NOVEMBER/DECEMBER 2006
Security, shredding, and service are the keys to United Recycling Industries’ domestic processing of electronic scrap.
BY RACHEL H. POLLACK
At United Recycling Industries Inc., recycling electronics is just like recycling cars—if the scrap processing facility contained a used car lot, engine diagnostics facility, auto dismantling operation, and auto parts wholesaler in addition to the shredder. To succeed in electronics recycling, URI’s West Chicago, Ill., facility does a little of everything: It tests and remarkets whole computer systems, dismantles electronics and sells the components, processes electronics for commodity recovery, recovers precious metals at a related smelting operation in Franklin Park, Ill., and much more. With that combination of services, URI has become possibly the largest private, independent electronics recycling company in the United States, processing an estimated 40 million pounds of equipment in 2006.
A Different Side of Scrap
With electronic scrap, “it’s not your grandfather’s junkyard any more,” URI President Bob Glavin says. One fundamental difference is that e-scrap suppliers pay the processor to have their material recycled. “That’s a real culture shock for some of these old-time yards, where it just goes against the grain to charge anything,” Glavin says. “We send bills for thousands of dollars.”
The company that charges clients the least per pound of electronics on the front end usually gets the business, Glavin says, and the key to lowering those charges is to get the most you can from back-end sales of used equipment, components, and commodities from processed scrap. To reduce expenses and maximize volume and back-end revenue, URI has invested heavily in mechanical processing that generates only salable commodities—steel, aluminum, copper, leaded glass cullet, and several nonferrous mixes, including the plastic and circuitboard fraction. “The better and more efficient you can make the processing and the product that you generate at the end of the day,” the less you have to charge on the front end, says Jim Glavin, Bob’s eldest son and vice president of operations for URI’s electronics group.
Working Up From the Furnace Floor
Bob Glavin joined what was then United Refining & Smelting Co., a smelter of precious metals and white metals, in 1966. He started in furnace maintenance, earning about $135 a week. By the mid-1970s Glavin had moved up to plant manager of the 20-person company, which by that point had been purchased by Diversified Industries Inc. (St. Louis). He became president of United in 1982.
When Diversified filed for bankruptcy in the early 1990s, Glavin reorganized the United subsidiary as United Recycling Industries, and his sons Jim and Mark both joined the company. Jim, with a degree in electrical engineering, went from repairing mainframe computers to disassembling them for URI. Mark, a former electrician, became vice president for operations of the precious metals group. Their younger sister, Amanda Hale, entered the family business in 2001. She first worked in the precious metals lab, then she led the two groups through their ISO 9001 and 14001 certifications. Today Hale is URI’s vice president of marketing and regulatory compliance. Bob’s wife Linda, who has been with the company since 1975, is the controller and IT manager for both groups. Hale’s husband Rob also works for the electronics group as quality control manager.
After the reorganization, the Glavins began purchasing shares of the company from its creditors. They turned it back into a private, family-owned company by 2004. Today URI comprises the original precious metals group in Franklin Park, which processes gold, silver, platinum, palladium, and copper—and produces 70 percent of the company’s revenues—and the electronics recycling group in West Chicago. Each has its own customer base, though the two are interrelated. Many suppliers to the precious metals group are electronics manufacturers who use such metals on circuitboards and wire connectors. A container of circuitboards would most likely go to the smelter, but generally “anything with a cord or battery” ends up in West Chicago, Bob says.
From Mainframes to Microchips
United Refining & Smelting began dabbling in electronics as early as the late 1970s, Bob recalls. “When Jim and Mark were 12 and 11 years old, we used to get mainframe computers … and they used to come to the plant and tear them apart with hammers and chisels” to get the circuit cards and precious metals, he says.
In 1990, URS began losing its suppliers of circuitboards to other processors, who were paying for both the gold on the boards and the integrated circuits. It was a revelation, Bob says, to find out there was an entire business out there based on the resale of obsolete microchips and that circuitboards could have “$2 worth of gold and $500 worth of chips.” The company entered the chip remarketing business at just the right time and did $11 million in sales the first year. The market crashed the next year, though, with chips losing nearly 90 percent of their value. “We took a big, big hit,” Bob recalls, “and that’s the last time we put any value on our inventory.”
