American Iron & Supply Co.: Doing Things Differently

Running a scrap business based on tradition can hold you back from myriad opportunities, believes the young management team that runs this successful Minneapolis firm.

By Elise R. Browne

Elise R. Browne is editor of Scrap Processing and Recycling.

It's difficult--perhaps impossible--to describe most companies in one word, but in the case of American Iron & Supply Co. (AIS) (Minneapolis), a single term seems to fit pretty well. That word is progressive.

This doesn't mean that the 90-plus-year-old multicommodity processing and brokering firm is any less intricate or appreciative of its roots than other scrap companies. It's just that virtually every facet of AIS's business--from its equipment plans to its personnel strategies--appears to be focused on a distinct, future-oriented philosophy.

The driving force behind this progressive stance is a willingness to try new ways of doing business. Although innovative ideas occasionally don't pan out, more often than not they lead to even more opportunities, says Daryl Parks, the company's executive vice president and general manager. Four years ago, for instance, when some in the scrap industry refused to acknowledge waste haulers' entrance into the recycling field, AIS began targeting haulers as a source of aluminum cans. That strategy soon inspired the company, which had handled strictly metallic scrap up to that point, to add nonmetallics to the list of materials it purchased

Entering the MRF Turf

The pursuit of postconsumer scrap has escalated since then to the point where, today, John David Isaacs, AIS's president, is also co-owner of a year-old municipal material recovery facility (MRF) that processes and markets newspaper and some higher grade papers, plastics, glass, and aluminum and steel cans. While the move into the MRF business probably wouldn't have happened if AIS hadn't already cut its teeth on handling these materials through its relationship with waste haulers, it was a county flow-control proposal that really pushed Isaacs into opening the MRF.

Two years ago, he relates, officials with Hennepin County (which includes Minneapolis) introduced a plan to build a county-owned MRF as well as a scheme to retain all rights to the recyclables generated within the county. As the then president of the Institute of Scrap Recycling Industries's Northwest Chapter--a staunch opponent of the latter portion of the proposal--he lobbied hard against the county plan and won, but not without a trade-off. "In the course of our lobbying efforts," Isaacs says, "I personally made a promise to the county board of commissioners that there would be a MRF developed in the county by private industry within a certain amount of time." Because of this vow--and because Parks and others at AIS were hot to get into the MRF business--Isaacs decided that he should start such a facility.

Another chapter member who had strongly opposed the county plan, Rick Foreman, president of Recycling Services Inc. (Minneapolis), which specializes in processing and brokering scrap (primarily paper) collected from office buildings, was also interested in the idea. Since the two had complementary backgrounds and liked each other, Isaacs says, they worked out a plan to build and operate a MRF together.

The resulting collaboration, American Recycling Services Inc., operates out of the same building as Foreman's other business and draws much of its supply from municipalities and private haulers of curbside-collected recyclables, most of which are delivered separated by commodity. (Once a planned sorting line is installed, the MRF will accept more commingled materials.) The marketing staffs of Isaacs's and Foreman's other businesses buy and sell scrap for the MRF (depending on whose account the material is being bought from or sold to), with the recyclables marketed among the three businesses. Management responsibilities are intertwined as well.

Although Isaacs says he was not originally excited about getting so deeply involved in the municipal recycling business ("I wasn't against it," he notes, "I simply had enough on my plate already"), in retrospect he calls it a "great" move.

"There's a world of opportunity in postconsumer recycling out there for the taking," he explains. "It's not easy and it requires a big investment in time and money, but I think the rewards through the 1990s will be extremely high."

While making money is an important reward, Parks points out that entering what he calls the "horizontal recycling" business has the added dividend of making a company a "good guy" in the public's mind. "I've learned through the years that it doesn't matter what's true or false, " he says, "only what's perceived by the public as true." Therefore, he believes, scrap companies need to focus not on what's true or false but on how they're perceived.

Advancing Equipment Abilities

While political proposals had a happy ending (so far) for Isaacs and AIS as far as municipal recycling is concerned, government hasn't been so kind to another progressive AIS plan: installation of the first Kondirator in the United States. The scenario has become so frustrating, in fact, that Isaacs might be described as politically obsessed.

The headache began in late 1989, soon after AIS committed to the purchase of the multimillion-dollar, heavy-duty ferrous shredder made by Lindemann Recycling Equipment. Rather than simply apply for the building pen-nit required to install it, the company presented its Kondirator plan to the Minneapolis City Council, which responded with a requirement that the scrap firm obtain a special council permit before installation. AIS applied for and last summer received the special permit, but in the meantime the council passed a resolution requiring that the firm complete an environmental assessment worksheet prior to installation.

Once the issue is settled, AIS will begin installation of the Kondirator and implementation of its five-year site improvement plan, which, because it's based around the new machine, has been on hold since its permit problems began. Among the improvement plan's provisions: hard surfacing the plant (the roadways are now covered with crushed rock, but the plan calls for concreting the entire 12-acre plant), installation of an oil/water separation system, and construction of a new seawall on its riverfront.

What will the Kondirator mean for AIS? Most of all, says Isaacs, "It will increase our business tremendously." The company's current ferrous handling equipment--a rebuilt, 18-year-old Harris guillotine shear; a 1977 Harris press; and nine cable cranes and hydraulic excavators manufactured by American, Koehring, and Liebherr, which range in age from 1 to 42 years--can process 30 to 45 tons per hour. The Kondirator, according to Isaacs, is capable of shredding 100 tons of mixed scrap in an hour.

