ILMA Compoundings - August 2020 - 22

Tony Greer, chief supply chain officer at Old World
Industries, said the company made some changes to diversify
suppliers but still has a good amount of business that comes
from China. "At this point, we don't feel like it is an urgent
requirement to completely get out of there," he said. "We're
looking at options."
Charles Culverhouse, CEO of Old World Industries, said
that the tariffs made the company look at its supply chain in
2019. "We had to look at diversifying even more so than we
historically had when it comes to a number of the products
and components we import," he said. "We started looking
outside of China."
With products that are more commodity-based, Old
World Industries has diversified into other regions to create
some redundancy, which Greer said has paid off. "We feel
like we're in a good spot for the current reality," he said.
For many companies, the challenge is that China has done
a great job of building the infrastructure needed for the
supply chain, Greer said. "It isn't just the person who manufactures what we need," he said. "It is all of the components
around that, including packaging and import/export expertise. You're not just replicating a supplier in another region.
You have to replicate all of that, and it is not that easy."

The COVID-19 Effect

financial penalties as well as the abusive penalties happening
in China," Eggenschwiler said. "I have plenty of scenarios
where I've seen China Customs and China Export Authority
charging penalties for exporting to the U.S. and charging
inappropriate custom duties. Some are many times what the
normal rate would be when they find out it is coming from
the U.S."
Other countries in that region, including Vietnam,
Indonesia, Thailand and Singapore, have been competing
for business that has been based in China, Eggenschwiler
said. "Vietnam is taking the lead in developing a business
and business legal environment that is attractive and offering
investment money to companies that would like to locate
there," he said. "Vietnam is still a communist country but
has become very business-friendly and more capitalistic.
They have a more developed infrastructure and a more skilled
labor force."

AUGUST 2020

| COMPOUNDINGS | ILMA.ORG

Overall, COVID-19 changed the U.S. government's priorities
in trying to resolve the U.S.-China trade issue, Damiani said.
"Corporately, we haven't seen a whole lot of movement in the
U.S.-China trade negotiations," he said. "A lot of us in ILMA
were really hoping to get the U.S.-China agreement done as
soon as possible. There is a fairly large amount of lubricant
that moves back and forth between the two countries. Before
the COVID issue, we were making progress."
Leiter said COVID-19 has soured people around the
world on China, which could touch off a move to relocate
manufacturing to the U.S. He added that bringing production back to the U.S. would be good for ILMA members.
Ron Powell, president of MorOil Technologies, said the
future role of manufacturing in Asia depends on how reliant
the U.S. will continue to be and if manufacturing moves
back to North America. "I think a lot of companies are
going to be looking at what can go wrong and broaden their
view of what that might be," he said. "Hopefully that will
lead them to decide we need more of our supply chain local
rather than distributed. Any effort to increase American
manufacturing should be embraced."
One of the issues ILMA members deal with is that
many of their end users or customers have specifications
or requirements for their products that can make it hard
to switch suppliers. "ILMA members will come up with
formulations for those products based on a combination of

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ILMA Compoundings - August 2020

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