May/June 1993
This 50-year-old Indiana-based firm strives to maintain the personal touch of a small company despite its stature as a formidable player in the scrap processing and brokerage businesses.
BY KENT KISER
Kent Kiser is associate editor of Scrap Processing and Recycling.
When Irving Rifkin started his own scrap business in 1943, the firm—Superior Iron & Metal Co.—was a humble processing facility in Fort Wayne , Ind. Thanks in large part to the founder's farsighted philosophy, OmniSource Corp., as the company is now known, has become a major player in the U.S. scrap industry, with 22 operations that annually process and/or broker in the neighborhood of 1.5 million tons of ferrous scrap and 300 million pounds of nonferrous scrap.
"My father was more interested in growth, in building something, than in the immediate satisfaction of a deal here or a deal there," recalls Leonard Rifkin, OmniSource's president and chief executive officer, of Irving 's focus on the future. "He looked at long-term opportunities rather than short-term benefits, and I've kept the same philosophy."
OmniSource's other top executives—a group that includes Barry Dorman, senior vice president, and Leonard's sons Danny, executive vice president; Rick, vice president; and Marty, vice president—also share that outlook as well as the work ethic, high standards, and entrepreneurial spirit Irving instilled in the company. At the same time, they have tried to run their expansive operation with the intimacy and control of a small firm, viewing it not as a scrap conglomerate but as a "little big" company.
And as far as these men are concerned, the best is yet to come. "At OmniSource," Barry says, "we never look at how we are, but rather at what opportunities are available to us."
Growing the Company
While OmniSource's growth over the past 50 years has been nothing short of exponential, the company that translates it name to mean "one source for scrap products" has not expanded willy-nilly. "We've been growing at a controlled rate and within a region where we're fairly strong," Leonard says. "We try to grow with a plan and try to consolidate our positions as we grow."
In the past five years, the "plan" has been a formal, written strategic growth plan that the management group drafted to give the company a roadmap for the future. One area that map doesn't lead to is major diversification into unrelated businesses. "The scrap business is our business," Barry says. "If we all know that's the key for us, then we're running in the same direction." On the other hand, the OmniSource plan leaves plenty of room for expanding into new territories as the company's consumers direct. "If a consumer has a need and we have the expertise and capital to meet that need, then we look at a venture to grow," Marty says. "We've always followed the direction provided by our major consumers." As an example, OmniSource opened a precious metal recovery operation in 1984 to process silver-bearing scrap. The reason? "A lot of our consumers of other grades of nonferrous also use silver to make certain alloys," Rick explains, "so we saw it as a nice adjunct to that business."
Balancing this kind of growth with the company's desire to maintain a small-company atmosphere has meant adjusting its corporate structure to make it as organized as possible, Danny says. "We certainly don't want to have a corporate structure that inhibits our response time or alienates us from our suppliers, consumers, or employees." Thus, OmniSource's operations, which include 13 processing plants, four feeder yards, and five trading offices, are grouped with like operations into one of three business units: the ferrous group, the nonferrous operating group, and the nonferrous trading group, each of which may have ties to a particular OmniSource facility.
The company's three Fort Wayne operations—known as plant 1, plant 2, and the granulator division—serve as its heart and nerve center. In addition to housing its executive offices, the 30-acre plant 1 has a nonferrous retail business, an aluminum can briquetting machine, a system that separates Ni-resist from aluminum piston turnings, an automotive block breaker, the precious metal recovery operation, and a furnace for melting irony aluminum.
A few miles away, OmniSource handles the bulk of its ferrous and nonferrous industrial-service business at the 46-acre plant 2, which it acquired in 1987. On the nonferrous side, this facility features a brass sorting line, several balers for processing copper and aluminum, and a furnace with a scrubber to sweat lead and insulation from copper wire and cable. On the ferrous side, the plant operates a shredder, two shears, and a baler. Meanwhile, the company's granulator division recovers aluminum and copper from insulated wire and cable.
OmniSource's other processing operations encompass a facility in Marion, Ind., that handles ferrous and nonferrous scrap as well as glass and paper; a processing plant in Toledo, Ohio, that features two shears, a baler, and cast-breaking equipment; an operation in Defiance, Ohio, that briquettes cast-iron borings and steel turnings; a processing and shearing facility in Mansfield, Ohio; a shearing and baling plant in Lima, Ohio; baling operations in Twinsburg, Ohio, as well as Warren and Wayne, Mich.; and an aluminum processing plant in Davenport, Iowa.
In addition, OmniSource operates three feeder yards in Indiana —in Auburn, Huntington, and Rochester—and one in St. Marys, Ohio. The company is also a partner in Gopher Smelting & Refining Co. Inc., a secondary lead smelter in Eagan, Minn.
The Processor/Broker Advantage
Of course, OmniSource is more than a processor, maintaining trading offices at its Fort Wayne headquarters, as well as in Toledo, Davenport, Atlanta, and Asheville, N.C.These offices not only serve as the marketing arm for OmniSource's processing operations, but also broker material from other vendors.
