Brian Taylor

Features

An elusive prey

Operations Focus

Even customized software can lag in tracking inventory because of the multiple stages and quick decisions inherent at recycling plants.

June 2, 2015

The inventory held at a recycling facility—whether it handles metals, paper, plastics or mixed materials—changes from minute to minute, not only in volume but in many other ways.

Decision-makers throughout an organization may have reasons to blend or combine materials to upgrade them or to fill an order in a process that is a daily occurrence at plants across all types of secondary commodities.

Changing monetary values also can prompt changes in inventory management and grade classifications, a circumstance that is especially acute in the nonferrous sector, where metals prices fluctuate on a constant basis.

Nonferrous recycling company managers say they are largely pleased with the customized recycling software they own, but the nature of the business can present problems that can only be solved through personnel training.
 

Downside of upgrades

Upgrading materials is one of the foremost ways a nonferrous processing firm can squeeze out a profit margin, but the practice can create headaches on the inventory management side.

Scott Gezymalla of Lincoln Recycling, Erie, Pennsylvania, says upgrades can be as common as stripping wire or cable to create a bare bright copper product, or they can involve more complicated procedures.

In all cases, he says, the inventory management aspects of the operating software used by Lincoln Recycling “can account for that—but the key is making sure everyone in the office absolutely understands the scrap business and the natural flow of material through the facility.”

Another Pennsylvania-based recycler, who prefers not to be named, says gaps in communication quickly can create incorrect inventory readings. In extreme cases, as when a less common grade has been upgraded and blended with another, this can result in negative inventories being displayed.

Like Gezymalla, the recycler says internal communication is one of the keys to preventing such inaccuracies, while another is the need to take prompt action to enter data in the midst of what can be a hectic plant environment.

Obligations to meet

The software used at recycling facilities helps carry out many crucial functions to help improve efficiency and profitability, but it also increasingly helps carry out legally necessary obligations.

City Scrap and Salvage Co., Akron, Ohio, was for decades a privately held business operated by members of the Katz family. Earlier this decade, it was acquired by publicly traded steelmaker Timken Co., based in Canton, Ohio.

The acquisition was one of several reasons that prompted City Scrap to recently upgrade its operating software, with obligations pertaining to federal Sarbanes-Oxley Act (SOX) corporate disclosure requirements at the forefront. “SOX controls differentiate us from privately run companies and make our lives much more complex,” Katz says.

Recyclers large and small also have worked with software providers to develop the tools necessary to respond to metals theft laws enacted throughout the United States.

Photographic and scanning devices that track license plates and drivers’ licenses and that capture images of what inbound material looks like have become standard issue at scrap facilities—even the smallest retail yards.

Katz says his new software is no exception. “Each purchase includes photos, which is good for the police,” he says.

At The Federal Metal Co. in Bedford, Ohio, Karen Calo and Michael Buyarski say the operations software the company uses can track the status and history of inbound materials accepted by the company from receiving through shipping.

In Federal’s case, its role as a consumer of much of the scrap it receives in its ingot-making furnaces complicates the tasks it asks its software to perform.

As with the Pennsylvania firms, Federal also may choose to upgrade materials, either for its later use in ingot production or to resell to another company. “Most of the time, scrap that comes in to our receiving area is not furnace ready,” says Buyarski, chief operating officer at Federal. “Sometimes we have to cut it or briquette it or perhaps get the moisture out of it. A lot of times we have to sort it further.”

The degree of materials processing taking place at Federal Metal means it needs to pay the same attention to inventory management as other recyclers in a series of steps that entails considerable communication between more than 20 employees.
 

Start to finish

As Buyarski indicates, at Federal Metal material that is received in one condition inevitably changes its shape, form and value as it makes its way from receiving to shipping. That is a pattern that is common to scrap processing plants such as Lincoln Recycling but one that contains additional steps at a furnace operator like Federal.

Although Federal Metal’s operations are largely contained within two buildings in Bedford, the company nonetheless has a 28-user software license to ensure that employees from throughout its production chain are updating and seeing the same inventory status reports.

“Our software incorporates purchasing, receiving, scrap movement, processing, classifying, splitting [of scrap grades], inventory, sales contracts and shipping of both scrap and ingots,” Calo says.

At the start of the process, “We weigh each incoming box and compare it to the packing list. We receive lot-based shipments, so 10,000 pounds of one grade may be packed in five boxes, and [we] work from there,” she continues.

“At the dock someone dispositions what needs to be sorted, what goes to the lab and what is furnace ready, so it can allocated into heats,” Calo adds.

