May/June 1992
This scrap consumer is committed to taking whatever steps are necessary to ensure its future as a leader in the copper-based ingot-making industry.
BY ELISE R. BROWNE
Elise R. Browne is editor of Scrap Processing and Recycling.
In the 1950s, I. Schumann & Co. (Bedford, Ohi ) was one of about 60 copper-based ingot manufacturers in the United States . Today, the firm, founded in 1917 when Israel Schumann began collecting scrap with a horse-drawn wagon, is among only a dozen or so industry survivors, and counts itself as one of just a handful of U.S. companies in its field with a national marketing scope.
"We made a decision many years ago to stay in this business," says Mark Schumann, chairman of the board. "And we're committed to being here in the future."
It's this dedication, echoed in conversations with all of the company's principals, that seems to explain much of how I. Schumann & Co. not only survived, but also grew, while its peers closed shop. For instance, Mark points out, top management's commitment to reinvestment in the business—particularly in equipment and environmental control systems—has been crucial to I. Schumann's longevity.
Many of the ingot makers that went out of business in the last three decades, he explains, were forced to shut down when they fell behind in environmental compliance and competitive technology because they couldn't—or chose not to—reinvest money in their companies. At I. Schumann, on the other hand, company policy is to put a percentage of its depreciation back into the business every year. "To succeed today, you have to stay current with evolving technology," says Ron Schumann, executive vice president.
The company's dedication to doing what it takes to ensure its place as an industry leader extends to the Schumann family as well. While many of the ingot makers lost in the shakeout reportedly went under because their family business owners had no one to pass the baton on to, I. Schumann & Co. is now a fourth-generation family company, Mark says proudly. Israel Schumann's sons, Bud and Irving, joined him early on in the firm's history, and their sons—Mark, Ron, and Michael, I. Schumann's president—started working with the company in 1954, 1969, and 1959, respectively. In more recent years, David and Tony Schumann—Mark's sons—and Scott Schumann—Michael's son—have joined the firm.
Building on a Corporate Education
There was a period in the firm's recent history when it wasn't a family owned business. In 1968, I. Schumann & Co. was acquired by Ogden Corp., a New York City-based conglomerate that controlled it until 1978, when Mark, Michael, and Ron Schumann, along with a few key employees, regained ownership in what Michael describes as a "friendly" leveraged buyout.
The experience of being part of a large public corporation had a positive effect on the ingot maker, I. Schumann executives agree. It was during its time as an Ogden Corp. division, in fact, that the firm grew from a small regional company to a national ingot producer with sales offices and warehouses around the country.
The company's executives, who ran the firm's day-to-day operations during Ogden 's ownership, also benefited. Most importantly, says Michael, "The experience taught us the disciplines of corporate life." The I. Schumann management team retained these lessons even after the buyout, he notes, "taking them back into a more centralized, hands-on management structure where we could draw on the best of both worlds." In addition, says George Hoffman, vice president of trading and international activities, the Ogdenyears "gave us a feel for what hard work could produce."
The result, George adds, is "a very forward-looking company" that has more than doubled its size since the buyout. Evidence of the firm's growth can be seen in its diversification: Today, I. Schumann not only consumes nonferrous scrap to manufacture ingots and pellets, but also trades secondary metals and distributes foundry equipment.
To manage that growth, the company works from a philosophy that "fun equals prosperity," Michael notes. In an effort to help its 175 employees feel useful and challenged, the company offers employees the opportunity to move around within the firm and take on different responsibilities. "The result is that we've got someone who feels good coming to work in the morning," Michael says. "Life is far too difficult to be in a work situation that isn't pleasant."
Investing in the Future
Expanding into related businesses hasn't detracted from I. Schumann's principal business—consuming scrap. In fact, the company recently invested more than $1.5 million in improvements to its recycling operations, including the purchase of two new electric induction furnaces, a state-of-the-art oxygen combustion system for an existing gas furnace, a self-contained water recirculation and filtration system, an optical emission spectrograph, renovations to its chemical and physical testing laboratories, and a 22,500-square-foot warehouse expansion that brings the plant's total covered area to 140,000 square feet.
These improvements certainly fit with the company's dedication to reinvesting in the business, but why make such a significant capital outlay in the middle of an economic recession? "The saying of the wise old scrap dealer is that the time to buy is when no one wants it," says Michael, drawing a corollary that "the time to invest is when no one is doing it." A recession presents bargains and quick delivery terms on equipment, he explains, adding that upgrading the facility when business slowed down also gave I. Schumann & Co. executives the time to plan the expansion more carefully.
