The Family Touch

At one time, the scrap metal industry was dominated by small, family-owned businesses. Today, although there are still a number of family businesses that have often been passed from grandfather to father to son, their numbers are dwindling. Large, corporate-owned scrap businesses are on the rise. Bucking this trend, Parkwood Iron & Metal Co. Inc., Cleveland, is still family owned and operated, and the owners feel this gives them an advantage in an industry that relies heavily on personal relationships.

"We’ve struck out a niche which is very consumer and customer oriented," says Stuart Simms, vice president and chief operating officer. "It’s a total vertical marketing system structured within the family corporation – we buy, we sell, we handle, and we are responsible. There’s not a pound of scrap that’s bought and moved into this yard that’s not inspected by a family member, and at the same time, there’s not a pound of scrap that is moved out by rail or by truck to a consumer that’s not inspected by a family member. And that’s pretty unique in today’s environment with the large yards and the mergers and acquisitions."

This reflects the high degree of personal involvement on the part of the company’s owners, adds Michael Simms, chief executive officer and executive vice president. "Our rejection rate is one of the lowest in the industry," he says. "This is important, as quality control is a major focus today."

Another advantage to being family owned and operated, says Stuart, is that Parkwood can react in some ways that larger companies can’t. For example, decisions can be made quickly. "I can make the decision to open this yard on Saturday or Sunday if I need to receive material to benefit a contractor," he says. "I can stay extra hours. If we have to be here late to take scrap in, one of us is here."

On the relationship side, Parkwood goes back 35 or 40 years with a majority of its customers, says Michael. "Where we buy materials, often our father bought from their fathers," he says. "We are not the biggest yard in Cleveland, but we have had our customers the longest. Some customers we have taken from one stop a month to seven or eight per week."

In order to compete with the large scrap companies forming today, the medium-sized scrap yard either has to become larger or cut back in size, says Michael. "The guy in the middle is really hurting because he’s got the overhead but he doesn’t have the customer or the consumer base to support it," he says. "In many instances, the right thing for that person to do is to take two steps back and reduce his overhead."

 Parkwood, on the other hand, has chosen to grow, and in January 1995, the principals acquired Willoughby Iron & Waste, a smaller scrap processing facility located in the suburbs of Cleveland. "Right now, we’re either the biggest medium-sized yard you could ever find, or the tiniest big yard you could ever find," says Stuart. "In the next few years, we plan to acquire several similar operations to expand our tonnage and our base of operation."

Parkwood has about 30 employees, and Willoughby has another 20. The second facility has some similarities with the existing company in terms of what it handles, and it is a good fit, says Michael.

"The Parkwood yard is probably 80 percent ferrous and 20 percent nonferrous, and the Willoughby facility is about 60 percent nonferrous and 40 percent ferrous," he says. "Both yards have cranes, balers and shears. Even though they share a common market, they are 20 miles apart and are different in size. The Willoughby facility handles a much smaller type of customer than the Parkwood facility can afford to because of our overhead costs."

This enables the company to service the range of customers, from those generating one box of scrap every three months to those generating three or four truckloads a day. "This really gives us an interesting way to approach scrap," says Michael. "We can act as a really small company when necessary, and also act as a really large company when required. It gives us an interesting flexibility."

The Willoughby facility, located in the less industrial suburbs, handles curbside recyclables from some of the suburbs as well as small amounts of scrap metal from individuals. "On the other hand, Parkwood Iron is centrally located about five miles from LTV Steel, situated on a 15-acre parcel with three rail sidings, and right in the middle of interstates 480, 490, 77 and 71," says Stuart. "This gives us the flexibility to not only bring material in, but also to deliver to some of the foundries and mills in that geographic location."

Parkwood is also one of the largest peddler yards in the city, he says. About a third of the tonnage that comes into the yard is peddler, or street trade. "That could be anyone from those who bring in 20 or 30 pounds of aluminum siding, aluminum doors or appliances, to the large demolition contractors that help make Cleveland the booming city that it’s been in the last five or six years."