“The same software carries through at our shipping facility across the street. Each skid of ingots has the chemistry from that heat and the sales contract pulls through to shipping,” she comments. “The software is very good about creating a history; for every heat you know exactly what went in. We receive [materials] with a vendor code plus a contract code that tracks if the scrap has been sorted or whether it came in clean enough to use. Also, downgrades are shown.”

Buyarski, who has a hot metals background, says the company had to make some compromises when selecting software designed for recyclers rather than one designed for foundry operators. Federal Metal’s previous software was more foundry- centric, and Buyarski says he misses some of its features.

When it comes to secondary ingot production, however, “There are only eight of us left in North America, so there really isn’t a custom software market,” Buyarski remarks. “If we were just a foundry, we could use a casting software. If we were a scrap yard, we could use a software like this without any gaps.”
 

A monthly necessity

The reclassifications and upgrade requirements that can create incorrect inventory data are not likely to go away, as upgrading is a vital and necessary task for nonferrous metals recyclers.

Identifying and correcting such mischaracterizations often falls to the monthly inventory process that takes place at recycling plants around the world.

The recycler in Pennsylvania says negative inventory balances cannot persist longer than 30 days at his company because of monthly inventory procedures. When an inventory process reveals a negative inventory reading, he says it most often is not difficult to correct.

“Most of the upgrading that takes place follows very common patterns,” the recycler says. “We can be reasonably certain where to look first and know which material with a negative inventory is likely to match up with another material that is showing a surplus.”

Gezymalla says Lincoln Recycling does not permit negative inventory readings, but it does experience similar inventory updating requirements; if these negative numbers are not flagged sooner, they will be during monthly inventory.

“We buy aluminum sheet, but we also upgrade purchased sheet to extrusions, and that upgrade entry may not be made immediately in the software,” he comments. “But when we are out of weight in extrusions, we know from where it was upgraded.”

Gezymalla says a similar pattern exists concerning No. 2 copper and yellow brass.

As a scrap consumer, Buyarski says Federal Metal runs into a similar challenge with the way inventory is deployed in the ingot production process. “I would like more flexibility in the inventory management aspects of our software,” he states. “What drives me crazy is when we buy, say, 10,000 pounds of nickel and use it in 30 different heats. We might have just 30 pounds left and the system insists on keeping it there. We can’t zero it out easily.”

The monthly inventory and reconciliation process at Lincoln Recycling involves several procedures, including comparing the inventory readings in its software with the bar-code tags physically present on material at its facility.

“We pick up and weigh all unprocessed material and we check off everything on our computerized tag list against the tags in the warehouse,” Gezymalla says.

Software with good tracking capabilities combined with a thorough inventory process yields multiple benefits for a scrap processing company, according to Gezymalla. “On the nonferrous side, we’d have limited ability to maintain a hedged position without the right software. Without accurate inventory data, you wouldn’t know what you need to sell to stay hedged,” he comments.

The inventory process also is critical when it comes to theft prevention. Scrutinizing inventory every 30 days by matching scale records with shipping and inventory records ideally means any theft schemes can be quickly detected, says Gezymalla.

On a more positive team-building note, Gezymalla says the inventory process also is an ideal way to improve companywide knowledge and to bring together operations and office personnel who work together throughout the inventory process.

Lincoln Recycling has a 24-user software license shared by some employees who seldom leave the plant or yard and others whose job duties require them to be mostly deskbound. “A good office staff wants to stay informed; and, when they take part in inventory, it helps them better understand what we’re doing.”

Keeping human eyes and minds involved in the inventory process provides critical benefits, but recyclers also are keen to mention they have no desire to return to the days before software did the heavy lifting for inventory tracking.

When Gezymalla started with Lincoln Recycling in 2007, the company “didn’t incorporate 10 percent of the software’s functionality, and we were still writing out a lot of hand slips.” The subsequent computerization, he says, has been a tremendous labor savor and efficiency creator.

At Federal Metal, when it comes to the more than 100 grades of scrap the company handles (classified by chemistry and by form, such as turnings, clips or briquettes), neither Buyarski nor Calo say they want to contemplate turning back the clock to before recycling-specific operating software was introduced.

“My great-grandfather started this business 100 years ago,” says Calo. “He and my grandfather would take old mail and use the back of envelopes to take inventory, eventually recording it in ledgers. With the type of volume we do now, I can’t conceive of operating without software.”


 

The author is editor of Recycling Today and can be contacted at btaylor@gie.net.

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