The electronics group grew from there. “From chips we got into computers, and from computers we got into the remarketing of the computers, and one part just kept leapfrogging into the other,” Bob says. The company went from 7,400 square feet of electronics processing in the Franklin Park facility to its 300,000-square-foot, 140-employee facility in West Chicago in five years.
Reuse Before Recycling
United typically receives 3 million to 4 million pounds of electronics each month, about 80 percent of which are consumer electronics. Monitors and televisions, because of their bulk, take up much of the floor space, but the company also processes walkie-talkies, copy machines, medical diagnostic equipment, telecommunications equipment, and a wide array of other electronics.
Entering the processing facility, the first thing a visitor notices is the security guard, the walk-through metal detector, and the barbed-wire fences surrounding some stored equipment. “Since 9/11, our clients have been asking for more and more security,” from the dock doors to equipment storage to witnessed destruction, Jim says. Their concerns might be for proprietary equipment, confidential information stored in the equipment, or just theft—many high-value electronics easily fit in a pocket or under a coat.
Material arrives primarily by truck to the 16 loading docks of a 100,000-square-foot receiving warehouse, the middle of the facility’s three buildings. Unlike most other scrap processors, electronics processors must deal with tons of packaging, from shrink-wrapped pallets of monitors and televisions to components in bubble wrap, plastic bags, cartons, and sometimes all of the above. (The company bales about 4 tons of OCC and plastic a day and recently installed a new pit baler.) One area is devoted just to “depackaging” and triaging items: to the left for equipment testing, component recovery, and remarketing; to the right to be prepped for the two shredders.
First, however, much of the equipment goes into a secure audit area for “asset management.” URI tracks and bar-codes incoming materials by the trailerload or skid if they’re destined for scrap processing and by the individual asset for component remarketing. Some companies even use URI as a long-term warehouse of older equipment for their own reuse, repair, or legacy parts. The computerized inventory gets posted on a secured section of the company’s Web site for the customer to review. “A lot of people send in the wrong stuff,” Jim notes—including brand new computers and new-product prototypes.
Some smaller materials go to Franklin Park for precious metals recovery. “We could throw this all into the shredder, but we’re not going to maximize the value,” Jim says of a small pile of components—including chips, connectors, and bits of wire—that two workers are sorting. With gold- and silver-plated connectors and screws worth up to $20 a pound, hand-sorting this material is worth the time and effort, he says.
Items destined for remarketing head to the next warehouse for data erasure and testing. Workers on up to nine lines perform a battery of tests and grade items A through D. “A will be like new, out of the box; B is going to be more functionally and cosmetically challenged,” Jim explains. Today workers are testing a shipment of hundreds of laptop computers on two lines. Many are flashing “WARNING” in red and yellow, a sign that their hard disks are being erased.
URI sells reusable equipment primarily to brokers or catalog companies that can handle large volumes without flooding the market and driving down prices. The higher the price, the better for URI—and its client, who shares in the revenue a sale generates. Personal computers are priced according to processing speed and configuration. Beyond computers, the company remarkets peripherals and small electronics—cameras, scanners, printers—as well as large ones, Jim says, including “copiers, routers, hubs, switches, network equipment, medical equipment, lab equipment, analytical equipment, test equipment,” and the like.
At least half of the equipment the company receives is too old to have real reuse value. But the biggest impediment to remarketing is the wishes of the scrap supplier. “There’s a lot of stuff that we recycle that could be resold,” Jim says, but “most of our clients don’t want secondary resale.” Some worry about damaged or faulty products entering the resale market and being returned under warranty. Others worry that high-quality used electronics might dilute the market for new products. Other companies want to guarantee that the technology—or the data the equipment contains—never falls into the wrong hands. As Bob puts it, “$50,000 of resale [value] is not worth a $500 million lawsuit … if your medical record gets out on eBay.” With all those client concerns, the company evaluates for resale only 10 percent of what it receives annually—about 33,000 pieces a month—and remarkets only half of that.
If the equipment is not remarketed, workers prepare it for component recovery and shredding. In general, URI does not disassemble computers before shredding them unless the chips are valuable. To remove the chips, workers place the circuitboards on heated tabletops to melt the solder. They use a tweezer-like tool to lift the chip carefully out of the solder. The company keeps an inventory of nearly 5 million chips, which can
be worth 5 cents to $30 apiece.
