January/February 1995
This Ohio-based processor and broker has achieved large-scale success thanks to its long-term business focus and its attention to detail. And with a slew of opportunities in front of it, the firm’s executives predict “real growth” for the company down the road.
By Kent Kiser
Kent Kiser is an associate editor of Scrap Processing and Recycling.
Luntz Corp. is a big wheel in the scrap recycling industry in more than one respect. From a bird's-eye view, this ferrous and nonferrous recycler's operations do indeed roughly resemble a wheel, with Canton, Ohio, serving as the company's hub/headquarters and its other five operations—located in Carrollton, Mich., and Cleveland, Columbus, Mansfield, and Warren, Ohio —serving as the spokes.
The firm's prominence in the domestic scrap business could also classify it as a big wheel. Indeed, one local paper has described Luntz as "one of the largest U.S. suppliers of basic scrap and steel products," and the company's principals agree that it is "of the larger group" of scrap recycling firms. The company has about 250 employees, processing plants as large as 110 acres, and headquarters offices in downtown Canton that occupy a three-story, 30,000 square-foot building that stretches one city block. In numerical terms, this privately held firm's annual processing volume surpasses a million tons, and its annual revenue is measured in the hundreds of millions of dollars.
Further, in 1992, Luntz was selected as one of Northeast Ohio's 100 top-performing companies by Arthur Andersen & Co. and Corporate Cleveland magazine, making it a member of Leadership 2000, an "elite group of over-achieving companies."
But to Andrew "Drew" Luntz, the company's president, the business's size has never been a goal in itself, but rather a "nice benefit" of its focus on providing high-quality scrap recycling and brokerage services. "Size isn't the standard to measure your company by," he says. Instead, the company measures its success by how well it meets the needs of its customers—both suppliers and consumers—as well as its employees.
And while the company's principals are pleased—nay, downright proud—that Luntz is a big wheel in the scrap world, they fully expect the firm to roll to bigger and better success in the future.
A Long-Term Outlook
Luntz is a long-term company, and this applies to its history as well as its approach to business. The firm's corporate brochures tout that it was "one of the nation's first recycling companies," and the thanks for that go to Polish immigrant Samuel Luntz, who established Canton Iron and Metal Co. with a colleague in 1898. In 1916, during World War I, Samuel's sons-Darwin and Abe-created Luntz Iron and Steel Co., a brokerage and warehousing operation. This firm was incorporated in 1918, developed some processing operations over the years, and became Luntz Corp. in 1968.
Today, this venerable recycling firm is in its fourth generation of Luntz management, a team of four "young turks”—as Drew calls them—led by Drew, his brother Greg, who serves as vice president and chief financial officer, and cousins John, chairman of Luntz, and Brian, president of the Cleveland/Marquette Steel division.
In addition to being long-term chronologically, Luntz is a long-run company when it comes to its business philosophy. "That gets to the whole philosophy of our company," John says. "We like long-term relationships."
For a geographical example of this, look at Luntz's processing operations, four out of six of which are located either on the property of or adjacent to a major consumer. Luntz's Canton ferrous plant, for instance, is next to Timken Co. and close to Republic Engineered Steels; the Warren facility is on the site of Copperweld Steel Co.; the Mansfield operation is beside Armco Inc.'s Empire Steel division; and the Columbus plant abuts Buckeye Steel Castings. "We've always felt that, in the long run, we're much better off being close to our consumers so we can service and supply them month in and month out, through the good times and the bad," John explains. “We felt that we would mutually benefit the most from such arrangements.” Drew agrees, playing up the point that Luntz has structured its operations this way primarily "to be of scrap service to our consumers and become a partner with them."
The Computer/Service Connection
Not surprisingly, service is a topic near and dear to Luntz's corporate heart. After all, Greg points out, "We're in the service business as much as we are in a manufacturing and distribution business." Or, as Dave Valentine, vice president, observes succinctly, "Our business is service. It means everything."
If you ask the company's executives what they mean by service, they say it is being responsive, reliable, and loyal to one's customers, and striving to supply top-quality scrap materials. To attain such goals, Luntz's leaders say it's essential to be technologically advanced, both in the office and the plant. This helps explain the company's emphasis on computers, which it has been using since the early 1980s, a time when computer equipment was large and slow and when scrap-specific software was still under development.
