Making the Grade

Scrap recycling is no longer an approximate business.
   Consumers who once tolerated the occasional load of off-spec material delivered on an overly elastic schedule are putting systems in place that make quality problems virtually unacceptable. Suppliers of all types of scrap—from ferrous and nonferrous metals to paper and beyond—are being scrutinized as never before. Increasingly, they’re being systematically rated on their ability to consistently supply clean, high-quality scrap in a timely fashion.
   Such supplier rating programs aren’t brand new. Some scrap consumers have had high standards and various systems in place for a decade or more. Often these standards were relatively informal or not consistently applied. With the advent of increased competition and industry consolidation, however, even companies that have long operated with such systems are finding they need to tighten existing standards or devise more stringent ones. As a result, today’s scrap suppliers are becoming accustomed to receiving a “report card” from many of their consumers at the end of the month and sometimes for the year as a whole.

The Ferrous of Them All
   The Timken Co. (Canton, Ohio), a manufacturer of highly engineered bearings and alloy steels, offers a good example of a supplier rating program in action.
   Timken must be careful about the quality of its scrap because its end products—which are used in industrial, automotive, aerospace, and medical applications—have little or no tolerance for contamination. The company buys between 75,000 and 90,000 gross tons of ferrous scrap a month from 40 to 50 suppliers for its two melt shops. This scrap makes up more than 60 percent (by weight) of each charge at Timken’s steel division, with home scrap filling the balance.
   About five years ago, the company underlined its quality focus by putting new standards in place to ensure on-time delivery of consistent-quality ferrous scrap for its melt shops. The mill now stringently measures supplier performance on two fronts: quality and timeliness of delivery.
   On the quality side, Timken checks every incoming load of scrap, inspecting the top of each railcar shipment and the
contents of all truckloads after dumping. Based on these inspections, a delivery might be regraded or rejected if it doesn’t meet the mill’s criteria. At the very least, a problem load means a phone call or fax to the supplier.
   “We might simply call the supplier and say, ‘We’ve never seen this contaminant in your material before and don’t really want to see it again,’” says Scot Bowman, unit manager of Timken’s scrap operations, who adds that the company will reject a scrap load rather than try to blend it. “We don’t blend. We don’t want to. We want to get what we pay for. We have our specs and everyone knows what they are.”
   Typical contaminants include copper, lead, and nonmetallics. Dirt can also be a problem. Whatever the contaminant, all problems encountered are logged and compiled, then a formula is applied to come up with a number Timken refers to as “problem tons” from the supplier.
   “We compare that number with the total purchases from that supplier and get a quality rating for the month,” Bowman explains. “Our quality rating is 97.3 percent so far this year through June.”
   In recent years, in fact, the firm’s overall supplier quality rating has generally been in a tight range of 97 to 98 percent.
   The other aspect of Timken’s rating program is each supplier’s on-time delivery record. “We measure on-time delivery on a monthly basis, do a calculation, and then give each supplier a rating,” says Bowman. “We give them 30 days to deliver. At the end of every month, we advise each supplier of their rating. The average rating in June was 95 percent, which is typical of the year so far. That’s up from around 70 percent when we started this. The program has had a big impact.”
   According to Bowman, in fact, the program helped Timken attain its ISO 9002 certification and the QS 9000 certification required by the auto industry.

