Allied Scrap's High Aspirations

Allied Scrap Processors may not be the biggest or the oldest recycling company around, but it has set its sights on being the best.

BY KENT KISER
Kent Kiser is associate editor of Scrap Processing and Recycling.

What a difference one flip of a coin can make—just ask Frank Giglia Sr.

In 1956, he was operating a small grocery store in Tampa , but he wanted to sell the business, buy some land, and become a cattle rancher. His wife Lucille, who was working for a scrap company, had her own entrepreneurial idea, however, so she challenged him to a coin toss. If she won, they'd start a scrap recycling operation. If he won, they'd enter the cattle business.

She won.

Thus, in January 1957, Frank Sr. and Lucille founded Allied Scrap Iron & Metal Co.—now named Allied Scrap Processors Inc.—in Lakeland, Fla., the reputed "citrus capital of the world," which lies between Tampa and Orlando .

The company's early years were rough, Frank Sr. recalls, because he had no experience in the scrap business and was a newcomer to Lakeland . In addition, Allied Scrap was born during a recession, and it faced competition from larger processors in Tampa and Orlando . "If anybody had walked in and said, `I'll pay you what you've got in the company,' they would have had it," Frank Sr. says. "It wasn't a question of liking the business, it was a question of making a living at it."

Since those trying early days, Allied Scrap has not only survived but has carved out a small but secure niche as a processor of a variety of ferrous and nonferrous scrap. The firm is primarily an over-the-scale operation—receiving much of its scrap from peddlers and tradesmen in pickup trucks—though it also provides container service to several industrial scrap generators in central Florida . And because it purchases mainly unprepared, obsolete material rather than prompt scrap, the company must process virtually everything it buys. "We're a processor in the truest sense of the word," notes Frank Sr.

On the consuming side, Allied Scrap sells much of its ferrous scrap to Florida Steel Corp. (Tampa), while its nonferrous scrap is sold "all over"—including into the export market when merited.

On a Quality Mission

While Allied Scrap has grown over the years, expanding from 3 employees to 24, and adding buildings and equipment, it continues to operate on its original 15-acre site and is still considered a small family-run processing operation. Lucille retired from the company in 1986, but Frank Sr., now 70, is still the firm's president, acting as a "consultant" and "goodwill ambassador," as he puts it. The day-to-day operations are now run by three of the Giglia's four children—Brenda, Frank Jr., and Rose Carey—and son-in-law Steve Carey. While the company's management roster has changed, its mission statement has remained the same: "Working Together for the Best Scrap in the World."

This may seem like a lofty goal for a small processor, but the company must aim high to be competitive, asserts Frank Jr., vice president and operations manager. "Due to our location and status as a small family business," he says, "if we don't make the best scrap packages in the world, we're not always going to be able to sell. My dad has always said, `In good times, it's easy to sell scrap if you can price it cheaper than anybody else, but when scrap is at the bottom, the consumer is only going to buy the best.'"

How does Allied produce what it calls the best scrap packages in the world? First and foremost, company officials diligently inspect scrap at every step of the processing chain. "Quality is a function of inspection," Frank Jr. explains. "We inspect scrap when we buy it, when we unload it, before and after we process it, and when we ship it. If no one ever looks at the material, you don't have quality." Steve Carey, vice president and trader, echoes these comments: "It's hard to say that we look at every pound of scrap that comes in and goes out, but it's darn close. If a trailer leaves here full of aluminum, for example, I make sure I've seen every bale on it."

Quality inspection is the responsibility of Allied Scrap's plant employees as well as its executives, Frank Jr. notes. "Everybody here is an inspector," he says. "Any employee can reject a load at any time." In addition, the firm has one employee whose sole job is to check incoming scrap and roam the plant examining the firm's material. "That's an added expense, but it's a lifesaver," Steve says.

Allied Scrap also ensures quality—and motivates its plant employees—through bonus-pool program begun in 1987. For every ton of ferrous and every pound of nonferrous shipped per month, the company deposits a preset amount in the bonus pool. At the end of each month, the firm distributes the pool among its 17 hourly employees based on the number of hours each one worked. "Everybody gets paid by results here," Frank Jr. says. "They don't get paid for putting in time."

