March/April 1992
Quality is a concept that can't be taken lightly. In fact, in coming years, scrap firms that aren't committed to quality may have to face not only downgrades and rejections on particular shipments, but also loss of markets.
BY MORRIS MARKOWSKI AND ELLEN UPMAN
Morris Markowski is a trader with Wise Metals Co. Inc. (Linthicum, Md.). Ellen Upman manages the firm's transportation and quality control.
For the aluminum scrap industry, energy was the buzzword of the 1970s and cost of money in the 1980s. This decade, however, the word of concern for metal recyclers is quality.
Unfortunately, the term can mean different things to different people, and can encompass not only what might be called "quality in fact"—meeting all requirements all the time—but also "quality in perception"—offering convenience and reliability, being courteous, anticipating customer needs, providing simple and clear instructions, and resolving complaints quickly and fairly. Sorting through these interpretations of quality may be confusing, but the alternative—rejections or downgrades—can be devastating.
The Quality Expectations
In these days of just-in-time deliveries, scrap consumers would prefer not to reject loads. Nevertheless, they're not willing to sacrifice their quality needs for the sake of feeding their furnaces. The reason is simple: Consumers seek to manufacture specific products or alloys that require a certain mix. In addition, their quality specifications take into consideration safety factors dictated by the plant's design. Thus, what may be excellent feedstock for one consumer could spoil the pot for another.
Although secondary aluminum ingot makers tend to be more flexible than mills in their quality standards, the prices they pay often reflect that tolerance. In fact, as 1992 got under way, the difference in price between mixed low-copper aluminum scrap shipped to mills and mixed low-copper material shipped to secondaries was approximately 4 cents per pound—and growing larger as aluminum values on the London Metal Exchange continued to increase.
Obtaining the most money for a load of scrap, and avoiding rejection, relies on a simple strategy: fulfilling the terms of a purchase agreement. This means both the buyer and the seller must have a clear understanding of the exact alloy, weight, gauge, and allowable contamination of the material. Vague provisions, such as "some dirt," "a little iron," or "a trace of plastics," only invite trouble, while using precise terms like "15-percent paint," "less than 1 percent iron," and "plastic on every other sheet" clarify the terms of the purchase and decrease the likelihood of rejection.
The consumer's purchase order also should spell out the price to be paid, packaging specifications, and date, time, and location of delivery. Neglecting any of these conditions is grounds for a rejection or downgrading. (See "What's Wrong?" on page 82 for a look at some common reasons for rejection.)
An Ongoing Process
It may seem that once a load of scrap has been shipped, unloaded, weighed, and accepted, the shipper's quality concerns are over, but this is not the case. Contamination, for instance, may not be detected in baled or briquetted material until it's been charged into the furnace, perhaps spoiling the melt or even causing an explosion. Although the consumer has inspected and accepted the material and, therefore, should take some of the responsibility for any problems, if the consumer can prove who shipped the scrap it will likely seek compensation for any losses.
Mills keep a watchful eye out for scrap processing companies that regularly overlook quality considerations in their aluminum deliveries, tagging those shippers' files with a red flag that alerts inspectors every time material from particular firms enters the gates. The result is that even the smallest problems may be magnified, causing the processor unnecessary aggravation. Eventually, the consumer may bar certain companies from further deliveries, perhaps causing those companies to lose an important market for their materials.
In addition, many consumers have taken this concept a step further, developing report cards to evaluate loads on a point system. Scrap processing firms that do not achieve a minimum score every quarter may be barred from future sales.
Nevertheless, because they are striving for efficiency as well as quality and may be carrying low inventories, many aluminum scrap consumers are taking steps to ensure that they receive the quality material they need to feed their furnaces. Some mills, for instance, have formed partnerships with suppliers that are willing to consistently provide quality raw material delivered on a timely basis. In exchange, the mills often recommend processing or grading changes designed to increase the value of certain scrap, advise the scrap processors on how to improve their report card scores, and share market information.
Quality Control at the Top
When it comes to quality, the buck stop at the top—with the key executives of the businesses that process, broker, and consume aluminum scrap. After all, they are the ones responsible for their firms' bottom line and growth, both of which rely on attaining a level of quality that satisfies their customers.
These individuals can't be all places at all times, however, so educating employees on the meaning of quality is a must. For example, a processing firm can't deliver a quality load unless its employees responsible for grading, packaging, and loading the scrap fully understand appropriate contract requirements. And buyers and sellers of scrap won't be able to follow industry-established guidelines for quality control if they aren't familiar with "Scrap Specifications Circular 1991," published by the Institute of Scrap Recycling Industries (Washington, D.C.).
It's also critical for top management to set an example of the importance of quality in the company's products and services and to take the lead in improving quality by providing proper training and feedback to individual employees. This can be accomplished, in part, through statistical process control, a popular method of tracing errors that teaches employees how their work relates to the final product of the ultimate user and where their responsibilities fit into various larger systems and processes.
Total quality management leaves no room for blaming others; excuses like "My foreman was sick and a new man took over" or "It wasn't raining when we loaded" are not substitutes for quality. If the key executives of scrap processing companies don't take all appropriate measures to protect their image as quality shippers, consumers will respond by seeking other suppliers, or even establishing their own processing divisions.
Establishing a quality-control program can be a big step in the right direction for many scrap processors, but only if they approach the program with a real desire to make it work. Quality control fails when
- People have a vague or inaccurate understanding of what quality means. If quality is perceived as merely meeting technical specifications or doing good repair work, only mediocre results will be achieved. Quality must be perceived as managing for excellence in all operations.
- Top management doesn't solidly back quality. Low or wavering commitment of energy and support will scuttle even the best-conceived improvement effort. This often stems from a poor understanding of quality's role in all corporate functions.
- A company handles quality improvement as just another temporary program with a lot of slogans and banners. If top management treats quality as nothing more than lip service, department managers and supervisors will view it as yet another onerous task to add to their already-full plates. Token participation is all that is evoked.
The Never-Ending Quest
Quality is not a new concept in the scrap industry, but, these days, it's more important than ever before. It's a word that belongs over the doors of every office and plant area of every scrap processor, broker, and consumer that plans to be in business when the next century begins.
The never-ending quest for quality begins with a simple concept: delighting the customer. This requires meeting all obligations and specifications, providing services and products that work correctly, and doing it right the first time. Put it all together, and quality means never having to say you're sorry.[END]
What's Wrong?
Most rejections fall into one or more of the following general categories:
- Contamination. Moisture in a load of aluminum scrap can cause a furnace explosion and improperly specified alloys can spoil a heat or even produce hazardous fumes if melted. Other significant contamination concerns include excessive oil, loose iron, and painted scrap mixed in a load that is supposed to be bare.
- Preparation and Packaging. Some mills do not accept scrap in gaylord boxes and will undoubtedly reject any material shipped in such a fashion. The same would hold true if scrap that is supposed to be briquetted is shipped loose or if material specified as processed to a certain size turns out to be a different size. In addition, consumers commonly reject loads that are so poorly packaged that the containers they're shipped in can't be unloading because of material shifting during transportation.
- Documentation. Without the proper paperwork, a shipment cannot be considered a quality one. In fact, many scrap aluminum deliveries have been held up because of lack of accurate documentation, leading to demurrage and additional costs to the shipper. All shipments should be accompanied by the buyer's purchase order and delivery numbers; a description of the material, such as alloy type, number of packages, weight, and tare; the name of the company that the shipment is for, and any material safety data sheets required by the receiving plant.
It's sometimes possible to arrange a price reduction on a rejected load as a means of compensating the consumer. At other times, however, the entire load must be returned to the processor or shipped to another consumer—which will generally offer a much lower price. —M.M. & E.U.
Quality is a concept that can't be taken lightly. In fact, in coming years, scrap firms that aren't committed to quality may have to face not only downgrades and rejections on particular shipments, but also loss of markets.