January/February 2014
With 25 years’ experience turning scrap engineering thermoplastics into high-quality custom compounds, SDR Plastics and Star Plastics are expanding into ventures designed to protect them from the volatility of the plastics market.
By Kent Kiser
When opportunity came knocking, Doug Ritchie had the good sense to open the door.
It was 1988, and Ritchie was working for Hartley Manufacturing Co., a company based in his hometown of Ravenswood, W.Va., that had a tolling agreement with DuPont (Wilmington, Del.) to process nylon carpet fiber from carpet mills in the southern United States. Borg-Warner Specialty Chemicals, a virgin resin producer in nearby Washington, W.Va., asked Hartley to help it establish a recycling operation for its postindustrial plastics. Because of its agreement with DuPont, Hartley could advise on the project, but it could not process the material. Ritchie saw his opportunity and grabbed it.
With his previous employer’s blessing, Ritchie, his father, and two of his uncles offered Borg-Warner 5 acres of land they owned in Ravenswood as the site for a greenfield plastics recycling plant. A $2.2 million guarantee from Borg-Warner allowed Ritchie to secure loans for the plant’s construction and equipment. Using his initials for the name of the new company, SDR Plastics, Ritchie signed a 10-year contract to recycle Borg-Warner’s scrap plastics under an exclusive tolling arrangement.
In 25 years, the business has grown from one company, one client, and eight employees to two companies—sister company Star Plastics debuted in 1997—more than 60 clients, and more than 110 employees. The core business has evolved from basic scrap plastic processing to a range of services, from processing and sorting to trading, bulk handling, and the companies’ specialty—custom plastic compounding. Though much of their current supply consists of post-industrial material, the companies plan to seek more postconsumer plastic supplies as well as expand their international presence and move into manufacturing products from recycled plastics, most notably from resins that have limited markets. Diversification is the key to success in recycled plastics, the companies’ leaders say.
Gaining Momentum
About 4,000 people live in Ravenswood, which backs up to the Ohio River on the western edge of West Virginia, a two-hour drive from Columbus, Ohio. A sign saying “Welcome to Ravenswood—Where Character Counts” greets visitors. SDR Plastics occupies two large industrial buildings just off the town’s commercial strip. Star Plastics is eight miles southwest inside three larger structures in Millwood, an even smaller, unincorporated community.
For its first contract with Borg-Warner—which General Electric acquired in 1988—SDR focused on processing production scrap plastics, primarily acrylonitrile butadiene styrene and Prevex, a brand name for GE’s proprietary blend of thermoplastic and glass fiber. It would shred and granulate the material, remove metal contaminants, and screen it into different size fractions. In the early 1990s, SDR added 90,000 square feet to its original 70,000-square-foot facility, giving it space to install two extruders and expand the employee lunch and locker room facilities. The new equipment allowed SDR to transform GE’s scrap plastics into extruded, compounded resins under their tolling agreement.
In the mid-1990s, GE asked SDR if it would focus its Ravenswood facility only on compounding operations and move its processing functions elsewhere. “GE was more familiar with compounding, and it was trying to push the market to supply it with good raw material that it could use directly in its own compounding operations,” Ritchie explains.
Seeing opportunity again, Ritchie established a second company—Star Plastics—and constructed a 60,000-square-foot plant to shred, granulate, separate, and blend scrap plastics. Now Star could purchase GE’s scrap plastics, process and blend the material, and send it to SDR for compounding. SDR then sold the final resin back to GE. This move allowed Star and SDR to expand their focus beyond the previous exclusive tolling arrangement with GE to begin offering tolling and compounding services to other customers.
The timing for this growth could not have been better. In 1996, West Virginia established the Polymer Alliance Zone, an economic development corporation focused on building the plastics industry in Mason, Wood, and Jackson counties. (SDR and Star are in Jackson County.) Today, the zone boasts one of the highest concentrations of high-technology, specialty, and engineering polymer production in the world, the state says.
Star continued to grow throughout the late 1990s. In 2001, it doubled the size of its facility, then it added another 70,000 square feet in 2005. Both companies have added equipment and new capabilities over the years and expanded their tolling services. They also evolved from selling resin under others’ brand names to branding it with the Star name. Today, the combined companies generate roughly $25 million to $45 million in annual revenue, which places them among the medium to large compounders in North America.
A Big Umbrella
The SDR and Star facilities’ unassuming outward appearance belies the round-the-clock bustle you’ll find inside as they process a variety of engineering-grade plastics—everything from shredded postconsumer computer housings to manufacturing scrap. In terms of polymer type, the companies handle primarily ABS, polycarbonate, and PC/ABS, including flame-retardant and glass-filled versions of those resins. About 85 percent of the companies’ business is creating custom plastic compounds to meet customers’ precise color and performance characteristics, says Sales Manager Chuck Hoop. As Luke Schindler, business development manager, explains, “We can go from clear to black and every color in between, and we can incorporate special additives such as flame retardants and glass.” The vast majority of the companies’ resin goes into electrical and electronic products such as junction and cable boxes, electric meter housings, and thermostat covers.
