Earlier this year, companies that use rail to transport scrap finally had enough after new demurrage policies resulted in extremely large charges after free time, especially for private cars, essentially disappeared. Many rail scrap shippers began experiencing demurrage charges that were between 600 percent and 1,000 percent greater than in previous years. Shippers of other commodities also experienced similar demurrage charges. These new charges were intended to improve rail service by requiring shippers to load and unload rail cars within the same day. However, for many rail shippers, this schedule is virtually impossible. Rail cars might not arrive on schedule or over weekends when facilities are closed, which exacerbated these charges.

These new charges didn’t sit well with shippers or the Surface Transportation Board (STB), which exercises economic regulatory oversight over rail service in the United States, including adjudicating complaints from rail shippers and railroads alike.

Under the Interstate Commerce Act, the STB has exclusive jurisdiction to resolve rate disputes in instances when railroads have market dominance–when the railroad is charging more than the regulatory floor and the shipper has no effective transportation alternative from other rail carriers or other modes of transportation, such as intermodal, trucks or barges.

The STB questioned the railroads’ policies, holding a series of hearings to get input from rail shippers and railroads alike. It was unusual for rail shippers to publicly speak up as loudly as they did, and the STB took notice.

The railroads stood by their policies, denying that the large demurrage charges were adding significantly to their bottom lines. Meanwhile, Wall Street was rewarding them for this new revenue.

The role of rail

Scrap commodities are integral to manufacturers in the U.S. and throughout the globe. They rely on efficient and reliable rail transportation to get these materials to their facilities all over the country. Manufacturers often save money by incorporating scrap. Using scrap also saves energy, conserves natural resources and protects the environment. For example, replacing virgin ores with ferrous scrap results in an energy savings of approximately 68 percent.

The U.S. scrap recycling industry is highly dependent on rail service to transport material to its facilities and to its customers’ facilities. Many scrap customers not only prefer but require their ferrous scrap to be delivered by rail for logistics and safety reasons. Consider that a gondola rail car is equivalent to five large trucks, which must be equipped with heavy liners to handle ferrous scrap. This need can reduce truck availability. Steel mills and foundries simply cannot have so many vehicles lined up and moving in and around their mills, never mind the increased traffic congestion these additional trucks would create.

Additionally, steel production in the United States has shifted over the past 50-plus years from legendary steel cities, such as Cleveland and Canton, Ohio, and Pittsburgh, to cities in the Carolinas, Texas and Alabama. However, the scrap recycling industry that served those legendary steel cities continues to prosper by using rail service to efficiently deliver their commodities to these new steel cities many hundreds of miles away. This makes efficient and reliable rail service vital to their survival.

Scrap recyclers consider the railroads partners because we need them to move our commodities. We agree that to make the nation’s railroads efficient, demurrage and other incentives need to be employed. We also agree the railroads need to be profitable so they can continue to invest in new rail cars, track and technology to meet the needs of shippers. This symbiotic relationship must be reciprocal.

The impact of PSR

However, this year, most railroads instituted precision scheduled railroading (PSR), leading to significant and sometimes excessive demurrage charges, as noted previously. While demurrage is a legitimate tactic to improve rail efficiency, few rail shippers were spared the drastic increase.

Before PSR, railroads provided several days for shippers to load or unload rail cars. Now, shippers get practically no time to load or unload, resulting in automatic demurrage charges. Additionally, if rail cars arrived on a weekend when a facility was not operating, demurrage charges would begin before operations resumed Monday.

Rail operations cannot always deliver the number of rail cars needed at a manufacturing plant because of many factors, including missed switches or other operational delays.

Before PSR, shippers and railroads agreed that adequate time was necessary to unload or load these additional “bunched” cars. Now, when rail cars are bunched—at no fault of the shipper—demurrage charges immediately begin to accrue.

At other times, demurrage charges have been added when shippers have no options based on historical practices or space limits. For example, a scrap recycling facility that has been in operation for 100 years with property limitations simply cannot expand to hold additional rail cars. However, when a switch is missed or another rail service problem arises, resulting in too many cars arriving days later, the shipper is unfairly charged demurrage.

