Behind the Scenes

To a recycler, time is money. The more efficient an operation can be, the better. While operators may look to have faster throughput for a shredder, or denser bales, often software that can be used to manage a business can be an afterthought. Yet, what goes on in the office is just as important as activity in the yard, making the right software package a vital part of a scrap operation.

High-Tech Management

As with many scrap recyclers, Tri-State Iron and Metal, Texarkana, Ark., was using a software package created in-house by a local accounting firm. Although the program was functional, says Howard Glick, treasurer, it wasn’t meeting the company’s needs. Streamlining data and eliminating double entry were two concerns the company had with the program.

“A real key to us was to use it as a tool to manage our business,” Glick says of software the company was looking to purchase. “The other thing we were looking for was good reports to use as a management tool.”

Even though Glick says the company was tightening up financially, the initial cost of a new software program was a good investment to increase efficiency. “It was a good investment money-wise at a time when we were looking at budget constraints,” he says. “We felt it was a good time to do it when it was slow so we could get everyone trained. Ultimately it is a function of cost and trying to control your cost. That was really the driving thing for us to justify the expenses of the investment.”

Software packages designed specifically for the scrap recycling industry are sophisticated business management tools continuously evolving. Some of the advantages offered by several companies include: detailed reports, price comparisons, bar coding systems and more accurate data. For vendors of these products, getting recyclers past the initial skepticism can be hard, as often they may not realize what functions they were missing.

There are many off-the-shelf programs designed for business use and accounting, but the nature of the scrap industry doesn’t make these programs the best choice for recyclers, says Larry Smith, Shared Logic, Holland, Ohio. He says that having an accounting system integrated with their scrap software is important to many recyclers. “Even though you can buy an off-the-shelf accounting package, it is not the same as having your own integrated package.”

There is an increased interest in having more control and involvement as far as business management tools provided by software, he says. “They want to get involved with software that addresses all of the operational aspects of their business, not just managing the purchasing and shipment of commodities. It has gone well beyond that. They now want to get data from the system presented in ways that allow individuals, such as traders, to make instantaneous decisions that affect the bottom line.”

Customers are now requesting to automate other aspects of the business, including dispatching, handling and comparisons of data, Smith says. They want to take advantage of all of the data that is collected and to use it to their best ability. They also want to take technology outside the office and into the yard, he says. “As technology has caught up with us, we are seeing more and more customers wanting to take technology out into the yard to produce bar coded tags. Only recently has there been more emphasis on the ability to tag material.”

The continuing drop in prices for computer equipment is facilitating this desire, he adds. “With the technology being cheaper, it makes more sense for customers to consider purchases.”

Unseen Benefits

Often, businesses don’t realize the benefits of using a specialized software program and are surprised to learn how much easier and more efficient operations can be.

“They might not realize they need it until they get it,” says George Kane of 21st Century Programming, Long Beach, Calif. “In a manual accounting system it is hard to track down to the transactional level what has occurred.” 

Pacific Iron and Metal, Seattle, saw increased efficiency once a new software system was implemented. Before purchasing updated software, the company had one employee who knew the majority of procedures for taking inventory each month. That employee left the company and it was left in a major bind, says Bruce Glant, owner of Pacific Iron and Metal.

“We had a situation where the only person who knew how to do this anymore left the company and we realized that we were very vulnerable. We needed something and we finally made the decision,” says Glant. “We had no choice.”

That scenario is not uncommon, says 21st Century Programming’s Dave Kane. “People fall into the trap of having one person who knows how to use a program, and they are completely reliant on them doing it.”

Results from using a new software system at Pacific Iron and Metal have been impressive—the company was able to eliminate double entries and streamlined inventory processes so much that two positions were eliminated because of the increased efficiency. “It allows us to ship and record inventory and invoice all at the click of a mouse. We used to have three separate reports. It allows you to do so much more and so much faster and have them all tied together.”

Many features are becoming popular with scrap recyclers as technology evolves. “Tagged inventory and bar coding systems provide better ways to manage inventory transactions, reducing the possibilities of human error and improving the efficiency of the operation,” says Rob Horan, president, Mayer Information Technology, Toronto.

As the economy continues to impose thin margins, accuracy is important at the scale. Bar codes and tagging abilities now available can facilitate this. “Any time you can use bar codes and eliminate human error, you can save a lot of money and time. Simply in the automation you gain a level of accuracy that you can’t get manually,” says Joel Erlichman, vice president of sales and consulting, Paradigm Software, Peoria, Ill.

Accurate and detailed inventory records are important for scrap dealers, says Jerry Martz, vice president of marketing, Systems Alternatives International, Maumee, Ohio. “From an accounting and management standpoint you need, in many cases, to meet mill specs and you have piles of material to track,” he says. From an inventory standpoint there is often detailed information to be tracked, something the right software can do.

Conversion tracking is also important, Martz says. “They want to make sure the recoveries are tracked accurately and provide that back to the client.”

