Navigating curves

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While the learning curve was steep, Rochester Iron & Metal, Rochester, Indiana, transformed its business with the installation of an auto shredder.

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June 2, 2015

Today, retail customers make up 25 to 30 percent of Rochester, Indiana-based Rochester Iron & Metal Inc.’s business; but, that wasn’t the case just a few years ago.

The company started its 6090 shredder from Wendt Corp., Buffalo, New York, in September 2012. Prior to that time, the bulk of Rochester Iron & Metal’s business involved serving retail customers. The ratio of retail to commercial and industrial customers has flipped since its addition of the auto shredder, company President Jason Grube says.
 

Expanded capabilities

“We thought we had a niche,” Jason says of the company’s decision to add the auto shredder to its 30-acre Rochester site. He and Rochester Iron & Metal Vice President Mooch Lewis, who is Jason’s stepfather, say they felt the company had the volume to justify the addition of an automobile shredder as long as it was sized appropriately.

“We wanted to chart our own course,” Jason says, adding that the company wanted more control of the metal it was selling.

Rochester Iron & Metal’s 60-inch shredder features a 2,5000-horsepower Quad- Plus DC motor and a Bowe disc rotor. It is equipped with an infeed conveyor, Wendt’s AutoDriver controls and a ferrous downstream system with a Steinert electro drum magnet and Z-box closed-loop air system.

Jason says he and Mooch felt the installation would be justified if the company processed 4,000 to 6,000 tons of material per month. The business partners initially planned to run the shredder for one shift three or four days per week. “But we have never been able to do that,” he says, adding that the volume of incoming material has warranted additional hours.

Jason says Rochester Iron & Metal had been running its shredder five days per week until this winter, when severe weather and a downturn in the metals market took a toll on material flow. Jason says this was the first slow period the company has experienced since adding the shredder.

Business has picked up since then, however, and Rochester Iron & Metal currently runs the shredder an average of four days per week, the business partners say.
 

On-the-job education

While the company was running its shredder more frequently than it had originally planned, that doesn’t mean things were running smoothly, Jason says.

“We didn’t know what we were doing when we started the shredder,” he says, acknowledging that the learning curve involved trial and error, or “mostly error,” as Jason puts it.

“Our sales tripled in a year and a half with the new location and the addition of the shredder, and it seemed like we were just so busy,” he says, adding that he and Mooch felt they had too many employees working too much overtime initially.

This situation led Mooch and Jason to look closely at the true costs of running the shredder, including the number of employees the company actually needed, Jason says. “This helped us understand what we were going to spend regardless of what we do [in terms of tonnage],” he adds.

Unwelcomed addition

Rochester Iron & Metal, Rochester, Indiana, faced its neighbors’ wrath in the form of a lawsuit six months after the company began running the small auto shredder at its 30-acre yard.

While the suit was eventually dropped, Jason Grube, president of Rochester Iron & Metal, says the company still spent considerable time, money and energy defending the company and its auto shredder’s installation.

Grube says neighbors of the company, which is in an industrial park in Rochester, leveled “every complaint that you’ve ever heard of related to an auto shredder” at the company.

He says Rochester Iron & Metal “tried to be a good neighbor,” working diligently to address any complaints neighbors had. However, he stresses that the company had ensured the installation complied with environmental regulations and permitting requirements from the start of the project. Unfortunately, that didn’t stop representatives from state and local agencies from visiting the site frequently in response to neighbors’ complaints, Grube says.

While the experience overall was “overwhelming,” Grube says, Rochester Iron & Metal completed the installation in the fall of 2012 and has been operating its auto shredder for an average of four days per week since then, producing 4,000 to 6,000 tons per month.

The business partners also determined the type of material they wanted to process through the shredder, he says. “We pass on some material because we know the recovery is just not where it needs to be.”

Jason continues to be hands-on as far as the company’s operations go. “I’m at the shredder every day,” he says. “I’ve seen loads come in full of everything that shouldn’t be in a car.”

In these cases, Jason says the suppliers are called. If the situation can’t be resolved, Rochester Iron & Metal is willing to sacrifice the volume, he says, adding that the company will pay more for higher quality material from trusted suppliers.

It took the business partners approximately two years to work on these kinks in Rochester Iron & Metals’ shredder operations. “We got it pretty well fine-tuned toward the end of last year,” Jason says.

The company’s focus on improving the efficiency of its operations has paid off, he says. “We have seen our efficiencies most recently help us weather the economic downturn in the metals markets.”

Jason says when it comes to the shredder, “it’s inventory in and inventory out. We work within our margins and try not to allow the market downturns affect us.”

Being a small company also makes it important for Rochester Iron & Metal to keep material moving. However, while he says the company anticipates incoming dealer tons and makes an effort to move this material in a timely fashion, Rochester Iron & Metal “may hold on to HMS (heavy melting steel), peddler scrap or nonferrous” in anticipation of improved pricing.

