September/October 2010
How can E-World charge minimal intake fees, take virtually any electronic product, and still turn a profit? By finding the maximum value in its scrap and giving its suppliers the peace of mind that it’s handling their materials properly.
By Diana Mota
Walk into the warehouse of E-World Recyclers in Vista, Calif., and you’ll see the expected computers, monitors, cell phones, televisions, and other business and consumer electronics. But then you see the laser eye-surgery machines, casino gaming systems, maybe even some vacuum cleaners and hair dryers, and you suspect that E-World might not be like other electronics recyclers.
E-World prides itself on taking whatever a client needs it to take and then looking for the greatest possible value in the materials those items contain. It’s more likely to disassemble
a device and resell the valuable parts than to drop the whole thing into a baler or shredder. It’s something of a treasure hunt for the company’s principals, who are confident that if they take the time and do the research, they will find a way to maximize the financial benefit for their clients and themselves.
Company CEO Bob Erie started in this industry as a refurbisher, then he became a processor, and now he combines the best of both worlds in E-World, where the goal, he says, is to diversify and create “as many material streams as possible.” Erie and his five co-founders realized, he says, that to stay competitive and to stay in business, the company had to do something different.
Getting Its Start
Bob Erie does not come from a recycling background; he became an electronics recycler almost by accident. “I was a welder,” he says. “My father was a welder; my brother was a welder.” While doing some work at a computer company in the mid-1990s, he noticed its employees carting hand-truck load after hand-truck load of computer systems to a trash bin and breaking them up with a long pole. A few months later, he witnessed the same process at another computer company. “I was watching this massive waste of electronics,” he recalls. Further, he learned that nothing was wrong with the equipment—the companies were just replacing it with more advanced technology. He saw an opportunity. In his spare time, Erie purchased used computer equipment, taught himself how to refurbish it, and then resold it. Soon he made more money from his side job than his job as a welder, which led him and his wife, Cindy, to start Pullz, a computer refurbisher and reseller.
At the end of the 1990s, the resale market was “drying up,” Bob Erie says, but he saw a second opportunity: California was about to ban cathode-ray tubes from landfills. He and Cindy dissolved Pullz and entered the world of electronics recycling. He educated himself about the machinery used to crush monitors—as well as how to recycle other electronics—and sought out investors and a third partner to form Computer Recyclers of America in 2001. “When we started, we didn’t know how to take apart a CRT, so we experimented,” says Cindy Erie, who served as CRA’s vice president. When the landfill ban took effect in 2002, CRA was the only state facility that crushed monitors, Bob Erie says. “It was a good idea at the right time.” The partnership was unsuccessful, however, and the Eries and their third partner “chose to go in different directions” in 2005.
The Eries started over again, but this time they were not starting from scratch. E-World Recyclers opened in September 2006, bringing together under one roof and one company what the previous two companies offered separately: resale and recycling. “It almost comes full circle in the course of the last 10 years,” Bob Erie says. Most of the company’s 26 employees came from CRA, as did five of E-World’s six co-founders: Bob and Cindy Erie, Dan Tweddell, Lyle DeStigter, and Joleen Burke. (The sixth is Dan Tweddell’s wife, Sheree Tweddell.) In that respect, “it’s not a new company,” Bob Erie says.
How does a company function with six leaders? They each fell into separate roles based on their strengths and their backgrounds, they say. Before joining E-World, Sheree Tweddell worked in business development for Fortune 500 transportation companies; now she markets E-World and develops business opportunities and relationships, she says. As E-World’s chief technology officer, Dan Tweddell develops and directs its technology and information systems. Joleen Burke, E-World’s chief financial officer, has a background in economics. She interned with CRA before becoming its claims administrator for the California recycling program. Chief Operations Officer Lyle DeStigter started with CRA in 2003 as a buyer and later managed its warehouse before the transition to E-World. He develops the processes and rules for material handling, he says. Cindy Erie, E-World’s president, helps position the company within the electronics industry by looking at what recycling services the manufacturers want and contributes toward the development of electronics recycling standards. Bob Erie focuses on expanding material streams and finding more value for the company and its customers. “We often joke that it’s Bob’s job to fill the warehouse and my job to empty it back out,” DeStigter says.