The scrap metal processor handled a great deal of the demolition scrap generated in the building of the new Gateway plaza, which houses the new baseball stadium and the new arena. The company is, conveniently, the closest scrap processor to that project.

"When some of the old, more famous buildings in Cleveland came down, we obtained a great deal of the scrap because of our ability to spot containers and our ability to be close by," says Michael. "And when LTV did a complete remake of two of their furnaces last summer, the material came to us for preparation to send right back to the mill."

The two facilities handle about 75,000 tons of ferrous scrap per year, along with "several millions of pounds of nonferrous, which basically is your aluminum, stainless and copper," says Michael. "Once the scrap comes into the facility, it’s all processed in one way or another, whether that means it’s sorted by chemistry, or hydraulically cut, hydraulically compressed, sized, broken, processed, and segregated. Then it is sent to the various steel mills and foundries in the Midwest, which could be from 5,000 tons in any particular month to LTV, or as little as one truckload going to Tennessee."

In addition to metals, the Willoughby yard also handles several grades of paper, including old corrugated cardboard and computer paper.

The company sells throughout Northeast Ohio, New York, Southern Canada, and into Kentucky and Tennessee to the south and Gary, Ind., to the west.

Since the owners of Parkwood plan to grow their business and acquire new facilities over the next few years, it is necessary to train employees well and give them some profit sharing in order to maintain the owner-operated characteristics of the business.

"While everything is now viewed by an owner of the company, it’s equally important to train the people we work with, give them the pride of ownership – even give them some proprietary or profit motive, so if Stuart or I go to a different facility, that person acts as an owner on the premise," says Michael.

The company has a profit sharing plan, pension plans, and a number of other benefits, he adds, which has resulted in a number of long-term employees. "We think the people at our facility are our most valuable asset. You can’t operate a scrap yard without customers and without scrap, and you can’t operate a scrap yard if you can’t sell the materials to a consumer. But if you have both of those and you don’t have people, it doesn’t work."

 As a result of the owner attention, Michael adds, consumers know they can rely on products the company sells. In addition, Parkwood works hard to ensure that the company is operated safely and in accordance with all environmental regulations. "We bend over backwards to implement every safety procedure," he says. "The safety of our employees is of paramount interest here."

Being a family-owned business can also mean wearing a lot of hats, says Stuart. In addition to being executive vice president, he is also the environmental and safety compliance officer.

"At least 10 percent of my day is spent with environmental issues, even if that just means reading articles to stay informed," he says. "We try to anticipate regulations and comply as much as humanly possible. Both our yards are in compliance with federal and state stormwater permits, both yards are in total compliance with Title 5 air monitoring, and in terms of MSDS right to know, all the training sessions are done on schedule."

On the safety end, the company has monthly safety audits and rigorous employee training programs. "Every employee here knows what kind of scrap he or she can and cannot take," he says. "We have training films. It boils down to a safe work environment."

Although most of the existing environmental laws are needed, says Stuart, their implementation leaves something to be desired. "It’s like using an atom bomb to kill a bee," he says. "And many of the laws are unfair; most notably, Superfund. I know of one company that sold one truckload of batteries in 1977, heard nothing from anybody until a year ago, and then had to pay $17,000 for something done absolutely right at the time. Environmental laws are on the books and it’s our duty to comply. But as an industry we have to lobby for fair enforcement of these laws."

There are a number of components to achieving success in the scrap industry, according to Michael. He lists hard work, attention to detail, attention to customers’ needs, attention to mills’ requirements, matching the customers’ requirements with the mills’ requirements, and processing materials in a safe and economical way.

And although the company has a number of long-term relationships with customers, these must be continually fostered, says Stuart.

"As companies become more corporate-controlled, and less family-operated – not only the scrap industry but the steel warehouses and service industries that we deal with, which are also being merged and bought out – the individual whom I dealt with today in Cleveland is in Chicago tomorrow," he says. "And so I get a relationship of understanding with his replacement, but six weeks later he’s in Indianapolis. And that’s frustrating when you’re trying to foster a relationship, trying to stay a step ahead of what your customer needs."

