READY FOR A REVOLUTION
Scrap commodities have been traded a number of different ways during the past 100 years. But for most of the last century, the telephone has been the workhorse of the scrap trade.
It was several decades after the advent of the telephone that the fax machine became affordable for small businesses, adding another element to instant communication through the same wiring network.Then just a few years after fax machines became universally accepted as a means of adding a written aspect to rapid-fire negotiations, the Internet (and its companion, e-mail) came along. More so than the fax machine, the Internet has brought with it as many questions as it has answers.
Due largely to the jargon associated with the advance practitioners of the "Internet culture," many business owners and managers were faced initially with a fear of the unknown.
But the fear of being left behind spurred most companies to get connected to the Internet, create a home page on the World Wide Web, and make sure e-mail addresses were added to business cards.
Thus far, however, Internet efforts have largely been considered supplements to existing sales, marketing and communication efforts. Outbound calls are still placed to potential and existing scrap generators and consumers, and personal visits and appointments are still made. Changes taking place in the way the world’s largest corporations are sharing information may be when the Internet’s ability to truly supplant existing communication methods is tested. Automakers will reportedly try to do more component specification and bidding work online.
If companies such as Ford, GM and DaimlerChrysler are willing to post and share their information on the Internet (even if it is on a site considered to be secure), it is because they anticipate productivity improvement from employees who will spend less time on the phone or meeting with supplier companies.
If such an attitude spreads, that could change the way scrap metal and paper traders do business, though not all are convinced that is for the better. "I think on the phone, you can sense a person, or sense by hearing their voice inflections. Buying and selling signals are sent that way," says Joel Litman of Texas Recycling/Surplus, Dallas.
Litman also sees e-mail and the Internet used as a potential wall between buyers and sellers. "Sometimes it can be a way to hide behind a computer," he notes. "If you have an issue to discuss, one person could be ducking it. You send them an e-mail and they respond to it at 6:00 in the evening. It ends up like voice mail—you play e-mail tag."
Even executives with ".com" companies do not see an era of Internet-only communication dawning. But a visit to recycling-related Internet sites shows that for those who choose to do so, a number of business functions can be carried out via the Internet and World Wide Web.RECYCLING’S GROWING PRESENCE
Reading about recycling on the Internet is not new, and for that matter neither is advertising for consuming markets or offering recyclable commodities for sale. Among the more established recycling-related websites is Richfield Springs, N.Y.-based www.recycle.net. The site, also known as Recycler’s World, offers lists of recycling trade associations, recycling publications, and directories of companies trading in the same material. It went online May 1, 1995.Recycle.net bills itself as a "world wide trading site" for recyclable commodities, and features an impressive list of metals, papers, plastics and other materials where sellers and potential buyers can post "wanted" and "available" messages. A check of one metals category—No. 1 copper wire—found 58 posted posts, including "wanted" messages from different parts of the world ranging from India to Italy.
Most recycling publications and recycling-related trade associations have also established a presence on the web, including the Recycling Today Media Group. Recycling Today magazine is currently re-designing its website to offer a greater depth of information beyond the content of current and past issues of the magazine.
The Cleveland-based publishing group stepped further into the online world when it switched publication of its paper recycling newsletter, Fibre Market News, to an Internet-only product called FibreMarketNews.com that offers free, current secondary paper prices. The decision was not made lightly, according to FibreMarketNews.com editor Dan Sandoval, and the irony of ceasing the printing of a paper recycling newsletter was not lost on Sandoval and others who made the decision. "It is a tradition-bound industry, so I would expect some initial apprehension," Sandoval says of the industry’s reaction to the switch in formats. "But over the next 12 months, I think more and more people will embrace the opportunity, immediacy and flexibility of our product."Trade associations have also used the Internet to make information available to members, with recycling-industry websites including www.isri.org for members of the Institute of Scrap Recycling Industries Inc., and www.nrc-recycle.org for members of the National Recycling Coalition.