Despite this, Jason says, “We work really hard to try to eliminate the market’s affect on what we do.”

In addition to No. 1 and No. 2 ferrous shred, the ferrous scrap grades the company produces include No. 1 HMS, 2-foot and 5-foot P&S (plate and structural), 2-foot foundry steel, shredded clips and foundry grades. Rochester Iron & Metal processed roughly 100,000 tons of ferrous scrap in 2014, Jason says.

Also that year, the company processed 15 million pounds of nonferrous metals, including various grades of copper, brass and aluminum, as well as zurik and zorba.

Rochester Iron & Metal buys material from industrial and commercial customers throughout north and central Indiana, Jason says, selling its prepared scrap to steel mills and foundries in the Midwest. The company’s zorba and zurik also are sold domestically. Diversifying its scrap consumers has been a key goal in recent years.

Mooch says that while steel production in the U.S. has slowed, this diversification has lessened the effect on Rochester Iron & Metal. “We do a lot of foundry business,” he says, “so that has helped us.”

Jason adds that small, family-owned companies can have an advantage in the industry.
 

Deeply rooted

“We are very close to our employees, which allows us to be on the same page and to be able to change our direction at the flip of a switch,” according to Jason.

“Being small also allows us to give customers a personal touch whether it comes to peddlers or commercial customers. We are visible in the yard and warehouse, talking with customer and employees daily, and are only a phone call away,” he says, referring to himself and Mooch.

While Jason says Rochester Iron & Metal “doesn’t really do things no one else does,” he admits he does “feel that we do some things better,” offering its relationship-oriented approach to business and its focus on customer service as examples.

The family’s history in the scrap industry contributes to its strong relationships.

Mooch is the third generation of his family to work in the scrap industry. His maternal grandfather, Abe Magazine, began his career in the industry in the late 1920s, collecting rags in Warsaw, Indiana, and later expanding into buying and selling scrap metal and coal.

Mooch’s father, Elmer, learned the industry from his father-in-law and eventually started a scrap metal recycling business—Lewis Salvage Co.—in Akron, Indiana, with his wife, Jeanette.

Elmer retired in 1982, turning the business over to his sons Mooch and Michael. In 1984 the duo reopened their grandfather’s scrap yard in Warsaw, calling it Lewis Salvage Corp. Their brother, Kim, joined them in that business in 1985.

In 1995, Mooch struck out on his own, opening ML Metals Inc. in Rochester. In 1998, Jason joined him in the business, becoming the fourth generation of the family to work in the scrap metal industry.

“It was always neat for me to hear about all the old relationships and how the people and families were connected in the industry,” Jason says, “and Grandma Jeanette seemed to know all the families and how the puzzle fit together.
 

A tale of two cities

Rochester Iron & Metal, headquartered in Rochester, Indiana, operates a second yard, Hunt Salvage LLC, in the larger city of Kokomo, Indiana. Company President Jason Grube says the yards’ experiences with scrap theft are like “night and day.”

Rochester Iron & Metal operates a shredder at its Rochester yard, while Hunt Salvage is a feeder yard.

In Rochester, Grube says, the company deals with theft occasionally. “A lot of people have come to the conclusion that they are not going to get away with it,” he adds.

However, scrap theft is a more common occurrence in Kokomo.

The company has the same processes and procedures at both yards, Grube says, which includes using ScrapRight software to document material coming across the scale.

“We are doing the exact same thing in two locations with completely different results,” he adds.

Both yards work closely with local authorities. On occasion, the yards have turned away material that their buyers thought to be stolen, even if the sellers were willing to sign statements of ownership.

“You may lose a customer if you question the material that comes in,” company Vice President Mooch Lewis says.

“In a sense we have become an arm of the police department,” he continues.

“The moral of the story is scrap theft is unique in all locations,” Grube says. “It should be governed by the local authorities in cooperation with the dealers. Simply establishing statewide legislation most likely will not fix the issue of scrap metal theft.”

 

“I seem to have a passion for this industry,” he adds, “and I believe it is because of my family roots. Family is one of the most important things in life to Mooch and me.”

In 2002, Mooch and Jason partnered to form Rochester Iron & Metal, and the company has benefitted from Mooch’s ties in the business as well as from his experience.

“Mooch working alongside his father and mother in the industry has given him wisdom and relationships that could not be possible starting out today,” Jason says.

Rochester Iron & Metal’s focus on building and maintaining business relationships has proven helpful, particularly in the last year as metals prices have softened. The business partners describe competition in their operating region as “saturated,” which has been especially evident as steel mill production has slowed, they add.

Now that Rochester Iron & Metal has navigated the auto shredder learning curve, Jason says the company plans to keep doing what it’s doing. “We want to sustain what we have and grow the business,” he says. “We’re content with where we are headed.”

In the meantime, the company will maintain what Jason describes as its long-standing focus: doing the right thing every time. “Our employees as well as our customers see this in all we do,” he adds.


 

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