On the other hand, if the railroad does not return a private rail car on time, no reciprocal charge to the shipper is assessed. Credit days a railroad may provide as a result of operational delays often expire at the end of the month before they can be used toward other demurrage charges. This means shippers get no relief for rail service problems yet get charged for circumstances out of their control.

Other issues concern inaccurate invoices and dispute resolution. Shippers complain that it costs too much to challenge incorrect invoices. As a result, the STB is working to develop a new way for shippers to challenge rates and other charges by making it easier for shippers to bring challenges and have resolution within a shorter time frame.

Seeking suggestions

The STB recently released a set of statements recognizing these complaints and asking for suggestions from shippers and railroads to remedy these problems and get things back on track. Every shipper, including the scrap recycling industry, reiterated that they viewed the railroads as partners, but also stressed that, as partners, the relationship needs to be made more equal.

This situation has festered for many years, and the scrap recycling industry greatly appreciates the leadership of the STB to tackle these issues. We welcome this opportunity to help resolve these long-standing problems by working with the railroads and the STB to find mutually beneficial solutions.

Billy Johnson is the chief lobbyist for the Institute of Scrap Recycling Industries, Washington. He can be contacted at bjohnson@isri.org.

Bobby Farris took the helm as CEO of Seattle-based Total Reclaim and its sister company, EcoLights, recyclers of regulated scrap materials, in mid-September. The companies, which Craig Lorch and Jeff Zirkle founded in 1991 to provide recycling solutions for refrigerants, lightbulbs, computers and batteries, likely sound familiar: Total Reclaim was the biggest participant in E-Cycle Washington, a program created by the Washington state legislature to provide safe recycling of hazardous electronics. That was until, according to the U.S. Attorney’s Office, news got out that Total Reclaim shipped 8.3 million pounds of mercury-containing flat-screen monitors from a storage facility on Harbor Island, off the coast of Seattle, to Hong Kong from 2008 through 2015.

Lorch and Zirkle, who previously served as Total Reclaim’s co-CEOs, appointed Farris to the role following their sentencing to 28 months in prison earlier this year. The sentencing occurred after the duo pleaded guilty to federal charges related to their LCD exports. Their prison time is to be followed by three years of supervised release, according the Department of Justice.

Farris’ responsibilities include improving transparency into Total Reclaim’s operations. He comes to the company from TerraCycle, a recycler of “hard-to-recycle” materials, where he served as general manager. Farris led its division that collects and recycles regulated end-of-life materials, such as lighting, batteries and electronics.

He has more than 20 years of executive-level experience in the appliance, lightbulb and electronics recycling industry and will use his background in sales and operations management to grow Total Reclaim. Farris previously served as vice president of business development for JACO Environmental, the country’s largest appliance recycling company at the time. For nine years, he also served as director of electronics recycling services at Houston-based Waste Management Inc., overseeing development and implementation of the environmental management standards for its electronics recycling operations and spearheading its expansion of electronics recycling services into nationwide product stewardship markets.

At the time of his appointment, Farris said, “My mission is to leverage my experience to lead Total Reclaim into a future that provides material reclamation services in a sustainable, accountable and transparent way.”

Shortly after starting his new role with Total Reclaim, Farris told Recycling Today, “Maybe I’m a sucker for the redemption story, but I think we have an opportunity to provide some redemption here for the company and for the employees of the company. I’d like to be a part of that, and I’m looking forward to the challenge.”

In the interview that follows, Farris shares the way he plans to increase transparency at Total Reclaim and his vision for the company going forward.

Recycling Today (RT): How do you plan to help rebuild trust in Total Reclaim given its owners’ legal issues?

Bobby Farris (BF): As you probably well know, one of the parties (Zirkle) is in the federal penitentiary right now, and the other (Lorch) will be going in next July. I think it’s important to note that the issues occurred three years ago, and the company has been operating since then, although it’s about half the size as it was at that point.

Obviously, we’ve lost some of our state product stewardship programs due to what occurred, but the business as a whole remains strong. It’s doing quite well in the lamp recycling side of the business and in the appliance recycling part of the business.

“Maybe I’m a sucker for the redemption story, but I think we have an opportunity to provide some redemption here for the company and for the employees of the company.” – Bobby Farris, CEO, Total Reclaim

The mistakes were made, and they were decisions made by the owners of the company, not by the employees. The employees have remained strong through the process and have stuck with the company and have kept it afloat. A lot of companies in the industry that have experienced similar things have gone out of business. I give credit to Total Reclaim that they have stayed alive and moved forward.