The bonus program isn't a one-way proposition, however. If Allied Scrap has a load rejected for quality reasons, it subtracts three times the weight—and, thus, three times the deposit—of the load from the bonus pool. These potential deductions prompt company employees to become quality vigilantes, so to speak. "If something is wrong with some scrap, you should hear them on the radio," Steve says. "They're yelling and screaming because they want to find out how the problem happened. They don't want a problem getting by them and leaving the plant. They're just as picky as I am, and that's what we need."

The bonus pool has been a win-win program thus far, Frank Jr. notes, helping Allied Scrap reach its quality goals while giving employees a tangible reward for their hard work. The program has also yielded the added benefits of reducing absenteeism, increasing productivity, and encouraging employees to work better as a team, says Brenda, the firm's treasurer and office administrator.

Playing for the "Go Team"

"Team" is a popular word at Allied Scrap. Instead of establishing a hierarchy among employees, Allied Scrap has developed a unified work force referred tp as the "Go Team." "We have no layers of management," Steve notes. "It's just the employees and us, and that's one of the company's strengths." Frank Jr., who describes the staff as "enthusiastic and energetic," adds, "We have an informal, team-oriented atmosphere here. It's like a sports team, you might say."

Allied Scrap has built its employee team through careful hiring practices, based around its temp-to-perm program. In the six-year-old program, the firm "leases" employees from a temporary employment agency for two months to observe how they work and how they mesh with current employees. At the end of the "Allied trial period," as Frank Jr. calls it, the company knows if it wants to hire the temporary employee. "Management gets a vote, all our employees get a vote, and the specific trainers get a vote," he says. "If anyone votes no, we don't hire the person."

Leasing employees is "more expensive on the front end," notes Brenda, because Allied Scrap has to pay the temporary agency in addition to the employee for every hour worked. Several advantages outweigh this drawback, however. For instance, Allied Scrap does not have to pay workers' compensation insurance for the temporary employee during the trial period, it doesn't have to complete extensive paperwork for an employee who might not stay, and "we don't feel so bad if we have to tell employees they're not going to work out," she says.

Out in the plant, Allied Scrap helps its employees operate as a team by giving every person a walkie-talkie, which allows for instant and constant communication. "Everyone here can talk to everyone else at any given time," Frank Jr. points out. The results have been smoother operations, effective troubleshooting, and tighter quality control.

Allied Scrap's practice of cross-training its employees also helps build a team work environment in which employees can fill in for absent peers and swap jobs. "Nobody has one job here," notes Rose, the company's controller and secretary. "If your loader is down, you don't get to go home, you get to do something else. We can afford to operate as lean as we do because everybody can wear so many hats, and that means job security for all." This cross-training applies equally to the firm's executives, most of whom have overlapping experience in accounting, business management, machinery operation, buying, and trading.

Safe and Sound

Being on a team means looking out for your fellow players, and Allied Scrap takes care of its staff through corporate programs such as the bonus pool, profit sharing, health insurance, and a wellness program, which is part of the firm's larger achievement of attaining status as a state-certified drug-free workplace. "The reason you have a wellness program," Frank Jr. says, "is to give your employees the opportunity to stay with you. A good manager doesn't give his or her employees the opportunity to fail." The company's wellness program provides off-site counseling to employees with substance abuse problems at a nominal cost to the company. "It's an inexpensive benefit," Frank Jr. says. "In fact, it saves us money because we get a 5-percent discount on our state workers' compensation costs."

Allied Scrap's efforts to become a drug-free workplace are also part of a larger goal and responsibility—safety, which the firm takes seriously. To ensure that employees attend its weekly safety meetings, for instance, the company holds them on Friday afternoons—prior to distributing paychecks. Allied Scrap also posts safety signs around the plant to serve as constant reminders to employees. "We hire our employees to think, not just to work," Frank Jr. asserts. Employees are also encouraged to serve as safety watchdogs for each other, he says, noting that "any employee can stop any operation if he perceives a safety violation." All these efforts have paid off. Allied Scrap has earned an 80-percent experience modifier on its workers' compensation insurance, which means that it pays 20 percent less than the manual rate for its insurance than other Floridacompanies in its category.