In those early years, the firm worked with Systems Alternatives Inc. (Maumee, Ohio) to develop and refine software to fit its needs. Since then, Luntz has continually expanded and upgraded its computer capabilities to the point where, today, all of its plants are managed by computer. As part of these efforts, the firm has strived over the years to establish computer links throughout its six operations and its headquarters in downtown Canton to expedite information exchange and improve communication. Currently, the Canton ferrous and nonferrous plants and the Cleveland facility are tied directly into the central office, while the Columbus, Mansfield, and Warren operations use stand-alone PC systems whose data is entered into the headquarters system.
According to Greg—the firm's "computer guru"—computers will continue to play a larger role in Luntz's future and the scrap industry in general. This, he explains with some predictions, is because consumers will eventually require recyclers to transfer shipment data electronically, orders will be increasingly delivered via computer, growing international trade will require more electronic transfer of data, and government agencies and banks will demand more computer correspondence with businesses.
Being Operationally Progressive
To Luntz, being technologically advanced also means always operating the best processing and handling equipment.
As a result, the company has adopted a two-pronged approach regarding its equipment, with the first being meticulous attention to preventive maintenance. To wit: Much of its major processing equipment undergoes what it refers to as 100-percent maintenance, which means these machines are tended to the same number of hours as they run each day. The firm's two shredders, for example, run eight hours a day, followed by eight hours of service. Luntz also has its own locomotive crane maintenance division to keep its machines operating efficiently, even if that means rebuilding a crane from the ground up. The company must be on to something because many of its key pieces of equipment are still operating efficiently after decades of service.
While the company spends what Greg calls "a considerable amount of money" maintaining its equipment, there are pay-offs in terms of customer service, productivity, and repair costs. As he explains, "If you have a big equipment problem and it hurts production, that can significantly affect your tonnage—and the scrap business lives and dies by tonnage."
The other prong of Luntz's equipment philosophy is that it doesn't hesitate to in vest in new equipment to improve its operations. While Luntz has historically been financially conservative, Greg says, it has been operationally progressive because "it pays to be progressive there. We've always believed that we need to purchase state-of-the-art equipment, maintain it, and look for new equipment that technology has changed for the better."
And Luntz puts its money where its mouth is in this regard, as can be seen in its seven-figure annual capital improvement budget. Last summer, for instance, the firm invested in a new central processing unit for its computer system that's 12 times faster than its old mainframe. Luntz will also soon be installing a new Harris HRB baler at itsCanton nonferrous plant, and it plans to install eddy current separation systems at both of its shredding operations this year.
Climbing the Quality Steps
As Luntz's principals explain it, having the right equipment operating in the right way is simply a means to the end of meeting consumer needs—in particular, their scrap quality requirements, which are fast becoming the most critical service element of all. "Quality has always been important," Greg notes, "but it has become more of a forefront issue in the past five years, and it's continuing to gather steam. Standards are higher now and suppliers have to quantify their quality more than ever."
Luntz has met the quality challenge by purchasing new measuring and identification equipment, stepping up employee training in quality control procedures, closely documenting its processes, and hiring personnel to focus exclusively on quality assurance. "It's a step-by-step process of doing a thousand things, with follow-through and procedures to ensure a consistent product that can be used," Drew remarks.
While meeting these quality requirements is demanding, the effort has been resoundingly positive for Luntz, Drew says. But as Greg observes, "Whether it's good or not, it's something recyclers should be doing for their customers anyway. That's part of the service of doing what the customer wants and needs. If you don't have quality, you won't have to worry about price."
And while Luntz's quality control efforts thus far have earned it kudos in the form of quality supplier awards from several consumers, the firm continues to aim higher, setting its sights on achieving IS0 9000 certification.
The Good People Factor
When discussing Luntz's service and quality aspirations, the company's leaders point out that achieving those goals depends on what Drew calls "good people," whom Dave defines as those "who are willing to do what's necessary to get the job done." Luntz expects a high degree of loyalty and commitment from its employees, and it responds by being loyal and committed to them, and addressing their needs in tangible ways that go beyond wages and benefits. These include soliciting and acting on their suggestions, treating all employees fairly, and communicating openly with them. "The main thing," Dave asserts, "is the constant striving for communication, making people in the company totally understand what we want and what the customers want, and striving to get everybody to feel they're part of that action."
