March/April 1989
The head of this scrap processing enterprise describes it as a big-city-like operation in a rural community. Here’s why.
By Gerry Romano
Gerry Romano is editor of Scrap Processing and Recycling.
Quick--what's a five-letter synonym for scrap?
If you're puzzling in Pulaski and you ask Ted Lipman, he'll fill your blanks with D-E-N-B-0. The proud (and, boy, can we tell) president and CEO of Denbo Scrap Materials, Inc., located in this Tennessee city with a population of approximately 10,000, expands on the connection: "The name Denbo and scrap are synonymous to people here because of our early existence in the region, servicing some 17 or 18 counties in south central Tennessee and northern Alabama. We are the largest scrap processor in our immediate area. Industries, smaller dealers, and individuals who have material for sale have found us to be a dependable market for 66 years."
Denbo Scrap Materials was not always the "big-scale operation in a small town," which is how Lipman describes it today. When his father-in-law, Ike Denbo, started the business in 1923, purchases were predominantly from the agricultural community and equipment was minimal. Commodities such as beeswax, ginseng, chickens, eggs, furs, hides, wool, and--last but not least--scrap iron were handled by a few employees in small quarters, shared with some hammers, torches, and wagons and an alligator shear.
Purchases of farm commodities phased out in the mid-1940s and Denbo Scrap Materials evolved into a strictly scrap iron business. Nonferrous scrap purchasing and handling came later. Charles Denbo, Ike's son, was responsible for much of the business expansion. After Charles's death in 1979, Lipman, who had joined the company in 1951, assumed ownership and management.
Equipping for Expansion
The present 10-acre site of Denbo Scrap, situated along a rail line, was acquired in 1950, when the company moved from a midtown location. The same year, the company acquired its first crane; installations of processing equipment and acquisitions of vehicles and additional cranes followed. The current equipment list includes an 880-ton Becker shear, an automatic MAC baler, seven cranes, and 15 trucks.
Standing amid these assets is the complex of processing parts that make up the shredding plant, key in Lipman's description of Denbo Scrap as a "full-blown, full-service facility." Lipman, presently chairman of the Shredders Committee of the Institute of Scrap Recycling Industries, says the shredder installation in 1972 sparked the growth his company is still experiencing.
Although the Hammermills shredder was Denbo Scrap's answer to increasing volumes of scrap in the early '70s, the company benefited much more than originally anticipated from the equipment. Says Lipman, "When we acquired the shredder, we had no idea that the scrap industry would come into prominence as a major supplier of raw material for the steel industry ... The decision we made in 1972 was the right one."
He sticks with this belief in the face of tough environmental regulations on the recycling industry and a special attention by regulators on shredding operations. He comments that "the emphasis on the pitfalls or the so-called evils of shredding is greatly magnified. We are performing a major service for the community and for the environment of this nation by ridding the countryside of unsightly worn-out equipment and transforming it into a valuable raw material for new products."
The company is more discriminating today about scrap purchases, Lipman says, because it has been advised that processing an abundance of certain types of material could prove hazardous. But, he adds, the opportunities for profitable shredding have not diminished for responsible, knowledgeable operators.
Efficiency Key
Denbo Scrap's profits from not just the shredding but from all operations stem from a current total annual production of 50,000-60,000 tons of ferrous material and 2,5003,000 tons of nonferrous. In comparison, production in 1972 was about one-tenth that of today, Lipman says, though the number of employees has only tripled, to 50.
Efficiency and quality--in products and service--are at the core of the company's success, says Lipman. First discussing steps taken to maximize efficiency, he describes a variety of efforts.
Equipment upgrading is an annual activity: "We budget capital improvements every year," Lipman says. In 1988, by adding horsepower to the shredder the company significantly improved production capability. "The horsepower now is in excess of 3,000, up from 2,000; this enables us to shred 55-60 cars an hour, just about double our old capability.
"We also changed the angle of the decline of the infeed, using the hydraulic double-feed roll. By doing so, we went from a high-maintenance type of installation to an almost no-maintenance operation. So we reduced maintenance costs and downtime."
Capital improvements for last year also included the addition of three hydraulic cranes and a few pieces of transport equipment. Total dollars invested for 1988 improvements: in excess of half a million.