What I see my role as is coming in and setting a path, providing direction and allowing the employees to thrive, allowing the company to thrive. I’m in charge of all operations, all decision-making related to the company, all day-to-day decision- making. [Lorch and Zirkle] are no longer involved in that. And my charter here is to earn trust: earn trust from the customers, earn trust with the employees and earn trust from the industry as a whole. The main thing we’re doing to accomplish that goal is to provide more transparency to the process and to the company.

Oversight will be a key component of the company going forward. We’re actively searching for a new EH&S (environmental, health and safety) manager who will be a part of the executive leadership team. We’re putting in place a new code of conduct for employees as well as an ethics hotline that allows employees to call out any issues they may see that are concerning to them regarding company practices. The hotline will be independently managed and monitored, with any alerts communicated to a designated committee within the company charged with following up.

We’re still operating according to all the best practices within the industry. The company had and continues to have a very robust ISO system, both for environmental and for quality standards. The problem wasn’t that the system wasn’t in place; the problem was that the system wasn’t abided by. The company needs to do what it says it’s going to do, and that’s my mandate.

RT: Do you have anything planned to increase the company’s transparency?

BF: As I noted previously, we are in the process of onboarding a professional EH&S director and we are adding an ethics hotline.

Additionally, we are reassessing all of our processes and procedures related to material handling and downstream commodity management with the intention of establishing the most rigorous and transparent environmental quality standards in the industry. Additional details regarding these improvements will be rolled out over time as a part of our marketing and communications strategy.

RT: Do you have a timeline for implementing that strategy?

BF: Absolutely; we won’t be delaying decisions. In a sense, this relates to the core of how we operate the business. I don’t want to jump ahead on some of the questions you have, but one of the things I’ve learned over my career at Waste Management and at TerraCycle and other locations is that the electronics recycling business has been turned into a commodity-based business and not a service business. Currently, the stewardship programs or the manufacturers ask, “What’s your price?” and then evaluate your relative value primarily based upon how your price compares to the other providers in the market. Service probably doesn’t come up top on the list of evaluation criteria, yet it is the most valuable thing that you provide. And then, on the back end of the process, you’re really a slave to the commodity market.

In my view, the businesses in the industry need to be rewarded for the service they’re providing. Our goal is to set the company up so that it’s a service-based company and adequately compensated for the services we’re providing. But, at the same time, the services we’re providing need to add value to the supply chain ... [and you need to be] recognizing that value and communicating that you add value.

If you want the lowest price, you’re going to get the lowest quality service in most cases. I’m firmly convinced that’s not necessarily what the industry wants. It’s just that the companies providing higher value services haven’t done a good job of communicating what that value is, and so they’ve been put in a position where they’re competing with lower quality service and the pricing associated with [them].

Look at something like certifications. Those aren’t inexpensive. There’s a value that you’re providing to the supply chain by gaining that certification. For pricing to be built around the industry as a whole without taking that into account, I don’t believe it’s fair, nor is it sustainable, and it puts companies in a position where they have to operate on a shoestring to try to meet the pricing requirements of the industry. And that’s not where we want to be going forward. We want to be a service-based business. And we want to be transparent in what services we’re providing and what value we’re providing.

Just as a side note, someone I worked for a while back at Waste Management asked me, “What business do you think you’re in?” Obviously, my answer at the time was, “I’m in the recycling business.” His response was, “No, you’re not understanding fundamentally what you’re doing. You’re in the security business. You’re making sure that a customer’s material is handled correctly from an environmental liability perspective and then from an information security perspective. You’re being paid to provide a security service, and so you need to think about your business in terms of security. You need to manage your company accordingly, and you need to be compensated accordingly for the services that you provide.”

RT: How much of the company’s business today is on the lighting side versus on the electronics side?

BF: The question’s hard to answer because, you can answer in terms of revenue, in terms of pounds [and] in terms of resources. I would say roughly “half and half” of resources and revenue would be a good way to look at it.

