Editor's Focus

Not everyone is a Bob Dylan fan, but even his critics generally admit that he has written some songs with important points to make.

In one of his lesser-known songs, "Gotta Serve Somebody," Dylan’s main point may have been theological, but he also touched upon a truism that strikes a chord with most business owners:

Not all of their employees may understand it, but small business owners know all too well that "being their own boss" doesn’t mean they are on top of the world looking down. As Dylan alludes to, these company owners still have someone to serve, and in fact there are usually a larger number of people to serve than the average employee has to worry about.

The tune is no different for scrap company owners, who have traditionally had to serve two sets of constituents—scrap generators and mill buyers. (Not even considering additional constituents such as boards of directors, employees, bankers, etc.) If recent conversations with scrap dealers are any indication, the degree of servitude involved has reached a painful point during the current down market.

Scrap processors use violent imagery—"putting the screws to" and "hammering"—to describe their recent treatment at the hands of mills, who can in turn argue that they are subjected to the same business terms from automotive companies and others who buy their steel, aluminum and copper.

At the other end of the customer spectrum, generators are generally acknowledged to have become far savvier in their ability to gain the most favorable terms for the scrap metal they generate.

Clearly, those who own scrap metal companies are not operating in a vacuum in which they can dictate all the terms. It has become increasingly clear that Bob Dylan’s lyrics ring as true for scrap dealers as they do for anyone else: they have to serve somebody.

And, increasingly, fast customized service is what is expected. The pace of business, even during a downturn, has continued to quicken. Mills have become enamored of just-in-time service. They don’t want to carry excess inventory if it can be helped, while at the same time they have to maintain enough feedstock to keep furnaces stoked.

A greater number of dealers and processors are convinced that they are in the service business, notwithstanding their SIC (Standard Industry Classifications) categorization as wholesale material providers.

Collecting, processing and shipping metal is still what they do, but meeting deadlines and quality expectations—also known as providing the best possible service—is what now makes or breaks a company.

On the one hand, being in the service sector can imply a link with esteemed professions such as accountants and attorneys. On the other hand, it is perhaps less glamorous to be seen as a servant at the behest of demanding masters.

Being a servant in that traditional sense implies maintaining a humble attitude. Judging by the tenor of recent remarks from scrap dealers, they are having little trouble remaining humble in the face of strict demands from their customers.