From the look of its recent investment list, the company's latest expansion strategy emphasizes production of engineered alloys such as aluminum bronze, manganese bronze, and Ni-resist, a nickel-iron alloy. The electric furnaces, for instance, have reportedly doubled I. Schumann & Co.'s capacity to manufacture engineered-alloy ingots, and some additional warehouse space is necessary for increased new product storage. The spectrograph is also an important tool in producing engineered alloys, says Mike Oberlin, vice president of operations. The company's wet chemistry laboratory is perfect for analyzing lead-containing metals, such as brass and bronze, he notes, but optical emission technology is better suited to evaluating engineered alloys, which are usually lead-free.
One-Stop Customer Service
I. Schumann & Co.'s increasing emphasis on manufacturing engineered alloy products has a dual purpose. First, because such alloys rarely contain lead, they seem unlikely to face the same kind of processing bans that threaten the future of the entire brass and bronze industry.
And second, company officials see engineered alloy production as another customer service that adds to I. Schumann's "ability to create and supply products above and beyond that of ordinary ingot makers," Michael says. In one phone call to I. Schumann, a foundry can order crucibles, permanent mold machinery, robotic polishing and buffing equipment, and prime metal, as well as copper-based and engineered alloy products—most of which are stored in I. Schumann's nine warehouses across the country and can usually be delivered overnight.
Adding to this one-stop shopping list are copper-based alloy pellets, an I. Schumann-specialty product manufactured under the trademark Inducto-Melt. "Only certain foundries can use the pellets," Michael notes, "but those that do reap a great advantage in material handling and reduce their melting costs."
Offering these kinds of "extras that make life easier for customers" has long been an integral part of I. Schumann's relationship with its consumers, Mark asserts. In fact, back in the 1930s, when the company was still a scrap processor, it installed its first furnace as a service to one of its industrial customers, establishing its destiny as a scrap consumer.
In more recent years, the ingot maker's customer service efforts have included employment of a full-time foundry consultant, who travels around the country helping I. Schumann's foundry customers solve technical problems free of charge.
Offering a Ready Market
Customers aren't the only recipients of I. Schumann's service efforts. The ingot maker is committed to taking extra steps to meet its scrap suppliers' needs as well, says Ron. For starters, although the company purchases some scrap directly from industrial generators, it won't do so at the expense of its traditional base of scrap processors. "We go out of our way not to buy from industrial operations serviced by our regular scrap suppliers," he explains.
I. Schumann also pledges to be an ever-ready scrap buyer, aiming to always be in the market when its suppliers offer material. "When they want to sell something, we want to be there to accommodate them," Ron says, noting that this gives the company an edge over competitors that tend to be more "hot-and-cold buyers."
The firm is able to be a consistent buyer of all kinds of copper-based scrap thanks to a couple of factors, George says. With a capacity to consume more than 60,000 tons of scrap per year, he points out, its hungry furnaces are always craving scrap. And because those furnaces turn out many different alloys, the company can often use even the lowest grades of metal in some area of its business.
Furthermore, scrap that can't be absorbed directly in I. Schumann's recycling operations can be handled through the company's trading division, which generally buys high-grade items such as brass clippings and bare bright wire for resale to brass mills, copper refineries, foundries, and the export market, but is not limited to those materials or markets. This purchasing versatility, George says, allows the company to be "all things to all people, within reason."
It doesn't mean the company is willing to overlook its scrap quality needs, however. "Our customer base is more concerned than ever about the quality of the products that we deliver, which makes our scrap quality control that much more important," Ron points out. "The more stringent we have to be in producing ingots, the more critical it is that our scrap feedstock is carefully sorted, graded, and analyzed."
To obtain this kind of quality, his brother Michael notes, I. Schumann is devoted to working with its scrap suppliers. "It's a partnership," he says, adding, "Processors and consumers need to be able to recognize and respond to each others' problems and concerns. That's the best way we know of to make ourselves and our suppliers as strong as we can be."
Looking Down the Road
In the years ahead, I. Schumann & Co. officials hope to increase the company's strength by boosting its presence on the international scene. The firm now sells between 5 and 10 percent of its metal products overseas, but has begun to think more globally in terms of its future.
The top item on the company's list of strategies for the future is "to satisfy changing customer needs and comply with new government regulations as they develop," says Michael, noting that the latter could be particularly challenging. "We look to the future with a certain amount of cautious optimism," he declares. "There are going to be some tough times ahead, especially with the environmental regulations facing the industry. As we look ahead, only the most progressive companies will prevail, and we intend to make certain it's us. •