OmniSource's status as a processor/broker has its advantages, Rick notes. "Our operations and brokerage activities support each other," he says. "We're able to take a position for brokerage because we have tons behind us, which gives us more leverage in the marketplace. If we gain that leverage, then we're also enhancing our ability at our operating plants to buy or be competitive in our local market."
The principals also assert that their brokerage services have been enhanced by their previous experience working hands-on in the company's processing plants under Irving's tutelage. This bottom-up training has given all of them "a better understanding of what it takes to satisfy a consumer's needs, more so than if we were pure brokers without the background," Barry says.
The Quality Journey
Among the many strategies OmniSource has for satisfying its consumers is its "added-value" philosophy—that is, the company has continuously sought to upgrade its scrap to make it more valuable. "My father and grandfather always wanted to add value, so they employed whatever equipment they could to upgrade our products," Danny recalls. "That mindset started us on our way to becoming a processing company as opposed to just a dealer."
In the late 1980s, adding value became intertwined with quality assurance, and OmniSource responded by being one of the first scrap companies to implement a structured quality-control program. "We could see the quality movement coming," Rick says, "and we knew we needed to formalize and quantify our informal quality practices." More important, Leonard asserts, "We saw that, in the future, if you don't guarantee quality, you're not going to be able to ship any scrap."
Though the firm knew how to produce quality scrap, it didn't know how to implement a quality-assurance system, so it hired a quality consultant. "Why reinvent the wheel in your own particular shape when it's been done already?" Rick explains. As part of the program, Leonard and Barry traveled to Japan with the consultant to learn how Japanese scrap processors and consumers viewed quality. Since then, OmniSource has gone through "a complete restructuring to become a quality-oriented organization, and it wasn't easy," Leonard recounts. "It's a whole different psychology than what the scrap business used to be."
Today, OmniSource employs four full-time quality-assurance coordinators, trains all plant employees in quality-control procedures, and maintains testing labs at its operations in Fort Wayne , Toledo , Defiance , Mansfield , and Davenport. These labs feature high-tech equipment such as spectrometers that can detect up to 18 metals in a sample, atomic absorption units, grinders, small furnaces to melt samples, and moisture testers. "Each lab can test for the whole nine yards," Rick says, pointing out their importance in identifying material changes among scrap suppliers and verifying the composition of incoming packages. "We also use our labs as a marketing tool to help us represent our product to a consumer and provide an analysis with materials," he notes.
OmniSource officials say the company's quality-assurance program has yielded both internal and external benefits. "It has encouraged our employees to look at our products and processes from the consumer's perspective," Danny says. "It has also improved the consistency of our operations, reduced variability, and lowered our operating costs." Marty adds: "Our quality system isn't a paper program. We're working hard to make it real to our plant employees. And once the quality philosophy runs from the top to the bottom of the organization, we'll have productivity and employee involvement that you don't often see in our industry."
Externally, the program has helped the firm "crystallize exactly what our consumers expect," Danny continues. This is critically important, he notes, because "in some cases, we're not only responsible for delivery, service, and physical characteristics, but also for the chemistry of the scrap we sell." The company must be doing something right: It has received quality supplier awards from Chrysler Corp. (Detroit), Commonwealth Aluminum Corp. (Lewisport, Ky.), Cressona Aluminum Co (Cressona, Pa.), Dalton Foundries Inc. (Warsaw, Ind.), Ford Motor Co (Dearborn, Mich.), and LTV Steel Co. Inc. (Cleveland).
People Power
By most accounts, a scrap company with 680 employees would be considered large, but OmniSource's leaders don't see it that way. "We never look at OmniSource as a large company but just as a company made up of a lot of individuals," Barry says, asserting that the firm's "innovative and aggressive" employees are the true foundation of its success. "We could have the best markets in the world," he observes, "but if we don't have a good work ethic with our people, nothing would get accomplished."
Thus, OmniSource's personnel philosophies are based on two premises: The company must understand employees' needs and treat them well. "We respect and are concerned about all our employees," Danny explains, "and we want to ensure that everybody grows as the company grows, both personally and financially." In addition to providing competitive pay and generous medical and retirement benefits, employees have the opportunity to advance and be heard. "We're not some monolithic organization that says, `Your job is to do this,'" Rick says. "We want our people to think, be creative, and come up with new ideas. They've got unlimited opportunity."
To this end, OmniSource sponsors a Partners in Excellence employee-suggestion program. "The playing field and the rules are changing around us every day," Marty says, "and if you have rigid people, you're going to stay still or go backward. We have excellent people who are open-minded, willing to listen, and change. Our division managers, plant managers, and sales personnel—in addition to our plant employees—are what makes OmniSource grow."