For the remaining electronics, the last step before shredding is the removal of hazards or undesirable materials, including paper, toner and ink-jet cartridges, fluids, fluorescent tubes, mercury switches, and many different types of batteries. These are practically the only materials United does not process.
The Shredding Step
URI’s main electronics shredder, installed in 2001, processes up to 4 tons of material an hour. Boxes of free-flowing material enter the system via elevators, while workers load larger or bulkier items onto a conveyor belt from the side by hand or with a forklift. The primary shredder reduces the equipment to about 4 inches in size and sends it across a picking line “in case someone missed a capacitor or a battery or an object that doesn’t really need to be shredded any further,” Jim says. The secondary shear shredder reduces the material to about 2 inches in size and sends it to a high-speed granulator, which brings it down to about three-quarters of an inch.
Overband and head-pulley magnets and an eddy-current separator start the separation process by dividing the results into two grades of steel and four grades of nonferrous, including one that contains the shredded plastic housings and circuitboards—and an estimated 1 to 2 ounces of gold per ton. With gold selling at record highs, and recently as high as $600 an ounce, “this is a salable product [that] allows us to keep our costs and fees down,” Bob says. From the control room, a dozen cameras watch the entire proceedings, and computer monitors display the status of the nearly 8,000 pounds of material moving through the system at any one time.
Initially workers demanufactured monitors and televisions by hand to remove the leaded glass before feeding the housing into the shredder. To increase capacity, URI installed a separate shredder for TVs and monitors in 2003. That unit processes up to 7 tons, or 500 monitors, an hour. With their cords removed, they march one-by-one up the conveyor belt to a low-speed, quad-shaft shear shredder, which reduces them to about 21/2-inch pieces. Workers on a picking line remove capacitors before the shredded material travels past an overband magnet that pulls out the steel.
The material moves into a fully enclosed area with additional granulation and separation equipment that removes the leaded glass. The remaining fraction goes into an eddy-current separator, “so at the end of the day I get copper, steel, leaded glass, aluminum, plastic, and circuitboard,” Jim says. With both shredders entirely indoors, the company constantly monitors air quality for a variety of hazards and pollutants. The HEPA air-filtration system on the monitor-processing line is thorough enough that the filtered air actually exhausts back into the building.
It’s rare for an electronics processor to do asset management, equipment remarketing, chip recovery, shredding, and precious metal refining, Jim says. The advantage of doing all of these processes is that the company can use one or more services as a loss leader to become more competitive. And if one segment of the marketplace is underperforming, the company has the other segments to rely on. “I don’t have to make big money on any one of these segments,” Bob says, “because if I can make a little money on each one of them, at the end of the day my unit is bigger.”
Selling Service
URI tries to set itself apart from other electronics recyclers with the quality and the variety of its services. On the quality end, United’s domestic processing attracts customers concerned about the use of prison labor, potential data-security and environmental risks, and exporting.
It’s nearly impossible to compete with electronics exporters on price, Bob admits. Instead, he says, “we sell the fact that it’s going to be done domestically … we’re going to destroy what we say we’re going to destroy, we’re going to erase hard drives when we say we’re going to erase hard drives, and we have checks and balances in place”—including the opportunity for clients to witness the equipment destruction in person or remotely via the Internet.
“I’m not so arrogant as to think that there’s nobody outside the United States that can do things responsibly,” he says. “There are good electronics recyclers outside our borders.” So to some extent, he says, his company is selling fear. “Do you care if [your equipment] ends up in Third World countries? Do you want to make sure your stuff is handled in an appropriate recycling manner? Then it should be factored into your cost of doing business.”
To diversify its services further, URI now provides logistics support for clients who need to arrange the secure, on-site destruction of electronic equipment or the removal and transport of electronics for secure destruction and recycling. “We’re getting more and more multinational companies who [want] a single approach” to electronics recycling, regardless of how many states or countries in which they operate, Bob says. The transportation cost for such services can easily exceed the charge for recycling, Jim points out, considering fuel prices and the difficulty of packing a trailer tightly with bulky, fragile material. “You aren’t getting 40,000 pounds out of a 40-foot semi,” he says. “You get 30,000 pounds if you’re lucky.”