Finding and Providing Value
E-World sets itself apart from other electronics recyclers by accepting just about anything, looking for ways to maximize material value, and providing a very high level of assurance to its customers that it’s handling their material properly. The company has developed these approaches gradually over its four years of operations, Bob Erie explains, as it has looked for ways to help its customers meet their economic and regulatory challenges. When E-World first opened, if a customer wanted something destroyed, the company provided that service with few questions asked, Bob Erie says, disassembling or shredding the products and finding markets for the processed commodities. But in a search for more revenue, the company’s principals began examining the material that came through its doors more closely, sometimes physically tearing it apart. They were encouraged by what they saw, but before they could capitalize on this new opportunity, they needed to go back to their supplier customers and get their consent to resell reusable parts. That meant asking the customers what they want to accomplish by the product’s destruction.
Destruction can mean many different things, Erie notes. Oftentimes the customer doesn’t want its older models to compete with its newer models; other times it’s about destroying the data. E-World often can address both concerns without shredding the entire product, Bob Erie says. “If you tell me you don’t want the 50-inch flat screen LCD [TV] going out into the market, what if I part it out and sell the power supply, the converter board, or the lighting system … as parts for ones that go bad?” In the end, the product is destroyed—it can no longer be reused or resold as an LCD TV. Instead of selling the copper, glass, steel, and so on, “you’re just creating different streams of revenue for the same product,” he notes. To encourage its suppliers to allow disassembly and the resale of parts, E-World adjusts intake fees and offers them a share of the revenue from the parts it can sell. “The condition and value of the materials collected will determine the arrangement with the client,” Cindy Erie says. “If there is substantial resale or residual value, we will often [not charge intake] fees because of our intention to remarket to make our profit.”
Disassembly and resale of parts means more work, but it also means more money. “You’re looking at about $150 in remarketable components for each laptop you take apart,” Bob Erie says. The difference in value is such that E-World now takes the disassembly approach to almost everything it acquires. “That’s pretty much our standard model,” Erie says. The company’s feeling is that “there isn’t much revenue in taking postconsumer scrap and turning it into ground-up copper, steel, plastic, or glass.” In contrast, “one little piece could be worth 10 times more than you could ever get for selling it as scrap [commodities],” Erie says. Lower intake fees and revenue-sharing take financial pressure off the supplier companies, he adds, and it gives them an incentive to send E-World more material. Some of the material E-World receives is proprietary, however, and the supplier wants it destroyed so that no part of it can be reused, Bob Erie says. E-World can meet the needs of those customers as well.
If there’s a flaw in the maximum-value strategy, it’s this: It takes knowledge and skill to identify the choice parts in a given electronic product. Bob Erie and DeStigter say their product knowledge and connections help them excel at this particular task, as well as in finding markets for the resale of the items. “We’ve been in the computer business a long time,” DeStigter says. “We can find a home for a majority of the things that hold value.” Because the two men can’t be in the warehouse every minute, they work with their employees daily to help them recognize materials and their value. They post pictures of some of the items, have standard operating procedures, and train and retrain. That said, “it’s easy to overlook something,” Bob Erie says. “It’s the thing I complain about the most. If you don’t know what it is, you’re not going to catch the value of it.” To illustrate his point, he pulls several reels of plastic heat-shrink tubing from a box destined for the baler. Most of the warehouse workers “would never know what this is,” he says. “You have to have a lot of product knowledge. This stuff is about $2.50 a foot.”
DeStigter shares Erie’s frustration and concern. Some items are rare or one of a kind, so creating a reference book doesn’t make sense, he says. “I wish I could crack open my head and say, ‘This is what you need to know.’” Instead, he instructs workers to put questionable items aside so they can ask him about them later. If DeStigter is unsure of an item’s potential, he writes down part numbers and first impressions, then he goes to the computer or picks up the phone to research it. “More often than not, someone knows what it is, and we go from there,” he says.