The Brass Standard
When it comes to nonferrous scrap, brass mills have some of the more demanding specifications in the industry due to the low contamination tolerance and high quality standards their products demand. For this reason, some brass mills have had rigorous quality programs in place for more than a decade.
   Olin Corp. (East Alton, Ill.), one of the largest U.S. brass mills, has had a supplier rating program in place for about 12 years. The company’s two casting facilities consume more than 10 million pounds of copper and brass scrap monthly. It mainly purchases bare bright copper scrap and some alloy scrap.
   Olin’s scrap sources number in the hundreds, if you include customers that return their production scrap to Olin. If you’re talking about scrap processors, however, the company has only about 25 to 30 suppliers of significant size—but that’s still enough to provide stiff competition in the face of the mill’s strict quality rating program.
   At Olin, scrap processors become qualified suppliers by submitting a sample of their material. If this sample is approved, the processor is allowed to ship a truckload of material as a trial. If the load passes, then the processor is considered a qualified supplier.
   All shipments from qualified suppliers are first inspected visually then reviewed by a mobile spectrometer at the unloading dock. Additional inspections are conducted when the material is processed. The company tracks all rejections and monitors the percentage of rejected material in each supplier’s loads.
   At the end of the year, Olin rates its suppliers based on their rejection percentages. Suppliers who have a rejection rate of less than 1 percent are given a rating of 1. Those with a rejection rate of 1 to 3 percent are rated a 2, and anyone with a rejection rate more than 3 percent receives a rating of 3, notes David Lang, vice president of purchasing and metals management. The company also rates its suppliers on their on-time delivery record.
   “We send all our suppliers a letter showing them what classification they’re in for that year,” Lang says. “You can never reject anyone outright in this business because you may need them. But the point is, we’re going to deal with the suppliers in the first category as often as possible and the ones in category 3 as little as we can, if we have a choice.”
   If a supplier slips a category from one rating period to the next, Lang usually gets a response that they’ll take steps to correct the situation. “They may elaborate and they may not, but the good suppliers will usually do the best they can because rejections are costly to them,” says Lang. Some suppliers, however, “just give up,” he adds. “If a dealer specializes in aluminum or steel and gets some red metal in on the side, sometimes their controls internally aren’t adequate to ensure that they can meet our specs. They may prefer to go to an ingot maker or refinery rather than a brass mill like Olin. We’re not a refinery, so quality is of prime importance.”
   Despite its high quality standards, scrap rejections are rare at Olin, typically running less than 1 percent, which is the company’s goal. In July, its rejection rate was 0.44 percent.
   Rejections that do occur usually involve lead, iron, or tin contaminants. Sometimes a supplier will mistake bare bright copper for an alloy typically containing 2.5 percent iron. Or someone might mistake cartridge brass, a 70/30 copper-zinc alloy, with alloy 353, which contains lead and is often used for key blanks and lock assemblies. At other times, a load might contain free iron as shavings or in other forms. Oil is sometimes a problem as well. Olin can handle scrap with an oil content of as much as 0.5 percent, though some brass mills can’t accept any oil content at all.

The ABCs of UBC Quality
In the past few decades, technology has enabled aluminum producers to—among other gains—make thinner sheet and, hence, lighter aluminum beverage cans. High-quality used beverage containers (UBCs) are an essential feedstock in the production of aluminum can sheet. Contaminants can create breaks in the production process, produce an inferior finished product, pose safety and environmental hazards, and more. In UBCs, such contaminants can include moisture, PET, dirt, aerosol cans, steel cans, wood, glass, and non-UBC aluminum or other base metals.
   With this many potential contaminants, no wonder consumers like Alcoa Inc., the world’s largest aluminum producer, have implemented strict UBC quality assurance programs.
   To meet its raw material needs, Alcoa currently accepts UBCs from nearly 2,000 suppliers. It inspects every load for the aforementioned contaminants and grades it according to a system that was developed in-house. The object of the system is the same as for most consumers—to lower overall costs, improve safety and performance, and protect equipment by reducing contaminants.
   UBC shipments that don’t meet published Alcoa quality standards are subject to supplier notification or rejection. Suppliers with substandard quality problems are given data from the grading process so they can see at a glance how their scrap shipments compare with Alcoa’s standards. Periodically, the company also performs audits to help suppliers improve their performance.
   Every year, Alcoa gives its top suppliers its UBC Supplier Quality Award, recognizing their work in consistently providing UBC shipments that were virtually free of contaminants.
  “Through time, our system has continually improved to the point where we’re receiving the highest-quality UBCs the market can deliver today,” says Bryan Steverson, chairman of Alcoa Rigid Packaging’s UBC quality committee. “Our program has active involvement from management, hourly employees, vendors, and suppliers. We work as a team toward common objectives, and the results have supported the program.”