Another benefit of automating business operations can be using the information gathered for other purposes. “Not only are you controlling transactions, but you can use that information in a more meaningful way, so what is on hand, what is to be purchased, what has already sold. Certainly from a cost standpoint and just from a pure accounting standpoint, computers can obviously do that job much better than you can manually,” Martz says.

Lagging Behind

For every scrap recycler happy with the new advances in software, there is another operation still using pen and paper or a home-grown application, Horan says. “In time, these processors will eventually migrate to the latest available systems, due to their significant technological benefits that offer improved business management and efficiencies.”

Often small processors and scrap yards may be using Microsoft Access or Excel-based transaction tracking for cash, inventory and containers. “This limits their ability to have the information needed to manage their business,” says Horan.

Convincing recyclers of the benefits of software can be a challenge, says Alissa Tilson, Custom Business Information Solutions, Alpharetta, Ga. “They are kind of at a stage where they are looking for something new but are also hesitant to jump in and get something new,” she says. “Once they do finally jump in, they find they love it because they save so much money and they can get their payback really quick.”

Of the several thousand recycling companies in North America, Horan estimates that just 250 have software from one of the software vendors in the market. “This represents a huge shortfall,” he says.

The dropping prices of technology do leave some hope for software vendors, Erlichman says. “I think that computer prices continue to fall for servers and I think that when the market does turn and when commodity prices do improve, then you will find large investments. I think there is the demand but where the economy is today there is a hesitancy to do that.”

Glant can relate to that hesitancy to implement a new software program. He had concerns about how easy the program would be to use and wanted something consumer-friendly. “The bottom line was I wanted something that was easy for me to use,” he says.

The hands-on nature of the traditional scrap business may further contribute to a hesitancy to convert to a more computer-oriented business operation. “It is such a personal business that people want to maintain the personal aspect of things,” Martz says. “It’s just a cultural and leaning curve that the recycling industry is definitely on.”

Amid the dot-com frenzy of a year or so ago, many companies were trying to convince recyclers of the benefits of managing their business online. Using the Internet for more than just information gathering has not yet proved be  widely accepted by recyclers. “Many companies aren’t very active on the Internet when it comes to ‘active’ information,” Horan says. “Most do have Internet access to allow browsing of prices and news from online services.”

  Erlichman points out that most scrap companies do not have the more expensive but reliable Internet connections, such as a T1, to support managing a business from a remote location. “I think there has been a [misfire] on the Internet solution. A lot of Internet companies were throwing money at the wall and hoping that something would stick. It takes more to actually have a product.”

The Kanes agree that the Internet doesn’t tend to provide the recycling industry with what they need. “The Internet is touted as a source of saving money,” Dave Kane says. “In the recycler’s world, the Internet doesn’t provide them that much.”

The Internet-only model of business management failed, Dave Kane says, because of the unreliability of the Internet itself. “That model failed a miserable death because the Internet is unreliable. If your DSL goes down then you are in trouble.

“The reason we don’t promote that is because we call it a single point of failure, because you are depending on one machine and if anything along that chain you need to connect with goes down, then you are down. I think most scrap dealers are going to keep it in-house because they are afraid of anyone getting their information,” George Kane says.

Using the Internet for pricing information and industry news seems to be more common for scrap recyclers, rather than trying to manage a business from an Internet connection, Smith says. “Because I have seen technology improve so vastly I’m not saying that those aren’t viable alternatives, but right now we are more concerned about our customer being able to run all the time,” he remarks.

Jeffrey Mallin, president of Mallin Bros. Co. Inc., Kansas City, Mo., says while the company could use a software system specific to the scrap industry, the amount of specialization needed has prevented it from investing in a new system. “The nature of our business is all of our statements are different and not uniform,” Mallin says. “It’s not a plug-and-chug business [and] the only thing that is consistent is the inconsistency.”

Mallin Bros. uses an accounting package they have tweaked to fit their needs. “We have been using it for about 10 years and we are very happy with it,” Mallin says. “It does everything we need it to.” The company uses the program for all accounts payable, accounts receivable, general ledger and payroll. If the company could find a scrap specific software program that would fit the needs of the company, and the cost would be feasible, there would be an interest. “We haven’t seen where the value of changing will exceed the cost of the training. We would be happy to do it if it was advantageous to us.”

Security Measures

An added bonus to using a more automated management system can be that red flags are easier to catch for things such as theft, both internal and outside the office. Glant says he caught a theft problem at Pacific Iron and Metal within the first month of using the new software program.

Some software programs can track the source of each piece of data entered and how it was entered, manually or through a scale. The ability to compile and pull this information can make shortages easy to spot, and can save a company money.

The Kanes, who came from a scrap recycling family, say they can remember their father chasing a foreman because he was stealing from the company. George also remembers cashiers stealing money and other inventory management issues within the scrap industry. Having the right match as far as a software program can help prevent or curb some of these instances.

Horan cautions, though, that just having the software does not guarantee decreased theft. “Just having the system doesn’t necessarily deter theft,” Horan says. “If the system has intelligent tracking facilities, then employees soon realize that their actions are prone to computerized scrutiny which provides the deterrence. Only a computer system can process large amounts of information to spot irregularities.”  RT