon, astronaut and author Today’s world offers significant challenges for both emerging and experienced leaders. Many people don’t start out to be a leader but the paths they have chosen require that they become one. Regardless of the size of the group, its makeup or goals, there are proven principles that can be applied to lead any assemblage of people – even though it may feel like herding cats.
What to do if you aren’t a born leader
It sometimes is said that leaders are not born, they learn how to lead. Often, this means jumping in and “faking it until you make it.” Starting small always makes good sense. Watch what other, more experienced workers do. Take note of how the leader of the group brings people together to achieve specific goals. Then ask to take on more difficult tasks. There always are people who will appreciate help and help in return.
Apply three principles of military leadership
There are three important principles that military officers are taught to use when they are responsible for commanding personnel. First, they must know their own job and duties exceedingly well. This gives them credibility not only with their followers but also with their superiors. Troops must have confidence in the leader’s capabilities, knowing that someday they may be used on the battlefield. Second, military officers must know that things can go wrong – and probably will. It’s the adage, “If you fail to plan, you are planning to fail.” It only is through considering possible failure modes and then practicing how to handle them that leaders will understand what must be done quickly in any time-critical situation. Third, good leaders take care of their people. Focus not only on what jobs must be done, but on the needs and challenges individuals may face.
Understand who is being led
Leaders must connect with the people they lead and tailor a leadership style to their specific needs. Every group is made up of individuals who come with different backgrounds, personalities and capabilities. A leader must decide who does what so each person will find their job fulfilling and the group, as a whole, reaches its peak performance. Leaders
have to become motivators, team builders and goal setters, taking responsibility for the group’s outcomes, sharing the praise and taking responsibility for the blame.
When failure happens
No leader is immune from failure. It has been said, “If you aren’t failing, you aren’t trying.” People learn from trying and from pushing the boundaries. This requires taking risk on occasion. That may lead to poor outcomes along the way and a feeling of failure and disappointment. At times like this, a good leader admits that mistakes were made, corrects them, profits from the experience and shares what was learned. Most importantly, a good leader encourages the team to continue making progress. People don’t know what they are capable of unless they try.
Finding role models
Leaders come in all varieties. Great bosses will give frequent praise, offering credit when it is due or support when needed, and they share their secrets for success. Having a bad leader will illustrate how easily a project or a plan can go awry. Some role models will teach what not to do in the way they treat employees and staff. Berating workers, failing to provide feedback about performance, harassment, lack of recognition – all can drive away the most patient of workers. When in a leadership role and uncertain of how to proceed, learn from observing leaders who get great results. Listen to those who have had formal leadership training; they have many lessons to share. Find mentors who are willing to help. Tailor your leadership style to the people and circumstances of the group being led. Observe leaders who perform poorly and strive not to emulate them. Fix problems by admitting they exist and learn from them to move forward. u Dr. Rhea Seddon is an astronaut and the author of “Go for Orbit,” a memoir about her adventures spending 30 days in space aboard the space shuttle. She also is a former surgeon, healthcare executive and entrepreneur. Dr. Seddon speaks to audiences of all kinds on the topics of teamwork, leadership and taking advantage of opportunities. To learn more, visit www.astronautrheaseddon.com.
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EVENTS CALENDAR FEBRUARY 2022 16 Bruckman Rubber Plant Tour (virtual)
MARCH 2022 10-11 Engineering and Quality Forum
APRIL 2022 27-28 2022 EHS Summit
MAY 2022 10 Building Leaders of Character
JUNE 2022 15-16 Sales and Marketing Forum
JULY 2022 20-21 HR Forum For the most up-to-date information and to register for events, visit www.arpminc.com/ events.
34 Inside Rubber // 2022 Issue 1
ACE Products & Consulting LLC............................... 29 www.aceprodcon.com Akron Rubber Development Laboratory, Inc. (ARDL)............................................14 www.ardl.com ARPM........................................................................10 www.arpminc.com ARPM 180 Skills........................................................30 www.180skills.com/ARPM ARPM Environmental, Health and Safety Summit.... 35 www.arpminc.com/ehs Barwell Global USA...................................................11 www.barwellusa.com Blair Rubber Company................................................5 www.blairrubber.com Chardon Custom Polymers.........................................9 www.chardoncp.com ChemTrend...............................................................17 www.chemtrend.com Grainger......................................................................2 www.grainger.com IceMiller.....................................................................18 www.icemiller.com PartnerShip...............................................................29 www.partnership.com/ARPM REP Corp..................................................................25 www.repinjection.com Rubber Division, ACS................................................23 www.rubber.org Sigmasoft................................................... Back Cover www.sigmasoftvm.com Smithers....................................................................19 www.smithers.com