The Paper Quality Chase
Quality is also an increasingly important issue with nonmetallic scrap processors. Cedar River Paper Co., which boasts the world’s largest single-site recycling mill in Cedar Rapids, Iowa, has had a quality sampling and rating program in place since its inception five years ago.
   The plant has the capacity to process 3,000 tons of scrap paper a day to produce linerboard for corrugated containers. OCC accounts for approximately 90 percent of the company’s scrap feedstock, with mixed paper and pulp substitutes making up the remainder. The mill, which has in excess of 1,000 supply sourcing points, uses standard industry-based paper specifications to note the grades it wants.
   Under Cedar River Paper’s quality assurance program—dubbed Quality Control Sampling—each incoming load is visually inspected and its quality is logged. If a problem is noted, the shipment is inspected more closely. If the problem is with the entire load and not just one or two anomalous bales, the inspector will generally downgrade the load, photograph it, and take a sample of the contaminants. When appropriate, a digital photo backup is also made, says Edward Sparks, the mill’s support supervisor.
   When a questionable scrap load is encountered, verbal and written reports are given to the supplier.
   The mill’s visual-inspection procedures are backed up with random sampling. Three days a week it randomly selects bales from 20 trucks. The bales are broken apart, sorted, and classified, after which a report is generated. Wax-coated paper and board—such as that used in the packaging of meats and produce—is a serious contaminant for the mill, as is the lower-quality packaging material recovered from products imported from the Far East.
   Cedar River Paper measures all suppliers against one another to determine a ranking based on the percentage of contaminants in their scrap deliveries. The resulting chart is forwarded to each supplier monthly. The names of competing suppliers aren’t revealed on the chart, but each supplier can see where it stands in the rankings. “Our suppliers appreciate the feedback and want to do a good job,” Sparks says. “We’re perceived as being fair. They like seeing how they’re doing against the competition.”
   The mill’s ranking chart helps show which suppliers consistently deliver quality scrap and which need attention. “You have anomalies periodically, but if one supplier is constantly in the red, I’ll visit them in the field and bring their people into the mill, if necessary,” Sparks says. “If that doesn’t work, we’ll drop them. That has happened.”
   Another paper recycler—SP Recycling Corp. (Atlanta), which buys ONP for its parent mill, SP Newsprint Co.—implemented a supplier rating system when U.S. recycling practices changed in the early 1990s. At that point, the nation’s recycling culture changed from voluntary recovery to government-sponsored and enforced curbside collection. The company went through a three-year period through 1996 when it was obliged to accept whatever suppliers shipped, which was often poor in quality. At one point, the quality was such a problem that SP Newsprint wouldn’t even buy ONP from SP Recycling, its own scrap division.
   In an effort to improve quality and become ISO 9002 certified, SP Recycling spent $6 million to install a state-of-the-art ONP sorting center to support what the company calls its Star Program. As part of this program, the company began to randomly sample 400 to 500 pounds of every incoming load. It classifies each load based on moisture percentage, flexible plastic bag content (measured in bags per 2,000 pounds of ONP), and percentage of contamination (based on the combined outthrows and prohibitives factored by the weight of the sample).
   The supplier receives the sample results within 24 hours, as does the supplier’s assigned account representative, who is responsible for any followup action deemed necessary. Quality improvement plans are then developed and included in future supply agreements.
   This program has enabled SP Recycling to consistently deliver ONP to SP Newsprint with a contaminant level of only 0.5 percent, which has improved the mill’s production efficiencies and increased its customer satisfaction and, hence, its orders. The program has also reportedly enhanced SP Recycling’s relationships with its ONP suppliers.

The Cost of Quality
Though consumers are reluctant to talk about the costs of starting a supplier rating program, many companies say such costs are minimal and generally limited to the administrative side. The labor and equipment required to inspect incoming deliveries would generally have been a necessary expense in any case, they note.
   Summing up the prevailing attitude on the subject, Alcoa’s Steverson states, “There are obviously some administrative costs, but the benefits and value of this program are far in excess of those costs.”
   The technology and consolidation trends currently sweeping the recycling industry suggest that supplier rating programs will continue to become more pervasive and fine-tuned. Perhaps the largest single issue will be the effect of e-commerce on scrap procurement and scrap quality. Computers will also likely make supplier notification of scrap quality or delivery issues more automated and instantaneous.
   In addition, while there’s currently little substitute for visual checks of incoming material, inspection procedures can be expected to become more automated as high-tech equipment becomes more widely available to suppliers and consumers.
   The one undeniable fact is that consumers will continue to raise their scrap quality standards in order to remain competitive in the increasingly global market. For scrap suppliers, the challenge will be to continue to make this ever-higher grade. •