1999 and 2000 have brought a new element into recycling on the Web: the introduction of well capitalized business-to-business sites that are seeking to capture significant amounts of trading business.NEW KIDS ON THE BLOCK
In the metals industry, a glance through recent issues of the daily trade journal American Metal Market reveals full-page, four-color adds for such sites as www.e-steel.com, www.MetalSite.net, and a smiling Lee Iacocca urging business owners to offer equipment for sale through a new surplus inventory trading website. The paper industry also has a choice of competing websites striving to host secondary fiber, pulp and finished paper trading transactions. Among the contenders for paper industry business are www.fibermarket.com and www.PaperExchange.com. The business plans of the different websites do not appear to be identical, but the most common thread is an attempt to serve as an intermediary for transactions. Offering industry news is often an additional incentive to encourage users to come to the site. "We at fibermarket.com have a vision that we’re after, and that is to have the paper industry supply chain better interact with each other," says Michael Fenton, president and CEO of Atlanta-based fibermarket.com. Fenton believes that those in the paper industry can add stability to their business methods by using the Internet to post information on future supply needs and supply availability. "Instead of doing business on a daily or weekly basis, either side of the transaction can see what the demand will be based on forward projections," Fenton says of the fibermarket.com concept. While acknowledging that mill demand can change from one day to the next, Fenton says, "there is always a steady stream of business mills can count on. They want high-quality material delivered on time and for the best price possible." Paper stock dealer Litman does not think the telephone can be replaced as the most certain means of instant communication, and Fenton does not necessarily disagree. "I don’t think the Internet will ever replace the phone call," he remarks. "Even with an order on the Internet, I’m going to call and verify that the schedule will be maintained." In addition to posting buy and sell orders, fibermarket.com is offering Internet-based management software. "We are not just trading raw materials," says Fenton. "Our integration package involves invoicing, accounts payable and accounts receivable, distribution systems, and tracking and recording what goes across the scale at the mill." By year’s end, scrap metal dealers will probably be hearing more from www.MetalSite.net, a Pittsburgh-based website that currently acts as a trading site for steel products, but will be moving into scrap metal and other feedstock trading later in 2000. MetalSite.net director of business alliances David Mayland believes his company’s site can offer time savings for those involved in metals trading. "I think one of the things being discovered . . . is that about 40% to 60% of a salesperson’s time is administrative," he comments. "By using an Internet marketplace, you can use automated systems to recapture some of that time." In some respects, Mayland believes a well-thought out website can reduce the telephone time of buyers and sellers. "If you can go online with things like order status and go to one place and get your order status from every seller at the one site, that saves you from calling and calling," he contends. Such information can be "aggregated" at MetalSite.net, he adds. The "back office" functions found at websites such as fibermarket.com and metalsite.net are one way of attracting visitors to a site, but trading volume will have to be good for the sites to be considered a success. "Our revenue is generated in two ways: we charge a transaction fee on sales, and there is also site advertising," says MetalSite.net’s Mayland. There are "no up front fees [for posting a material wanted or available], there is only a fee if there is a transaction between a buyer and a seller," he remarks.WHO DO YOU TRUST?
Among the management dictums to gain popularity in the pre-Internet era was the value of building long-term business relationships. Neither detractors nor advocates of increased e-commerce activity are willing to speak against that point of view. "We have long-term relationships with mills we do business with," says Litman. "Over the Internet, you lose that voice-to-voice or face-to-face contact." "If I work at a mill and I see a posting out there, how do I know the reputation of the people selling," he continues. "Or in my case, how do I know the reputation of the people that are going to buy it? How do I know they can pay?" Fenton of fibermarket.com has seen that one of the barriers raised by potential customers is "the fear that you are displacing the relationships." He remarks that "once we show them our site, and how they can use it and put their own name on it, they become immediately comfortable with it. It’s just not the case that they’re venturing out on their own anonymously." The home page of the MetalSite.net site carries a headline stating, "Look Who We’re Doing Business With," followed by an array of 25 corporate logos from national and international steel and metal companies. Mayland says that he too has heard the "lack of building relationships" argument applied to e-commerce. "For five or six years now, I have said that the [e-commerce] market leaders will have better relationships because they’ll have more time to work on the relationship stuff," he notes, referring to the streamlined administrative workload he believes can result from using e-commerce methods.FOLLOWERS AND LEADERS
"Pioneering doesn’t pay," was a phrase used by 19th century industrialist Andrew Carnegie. Some of his later biographers have questioned to what extent he lived by his own words, but his preferred style often was to buy out proven winners or copy their business methods. When it comes to earning steady profits from the Internet, many of the pioneers on the retail side have been paid handsomely by a willing investment community even if their business models have not yet stood the test of time. Many of the recycling-related companies staking their claims on the Internet are pioneering with the hope of a similar payoff, as business-to-business Web commerce becomes the latest Wall Street darling. It will be up to existing manufacturing companies to buy into the models being set up by companies such as fiber-market.com, PaperExchange.com, MetalSite.net, and e-steel.com. As of 2000, scrap metal and paper dealers are still looking to the telephone as the primary communication device, but the Internet has not been ignored. Conducting market research and having a presence on the Web appear to be common practice, and one scrap metal buyer contacted for this story has done some online shopping for scrap. "We look at web pages as a way where we can get the word out about ourselves to potential customers," says Litman. "As the younger generation gets more involved in the business world, they are used to looking up on the Internet to see who buys the various paper grades in my city," he says. "We may send our customers e-mail, but as far as doing business, we still pick up the phone, and call them to see what they need and what their trucking schedule is," Litman remarks. "I investigate companies online," says a ferrous scrap metal buyer contacted for this story. "For potential customers, I see if they have a website and do some research." The buyer also e-mails weigh tickets to customers that used to be faxed. Federal government agencies such as the Defense Reutilization and Marketing Service have been among the first to post scrap for sale on the Internet, the buyer notes. "We do participate in some government bids online. The Tennessee Valley Authority does some online bidding," he says, adding that pictures of scrap items for sale are scanned and displayed. "I would think it reduces the time put in by their personnel by not having to show the merchandise in person," he adds. Perhaps the biggest single question resulting from the e-commerce revolution pertains to the role of the "deal broker," and how to profit from it. If buyers and sellers can see time and cost savings from dealing online, then the market will show no reluctance to use the Internet. But if communication is going to be direct, and existing relationships are going to be maintained, then ultimately two companies can exchange information electronically without going through a third party. The hope for the third parties could lie in becoming a central trading site for those offering material to a number of parties at once, and in becoming a multi-function site offering back office software and industry news and events information"It comes down to one fundamental question," says MetalSite.net’s Mayland. "Do you believe that e-commerce is going to happen regardless? If you answer yes, I think you can ultimately be a market leader. We’re just going to try to lead that march to raw materials into the marketplace."The author is editor of Recycling Today, a publication that itself has taken the Internet plunge and can be found on the Web at www.RecyclingToday.com.
Explore the March 2000 Issue
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