Also important, the company gives employees the chance to grow with the company. "We've got employees who've moved from dispatching trucks to become traders," Brian notes. Dave is living proof of this opportunity, starting as a buyer more than 20 years ago and rising to vice president status. "You can start at virtually the bottom and work your way up to the top," he says "Good companies allow their employees to do that. If you don’t, you tend to have people who get bored or stymied, and then they don’t have the same ambitions.
Everything in Its Time
While Luntz has succeeded primarily due to the "down-to-earth basics" of customer service, quality equipment, good people, and a sterling reputation, there's one other factor at work: continuous improvement. As Drew explains, "There's not that much magic in the industry to enable one company to do something significantly different than another. But the really good companies do a lot of little things better." In other words, he clarifies—recalling a lesson he learned in school--"An infinite amount of infinitesimals is not infinitesimal."
To Luntz's executives, it's this dedication to continuous improvement, to scrutinizing the details in all facets of one's operations, that leads to excellence. "You have to constantly be willing to change and make things work," Drew suggests. "You have to always be trying to make things better and grow, so you're never satisfied."
And just how will Luntz grow in the future? One way, the principals note, is by expanding the services it can offer to existing and future consumers. "The future is going to require much more service orientation, handling more of the consumers' scrap, basically doing whatever they need us to do to make them more productive," Dave predicts, adding, "We're interested in being whatever our customers want us to be."
In particular, Drew says he expects the "next wave" will be total scrap management for consumers, including purchasing, grading, processing, and inventory control—even preparing premixed charges for direct melting. "What we're seeing is a real change in the overall needs of the mills," John says, "but it's one we welcome because it's the type of role we've always strived for with our consumers."
Other ways Luntz could grow include acquisitions, mergers, and joint ventures, but only when such moves make sense, the Luntz leaders agree. "You don't acquire just to acquire," Greg observes. "You have to do acquisitions that make sense financially, geographically, and so on. When you can work an acquisition where you can reduce your expenses and do more tonnage with the same or fewer employees, that's the kind of acquisition that makes the most sense." One such move was the firm's 1993 purchase of National Iron & Metal Co., a competing Canton-based recycling firm whose business Luntz absorbed into its Canton operations. Joint ventures are also “very much a plan for the future,” Greg notes, “not just for Luntz but the whole industry. There’ll be more and more reasons for scrap companies to work together.” The reason, he explains, is that bigger processing or scrap management deals in the future could make joint ventures prudent to prevent individual firms from becoming overextended. Another factor, Greg adds, is that "by working with other companies, you pool talents together, and that's how you get the job done."
One possible new but related direction for Luntz could be a venture into alternative metallics such as pig iron, direct-reduced iron, hot-briquetted iron, and iron carbide. The company has been watching this market develop for about eight years, and it's "something we're very interested in," Drew says. One reason the firm hasn't rushed into this market, he notes, is that such facilities generally require "mega-millions," which could necessitate a joint venture if Luntz moves in this direction.
With these and other opportunities spread before it, Drew sees Luntz as having "potential for real growth"—particularly considering that several new mini-mills are slated to be built in the Midwest in the next few years. But he concedes that the company needs to strive harder to fulfill that potential more completely in the future. While Luntz's "conservatively aggressive" philosophy—as John puts it—has served it well thus far, the company may have to become more aggressive and perhaps take more risks in the future, the principals agree. "The business in the future is going to demand that you do what you can to get the business you want," Greg says. "If that means going to financial institutions and working out deals that maybe 20 years ago you wouldn't have done, then you go and you try to do it."
Still, while the big Luntz wheel will certainly keep on rolling, don't expect any rash maneuvers from this 97-year-old company. “We're pacing ourselves nicely, we don't want to do anything too quickly,” explains Drew. "If you do too much too fast, it's hard to manage and you pay for that down the road." Then, turning more philosophical, he concludes, "I feel that timing is everything and that everything has to come in its own time."
This Ohio-based processor and broker has achieved large-scale success thanks to its long-term business focus and its attention to detail. And with a slew of opportunities in front of it, the firm’s executives predict “real growth” for the company down the road.