This pioneering spirit has led the company in some interesting directions: One part of the warehouse holds medical devices such as laser eye-surgery machines, incubators, and microscopes. “It’s a very interesting stream of material that I didn’t anticipate getting involved in,” Bob Erie says. Handling it requires additional certifications, security, and insurance. But he points to an area of the warehouse that contains a half-dozen hospital beds and gurneys. “One of those motorized gurneys costs $35,000,” which makes their parts valuable, he notes.
A Minutely Tracked Process
Another notable feature of E-World’s operations is how carefully it tracks material from arrival to departure and beyond. About 60 percent of E-World’s customers are Fortune 500 electronics manufacturing companies, Bob Erie says. These companies are attuned to the environmental concerns of customers, lawmakers, regulators, and environmental groups, and E-World gives them the assurances they need that it handles the material as they have specified.
The company receives anywhere from five to eight truckloads a day. Most of the material arrives in mixed shipments, Erie says. The outside overflow area is filled with pallets of electronic devices, which are kept covered to avoid fires. (The company learned early on that plastic, glass, metal, and the Southern California sunshine can result in spontaneous combustion.) It generally takes 30 to 35 days to move the material in and out of the plant, he notes.
As each pallet enters the 46,000-square-foot warehouse, the receiving manager weighs it and enters the type of material it contains into a computer program, which generates a bar-code sticker that allows the tracking of the material as it travels through the warehouse. The database tracks what comes in, who receives it, who processes it, how long processing takes, and what happens to it in the end. “If [the client] needs something back, we can track it through the warehouse,” DeStigter says.
After a worker enters the pallets into the database, they move to the staging area. The bar-code stickers contain special instructions on how to handle the products as well as codes such as D for destruction; A for assets, for when E-World can sell the components; or S for shared revenue with the customer. Employees responsible for marketing items on eBay for resale get first crack at the A and S material. Items selected for resale go into a secured area for testing and refurbishment. Some computers get resold as whole units. Hard drives, primarily from the company’s collection events, are wiped clean using Department of Defense-qualified methods before being refurbished for resale. Everything gets a 60-day warranty and is sold without operating systems.
The other items that E-World will disassemble enter an open area in the center of the warehouse. As the material moves down the line, workers separate the plastics, ferrous and nonferrous metals, and circuitboards, placing each into a separate bin. The company separates and bales electronics plastics by color and sells them to plastics processors. It separates circuitboards according to value, then bales and ships them to smelters that can reclaim their precious metals. Lower-value materials, such as hair dryers and electronics that are not worth disassembling, are consolidated into Gaylord boxes and are sent to other recycling partners for shredding in preparation for sale as separated commodities. All outgoing material gets weighed and receives another bar-code sticker to prepare it for the next step in its journey.
Because E-World does not have the permits that allow smelting or other processing that changes the chemical composition of the scrap, it cannot extract precious metals from circuitboards the way that some other electronics recyclers do. “We do as much as we can by hand,” Bob Erie says, then the company partners with qualified downstream recyclers that can further process the material. E-World also uses broker consolidators who export separated and processed commodities overseas, where the material is used as feedstock in the manufacturing of new products, he says. “We don’t export [whole devices] for someone else to take apart and figure out how to recycle properly,” he emphasizes.
E-World’s tracking technology gives it an edge, Dan Tweddell says. “Manufacturers are driving a lot of the market. They want to know what’s happening with their stuff. They don’t want to see it in the landfill.” Consumers feel the same way, he adds. “They don’t want to see their data end up in some hacker’s computer.” E-World’s technology provides all of those assurances, he says. Customers can log onto the system and generate asset management reports as well as other reports and invoices. “The bar-code tracking system helps assure customers that their material is being handled correctly,” Bob Erie says.