At its high point, the company had about 200 to 250 employees. Now it has about 65 employees. But ... the business that we’re doing now is a more profitable business. The e-waste stewardship business, as everyone in the industry could attest to, does not come with very high margins. The business that we’re focusing on is a more profitable business and requires less resources to operate, but it’s not as much of a high-revenue business.

RT: What are Craig Lorch’s and Jeff Zirkle’s current roles with the company?

BF: They are still the owners, but they are not involved in the day-to-day operations of the business. I’m the one making all business decisions related to the company. Craig at this point is operating in an advisory capacity. He’s not an employee of the company, but he’s helping transition the management of the company over to me. Again, the decision-making is all in my hands, but I need Craig’s help to transition background issues related to any executive management decisions that were made in the past.

Jeff and Craig were the sole owners in the business, and those decisions resided in their hands. It’ll take a little while to get everything fully transitioned over to me.

In terms of Craig and Jeff, one of the things I want to point out is that they both expressed to me when they asked me to entertain this opportunity that their goal is to put the company in a position to reward the employees that have stuck with the company.

It’s been a very rough time, obviously, for those two, but it’s been an even rougher time for the employees. I wasn’t with the company at the time, but there were many times where the company could’ve gone under, and the employees kept it alive and kept it successful. And Craig and Jeff both expressed to me that the charter that they see for the new CEO is to put the company in a position to reward the employees for the efforts they’ve given. And I think that’s a credit to both of them.

RT: Where do you believe Total Reclaim excels?

BF: One of the things I noticed coming into the company is that the employees have all been with the company for a long time. They’ve managed very many types and very high volumes of material. They have had to make lots of decisions in a very stressful environment. And then they’ve weathered the storm through the legal issues, through everything that’s been going on over the last three years. It’s a very experienced team that can do great things, they just need a little bit of guidance, a little bit of leadership.

RT: Where would you like to see the company strengthen?

BF: We’re in a position now where we need to earn business. And earning business means being much better at marketing and communicating and sharing—simply sharing the story of the company, of the industry, of what we do, how we do it and why it’s important. That hasn’t been a strength of the company because it hasn’t needed to be. But I think that’s an area that we need to focus on going forward. And, in fact, I think it’s an area where the industry needs to focus going forward. You hear a lot about the bad in the industry; the good news doesn’t often sell. But I think in today’s news environment, one of the things I learned working for TerraCycle is that if you’re doing good for the environment, people do want to know about it. They do want to hear about it. And if you communicate it effectively, you can succeed at building your brand and building the business.

Bobby Farris is the CEO of Seattle-based Total Reclaim. More information is available at www.totalreclaim.com.

Balcones Resources, CP Group partner on system retrofit

Balcones Resources Inc., Austin, Texas, has partnered with CP Group, San Diego, to upgrade its single-stream residential and commercial material recovery facility (MRF) in Austin. The upgrade of the 100,000-square-foot facility that opened in 2012 was prompted by changing market conditions, rising labor costs and new technology, according to a news release issued by CP Group.

Balcones and CP Group tested and analyzed several scenarios to determine the correct design and use of optical sorters.

The retrofit was completed in May and features three Cirrus FiberMax optical sorters from Nashville, Tennessee-based MSS Inc., the optical sorting division of CP Group. FiberMax optical sorters run at 1,000 feet per minute on 112-inch-wide belts using near-infrared (NIR) technology to clean the fiber streams using positive and negative sorting, according to CP Group.

“After a lengthy project analysis, we decided to work with CP Group because their success in the marketplace, advanced technology and experienced team gave us confidence in our investment,” says Kerry Getter, Balcones Resources CEO. “MSS demonstrated our material and proved the results we needed to achieve to make the investment. We are already seeing those results at our facility.”

The FiberMax optical sorters remove fugitive plastics and other nonconforming items from the paper stream.

The retrofit also includes a new four-deck CP Glass Breaker screen to remove glass and fines, a 140-inch-wide CP Anti-Wrap Screen, CP’s newest fiber screen that separates large fiber from other materials and a 140-inch-wide CPScreen to separate small mixed paper.

The upgrade included new software designed to help Balcones better understand its production through quantified data. Through the use of an integrated SCADA (supervisory control and data acquisition) package, Balcones can track production on its balers, including daily material totals, as well as inbound and outbound material volumes on each line.

