Knowledge is Power

While automation of the purchasing side of the scrap metals business has become par for the course, largely because of compliance issues, the methods used to run the sales side of the business vary widely.

With that, the numerous software programs on the market dealing with finished goods inventory approach that task in a variety of ways. Ultimately though, the goals of these programs are the same: knowing your inventory well enough to help avoid making costly mistakes.

Basic Necessities
Most software programs offer the same key benefits: showing what’s in inventory now in terms of weight and value, and what’s committed for purchase and sales.

Typical hardware needs include kiosk-style computers, handheld data entry devices, tablets, touch-screen monitors, wireless bar code scanners and bar code label makers. A key component is the use of bar codes for packaged inventory, which can quickly be scanned for inventory purposes and then again to create packing lists for shipments.

A related requirement is having the most up-to-date information possible.

“Properly designed software will give management a real-time view of inventory levels because each transaction, both buying (incoming) and selling (outgoing) will immediately add or subtract from the inventory master file,” observes Everett Duty of BuyBackPro Inc., based in Woodland, Calif. “The idea is to track material from the time it comes in to your possession until it is delivered to a buyer,” he adds.

Philip Rafle, national sales manager for 21^st Century Programming, Long Beach, Calif., says that for many scrap processors, critical information could include the actual costs of finished goods inventory, “so you can make an informed decision on what to sell it for, based on what you bought it for and any added expenses due to contamination, processing, production and shipping.”

Additionally, Rafle says the right software should be able to let managers know whether they are going to run long or short in any particular month.

Haley Glick, corporate secretary with Tri-State Iron and Metal Co., based in Texarkana, Ark., says her company’s ROM Standard software (from 21^st Century) lets the company know “to the pound exactly what we have and where it is in the processing stage.”

Similarly, Perry Jacobs, executive vice president of Shared Logic, notes that effective inventory management rests not only on knowing what’s been purchased but also on what results from the production process: “That moves it from the one commodity you bought to at least one, if not many, commodities you’re selling,” he explains.

Purchase price determination is also a major benefit, says Adam Blick of Scrap Dragon, based in Atlanta. “It’s more about helping you set a price on your purchasing side to make sure you can sell your inventory for a profit,” he explains.

Blick says while there’s no such thing in the scrap metal recycling industry as “excess” inventory, there is however, “inventory you paid too much for.” And, he says, Scrap Dragon is designed to help keep recyclers from doing that.

“As your inventory starts to back up, you may want to start paying a lower price on [a certain material] to control your inventory,” he says. Alternatively, if prices drop, a look at the value of current inventory could be a factor affecting what a recycler decides to pay going forward.

Built-In Flexibility
Operations flexibility is an area that some software providers say they have focused on. Blick says Scrap Dragon allows recyclers the flexibility to move inventory from one area to another and to make historical adjustments on inventory at any point in time. For instance, when packing a truck or creating a shipment, recyclers are going to be pulling inventory that could have been initially graded in other ways, such as tube that needed to be upgraded.

“Scrap Dragon allows you to go ahead and make that shipment, assuming you know that you have that inventory on hand to do that,” Blick says. Then, you can go back and make the historical adjustment related to that substitution.

Similarly, Shon Duty, president of ScrapRight, Waynesboro, Pa., says his company’s newest commercial module is designed to offer flexibility of operations.

Duty says the program allows recyclers to work through the various stages of inventory tracking, allocation, grading and fulfillment in any order.

“A lot of times, the user may think you have to start with what’s called first-stage inventory,” says Duty. “In ours, you can start there, or, if you want, you can start with unknown inventory or prepared inventory or with a couple kinds of prepared–allocated and prepared–unallocated,” he says. Recyclers can even start at the end of the process and work backwards, Duty says.

Jacobs says flexibility in payment type is one benefit of Shared Logic’s approach. The company’s software incorporates an industry specific accounting application. He says the program also takes into account that in some states, recyclers cannot pay cash for certain commodities. “We’ve developed ways to track, commodity by commodity, whether or not you can pay by cash or check,” Jacobs says.

Additional Features
Barry Grahek, president of DesertMicro, Jacksonville, Fla., says his company’s software offers a forecasting model that helps recyclers plan when shipments need to be scheduled, allowing them to manage inventory in a more just-in-time fashion. The benefit of such an approach, he says, is reduced time delays in terms of shipping and reduced stockpiles.

“The user can see he’s going to have, for example, a load of casting or iron and steel ready next Friday,” he says. “He’ll look out the next two weeks to forecast all loads that will be ready, so managers can schedule those shipments.”

Grahek says DesertMicro software also is integrated with online pricing indexes, such as COMEX, to help managers make optimal pricing decisions. “Our inventory tracking along with the electronic pricing index updates will give the manager of the yard an instant view of what commodities are on site, the volumes of those commodities and the total value of those commodities,” he says.

Joe Floam, president of ScrapWare Corp., Rockville, Md., says the company’s newest software program, ScrapWareSV2, can track inventory at multiple scrap processing company locations, yet is run on a single server, whether cloud- or office-based. Because the software runs light on system resources, remote yards with weaker DSL connections can access the server and the information they need efficiently, Floam says.

Reporting Features
Effective reporting is another tool that helps scrap recycling operations make the best decisions. Rafle says the ROM system provides several efficiency and profitability checkpoints.

“You can run reports on production to see how many bales you’ve run at any specific time to manage employees’ time. You can ensure that equal pricing is being set across the board through your employees. You can track which customers are charging you the most. You can see who is more profitable to sell your materials to,” Rafle says.

Floam says ScrapWareSV2 allows recyclers to view multiple reports, with the same date ranges, at the same time. In doing so, they can compare such things as paid purchases by commodity, top vendors by commodity and aggregate purchases, all for the same date range.

Bottom-Line Considerations
Calculating an exact return on investment can be difficult to measure. However some software companies have worked to help their customers do this.

“Your return on investment can easily be within a year depending on what version you’re getting,” Rafle says of 21^st Century Programming’s software. He cites added efficiency, better pricing and fewer thefts as reasons.

Grahek says his company proactively measures ROI by setting up benchmarks and monitoring performance indicators monthly for its clients. The goal, he says, is to have the software paid for within 10 months.

The author is managing editor of Recycling Today Global Edition and can be contacted at lmckenna@gie.net.