November/December 1992
This Arkansas scrap company has succeeded for 102 years by bringing creative ideas and a human touch to its metal recycling operations.
BY KENT KISER
Kent Kiser is associate editor of Scrap Processing and Recycling.
If A. Tenenbaum Co. Inc. were a tree, it would be a grand old oak, with roots reaching four generations deep. Stable, strong, slow-growing, and vibrant. Those adjectives seem to capture the character of this North Little Rock, Ark., recycler of ferrous and nonferrous scrap. President Harold S. Tenenbaum describes his firm as "hard working and not afraid of a challenge," but it is much more. It is a company that has succeeded for 102 years thanks to smart money management, controlled growth, a commitment to quality and efficiency, and dedication to its employees and community.
Minding the Money
The "A." in A. Tenenbaum stands for from Abraham, who founded the company in 1890 with a sign that read: "Buyers of Hides, Furs, Wool, Beeswax, Burlap Bags, Scrap Iron, and Metals." Today, the firm handles the last two commodities metals exclusively, including steel, cast iron, aluminum, brass, copper, and stainless steel. And that's not all that's changed since Abraham Tenenbaum's times. From its small beginnings, the firm has become one of the largest scrap recycling companies in the South, says Dick Bozile, vice president.
What's behind this success? For starters, A. Tenenbaum's executives seem to have a flair for innovative money management strategies. Nine years ago, for instance, the firm developed a unique "zero balance" program with its bank. The program, which can be likened to a pipe with a balloon on both ends, works this way: If the account has a surplus at any time, the bank automatically places the funds in one-day investments. If there's a shortfall, the bank withdraws what it needs from the firm's line of credit. In either case, A. Tenenbaum settles with the bank every day to ensure a zero balance and subtracts funds internally from the appropriate department. "That way, everybody pays their own way and we essentially have no surplus funds anywhere," says R.J. Wills, secretary/treasurer. "The program represents a considerable savings to us."
Another of A. Tenenbaum's financial secrets can be summed up in two words: limited debt. "We have no long-term debt," Wills notes. "All our loans are on a short-term basis. If we had to borrow huge sums, we would not be profitable." In this case, the "we" encompasses A. Tenenbaum and its three related companies: Arkansas Aluminum Alloys Inc. (AAA), a secondary aluminum smelter in Hot Springs, Ark.; Southern Scrap Co. in Little Rock, a joint venture with Southern Scrap Material Co. Inc. (Baton Rouge, La.); and Commercial Shredding Inc. in Orlando, Fla., a joint venture with Orlando-based Commercial Iron & Metals Co. Inc.
The firm also applies wise money management to its insurance policies. A few years ago, A. Tenenbaum adopted a modified self-insured program in which it gets back a percentage of its annual premium for good performance. "If we have a good year," Wills explains, "instead of the insurance company getting all the benefit, we share in it. We did this to save money on our insurance, and it's worked for us." Indeed. In 1991, was rewarded with the return of 25 percent of its annual premium.
Besides these "smart money" strategies, A. Tenenbaum has been able to remain financially strong by controlling its growth. Harold Tenenbaum has no desire to expand the company into a corporate behemoth, with satellite plants in every corner of the country. "We've had many opportunities to grow," he says, "but we haven't done it because the company would get unwieldy. Instead, we've grown slowly and steadily." While A. Tenenbaum is far from being a small company—its revenues have reached $170 million a year—it is equally far from being a bureaucratic operation.
The advantages of this are that the firm "can make decisions faster and respond to problems faster due to the lack of layers of management," Wills points out. For Harold Tenenbaum, this lack of hierarchy means fewer management headaches. "The way I look at it," he says, "you're better off concentrating on doing the best job you can with what you've got, rather than trying to expand, expand, expand and get yourself into trouble."
This doesn't mean that A. Tenenbaum allows itself to stagnate, as proven by its plans to open an "express recycling" drive-through buy-back center at its plant in 1993. This facility, designed to serve the firm's small scrap suppliers and the public, will accept cans and limited quantities of other types of metal scrap. By building the buy-back, the company hopes to increase its retail scrap purchases and enable its scale and warehouse employees to tend exclusively to its large suppliers—primarily smaller scrap recycling companies and about 50 industrial accounts in Arkansas and a few neighboring states.