Further, clients can go online at any time—seven days a week, 24 hours a day—and get access to cameras in the E-World warehouse. Through this remote access they can zoom the cameras to track their material. “Employees have to understand that they could be [monitored] at any time,” Bob Erie notes. Alternatively, walk-in customers can witness the destruction of their material on site. For even greater security, some clients have their own secured space in the warehouse where E-World removes the client’s internal stickers or identifiers from that material.
E-World is equally rigorous in its data destruction practices. The company is certified by the National Association for Information Destruction (Phoenix). It destroys drives with confidential information and other sensitive items immediately when they arrive in the warehouse using a four-shaft, high-powered shredder. Only five people in the company have access to the shredder cage, which has its own 24-hour surveillance system, cameras, and alarm.
The company has added one more quality assurance: It became R2 and RIOS certified this past spring. “Certifications like RIOS and R2 provide a great set of tools for scrap processors to prove their transparency and integrity,” Cindy Erie says. “We looked at many different standards, but in the end R2/RIOS seemed the best choice for both our business model and our budget.” RIOS is a comprehensive quality, environmental, health, and safety management system that was crafted with the recycling industry in mind, she says, whereas R2 gives electronics recyclers a set of guidelines specific to the materials they handle. “The two cer-tifications work well together.”
No Device Left Behind
E-World also endears itself to its suppliers by turning little away, often acting as the intermediary for items it can’t recycle itself. “It doesn’t have to be electronic—anything with a cord or battery” is fair game, DeStigter says. “If it has metal, if it has circuitry, if it has plastic, we’ll find a use for it, we’ll find a buyer, we’ll find something we can do with it.”
E-World’s goal is to make life easier for its customers by accepting all of their items. “It would be easy to say, ‘We don’t make any money on this, so let’s not do it,’” Bob Erie says. Being so accommodating can have its drawbacks, however. “Sometimes we become a dumping ground for scrap,” he says, quickly adding that “I’m not complaining, because it all has value.” Much of the lower-value material is postconsumer material. Thirty-five percent of the company’s business is from companies that collect e-scrap for city and municipal governments; another 5 percent comes from its own community collection events and walk-ins, who are welcome five days a week from 6 a.m. to 6 p.m. E-World continues to accept this material because it keeps the company connected to the community and it’s a way to give back to the region, Cindy Erie says. “It’s an opportunity to be a positive role model in our own backyard.”
By weight, CRTs account for about 60 percent of E-World’s business. Some e-scrap recyclers refuse to accept or charge to accept such devices because the cost of properly handling the leaded glass they contain can exceed the value of their other materials. (E-World receives a subsidy from the state of California to process them.) It developed a hot-wire separator to separate the leaded glass yoke from the unleaded panel. The company had 10 such machines operating, and it still couldn’t keep up with demand, Erie says. Ultimately it found it more cost-effective to send the whole tube to a specialized processor. “It didn’t make sense to do in-house,” Bob Erie says. Though it stopped using the hot-wire separators, it still sells them to other companies. But Erie sees the proportion of CRTs falling steadily. “It’s not like it used to be in relation to other electronic scrap,” he notes. “It used to be 90 cartons a day—now it’s more like 10 a day.”
The company recycles or reuses everything it receives, including the shrink wrap and Styrofoam from packaging. “Our motto is, nothing goes to the landfill,” Dan Tweddell says. Only treated wood from console televisions remains a challenge, DeStigter says.
Why It Works
Having six co-founders under one roof who are actively involved in the company can present challenges, E-World’s leaders say. “Because everybody is bright, creative, intelligent, and active, it does get challenging,” Cindy Erie says. “There’s always a tug of war—a pull,” but it works, DeStigter says. “A company might run with one leader, but it takes the ideas of the entire company to make him the leader that he is.” Burke agrees. “We’ve got a lot of opinions or paths to consider. We try and collaborate on issues that really affect the company’s direction.” Most of the time, they’re busy managing their own specialty areas to make sure everything is covered, she says.