Although it might seem that adding such capacity would put extraordinary pressure on AIS's ferrous traders, Isaacs is confident that "there's enough material running through this market to easily satisfy the Kondirator." In addition, he points out, the company's plant is located on a major rail line and has two docks on the Mississippi River, enabling it to buy from a wide area. "Purchasing material will not be a problem for us," he asserts.

AIS has other plans to upgrade its processing abilities. The company is now discussing acquisition of a new shear and intends to add conveyors to its Mosley nonferrous baler, a truck dumper for its nonferrous warehouse, and an aluminum sweat furnace. It's all part of a strategy to increase the efficiency of its operations and add value to its products, both of which have particular importance when market prices are down and margins suffer. "You have to spend money to make money," Isaacs says.

Emphasizing Customer Satisfaction

AIS relies on something else to help it prosper: maintaining-and increasing-its market share through customer service. "The customer is number one," Isaacs says. "It's something you hear all the time, but knowing what their concerns are and addressing them works." The company's other managers and large marketing staff echo this sentiment, each offering numerous examples of how AIS satisfies its suppliers and consumers, most of which fall into two general categories: flexibility and integrity.

Much of AIS's flexibility is derived from its multicommodity capabilities, Parks points out, which allows the firm to buy mixed loads of metallics and/or nonmetallics from smaller processing companies that don't handle enough of each commodity to compile full truckloads of each. The other major facet of the firm's flexibility is its "willingness to bend, to take an extra step to meet our customers' needs," Isaacs notes. Because AIS is "relatively small" (employing 70 people and buying and selling approximately 200,000 tons of ferrous and nonferrous scrap annually) and "not rigid" in its systems, he explains, the company can accommodate special requests such as an industrial account's preference that its scrap buyer's billing system match the account's selling system.

The integrity aspect of the company's customer service attention is broader. For one thing, says Douglas F. Hall, AIS's ferrous trader, "We try to add value to our customers' products on both the buying and selling sides." When purchasing, he notes, that means showing suppliers "how to get the most return on the recyclable materials they generate. " AIS is also concerned with "looking out" for its suppliers by letting them know when the company's buyers think markets are about to move up or down, encouraging them to hold onto or sell their scrap as appropriate, points out Sara Chechik, a buyer.

On the selling side, AIS's strategy is based on simply "selling customers what they want to buy," Isaacs says, noting that in his 20 years in the business one of the biggest mistakes he's seen people make is trying to sell consumers something they don't really want.

One way AIS nonferrous trader Dan Berman says he is able to provide customers with the scrap they're looking for is by spending time at his consumers' facilities, paying attention to how their operations might affect their needs. In more than one instance, he says, he's learned enough in his visits that he's been able to tell a mill's purchasing agent why the facility's furnace can't accommodate a particular load of scrap he or she had offered to purchase.

AIS also demonstrates its integrity through its tradition of loyalty and always honoring its commitments, Hall notes, as well as providing quality. That last point has given the company a big advantage over its competitors in the postconsumer scrap segment of its business, Parks says, since the primary competition in this market-waste haulers-often doesn't have the same longstanding experience providing quality products.

Finding and Keeping Dedicated People

It's one thing to have a philosophy of providing exemplary customer service. It's quite another to have employees that feel strongly enough about that philosophy to bring it to fruition. Nevertheless, according to Pamela Wandzel, assistant to the president and personnel manager, the office is now comprised of people who are "all ambitious and dedicated to the mission of the company--to be the best in the field."

Finding people who demonstrate this dedication comes from an extensive interview process that Wandzel says allows her to find "not only the skill fit, but also the personality fit." Retaining them is accomplished by offering a good benefits package that includes reimbursement for a variety of educational programs and a work atmosphere that promotes enjoyment of their jobs. "It's a lot of fun working here," says buyer Jim Peters, adding, "It really helps you do a good job when you can say you like working someplace."

Offering a fun place to work hasn't been accidental. "John and I decided long ago," Parks says, "that if it ever stopped being fun, we wouldn't do it anymore." One reason it's fun, Peters notes, is "we work hard together and play hard together. " Another is that although the family-owned business is short on family (Isaacs and his father, who's chairman of the board, are the only family members who work for the business), the staff feels like a family, Berman believes. Not only do employees seem to get along almost too well, but the office feels like a home (in fact, the Isaacses used to live in part of the building), from its fully stocked, chef-quality kitchen where employees enjoy a complimentary lunch every day to its designer bathrooms.

Promoting Innovation

Another way AIS encourages its employees to do their best, Parks points out, is by "treating them like adults-having enough confidence in them to give them responsibility and allow them to make decisions on their own." Sometimes people don't make the best decisions, he admits, "but whether they're right or wrong, when people are allowed to make decisions, they take more interest in their jobs, they work harder, and they come up with innovative ideas."

Cultivating innovation is so important to AIS's management, Parks notes, that the company has strived to hire personnel who don't have a scrap background to fill certain key marketing and operations positions. People with experience outside the scrap industry, he explains, have a "fresh perspective of things" and lack preconceived notions about how a scrap business should be run. The company has also set a precedence of promoting hard workers from labor positions to marketing jobs. In one instance it's gone even further: Parks began his career at AIS 15 years ago as a laborer.

These strategies seem to have worked. Although Isaacs readily offers that many of AIS's forward-minded policies have been modeled after those of Miller Compressing Co. (Milwaukee) (a company he calls "so good at what it does and concerned about what we consider to be the proper things, such as being active in the community, very safety conscious, employee conscious, and team spirited"), he also notes that the people at AIS are full of good ideas. "As a management team, we're all young, excited about the industry, and want to do it all," Isaacs says. In fact, he adds, "One of our biggest problems is that we have a lot of people coming up with a lot of great ideas, and we just can't implement them fast enough.” •