Branden Sidwell, CP sales engineer, says, “Working with the Balcones team has been a real pleasure. As operators and marketers of their material, they really know their numbers. When it comes to MRF design, you have to know your numbers in order to create the right solution. Balcones made it easy for us.”

Eriez to expand Pennsylvania plant

Eriez, Erie, Pennsylvania, has plans to expand its facility at 1901 Wager Rd., located about 15 miles from the company’s headquarters at 2200 Asbury Rd. The expansion will support strategic growth initiatives for repair, testing and global research and development (R&D) activities, Eriez reports in a news release.

The Eriez Wager Road facility, which opened in 2012, is currently 114,000 square feet. The planned expansion will add another 38,000 square feet. “We plan to break ground later this year and anticipate a 2020 completion date,” says Eriez President and CEO Tim Shuttleworth.

According to Eriez, the new space will be dedicated to creating specialized repair, testing, demonstration and R&D areas. Shuttleworth says the new areas will be designed to help Eriez grow and enhance its repair business, facilitate product development, accommodate bigger projects and pilot tests and provide better testing support for its products.

“This expansion is important to maintaining the success of our North American aftermarket repair business, as it proactively addresses floor space constraints being brought on by rapid growth,” adds Tim Gland, vice president and general manager of Eriez-USA. “The expanded capabilities this will bring to our aftermarket business will allow us to offer additional services and even faster turnaround times.”

Shuttleworth says that while this expansion will have a global impact for the company, the local significance in Erie is just as important.

“The fact that we are expanding in our hometown is confirmation that our commitment to the Erie community is still going strong after 77 years,” he says. “We now have 12 international subsidiaries located on six continents, but we remain proudly and firmly rooted in Erie.”

Jim Levine, the co-founder and president of Regency Technologies, headquartered in Stow, Ohio, about 35 miles southeast of downtown Cleveland, says simplicity and a business model borrowed from the scrap processing sector are among the keys to the information technology (IT) asset conversion company’s success. Regency also embraces standardization across all seven of its locations—from Brooksville, Florida, in the Southeast to Olympia, Washington, in the Northwest—helping to ensure consistency of service for the company’s national clients.

Levine and a small group of others established the company in 1998. Regency initially was focused on the repair and resale of IT assets. However, as the company found itself having to recycle more of its incoming material, the opportunity arose to partner with a seasoned scrap processing company that was also a neighbor.

Expanding its capabilities

Levine says he became aware of how Regency’s business was shifting away from reuse toward recycling in the early 2000s. When Regency was first established, 90 percent of its incoming material was destined for resale. So little was going to scrap at that time that Levine says, “[We] weren’t even paying attention to it.”

He continues, “By 2003, 70 percent of our equipment was going to resale, and 30 percent of it was going into the scrap bins, and more people were leaving the [asset recovery] business.” Levine says he knew the ratios were heading for equilibrium and he had to do something differently. Shortly after having that revelation, he met Steve Joseph, the CEO of Reserve Management Group (RMG), a scrap processor with operations near Regency’s facility at the time.

Levine recalls that Joseph suggested doing a few transactions together to take advantage of their two companies’ relative strengths. They agreed the deals would be completely transparent so both sides could then make a data-based decision about whether to continue the relationship.

Those initial transactions proved successful, leading to a more formal partnership between Regency and RMG that began in 2005. The companies partnered for about a year, with RMG handling the scrap generated by Regency’s operations, Levine explains. They then formed a joint venture and, eventually, Regency officially became part of RMG, a family of distinct but related businesses involved in recycling, scrap metal processing, material handling, equipment sales and purchasing and property management. This move allowed Regency to benefit from synergies that existed among other RMG affiliates and from the institutional knowledge they had amassed in the areas of size reduction and materials recovery.

RMG and Regency recently moved to a new joint headquarters in Stow. That building includes more than 500,000 square feet of warehouse space occupied by Regency. RMG has a second headquarters at a complex in Chicago that also houses one of Regency’s seven locations.

Six of Regency’s seven locations feature shredding systems with varying downstream recovery capabilities. The Stow facility, the company’s newest, was putting the final touches on its shredding plant in October, when Recycling Today visited with Levine and toured the operation.

Regency’s separation equipment allows for the recovery of a wide range of commodities that wind up moving to various customers around the world.