E-World is not trying to be the biggest electronics recycler, the company leaders say. It moves about 15 million pounds of material a year, Bob Erie says—not a particularly large volume. Instead, E-World focuses on serving its clients and finding more value in the material it receives. The company also works to be “recognized as an industry leader,” DeStigter says. It strives for new and better ways to do things. “We make sure our downstream is reputable and that we’ve done an audit on [downstream partners] so we can be very transparent. We can let anybody walk through the warehouse at any given time.”
Cindy Erie agrees. “E-World is well-positioned in the industry,” she says. “We have some great resources; we have really good connections; we foster relationships. We can see what’s needed to get to the next level.” Flexibility also helps. “The industry is constantly changing,” Sheree Tweddell says. For example, “when we started, there was no market for electronics plastic,” but that has since changed.
“I think Bob is a great visionary. He comes up with ideas on how to stay sustainable in this industry and creates new streams of services that aren’t being supplied right now,” Sheree Tweddell says. Bob Erie credits his background for that ability. “I grew up on the East Coast in a blue-collar, middle-class family,” he says. “I come from a construction worker’s mentality where a guy who works hard and has ideas can get ahead. When everybody’s out there spending money, I’m thinking, how can I be more valuable to my clients? How can I be more valuable to the community?”
What the Future Holds
E-World continues to look for ways to turn changes in the electronics industry into opportunities. A relatively new trend on which it has capitalized is the proliferation of state laws that hold manufacturers responsible for collecting and recycling end-of-life electronics. As more states adopted such laws, E-World saw an opportunity. It launched the wholly owned subsidiary E-World Online (EOL) to administer and manage those programs for manufacturers such as Sony, NEC, LG, and Viewsonic.
With EOL, “the manufacturer doesn’t have to worry about how to stay compliant in each state,” Erie explains. “We’re the ones doing all the contracts, all the tracking of the material,” using an online system Dan Tweddell has developed named the Manufacturers Interstate Take-Back System, or MITS. “It’s an administrative nightmare for manufacturers to manage different requirements for different states,” Tweddell says. “This manages it all for them.”
E-World partners with local recyclers in each state to do the collections and processing. EOL collects the recycler’s data in MITS and generates all the information and reports a manufacturer needs to ensure its compliance. “We coordinate the myriad details: compliance with legislation, collection, recycling, material tracking, [and more] so that the manufacturers can focus on what they do best,” Tweddell says. “We also work with our manufacturers, auditing our [partner recyclers’] processes, and helping them move toward R2 and RIOS certifications.”
E-World prefers expanding via this model to the alternative: opening facilities in other states or shipping the material to its facility in Vista. “We don’t have to have a facility in every state,” Cindy Erie says. “We just need to have a network of relationships with people across the country who have the same values and capabilities that we do.” It’s a model that benefits everyone, Bob Erie says. It’s too costly to ship the material to E-World for processing or to open new facilities, he notes.
It’s in the best interests of electronics recyclers in states with such mandates to partner with E-World, Erie explains, because it has developed the relationships with the manufacturers who will be controlling an increasing proportion of the end-of-life material in those states. “If you’re a recycler, and you don’t have a relationship with a manufacturer, how are you going to get paid?” Bob Erie asks. “You can’t charge the general public any more. … We come in with a coalition of manufacturers and negotiate with recyclers for poundage and price. We’ll make sure [they] get paid.” So far EOL has partnered with 51 different recycling facilities as part of the program and expects to have 200 by the end of 2010, he says. Electronics producer-responsibility laws “are jumping up so fast,” he says. “We’re going to need more people in the program.”
As time goes on, Bob Erie envisions himself becoming more involved in EOL and less in E-World Recyclers. “That’s the most exciting direction our company is going in,” he says.
Diana Mota is associate editor of Scrap.
How can E-World charge minimal intake fees, take virtually any electronic product, and still turn a profit? By finding the maximum value in its scrap and giving its suppliers the peace of mind that it’s handling their materials properly.