OmniSource takes care of its employees in other ways as well. For plant employees, the firm adheres to a strict safety program, which includes safety orientation for new employees, monthly safety discussions, and special sessions on select safety topics. In addition, the company employs safety coordinators at all processing locations and works with a certified safety professional on a consulting basis.
For supervisors and managers, OmniSource has created OmniCollege, a continuing education program held at its headquarters. The program, directed by a local university professor, offers courses on management techniques, stress management, accounting, and more. And all employees benefit from the company's employee assistance program, which offers free, confidential visits to an independent counselor to discuss personal problems. "We try to make OmniSource a good place to work," Rick says.
In return for these benefits, he adds, employees "have a challenge and a responsibility to perform to the best of their ability, bring up what they think is wrong, and try to eliminate waste." Or, as Danny expresses, "We strive for excellence and expect it."
OmniSource's care and concern for people extends beyond the boundaries of its plants to the communities in which it operates. The entrance way at its Fort Wayne headquarters, for example, is covered with plaques and framed certificates honoring its support of the Indiana Sheriffs' Association, Fort Wayne Museum of Arts, and the local Little League, Girl Scouts, and United Way. In addition, the company proudly displays the recycling leadership awards it has received from the city of Fort Wayne for the past three consecutive years.
A Win-Win Situation
The final ingredient of OmniSource's success, its executives note, is the farsighted innovative spirit that infuses the firm. This spirit can perhaps best be seen in the scrap management arrangements the company has developed with scrap generators and consumers. In such arrangements, OmniSource contracts to serve as the exclusive scrap processor and broker at the generator or consumer's site. "Our approach is to try to work with our suppliers and consumers, understand their problems and needs, their costs in handling or marketing scrap, and see if we can employ our expertise to provide a service and increase their net revenue," Danny explains, "at the same time giving us a fair return on our investment and the opportunity to control additional tons."
Currently, OmniSource has scrap management agreements with the Nichols-Homeshield secondary aluminum mill in Davenport; Chrysler's stamping plants in Warren and Twinsburg; and Ford's Wayne assembly plant. Furthermore, the company's Mansfield ferrous processing plant has a just-in-time arrangement with the nearby Armco Inc. steel mill. OmniSource's scrap management team is headquartered in Toledo and is managed by Tom Tuschman, who serves as president of the firm's Ohio/Michigan division.
In addition to saving the suppliers and consumers money, Danny claims, these scrap management arrangements can also reduce their scrap quality concerns and eliminate the headaches and environmental risks related to processing and marketing their own scrap. "When these arrangements work out, they work out well for everybody," Leonard says. But as Barry points out, "The important thing is to have the background and the knowledge to perform the required tasks as opposed to just making it a sales approach."
OmniSource has also been farsighted when it comes to today's tough environmental regulations. "Our approach to environmental issues is to understand the regulations and meet or be ahead of them," Marty says. "We plug compliance costs into our investment calculations. If we can't justify a new venture on the basis of stringent environmental compliance, then we won't pursue it." The company not only has a full-time environmental manager on staff, but it also requires all operations managers to undergo training in how to deal with environmental issues both in the plant and with scrap. "Environmental restrictions are part of the business today," Danny states, "and we intend to manage them like we manage everything else."
For a company as broad-based as OmniSource, managing "everything else" is a gargantuan task, one that requires state-of-the-art computer equipment. For years, the company relied on a Wang system to manage and control the massive amount of data involved in running its diverse operations. As OmniSource expanded, however, its information-management needs also escalated to the point where it is now installing a new, more-capable IBM network. "We need to be current electronically," Barry says, "and we think that firms that don't update their computer systems will stunt their own growth."
Future Perfect
Looking back on OmniSource's growth in recent years, Leonard says he'd like to see the company "take a little time to consolidate right now, get everything operating smoothly, then go ahead with the next phase of growth, which is on the drawing board."
This next phase will likely include more scrap management arrangements. "With our expertise in both operations and brokerage, scrap management is a good way to grow," Rick says. The company may also pursue other types of vertical integration in the scrap industry, such as expanding its aluminum melting operations. As Leonard explains, "When you control as much scrap as we do, it makes sense in certain instances to turn it into another product and then market that product rather than a scrap product."
Danny also predicts that "we'll see more and more brokerage come into our group as we expand the potential demand for our ferrous products." And Leonard expects that "one day we'll probably get a location on the water, which would fit into our growth pattern. We have a lot of future plans, we have a lot of growth potential, and we hope to double our size in the next 10 years."
Are OmniSource's executives worried that the company could get too big? According to Rick, "If it gets to the point where I'm a suit in an office on the eighth floor, then that's probably too big." On the other hand, Danny asserts, "We believe that there's still a lot of equipment and technology available that can maximize the efficiency of our operations, add value over cost, and provide products and services that our consumers require. The challenge is to have the company grow while still maintaining the same values, philosophy, and atmosphere."
In other words, if the company's executives have their way, OmniSource will continue to grow but still remain a little big company.