Problem Solvers

Recycling companies are involved in a commodities market, but veteran owners and managers also consistently stress that theirs is a service industry.

That viewpoint has been prominent in the operating history and philosophy of Mervis Industries, a recycling company with a Midwestern scrap metal background that has broadened its scope both geographically and operationally.

FOLLOW THE OPPORTUNITY

When William Mervis and his sons opened two scrap yards in the 1920s, located in Arcola, Ill., and Veedersburg, Ind., the entrepreneurs took a broad-brush approach to operations, handling ferrous and nonferrous metals, paper, rags and animal hides.

Through more than seven decades of operations, numerous things have changed about what is now called Mervis Industries, but a constant has been a willingness to consider any new markets that are deemed to be customer-driven.

"We work with our customers on a total recycling package, so if they have it, we try to find a way to recycle it," according to Michael Mervis, director of Mervis Industries.

This approach has led Mervis Industries specifically into the plastics and electronics recycling sectors, as well as into conducting waste audits and diversifying geographically to serve the Texas-Mexico border at the request of its customer base.

CEO Adam Mervis says that earlier this decade one of its large industrial customers in Indiana "did not feel they were getting the service they should have" at manufacturing plants in south Texas and Mexico.

The customer practically insisted that Mervis set up shop in the region within the next 60 days. "So, we were there in 30 days," recalls Adam. "It was a heck of a challenge, but we were able to meet their goals of waste avoidance, providing secure product destruction and giving them the best return on their generated scrap," he adds.

Providing those same services to all of its customers has been a core philosophy for Mervis Industries as it has solidified its market share in an operating region that runs in a belt through central and eastern Illinois and western Indiana.

The willingness of Mervis to set up shop in Mexico, 1,300 miles from its Danville headquarters, is indicative of its approach to customer service. "Our greatest success stories have grown out of the engagements with our large industrial partners and their one-of-a-kind needs," says Michael. "There is no challenge more motivating to our professional team than to scope out a complex situation and then respond with customized recycling programs for plastics, metals, electronics, fiber or used machinery and equipment."

That philosophy has meant that even during the scrap metal boom of the past few years, the company continued to focus on service as opposed to strictly chasing metal volumes.

In fact, the company sold off some of its Indiana scrap processing assets in late 2006 to OmniSource Corp., Fort Wayne, Ind. (which was subsequently purchased by steelmaker Steel Dynamics Inc.).

Says Adam, "Those assets were of much greater value to OmniSource, which was trying to consolidate its market position in key operating regions." He also notes, "The good news is the transaction helped give us a good cash position and a strong balance sheet."

The facilities that were sold, located in Indianapolis and Kokomo, included one shredding plant that had been owned by Mervis Industries as well as the company’s joint venture interest in another auto shredder.

For now, it means Mervis Industries is operating without a shredder, a condition that does not greatly trouble Adam. "We look at shredding all the time, but we want to observe the state of the shredding industry for awhile," he comments. "There may be casualties and there may be used shredders that become available. We’re going to have to see."

In the subsequent two-and-a-half years, Mervis Industries has stayed busy with a wide variety of activities that help it cultivate a loyal customer base. 

NEW FRONTIERS

The company’s plastics recycling operations have grown in volume and now fill a large building at its Danville location. Plastic scrap is also collected and processed at a number of other facilities, including at the Terre Haute, Ind., and Brownsville, Texas, plants.

Adam says learning the plastics recycling industry has involved a healthy amount of research and education for Mervis Industries and its employees. "We have found that it is a different business completely in and of itself," he remarks. "The learning curve is longer, and the technical challenges are greater."

He continues, "In metals, you can generally blend materials together to produce, say, No. 1 HMS (heavy melting steel) or No. 2 copper. With plastic, you most often can’t mix different colored materials of the same resin, let alone mixing, say, PVC (polyvinyl chloride) with PET (polyethylene terephthalate). You have to know not just what it is, but who made it and the manufacturer’s number for it," says Adam of handling plastic scrap. "And you can’t work out contaminants in plastic," he adds.

But the effort, while significant, has been worth it, Adam says. "It allows us to operate this as a service business. It broadens the number of services we can provide for our customers. When you operate in central Illinois and Indiana, the plastics business is very important."