“We go wherever the markets are,” he says, provided that the economics make sense and that consumers comply with the requirements set forth by The Sustainable Electronics Reuse & Recycling (R2) Standard.

He mentions that Regency, like many other end-of-life electronics processors, has been dealing with the global challenges of marketing many of the commodities it recovers. The company continually looks to improve and refine its processing capabilities to produce commodities that can find homes in today’s shifting marketplace. “What we continue to try to do is make what we hope are long-term sustainable investments in the business based on where we see the potential,” Levine says.

Regency’s inbound material streams continue to include large quantities of both resalable and recyclable equipment, he says. “It depends on the mix of suppliers and their requirements.”

Levine stresses that Regency’s growth and success stem largely from its ability to handle both types of material.

Focusing on service

Regency annually processes in excess of 100 million pounds of electronics across all its locations, Levine says, as well as more than 1 million unique assets.

The company serves clients in the financial, health care, government, education and retail sectors. “We are well-balanced between the financial, retail, government and health care sectors,” Levine says.

Regency’s services “fit best with larger complex supply chains that require the service and see the value in [ongoing] service versus transactional businesses,” he says. Much of the work Regency does involves repeated asset conversions as opposed to one-time service.

The moment it is picked up, equipment enters Regency’s proprietary process.

“We know what the basics are, and we’re not willing to veer from them.” – Jim Levine, president, Regency Technologies

Because Regency often serves large, national accounts, it employs the services of third-party logistics providers as well as its internal logistics team. “We have a full logistics team internally. They manage our own trucks,” he says. “We might have two, three, sometimes four box trucks in one of our seven markets, where we’re dispatching those trucks to do certain pickups. Sometimes they’re used for the large national accounts, sometimes they’re for smaller local pickups.”

When equipment arrives at one of Regency’s plants, it enters a triage area where it is identified and segregated based on defined criteria.

From there, devices are tested, audited and repaired, if necessary, and data are overwritten before the devices are remarketed. Equipment with no viable resale option is routed to the respective downstream processing areas.

Regency works with a global network of equipment dealers in addition to using e-commerce channels, such as eBay and Amazon. Levine says “there are certain disposition requirements that have to be met” before Regency places an item on eBay or Amazon for sale. “There should be a significant pickup to move it on eBay or Amazon because there are lots of extra costs to market and push it through that e-commerce channel.”

Processing discipline

Levine says he believes Regency’s focuses on service and process help to set the company apart from other asset recovery companies. “We look at everything in a very fundamental way.”

Every business decision the company makes is examined through the lens of a more traditional scrap processor, Levine says, with the company considering if a particular step makes economic sense or if it can be done a better way.

Regency constantly is asking how processes can be improved and costs controlled. The company engages in “constant analysis of everything that rolls through the operation,” he says. “That spirit comes from the very top and pushes all the way through the operation.”

Levine adds, “The real key to our success as a company has come from our people and teams pulling together to accomplish the mission. From operations to sales, accounting and IT to logistics, senior managers to line workers, there is a clear sense of team and caring. That makes a big difference day in and day out.

“We know what the basics are, and we’re not willing to veer from them,” he continues. “And that’s really a scrap industry mentality, and we’re applying it in the tech center.”

The fundamental issues

Levine says secondary commodity markets, while currently low, fluctuate. However, he believes that an ongoing challenge will be educating generators on the value of the services Regency and similar companies provide.

The data security industry is attracting outside investments because it is viewed as a growth sector, Levine says. “However, you have people with relatively little knowledge about what it really takes to run the business itself,” he explains, and their business model might not be grounded in reality. “That’s a huge challenge for us, trying to somehow validate what we’re doing.”

Another factor that has had an influence on the electronics recycling sector is state extended producer responsibility (EPR) laws, which Levine says he is not in favor of. “I think they’ve done more harm than good, and I think they’ve distorted the true economics of the marketplace. Subsidies just lead people to make bad choices.”

When it comes to Regency’s business philosophy, he says, “We want to do the right thing. We negotiate tough, but we negotiate fair. We want to feel good about what we do.”

The company’s plans include diversifying and expanding its generating customers and growing the volume of IT assets it handles.

Levine and the team at Regency are counting on the company’s dedication to process and transparency to ensure its future growth.

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