Achieving Efficiency
Beyond money matters, A. Tenenbaum's success also rests on the bustle and efficiency of its processing operations. "One key to our success is our ability to be competitive," says Tony Pultz Jr., the firm's nonferrous buyer and trader. "We won't back off because something looks difficult. We won't say, `we can't do it.' Instead, we say, `let's find a way to do it.' There's a way to make a sow's ear into a silk purse."
To stay competitive, A. Tenenbaum has invested in a spectrum of equipment, all designed to move, process, and package its scrap better. In addition to a shredder and a Harris HRB baler, the firm's 38-acre plant includes an aluminum sweat furnace, a copper burner, four hydraulic cranes, one cable crane, and 15 forklifts, as well as eight semis and four roll-off trucks that service the firm's 120 trailers and 120 roll-off boxes in the field. Also, the company built and operates a nonferrous separation system that reportedly produces top grades of scrap from its nonferrous shredder residue stream. "Without the appropriate equipment," Pultz points out, "not only can't you process the scrap, but you can't keep the customers happy. If you don't provide service, someone else will, and then you'll lose a customer."
About 10 years ago, A. Tenenbaum also increased its efficiency by automating its operations, installing a computer system to handle everything from inventory to bookkeeping to payroll. With AAA tied into A. Tenenbaum's mainframe, "there's an immediate transfer of information," Tenenbaum says, and executives at both plants can call up and discuss the same information on-screen.
Efficiency—and success—is more than just a function of equipment and computerization, however. In today's scrap industry, companies must stay ahead of environmental regulations to remain viable, and Harold Tenenbaum knows this. "Everything in our plant is permitted by the Environmental Protection Agency," he says, adding that the firm is improving its water runoff system and is a participant in the group storm water permit application of the Institute of Scrap Recycling Industries (ISRI) ( Washington , D.C. ).
"Our biggest environmental control point, however, is the scale," he observes. "We're very picky about what comes in here. If any material looks like it could be a problem, we just won't buy it." This readiness to reject incoming material is "a whole new attitude in the scrap business," Tenenbaum says. "We never did that years ago, but now we have to do it to protect ourselves. Every day there's a new threat."
Believing that an efficient operation must also be a safe operation, A. Tenenbaum has taken significant steps to continuously improve itself in this area. "About five years ago," Wills explains, "we put in a safety program with teeth and a random in-house drug testing program that works." Employees are motivated to work safely through contests and rewards. Every year, for instance, the plant is divided into two teams that compete for the best safety record, with each employee on the winning team receiving $100. Also, employees who go a year without an accident receive a jacket that touts their accomplishment. "If the employees, through their efforts, help us save money on our insurance," Wills explains, "they're entitled to a reward." The result of these efforts? "We have an excellent accident record," Tenenbaum asserts. "Our insurance company loves us."
The Human Touch
A. Tenenbaum's concern for its 85 employees extends beyond their safety and can be seen in the many benefits it offers, such as profit sharing, total health coverage, term life insurance, and a retirement plan. As a result, the firm enjoys an extremely low turnover rate, Wills reports, adding, "This is a very fine place to work."
The company's "humanness" can also be seen in the work of the Tenenbaum Foundation, which supports the Boy and Girl Scouts, the Red Cross, the University of Arkansas Medical Center, the Jewish Federation—"just about everybody," Tenenbaum says. During A. Tenenbaum's centennial celebration in 1990, the foundation gave away 10 gifts of $10,000 for such programs as sending underprivileged kids to camp. "We're an easy touch," Wills says. "We contribute and everybody knows it."
On an individual level, Harold Tenenbaum has been a board member of many local and national organizations, and he has served almost 20 years on committees for theInstitute of Scrap Iron and Steel, an ReMA predecessor organization, as well as ISRI. Currently, he is active on ReMA's shredders and processing & equipment committees.
Smelting Success
While A. Tenenbaum has many distinguishing features, perhaps the largest feather in its corporate cap is AAA. Founded in 1976 and guided since "day one" by founder and Chairman Joseph M. Tenenbaum, President Tony Pultz Sr., and Secretary/Treasurer Howard Schlesinger, AAA is now said to be among the five largest secondary aluminum smelters in the country, with 126 employees and annual production up to 144 million pounds. Its business is making specified ingot for die-cast and permanent-mold manufacturers and, on a daily basis, it produces about 25 different alloys. The operation's 10-acre, 140,000-square-foot spread in Hot Springs encompasses its corporate offices, smelting facilities, scrap storage areas, ingot cooling room, and climate-controlled warehouse that contains about 9 million pounds of ingot.