According to Mike Smith, Mervis Industries vice president and chief financial officer, the company pelletizes some of its plastic scrap and has begun to do some compounding to create customized secondary plastic products.

The company still has a significant metals recycling presence, including some specific niches in that sector. The Danville location’s 46-acre site at a former railroad yard is an ideal place to de-manufacture and recycle rail cars.

Railroad companies and rail car leasing companies can send their cars to Mervis Industries. "The customer makes a decision on whether cars are to be retrofitted or scrapped," says Adam. "What we are finding is that as railroad traffic has slowed, there are a tremendous number of cars available for dismantling." The company uses large hydraulic cranes with heavy-duty mobile shears to create pieces that ultimately are fed to its new 1,300-ton Metso stationary shear.

Mervis Industries most likely would not have its extensive presence in the plastic scrap market if it also did not offer waste and recycling audits for its customers and prospective customers.

"What we often have discovered are a number of things that are recyclable that are being discarded—cardboard, plastics, other items—and there are big savings in waste minimization," according to Adam.

The hardest work can often come after an audit, when the Mervis philosophy of "solving the unsolvable" is put to the test.

In one example, a company had been stockpiling sheets of material made from a steel and plastic composite. Separating the two materials had stumped other companies, but Mervis Industries brought the 12 million pounds of material to one of its facilities and invented a proprietary process to successfully separate the steel from the plastic.

In addition to recycling the steel, Mervis Industries also pelletized the recovered plastic into a form that could go back to the manufacturer for reuse. The solution saved the customer on stockpiling (and eventual disposal) costs while also providing affordable feedstock.

The audits also can reveal savings or operational improvements in the traditional metals markets. Adam cites the example of the company recommending covered facilities and sealed containers for turnings and other types of scrap that help customers upgrade their storm water runoff compliance methods.

The company also found $500,000 in cost savings per year for a client in the plastics sector. "They had been mixing their plastics and, essentially, making garbage. But we segregated the plastics and found ways to recycle it," he says.

KEEPING OPTIONS OPEN

While scrapping railcars and recycling plastic have become successful niches or additional sectors for Mervis Industries as of 2009, the company’s managers cite a continual need to evolve and work with customers in new ways as being a corporate way of life.

"We see the nation transforming from a manufacturing economy to a service economy," says Michael. "We are following suit in respect to our customers—it is the breadth and level of service we provide that allows us to flourish in an economic downturn."

When a company thinks service first, the next new niche or sector may be just around the corner. "In meeting the specific requests of our industrial partners, we have often built new facilities, expanded into new regions and reached new heights in state-of-the-art processing," says Michael. "Whether we need to install train tracks to a customer’s door, or we’re asked to enter a brand new industry or we’re challenged to solve the unsolvable, we never shy away from an opportunity to reach new heights with our customers."

Reaching new heights of any kind in the 2009 market may prove difficult, and material flows are down significantly from 2008. But, according to Adam and Michael, Mervis Industries will not retreat from new opportunities and also is ready to compete in any type of market.

"Last year we aggressively took advantage of the [federal tax] depreciation bonus and had a record capital budget," says Adam. "We installed an additional new 1,300-ton Metso shear in Decatur plus a new iron baler in Danville, as well as multiple cranes."

As recently as 2006, Adam and Michael, each of whom is in their 40s, renewed their commitment to retaining leadership roles in an independent family business. "When we sold the Kokomo and Indianapolis facilities, we could have sold the business," says Adam. "But we decided to stay in it for the long haul."

As he looks forward, Adam says he is encouraged by the capital equipment and the human resources Mervis Industries has in place. "We have efficient processing equipment in place and a strong team of non-family managers. Without them, our family business would be nowhere—two or three guys cannot run a company this size."

Michael, while acknowledging a challenging landscape, is striving to keep the family legacy moving forward. "After a great ride the last few years, our areas of the country—as all the rest—are in the bottom swoop of the roller coast ride," he comments. "We work very hard to position ourselves for the ups as well as the downs, and since we are still here after 75 years, it has proven to be a successful strategy."

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