In addition, scrap processors are manufacturers, says Stuart, although consumers and the general public don’t always see it that way. "We make a product and we supply the product to a consumer," he says. "And in the supplying of the product to the consumer, we have some very strict rules and regulations to which we have to conform, just like if you make widgets or soap powder or steel. We also carry product liability – we supply a product, and if our product doesn’t conform chemically or in density or physically, and the consumer makes a detrimental reliance on that product, we end up buying a heat. The bottom line is, we’re responsible, just like any other supplier to any other consumer."

In sum, a successful scrap processor has to have a full knowledge of everything that goes on, not only in his own yard, but also in his customers’ facilities, says Michael.

"Knowledge is the key, attention to detail is the key, and somehow you have to balance very delicately safety, economics, environmental laws, and the well-being of both your customer and your supplier," he says. "And on top of all that, we’re supposed to make a living."

This may seem like a tall order, but it is possible to achieve, he says. "Notwithstanding all that, the scrap business is an exciting business," says Michael. "It changes every week, every day. After all these years, I still look forward to getting up and coming to work."

The company is owned and operated by the three brothers: Michael; Stuart; and Ronnie Simms, vice president of sales and transportation for Parkwood and secretary/treasurer of Willoughby Iron & Waste; along with their father Harry, president. There are both benefits and challenges to working with your family, says Stuart.

"When you’re in a family business you say things you would never say to anyone else – you’d never treat your friends like you treat your family," he says. "On the other hand, you receive benefits you would never receive outside the family business. Michael and Ronnie and I have been involved in many outside activities both within the industry and in the community. None of us could have had these accomplishments had we not had the benefit of having all three of us. And most importantly, none of us could have done what we do if it were not for the diligent, hard, honest work and role model our father gave us."

Their father Harry still, at 83 years old, comes in every day during the summer, adds Michael. "That’s typical of the scrap business. It breeds longevity."

Stuart relates the tale of being at a scrap industry convention in 1979 with Michael and observing a discussion between two older gentlemen in their late 60s or early 70s. "One turns to the other in front of the elevator and says, with a heavy European accent, ‘Irving! Pa’s gonna drive me crazy!’ Michael and I looked at each other – we were in our 30s, and these guys were in their 70s – and we realized we’d be working with our father for another 45 years or so."

At the same time, it’s clear that the three brothers have the utmost respect for their father. "If we’re able to provide for our children half of what our father provided for us, I know we’ll consider ourselves extremely successful," says Stuart.

The three brothers took different routes to joining the business. Stuart, with a double degree in marketing and economics, went straight to work for the scrap business. Ronnie, with an economics degree, worked for a few years outside the company, as did Michael.

"Michael graduated from law school, practiced law and taught," says Stuart. "Then he came into the business. I, on the other hand, took my law boards, applied to law school, made the decision to come into the business, got the letter from the law school, and never opened it up because I’d already made up my mind."

When their youngest brother Ronnie came on board and learned the business, adds Michael, this opened up all kinds of new opportunities for the company. "He adds another spoke to the wheel, and is one of the reasons we were able to expand and buy the new facility," he says.

Despite the trend toward mergers and conglomeration in the scrap industry, with more businesses going to corporate ownership, Michael hopes someday his son will join the family business.

"My son just started law school," he says. "I’m hoping he’ll practice law for three or four years and then come into the scrap business."

Both Stuart and Michael are very active in the scrap industry, as well as in the community. Among many other things, Michael has been president of the Cleveland Area Scrap Dealers Association since 1987, and Stuart is very involved with the Northern Ohio Chapter of ISRI, serving a term as president. Stuart was also a member of the Ohio Recycling Task Force, organized by the Ohio Department of Natural Resources, from 1987 to 1991. In 1992, he was the author of anti-theft legislation for scrap and salvage materials for the Cleveland City Council.

The brothers plan to continue to grow their business, add to their customer base and consumer base, and continue the practices that have led to their current success. "We plan to work with our consumers to make certain that we’re producing a quality product that conforms to their specifications and is acceptable to them," says Stuart. "Our goal is to be the best, largest and most profitable that we can be, and to make certain that we don’t lose sight of how we got there and where we want to go."

The author is editor of Recycling Today.