Plans for this year call for adding an infeed conveyor to the shredder. In another 1989 capital improvement effort, the company will rework its road system to increase operational efficiency. This is doable, Lipman says, with the January acquisition of a one-and-a-half-acre piece of property adjacent to the plant. He points out that there are other land acquisition opportunities, but he doesn't believe in having too much property in a scrap operation--"it leads to very bad habits like holding onto too much inventory. Our philosophy is to receive material, process it, and ship it."
A great boost for Denbo Scrap, Lipman says, was the computerization installed about six years ago. "We put in place new methods of accounting, developing profit centers for our various functions--for the nonferrous, for the trucking, for the shearing, for the baling, and so forth.
This enables us to examine things like where the energy costs are and where the labor costs are. ... By identifying individual areas, we're able to determine where the problems are and become more efficient in those areas."
Quality Service for Sale
"Everybody has prices which are fairly comparable," Lipman says, so he sells his company's service. "Industrial customers can depend on us to do what we say we're going to do and to give them the type of service they want. In other words, we do our job quietly and undisruptively and on an automatic basis--just like the postman. Neither rain nor snow nor dark of night nor gloom of night can keep our carriers from their appointed missions."
Denbo Scrap services industrial customers (the bulk of its business) within a 50-75 mile radius of the plant. Competitors are 75 miles north and 50 south. To address his competition, Lipman says he offers complete service for his customers, but he notes that the company knows not to spread itself thin trying to satisfy customers with functions it cannot perform.
Lipman applies the same service philosophies to his consumers, most of which are domestic. The bulk of his ferrous material moves by truck or rail within a radius of approximately 125 miles. Birmingham is the location of Denbo Scrap's primary ferrous consumers, the ductile iron foundries. Consumers of the company s nonferrous products are east and north as far as Chicago.
By maintaining its own fleet of vehicles, Lipman says, his company is able to provide certain consumers with just-in-time delivery. He quickly adds that good delivery service is not enough; the packages delivered must be top quality.
What steps does he take to ensure this quality? Lipman personally inspects the products ("I don't sit in the office all day.") and has trained his employees to constantly be aware of impediments to the quality that has helped build Denbo's reputation. Besides, he says, "every Friday afternoon is payday. And if you don't operate properly, you don't eat."
As far as handling rejections (which Lipman says are very few and far between): "We do our damnedest to work with the consumer and not against the consumer. We work in a conciliatory atmosphere." There's no sense being on the defensive, he says, because nobody's perfect. "They are still making pencils with erasers on them."
Success Bred of Cooperation, Challenges
What else makes for a successful business? Lipman says a leading factor is employee relationships. "Good communications between management and operations people ... treating people like people," and, simply, "paying attention to business" are factors he affirms make his company strong.
When it comes to his personal management style, Lipman believes in "being visible. I let my people know that I'm here if my assistance is needed, that I'm a part of this organization, just as they are, that I'm interested in the success of our operations, and that I like to see the people that work for me." He is uncomfortable with the way some organizations are run, with too much layering of personnel: "You lose the continuity ... the relationship the management has with employees." That continuity is one of the things Lipman says has contributed to the efficiency and service his customers expect.
Not that it's been a smooth road otherwise. "We tightened our belts during the recession years and during the years of the 21 percent interest rates," says Lipman.
Since then, the scrap processing and recycling industry has become extremely competitive. Rather than panicking, however, this development has provided extra motivation for the firm to operate with profit in mind. "Too often people slide by the seat of their pants and think that they can operate a business the way it was operated by their forefathers 25 or 30 years ago," Lipman explains. He points out that those who run scrap firms today may have several college degrees, strong business backgrounds, and in-depth knowledge about metallurgy and manufacturing. He says it's important to become as knowledgeable as- possible about operations to be a success.
The community has certainly become knowledgeable about Denbo Scrap Materials. Lipman displays the awards his firm has received from the chamber of commerce, the mayor, the county executive, and the governor for its contribution to the local economy.
He then returns to his business philosophy. "Knowing your own strong and weak points is essential. I think the ability of a person or persons involved in any one particular operation to recognize their shortcomings and to do something about them is one of the greatest hurdles they can overcome." •
The head of this scrap processing enterprise describes it as a big-city-like operation in a rural community. Here’s why.