Thursday, April 03, 2014

Toronto Filtration Firm Faces Unchartered Waters in Outsourcing Manufacturing - Toronto Star

NanoStruck Technologies is profiting off the backs — or rather, the shells — of sea creatures.   

The Mississauga-based firm has built its business around technology that mimics how shells filter out contaminants in polluted water.   

It uses a powder made of absorptive molecules derived from the shells of crustaceans like shrimp, lobster and crab fish. These nanometer-sized polymers act as molecular sponges and can be custom-programmed to absorb specific particles.   

This makes them extremely effective in industrial wastewater remediation, an eco-friendly means of removing toxins, heavy metals, hydrocarbons or organic waste.   

NanoStruck now sells water-filtration plants — which typically cost between $1 million to $2 million, depending on flow-through rates and the nature of contaminants — and charges a fee on top for maintenance. Alternately, it leases out units and charges customers on a price-per-litre basis.   

Its clientele include an ice cream maker with waste rich in dairy that can contaminate the surrounding water and air; municipalities dealing with wastewater leaching from landfill sites; and it’s in talks with a transportation company, which needs to treat its bus-cleaning wastewater.   

To keep costs down, NanoStruck is seeking to outsource manufacturing of its filtration plants overseas, where labour is cheap. But the theft of its patented technology is a major concern.   

“We want to follow the Apple model, which is to focus on design and engineering, and manufacture our product elsewhere,” CEO Bundeep Singh Rangar explains. “But because of the risk of intellectual property theft we won’t get the best bang for our buck.”   

On top of wastewater remediation, NanoStruck believes its molecular sponge technology can offer a potentially economical way to recover base metals and precious metals such as of gold, silver and platinum from mine tailings, the finer particles stored in ponds after chunkier parts of metals have been mined.   

The tailings recovery side of the business is still in the development stage, but NanoStruck sees it as an avenue for substantial growth. About $20 billion was left behind in tailings in 2012, according to company estimates. “Even if you capture a small slice of that, you’re still getting good revenue,” Rangar says.   

Within the world of wastewater remediation, NanoStruck’s patented nano-technology sets it apart from competitors, whose solutions are based on the use of membranes and reverse osmosis to treat water.   

NanoStruck doesn’t want to manufacture its own remediation plants. “We can scale up faster if we focus on winning business by dealing with samples, analyzing them and configuring solutions specific to client requirements, then designing a machine and giving that design to a company to build it for us,” Rangar says.   

Asia is the most obvious choice of destinations to which it can outsource its manufacturing, given the cheap labour costs and production capability in the region. Problem is, Rangar says, “the risk of intellectual property pilfering is highest in Asia, particularly China.”

   Whereas Apple has “deep pockets” and can vigorously fight IP infringement, Rangar notes that NanoStruck is still getting established. “We want to focus on the commercialization and deployment of our technology, not spend time and cash fighting patent infringement cases.”

NanoStruck needs to find a location where it can have its treatment plants manufactured in a cost-effective way but where its intellectual property will be protected. “(IP) is ultimately where the long-term value is for our company,” says Rangar.   

Intellectual property consultant and lawyer Marcel Mongeon suggests NanoStruck partner with a multinational Asian manufacturer that has operations in Canada. “This ensures there is someone locally that NanoStruck could deal with, and potentially sue locally, if problems develop.   

Rangar hopes to do just that: find an Asian manufacturer with a Canadian subsidiary it can contract to manufacture its treatment plants. “The (IP) protection comes through the Canadian subsidiary, and we’re able to optimize costs by having manufacturing done via the Asian partner. You get the best of both worlds.”   

NanoStruck also builds safeguards into its equipment to thwart copycats. The waste treatment units have dummy parts, for example, making them difficult to reverse engineer. And the company assigns Internet protocol codes to its machines, to monitor performance remotely but also disable the machine if tampering is suspected.   

At the moment NanoStruck is manufacturing its treatment units in-house, at a GTA-based factory. But Rangar says the company soon plans to transfer production to a locally-based company.   

“That way we’re close to where the treatment plants are getting manufactured and can supervise and oversee things — and be protected by Canadian (patent) laws.”   

Rangar says outsourcing further will have to wait for the right partner.   

“We’ve got to bite the bullet on the cost right now,” he says. “It’s just too risky.” 

- See more at: