November/December 1989
Has your firm learned its lessons from the struggles of the early ’80s? Have you been coasting along on the tide of mid- to late-’80s success? Are you open to—and prepared for—the changes awaiting you in the ’90s? Here are a few questions to consider as your business enters the next decade.
By Paul Green
Paul Green is director of membership services for the Institute of Scrap Recycling Industries, Washington, D.C.
Your scrap recycling operation today might not look too different than it did when someone in your family started it many years ago. As your operation entered the '80s, there probably were some noticeable physical changes such as the addition of new pieces of equipment or property. Those purchases might have ranged from a new forklift to a new shear or furnace. Among the major concerns prior to the early '80s were competition for raw material, transportation issues (particularly rail), raising administrative aspects to more sophisticated planes, and being as efficient and profitable as possible.
Looking back over the last 10 years, how farsighted were you in dealing with many of the explosive issues that occurred—issues that win have far-reaching effects on this industry through the next decade? Certainly, some of the issues of the '70s will remain, for they constitute the essence of running a scrap recycling operation. But the issues that developed through the '80s severely test the ingenuity, business acumen, and entrepreneurial skills of industry members who have relied on their historical perspectives to make business decisions.
Futurist Alvin Toffler surmised that change can happen faster than a person's ability to react to it. To prepare for change, individuals must develop a sense of the future, both short- and long-term. They need to explore the "what-ifs" and develop methods of meeting challenges—both positive and negative ones.
Currently there are raging debates going on in communities across America about recycling, landfill space, and solid waste reduction. These are communities in which your business exists and operates. Perhaps there is debate within your own business as to how you fit into the definition of "recycling" developed by your community. No matter how that debate develops or how your firm fits into that complicated equation, there is a possibility that how you ran your business in the '80s might not cut the mustard for the '90s.
Survival Tactics
In the early '80s, one of the predecessor organizations of the Institute of Scrap Recycling Industries conducted a survival seminar. It offered ideas on how a scrap recycling operation could survive a difficult economic downturn that was causing bankruptcies and major consolidations. With healthier markets the last few years, there would seem to be no need to conduct such a program. But what about learning how to survive new industry-related economic, political, and societal changes that are continuing to develop?
The last statement might seem fairly broad and it might be hard to conceptualize where your firm fits in, so let's try to relate it to some specific issues your firm might face over the next decade.
Material. Will you be handling the same kinds of materials you do today? Will your competition be broadened because of government involvement in recycling? If you decide to evaluate the types of material you want to handle, will your operation be flexible enough in terms of flow and storage to handle these new materials'? Is current equipment adequate for processing? Does knowledge exist to market material you might not be familiar with?
Personnel. Many scrap firms during the past few years have found this area to be a difficult and frustrating one. There seemed to be a dearth of midmanagers, particularly supervisors and general managers. While the family enterprise is still the backbone of the industry and most likely will remain so, more and more family operations are taking fresh approaches to developing nonfamily managers. Some are continually confronted with the question: After you have attracted competent nonfamily managers, how do you keep them? The assignment becomes harder when that person knows he or she can never advance above a certain level. Is your family firm willing to have a nonfamily member as president? Are you prepared to give stock to a nonfamily member? Also included within this area is the question of continued employee training. Do you have in-house expertise? In your budgeting process, do you consider how your staff will acquire new skills and knowledge?
Operational Layout. If you currently handle a mixture of ferrous and nonferrous metals from peddlers and industrial sources, could your current structure accommodate other materials that historically you did not consider? Would you need additional scale operations, more warehouse space, new rolling equipment to meet more diversified needs, an administrative system that can identify and track a more complex variety of materials as well as meet mandated reporting requirements? When scrap recyclers look toward expanding or developing a new operation, they naturally speak with other scrap processors about how they plan and operate their businesses. That is a first step, but changes and developments in the industry are requiring consultation with planners in other manufacturing environments that might be more closely aligned with the industry than they were in the past. Expertise from nontraditional sources may become the norm rather than the exception.
Quality of Product. The discussion about this issue continues to intensify. The specifications set forth by consumers most likely will become more stringent regarding preparation, packaging, and shipment of products produced by scrap processors. The superintendent of operations of a large steel mill that uses both the basic oxygen furnace and the electric furnace addressed the feeling among some scrap processors that steel mills are the ones producing problems with the additives to their steel. He indicated that the steel mills need to prepare steels according to the requirements of their customers and these needs are continually changing. By the time a product is ready for recycling, customer specifications for the next product might have changed. It will continue to be the responsibility of the scrap processor to be aware of the quality of product he is supplying to the mill and to meet the specifications that exist. Will your quality-control apparatus be sophisticated enough in the future to meet these ever-increasing quality demands? The quality-control process that you now have might be adequate for the products you currently handle, but what happens if you take on other materials? In visiting some ferrous and nonferrous consumers, each facility told of how it was going about rating its suppliers--processors--and the need to have this process extended all the way down the flow chain, with processors in turn rating their suppliers.
The above issues center on operational and administrative concerns for the '90s, but there are also environmental and legislative concerns that will have a profound effect on your decision-making process. As you search out answers to the questions raised above, you also should consider things like storm water collection, oil containment, concrete padding, and a host of other environmental systems. Installing these systems takes money. If you had sales of $1 million, would you spend $100,000 on environmental programs? If you had $10 million in sales, would you spend $350,000? Would you spend $1 million on $35 million in sales?
Will the '90s be different than the '80s? You'd better believe it. Conducting a scrap recycling enterprise during the next decade should prove to be an intellectual and fulfilling challenge for those willing to prepare themselves and their businesses.
Did the '80s prepare us for the next decade? Yes and no. The lessons from the hard early '80s may have faded because of the more profitable mid- to late '80s. However, no one should turn a deaf ear to the messages we've been receiving about the need to change and adapt to celebrate the continued strength of the recycling industries.
Keeping Up
There are, of course, many companies that are staying on top of industry changes. Here are a few things some firms are doing.
Central Metals Co., in Atlanta, has set up buying centers in the community for residents’ glass and newsprint and is considering adding a center for plastics. The yard at its main facility is almost completely paved to avoid possible soil contamination, and the firm is installing a storm water treatment system. There are limits on what materials are accepted for processing—for example, unless drums that contained potentially hazardous material have been certified as clean by the previous user, they don’t enter the plant.
At Brocks Scrap & Salvage Co., in Cumberland, Maryland, employees are trained to identify potentially hazardous material that may enter the facility; notification procedures are in place in the event something does come across the scales. Employees receive periodic examinations for potential exposure to hazardous substances. The firm takes soil samples and has instituted a storm water treatment system. As for expanding to handle additional types of materials, Brocks Scrap & Salvage has set aside a 1-acre lot to build a processing facility—it is actively assisting the municipality in developing its local recycling program and is committed to processing materials chosen by the county once the program is in place.
For a time, Baltimore-based United Iron & Metal Co., Inc., refused to accept small appliances, which may contain potentially hazardous polychlorinated biphenyls in their capacitors. To keep this scrap coming in, however, the company instructed its suppliers and trained its scale employees and its inspectors in the yard on how to ensure capacitors are not present in appliances. United Iron & Metal is adding a super-heavy-duty wet shredder to its operation to increase the value of input material and to more easily control air quality. The firm plans to increase its nonferrous metal processing: it recently won a bid from the city to process steel and aluminum cans collected from city residents who voluntarily take these items to designated collection sites. While United Iron & Metal owners are family members, nonfamily employees work in key positions as scale operators, scrap buyers, traders, supervisors, and accountants. •