“What’s unique about us,” Schindler points out, “is we have several different businesses under one company umbrella.” The services they provide include shredding, granulating, classifying, blending, compounding, polymer identification, desiccant drying, optical color sorting, metal detection, repackaging, trading, and bulk handling. “Everything under the roof is available for tolling services,” Schindler says. “If we have a piece of equipment and its capacity isn’t full, we’ll entertain tolling arrangements.” The companies can meet virtually any customer need, even on short notice, he says. “If SDR and Star were a hospital, our tolling section would be the emergency room,” he says. “We get calls from customers today who need us to help them meet their customers’ needs tomorrow.” The company also has plenty of non-emergency tolling arrangements with customers. One company, for example, sends SDR/Star five truckloads a month of white pellets destined for high-level use in smartphone cases, and the recycler uses its optical sorter to purge any pellets contaminated with black flecks.
When deciding whether to toll-process material or buy scrap outright for its own account, SDR and Star consider a host of factors, including the customer’s preference, which party has the highest-value outlet for the material, and which approach makes the most economic sense based on the processes required, yield loss, purchase cost, and expected final price of the material, Ritchie explains.
Focusing on Quality and Safety
Making custom plastic compounds is an exacting science, and SDR and Star have built their reputations by meeting the quality standards of everyone from primary resin producers on down the consuming chain, starting with SDR’s very first tolling agreement with GE. “Even though we’re in the recycling world, we’re also in the prime world of high quality,” Ritchie says.
Laboratories in Ravenswood and Millwood are the heart of the companies’ quality efforts. The temperature- and humidity-controlled labs both have several melt-index machines to check a plastic’s flow rate. In Millwood, Star has two analyzers for incoming scrap: one that uses X-rays to identify the elements in a polymer and one that uses a laser to identify the resin type. There’s also a light booth that simulates different light conditions for viewing color samples. SDR’s lab in Ravenswood has a microwave that burns away all the plastics in a sample, leaving only nonplastic constituents such as glass. A freezer can chill samples to minus 40 degrees F to test the impact they can withstand at low temperatures. Another machine immerses plastic bars in hot oil and applies pressure to the middle to measure heat deflection. Both labs have small-scale extruders, one for testing the homogeneity and color of a specific lot and one that extrudes a thin strip of plastic to check if a lot contains silicon, a contaminant. The labs’ injection-molding machines, meanwhile, make Izod bars that are used as test pieces in several of the abovementioned machines. The companies might put a single load through as many as 20 different tests, Ritchie says. “We had to meet GE’s standards, so we needed equipment like it had in-house.”
GE also required SDR and Star to achieve certification to the ISO 9000 quality management standard. “At first, we thought it was a mountain we had to climb,” Schindler says, “but once we got our team dialed in and going in the right direction, it became fairly routine.” To maintain its ISO certification, the company must pass a third-party audit every year and a more detailed audit every three years.
Ritchie also takes pride in the companies’ certification to UL standards for flame-retardant plastics. To maintain this certification, the companies must not only undergo an annual audit, but also put samples from every load of flame-retardant polymer through flame tests. In those tests, a technician exposes the sample to a flame and then removes the flame to observe how the sample reacts. Samples with the necessary flame-retardant characteristics will self-extinguish when the flame is removed.
The companies’ leaders also credit GE for ensuring safety was part of their operations from the very beginning. Their ISO practices—especially the required training and documentation—help bring order to their safety efforts. For instance, if an employee wants to operate an extruder, the manager checks the individual’s training records to make sure he or she has the appropriate skills and knowledge. Each facility has a safety coordinator to guide its safety efforts, and plant managers are responsible for safety as well. An environmental, health, and safety steering group meets quarterly to identify and address safety challenges, and the companies work with a safety consultant on more technical issues and training because, Ritchie says, “sometimes you need another set of eyes.” As of December, SDR had gone more than 300 days without a lost-time accident, while Star had gone more than 200 days. That track record is good, Ritchie says, but he’d like it to be “stellar.”
That focus on continuous improvement also is apparent in the companies’ processing operations. The leadership team—Ritchie, Schindler, and the two plant managers—meet once a month at each site to take a fresh look at one particular process, such as an extruding line, with each person scrutinizing a different aspect, such as housekeeping, safety, job training, or environmental compliance. “We evaluate the whole area, then rate it and create a to-do list of any improvements,” Ritchie says. The lab and manufacturing team leaders also meet monthly to analyze the prior week’s runs, assessing what worked, what didn’t, and how to resolve any problems. “This continuous improvement allows us to reduce downtime and increase quality and productivity,” Ritchie says.
Company and Community Engagement
As SDR and Star have grown, they haven’t lost touch with their roots, with the two companies among the largest employers in Jackson County. As part of that local support, Ritchie “treats this company like an extension of his family,” says Schindler, one of Ritchie’s childhood friends since the 1970s.