AAA produces its ingots from all grades of aluminum scrap, including cast, sheet, mixed clip, mixed low-copper clip, segregated low-copper clip, extrusions, aluminum/copper radiators, and aluminum turnings. As with A. Tenenbaum, its scrap suppliers are mainly smaller scrap companies and industrial generators. "We deal with scrap companies all over the country," says Bozile, who is in charge of buying all of AAA's scrap through A. Tenenbaum. "They know we're honest and they're going to get a fair shake." AAA also accepts scrap on a tolling basis for some of its consumers.
On the consuming side, AAA sells primarily to manufacturers of automotive, electrical, and houseware products. While most of its consumers fall in the geographic band from Michigan to Louisiana , AAA also sells as far east as Pennsylvania and Virginia , and as far west as New Mexico and Colorado . "We look forward to doing business with companies that want quality," says Schlesinger. "We're not part of the price sellers. We sell strictly on quality."
The Quality Question
And just how does AAA ensure quality in the precision business of ingot making? "We're into statistical process control [SPC] very strongly," Schlesinger notes, "and we have employees who care." The smelter implemented its SPC program in 1986 to meet the requirements of one of its largest consumers, but now more than 100 of its consumers demand the practice.
AAA's quality process begins when it assigns a receiving slip—or RS—number to each incoming load of scrap. This tracking number ensures that loads are not mixed until assays are taken to determine the scrap's precise metal content. After assaying, the scrap is either immediately deposited in the appropriate alloy bin or sent to the firm's Hammermills shredder for processing.
And that's just the beginning. As scrap is melted in one of AAA's two furnaces—one 200,000-pound capacity, the other 220,000-pound capacity—samples are taken approximately every 30 minutes and tested on a spectrometer to check the alloy content. After about 14 of these samples are taken from the heat, and all the numbers come in on target, the metal is poured into ingot.
The firm's other quality checks include using a photo micrograph to ensure that a sample's oxide content is correct, and photographing the grain of a sample to assess its silicon structure. Only about 10 of AAA's consumers require the latter test, known as metalography. While AAA's quality demands are certainly rigorous, its efforts haven't gone unrewarded. "There are quality awards all over this place," Bozile says.
The smelter's devotion to quality also applies to guaranteeing the environmental compliance of its operations. By Pultz's estimation, more than a third of AAA's plant costs are devoted to its environmental systems, "and that amount is increasing because the rules and regulations are becoming more and more stringent," he says. The smelter's pollution protection system centers on a 10-compartment baghouse that cleans furnace emissions, and the firm closely monitors the baghouse's stacks and dryers via television monitors. AAA must also ensure the environmental safety of its turnings drying system, which consists of a rotating vessel that heats turnings to vaporize the residual oil. The oil vapor is then burned in an afterburner before any air is released.
Improving on a Good Thing
While AAA has certainly carved a secure niche for itself, Pultz strives to improve the operation, always navigating between the squeeze of production costs and selling prices. For him, improvement lies in speeding up AAA's pouring rate, getting the most melting potential out of its burners, insulating the furnaces to limit heat loss, and taking time for preventive maintenance to eliminate unexpected downtime. "The trick is, how can I improve production without interfering with my quality and competitiveness?" he asks.
A. Tenenbaum shares this goal of continuous improvement. Its executives constantly seek ways to cut costs and streamline operations, in part to help the firm better weather tight times such as the current economic recession. "We have to run a little faster, work a little harder, and operate smarter and cheaper today than we used to," Tenenbaum notes. "We have to keep getting better at what we're doing."
Such economic challenges, however, are nothing new to the century-old company, or its president. Harold Tenenbaum is confident that A. Tenenbaum will continue to survive and prosper, growing stronger as it advances in its second century, sinking its roots deeper and deeper to become more stable every year. Just like an old oak. •
This Arkansas scrap company has succeeded for 102 years by bringing creative ideas and a human touch to its metal recycling operations.