One company recently hired URI to serve all its outlets in North and South America, Europe, Asia, and the Middle East. URI must either transport the equipment back to West Chicago or partner with an approved local vendor to ensure data destruction and either remarketing or recycling. To fulfill the contract, the firm will need to master other countries’ recycling, solid waste, and export laws, but the advantage, Bob notes, is that “once we build partnerships in other countries, we will have them forever.”
The individualized services URI provides to its clients are the company’s best avenue for growth, Jim says. “We’re entrepreneurial, therefore the words ‘No, we can’t do that’ really aren’t in our blood”—which he sees as one of the company’s great strengths and one of its biggest challenges.
Seeing the Forest and the Trees
The advantage of being a family-owned company is that it’s flexible and can act quickly, Bob says. URI’s upper management is about 10 people, five of whom are related. “Everybody making the decisions is sitting at the table, either [the conference] table or the dinner table,” he says.
The managers keep an eye on the big picture, looking for opportunities to create synergy among the company’s various parts, and work down in the trenches. “All of us, no matter our job title, will do whatever it takes to get the job done,” be it processing, sales, operations, or marketing, Bob says. “If one of my salesmen makes a promise, we live by that commitment, and if that [causes] us to lose money, so be it—we pay,” he says. “We do not go back on our word.” That’s why he personally reviews every commitment letter and final contract.
Given that level of oversight, it’s perhaps no surprise that Bob jokingly calls himself a “benevolent dictator,” but he says he tries to run the company by family consensus. The way it’s structured minimizes problems: Mark runs the precious metals side, Jim runs the electronics side, and Amanda, in regulatory compliance, “can shut either one of them down. She’s the bridge between the two,” Bob says. The two groups “draw on two different customers, so you don’t have that sibling rivalry for who is going to be top dog,” he adds.
The structure seems to suit many of the company’s employees, who have an estimated average tenure of eight to 10 years. Employees like working for a stable, family-owned business that has “a different type of relationship than corporate America has with its employees,” Hale says. Bob points out that he and his children have worked just about every job in the company, thus they know what it takes to do the job right. Bottom line, he says, is “give me an honest day’s work, and we’ll give you an honest day’s pay.” Employees can earn up to $28 an hour in the plant, and the company pays about 75 percent of the cost of medical and dental insurance and provides a 401(k) plan, paid vacations, and holidays.
URI also has a strong safety record, with a “dramatic” decrease in injuries over the past five years, Hale says. As part of what Jim calls “a concerted effort to align URI with ISRI’s Safety Pledge,” the company recently hired a full-time EH&S manager, who provides safety training, performs inspections, and heads up the newly formed safety committee.
Looking Ahead
Several trends in electronics recycling might shape URI’s future.
Consolidation is one: “There is enough focus on electronics recycling now that there is going to be an awareness to the bigger players,” Bob says, including logistics companies and municipal solid waste companies, which have the advantage of a network of local service routes. To compete, URI is considering its own expansion, though it has not narrowed down the many options. Construct a new facility for full processing or partial material preparation? Purchase or partner with an existing company that shares its philosophy and values?
Where to expand is an even bigger question .
A potential new facility in a new state raises questions about state regulation. Increasingly, states are banning some electronics from landfills. URI would most likely benefit from such bans: With landfill prices at $30 to $50 a ton and domestic electronics processing closer to $400 a ton, it can’t compete with landfills on price, Jim says. The risk, however, is if some states classify electronics as hazardous waste, that could impede the interstate movement of e-scrap. “One of our fears is investing millions of dollars in a state, then all of a sudden, legislation is passed that makes it impossible to earn a return on our investment,” Jim says. The Glavins have been active in ISRI—Bob currently chairs the Electronics Recycling Council—to ensure the recycling industry is at the table during the development of state and national regulations.
Another concern is how the composition of electronics continues to change. Over the past 25 years, manufacturers have reduced the metal content of their products in an attempt to reduce weight and cost. Luckily, electronics have proliferated and become less durable at the same time the metal content has shrunk. “So while they’ve gone down in value [individually], the sheer numbers of them have increased,” Bob says. As materials continue to change, URI will need to stay flexible. But Bob Glavin says he’s not too worried. Hard work and customer service have brought the company to this point and will continue to serve it well in the future. “The fact that we continue to do close to 40 million pounds a year, that we’ve grown to that size, means we’re doing something right.”
Rachel H. Pollack is editor of Scrap.