May/June 1995
In the business of exporting stainless and nickel alloy scrap, this U.S.-based, European-owned recycler has reached an enviably loft position, which it credits to ultra-streamlined operations and solid customer relationships.
By Kent Kiser
Kent Kiser is an associate editor of Scrap Processing and Recycling.
When Robert Krasnov tries to describe the Jewo U.S.A. Inc. in a nutshell, he comes up with a paradox: “We’re a big company, but we’re a very small company.”
By big, he’s referring to the firm’s shipments of stainless steel and nickel-chrome alloy scrap and its annual revenues, which hovered around 100,000 tons and $100 million in 1994. These numbers make Jewo (pronounced yay-whoa) U.S.A. the largest exporter of stainless and nickel alloy scrap in North America, asserts Krasnov, the firm’s president.
By small, he’s referring to the size—or, rather, lack thereof—of the company’s staff, which stands at about 35 employees, management included who are spread thinly throughout its headquarters in White Plains, N.Y., processing plants in Louisville Ky., Elizabeth, N.J., and Darrow, La., and purchasing office in Fremont, Calif.
“We handle a lot of material and we have a big dollar volume, but we’re not a big company,” Krasnov rephrases.
While that remark helps explain the big-yet small paradox, it begs another question: How has Jewo U.S.A. been able to create something so big from something so small? The answer, it seems, lies in the company’s streamlined operations, solid customer relationships, and international ties.
The Power of Perseverance
Jewo U.S.A.’s strength is particularly impressive considering that, if all had gone as planned, the company wouldn’t even exist today. In fact, twice in the last few years a sell-off seemed imminent.
It all began in 1979 when scrap veteran Robert M. Waisfisz, a Dutch native, decided to start his own stainless steel and nickel alloy scrap trading firm called J.A.R. Holdings Corp. (the J.A.R. refers to the initials of Waisfisz’s three children) in White Plains, a suburb of New York City. A few years later, in 1986, Jewo Metaal Stainless Processing B.V. (Rotterdam, Netherlands)—a subsidiary of the international conglomerate Metallgesellschaft AG (Frankfurt, Germany)—bought a majority interest in the company renaming it J.A.R. International Sales Corp.
Business continued apace for J.A.R. until the early 1990s, when world demand for stainless steel and nickel declined, dragging nickel values with them. The bad business conditions took a heavy toll on J.A.R., prompting Jewo Metaal to consider selling its interest in the company. Before it could do so, however, the situation changed when Waisfisz decided to leave the firm in 1992. (As part of this transition, Krasnov, who had joined J.A.R. in 1986, was promoted to president in December 1992.)
No sooner had the firm ridden out this storm than Metallgesellschaft stumbled, and the conglomerate put Jewo Metaal—and, hence, J.A.R. International Sales—on its list of “non-core” subsidiaries to be sold. But in the nail-biting months that followed, Jewo Metaal survived as other subsidiaries hit the auction block, and today the firm is a solid part of the Metallgesellschaft corporate family.
After weathering these difficult years, it seems appropriate that J.A.R. International Sales was renamed Jewo U.S.A. in October 1994. This not only gave the firm a closer identity with its parent company, enabling it to “present one name to the whole world,” as Krasnov puts it, but it also signified a new start of sorts for this persevering scrap company.
Setting up Shop
In J.A.R.’s first decade of business, prior to 1990, the company consisted of only one office in White Plains and about six employees. No processing facilities. No branch offices. Nothing else.
Beginning in 1990, however, the company shifted into expansion mode, kicking off with the opening of its Louisville plant. From all appearances, this move and the firm’s facility growth since then have been undertaken with meticulous care and calculation.
For one thing, the company sited its recycling plants to maximize the area from which it could draw scrap, with its three locations able to buy material from a region extending from Minnesota to Nebraska to Florida to Maine, Krasnov notes.
The firm also looked for sites that could serve as both domestic and export shipping points. For domestic trading, this meant being near highways and rail lines, as well as within striking distance of the stainless consuming centers in the Northeast. On the export side, this meant having easy access to inland waterways and ocean ports. And with the exception of the Darrow plant—which has no rail spur—all of the company’s plants fit this bill.
When Jewo U.S.A. was setting up these operations, Krasnov says, its plan was to ship a third of its material to each of the three major stainless producing regions in the world: the United States, Europe, and Asia. But the company found the domestic market virtually closed to it, so it had to become almost exclusively an exporter. Indeed, the company currently ships more than 95 percent of its scrap overseas—primarily to Spain, Belgium, and other European consumers, with a lesser amount going to Asian countries such as Korea, Japan, and Taiwan.