Another benefit of Allied Scrap's safety efforts and other positive employee programs has been a minimal employee-turnover rate. Of the firm's 17 plant employees, only two have been with the company less than two years. "No one ever leaves," Frank Jr. says. "Even employees who retire want to work part-time." More interesting, the company has two employees who left the firm and later returned, notes Rose, adding, "We must treat them all right." Frank Sr. points out proudly, in fact, that the company has never laid off an employee. "I treat them like human beings," he says. "If they do their share, I do my share."

Success the Tortoise Way

While Allied Scrap's "energetic" work force and quality mission are principal ingredients of its success, they don't paint the whole picture. The firm's honesty, or "integrity-based management," as Brenda calls it, is equally important. "We do what we say and we say what we do," Rose notes. "Our goal is to be accurate, be efficient, treat a customer fairly, and get them in and out of here quickly." This management approach is based on Frank Sr.'s strict ethics. "If he gives his word to somebody," Brenda says, "there's no way he'll go back on it. He'll lose money rather than not live up to his word, and we've continued that tradition. That's our management style."

It is also the company's "style" to constantly explore ways to reduce its operating costs. When the firm installed its shredder in 1990, for instance, it faced electricity access charges of more than $4,500 per month. In response, the Giglias decided to power the shredding system, which was designed by Magnatech Engineering Inc. (Tonganoxie, Kan.), with two 624-horsepower Caterpillar diesel engines. "We solved the utility cost problem, as well as the frequent power interruptions we suffer in this climate," recalls Frank Jr. "And we've been considering going to total self-generation for all of our electrical power." The company's rigorous equipment-maintenance schedule is another cost-saver, involving daily, weekly, and monthly checks. "We have good equipment and we keep it in good shape," Steve says.

Allied Scrap is equally conscientious in its money-management practices, Rose asserts, noting, "We don't take any risks. We don't do the stock broker deal." Instead of building the company on clay—that is, on leveraged or borrowed money—the firm has built on rock, reinvesting its profits gradually in equipment and other improvements. Frank Sr. likes to recount how, in the early days, he could only hard-surface the floors of his buildings in sections, whenever he had an extra few hundred dollars. While this conservative approach doesn't lead to exponential growth, it does ensure stability. As Brenda expresses, "It doesn't matter if you're big or small, the important point is being stable. We've always followed the slow and steady course, kind of like the tortoise."

This doesn't mean that Allied Scrap allows itself to stagnate. "You have to grow or you go backward," Brenda says. In the past decade, this has meant keeping up with industry trends, particularly in the legislative and regulatory arenas. Though current and proposed environmental measures pose serious—even life-threatening—challenges to scrap recyclers, Allied Scrap has managed to turn this negative into a positive. "We've set up our environmental projects so that they enhance our operation," Frank Jr. explains, "and, in that way, we get some payback for the work we've done." For example, Allied Scrap constructed concrete barriers around its stationary hydraulic tanks for spill protection, but the barriers have also prevented mud and other debris from washing up on the machinery pads during Florida 's inevitable heavy storms. The company also has a storm water system that funnels the plant's runoff water through one outflow, minimizing puddles and the disruptive effects of heavy rains.

Poised for Takeoff

While Allied Scrap's executives say they enjoy "being small," they still see room for growth and improvement in their operations—particularly when the general economy picks up greater speed. "What we're doing, we're doing good," Steve says, "but we need to do more of it. Things are slow now, but we are poised and ready when business takes off. We keep ourselves in that position. Whatever happens tomorrow, we can handle it." While he doesn't expect miraculous market changes in 1993, he is optimistic about the long-term outlook for central Florida . "Where we're located, things are only going to get better," Steve remarks. "It's a growing area, not only for the service and tourism businesses, but also for industry."

As for its processing operations, Allied Scrap plans to continue making itself more and more efficient, drawing ever-closer to its goal of making the best scrap packages in the world. "We work toward perfection," Brenda says. "Even though we know we'll never be perfect, we keep striving."