As part of their efforts to be supportive employers, SDR and Star provide a work environment where employees can thrive. The companies offer benefits that include a 401(k) retirement savings plan with company match, health insurance (for which the company pays 70 percent of the premium), profit-sharing, short-term disability coverage, paid vacation and holiday leave, and uniforms for plant employees. The companies also train employees for a variety of tasks and frequently promote from within. Some of the lab technicians, for instance, started on the scrap processing side of the operation and trained to become technicians while on the job. “People can see a future here,” Schindler says. “They can learn through experience and build their own career here.”
SDR and Star executives also make it a point to stay connected with employees at all levels. Every Monday, each company holds a meeting before each shift to update workers on company news and expectations for the coming week. “You get to look every employee in the eye, make sure they’re OK, then give them the update of what’s going on,” Ritchie says. Every quarter, there’s an all-staff, state-of-the-company meeting that covers the accomplishments of the past quarter, goals for the next quarter, and whether there will be a profit-sharing bonus. A monthly company newsletter, The Recycler, provides business and employee news, staff recognitions (such as awards, birthdays, and work anniversaries), upcoming events, health and wellness information, a word-scramble puzzle, and more.
The companies also hold several get-togethers each year for workers and their families. In the spring, they shut down both plants early on a Friday and invite everyone to a local park for food and fun. Summer events for employees and their significant others have included a semi-pro baseball game, a boat ride with a DJ, and a casino night. Whenever the football team from Ravenswood High School—Ritchie’s alma mater—plays its rival from Ripley, W.Va., SDR and Star hold a potluck “rivalry function” in one of the plants. The firms hosts a Thanksgiving meal for employees the week before the holiday, with workers contributing side dishes. For its winter event this past December, the company rented a movie theater and hosted a screening of Disney’s animated movie Frozen, providing goodie bags for the kids.
Ritchie says such get-togethers are “a big part of the fellowship among our employees,” and the company holds them “to be the best employer we can be.” The employees have repaid this support with their loyalty: About 40 percent of them have worked for the companies for 10 years or longer, Schindler says.
SDR and Star are equally supportive of their surrounding communities. Last year, for instance, they provided six needy families with Christmas gifts as part of the local adopt-a-family program serving northern Jackson County. The companies sponsor local soccer teams and the Jackson County Junior Fair, and they donated $1,500 to the Ravenswood Fire Department to purchase safety rescue harnesses. The companies’ executives also hold leadership positions in various community organizations, including the Jackson County Chamber of Commerce, Jackson County Development Authority, Jackson General Hospital, and the Junior Fair.
Growth Through Diversity
To keep these companies growing and improve their ability to weather the unpredictable national and international economic conditions, Hoop expects that SDR and Star will become “significantly different” in the coming years. “Part of the discussion is, how do we diversify ourselves so we can be in a niche that’s still growing even when the economy is not?” Ritchie asks. “You can’t just wait on the rising tide.”
The planned diversification will happen at both ends of the processing spectrum. On the scrap buying and processing side, SDR and Star plan to expand their postconsumer recycling volume, stepping up purchases of end-of-life plastics and seeking closed-loop markets, such as selling computer-housing plastics for use in new computer housings. Some of these efforts will be in China, where the companies have become the majority owner of customer EcoTech Polymers (Hong Kong), which sells Star’s postconsumer recycled resin in China. “We’re getting comfortable enough with that business to do the same thing in North America under the Star brand,” Ritchie says. The companies also are stepping up their involvement in and ownership of a Shanghai-based scrap plastics processing operation—now named Star Plastics Shanghai—very similar to the Star facility in West Virginia, only smaller.
On the consuming end, the companies plan to make their first foray into product manufacturing with a new division, Technology Plastics, that will make waste container lids out of 100-percent-recycled polyethylene. As Ritchie walks through the Star plant, he describes the proprietary molding equipment he plans to install there, which uses an “inherently cheaper” process than other molding approaches and will allow SDR and Star to make the lids with various colored “skins” while maintaining a black, 100-percent-recycled PE core. The companies eventually hope to make other recycled products out of existing byproduct materials that currently have limited demand.
Supporting all these new initiatives are additional corporate marketing efforts to give the Star Plastics brand a higher profile. Star already has created a new logo and revamped its website, and it plans to step up its advertising, trade-show presence, and editorial pitches to various media. As part of its updated Web efforts, Star launched an online trading site, Polymer Vault, late last summer to market virtually any resin that’s not a custom-compounded product, Hoop says. Visitors can request a sample through the site—which is updated twice a week—and if they’re interested in buying, a company salesperson contacts them to negotiate a price. Hoop, who says the site is “making everyone more efficient,” describes the effort as another service for customers—allowing them to source resin in another way—and “another way Star is extending its market presence.”
Although SDR and Star see more than a few challenges ahead—including rising health-insurance costs, more requests from suppliers to conduct downstream due-diligence audits of its operations, ongoing consolidation in the compounding niche, and overcapacity in the virgin resin sector—Ritchie isn’t daunted. With their reputation for quality and service and their investments in a wide range of products and services, they’re ready for the next time opportunity knocks.
Kent Kiser is publisher of Scrap.
With 25 years’ experience turning scrap engineering thermoplastics into high-quality custom compounds, SDR Plastics and Star Plastics are expanding into ventures designed to protect them from the volatility of the plastics market.