Aside from choosing its operating sites for their business potential, Jewo U.S.A. also scrutinized them from the environmental compliance angle. For instance, its preference was to start out with “green pieces of property,” as Krasnov puts it, in an effort to avoid inheriting contamination. And that’s exactly what the company did with Louisville plant, which was sited on a virgin plot in the Jefferson County Riverport industrial park, as well as the Darrow facility, built on farmland in 1991. In contrast, its plant in Elizabeth , opened in 1991, sits on property that already existed as a scrap recycling operation, but as part of the acquisition agreement, Jewo U.S.A. required the previous owner to gut the facility to make it a clean site.
As further environmental precautions, each of these locations was completely hard-surfaced with 10 inches of concrete, with an impermeable plastic line installed under the pavement in some areas. The plants were also outfitted with comprehensive storm water collection systems. “We’ve expended a lot of money and effort to comply with the current regulations and prepare the company for the future,” says Krasnov.
The Art of Efficiency
Setting up operations is one thing, making them run well is another. But if there’s one thing Jewo U.S.A. knows how to do, its how to run efficient operations. The firm’s modus operandi, simply stated, is to achieve maximum throughput at the lowest cots and with the minimum of staff and machinery.
How does it achieve this goal? First and foremost by purchasing primarily clean, prepared scrap from other recyclers. This buying approach allows the company to minimize its processing and sorting work. “Our expertise is in handling, sampling, and marketing material, so we try to keep processing to a minimum,” says Al Goodman, senior buyer. “The more processing you have to do, the less material you can handle.”
By reducing its processing burden, Jewo U.S.A. also minimizes its equipment investments. The only processing machinery at the company’s three plants, in fact, is a couple of turning crushers, one baler, and a few hydraulic alligator shears. Otherwise, the firm runs its business just with material handling equipment such as hydraulic cranes, forklifts, and front-end loaders.
To understand the lengths Jewo U.S.A. goes to hold down its equipment investments, consider these examples: At its Louisville plant, the firm doesn’t own a crane with a mobile shear attachment for processing oversized material. Instead, it rents such a crane a couple of days a month from another local scrap processor. In addition, theLouisville operation doesn’t have its own fleet of trucks, instead contracting a local trucking firm four or five days a month to haul its scrap to the barge unloading dock.
The general philosophy behind these actions is this: Unless a piece of equipment will be used daily, it’s more cost effective to rent or contract for its use. And the firm is equally efficiency-minded regarding some equipment it does use every day, such as alloy spectrometers. Rather than having a spectrometer and lab in Louisville, for instance, that plant sends material samples for testing to the Elizabeth operation, thus saving the cost of buying another alloy spectrometer and hiring another lab technician. As Steve Solomon, commercial manager of the Louisville plant puts it: “If you don’t absolutely need it, don’t buy it.”
And equipment isn’t the only part of Jewo U.S.A.’s business that’s streamlined to promote efficiency. Even the modest size of the firm’s plants—about 4 acres each—was a conscious choice made with efficiency in mind. Small plants give the company limited inventory capacity, which forces it to ship material quickly rather than stockpiling it, thus reducing its financial exposure and maintaining its cash flow, Krasnov explains.
The efficiency philosophy applies equally to Jewo U.S.A.’s management structure and the size of its operating staff. While the company us “one of the biggest players in the world” in its niche, Goodman says, it’s “small enough to be able to respond immediately to changes in the market. We don’t have a large group of officers to make decisions. With our small management staff, we can stay ahead of the competition because our decision-making process is extremely fast.”
Jewo U.S.A.’s plants also function on what Ostermiller, vice president of operations, calls a “thin staff.” The Louisville facility, which ships about 40,000 tons a year, has only five plant employees, and the story is similar at the other two plants. This approach enables Jewo U.S.A. to achieve a high employee-to-tonnage ratio and keep its personnel expenses low, which helps it “survive during the lean periods,” Ostermiller says.
While Solomon agrees that Jewo U.S.A.’s employee tally is low, it’s sufficient, he says, noting, “Extra people wouldn’t do anything for us.” Krasnov, in fact, rules out some business expansion ideas—such as augmenting the company’s brokerage business or delving into the container segment of the export business—because they would add too many employees and, hence, too much cost to the firm’s balance sheet without sufficient rewards.
“Our forte is trying to keep things as simple as possible,” Goodman explains. “We know what we’re good at, concentrate on that, and stay away from things we’re not good at.”
Macro- and Micromanagement
The success of a scrap recycling company rests on more than its operational efficiency, of course. There’s also the management factor: How experienced are a company’s executives? How adept are they at managing disparate operations? How well can they see the big market picture?
Krasnov has definite ideas on this topic. “To function well in today’s environment,” he asserts, “scrap executives must understand and be comfortable with different areas of expertise—commercial, operational, and financial. Successful interaction of these three disciplines is essential. Without knowledge of these three, you can’t run a company.”
Using himself as an example, Krasnov notes that his operational experience comes from managing nonferrous operations at such big-league firms as Prolerized Schiabo-Neu Co. (Jersey City, N.J.). His financial savvy comes, in part, from his education in finance, and his commercial expertise is based on more than 20 years of scrap buying and selling. This is the sort of firsthand, multifaceted experience that today’s executives need to manage well, he says.
In Jewo U.S.A. ’s case, effective management also means being able to work seamlessly with Jewo Metaal, its Dutch parent. While such international business relationships can be fraught with a world of problems, Krasnov dispenses with that concern quickly stating, “Our relationship with the Jewo Metaal is an ideal situation.” Explaining, he says, “The synergy between Jewo U.S.A. and Jewo Metaal is absolutely fantastic. We trade together, speak daily, reach consensus quickly, and share the same market and trading philosophy. We function as one.”
To illustrate the camaraderie between the two, Krasnow notes that representatives from the Jewo Metaal will travel to European mils to check on test melts of Jewo U.S.A.’s scrap. At other times, one of the companies will make a sale on behalf of the other without receiving—or expecting—a commission. “We do not make money off each other,” Krasnov says. It’s business by the Three Musketeers credo: One for all and all for one.
But in every parent-subsidiary situation, there are nagging questions about autonomy. Can the subsidiary—in this case, Jewo U.S.A.—truly run its business as it sees fit, free from the meddling arms of its parent? Krasnoc answers with a resounding “yes.” Rather than being a meddling hand, Jewo Metaal is a helping, open hand in his view. “We run Jewo U.S.A. with the blessing of Jewo Metaal and with the same ultimate group goal: to be the most efficient, best-quality supplier of stainless scrap in the industry,” he says.
The issue of autonomy also comes up in Jewo U.S.A.’s approach to its domestic operations. On the one hand, Krasnov strongly believes in letting his employees do their jobs as they see fit. On the other hand, he believes that some aspects of the firm must be micromanaged to ensure consistency and accuracy. For example, Krasnov himself sets the firm’s buying and selling prices, signs all checks, approves all the settlements, and approves or vetoes all big decisions. “There can only be one boss,” he reasons. “Otherwise, you have chaos.”
Building Relationships
No matter how well you set up and run your business, it doesn’t mean a thing if you don’t have great customer relationships, assert Jewo U.S.A.’s principals. “Jewo’s philosophy has always been that there’s only one way to do business, and that’s the right way,” says Goodman. “Whether the market is up, down, or sideways, our goal is to always handle our business in the exact same manner. Our customers always know exactly what they’re going to get from us because we always deal with them is the same way.”
This sort of consistency is what builds trust, the cornerstone of any ongoing business relationship. For suppliers, that means trust that they’ll be treated fairly and paid quickly, Krasnov says. For consumers, it means trust that they’ll receive regular supplies, timely service, and high-quality materials. “We work very hard at developing solid customer relationships,” Solomon says. “That’s a daily focus.”
Establishing and maintaining good business relationships isn’t easy, of course, and Jewo U.S.A.’s relationships were certainly put to the test during the firm’s difficulties in the early 1990’s. In those turbulent years, Jewlo—then called J.A.R.—became grist for the industry’s rumor mill, which speculated that the firm would close or be sold. These whispers had their effect “on people’s psyches and the company’s image,” Krasnov recalls.
Rather than sitting by watching its reputation get tarnished, the company went on the offensive to assure its suppliers that it was here to stay. To do this, it had to go above and beyond normal business practices, in some cases offering immediate payment for material and even advancing cash for some purchases. “We went through some very difficult times, but we’ve never failed to meet our obligations,” Krasnov says, proudly adding, “Without our customers’ confidence, we don’t have jobs.
Riding the Stainless Wave
In the coming years, Jewo U.S.A.’s fate will be closely tied to world demand for stainless steel and other nickel alloys. If current forecasts can be believed, the future for these materials is destined to go nowhere but up, especially considering that most countries in the world—including the United States—have ample room for growth in per capita consumption of stainless steel.
In addition, millions of tons of new stainless production capacity is expected to come on-line before the end of the decade, with a significant share of this production being added in Asian countries such as Taiwan. These capacity expansions, if realized, would significantly boost demand for stainless and other nickel-chrome-bearing scrap—which is good news for Jewo U.S.A. and others of its ilk.
If this growth materializes as anticipated, wouldn’t it be logical for Jewo U.S.A. to expand its operations to keep pace? Perhaps, Krasnov says. “We’re always looking to expand into areas where we see potential availability of scrap and where we can move it to consuming markets competitively.” But then again, when it comes to expansion, his guiding principle is to avoid growing the company at the expense of its efficiency.
Considering how Jewo U.S.A. is currently run, there doesn’t seem to be much danger of that.
In the business of exporting stainless and nickel alloy scrap, this U.S.-based, European-owned recycler has reached an enviably loft position, which it credits to ultra-streamlined operations and solid customer relationships.