by Matt Wengert, CMIR
Knowing what not to do and what questions to ask keeps any scrap
metal management system efficient, viable and profitable. Stewardship
of a valuable asset is not “dealing with junk”. Much more is involved
in providing effective scrap management than having “a deal” or
contract in place with the local vendor. Beyond the basic definition of
scrap and more sophisticated than simply separating ferrous from
non-ferrous materials, lays a system of controls, checks and balances
that requires proactive management to achieve maximum efficiency and
results.
A professionally managed scrap system requires constant monitoring
due to the fluidity of commodity markets. Commodity markets are a
moving target which have legitimate risks and regulations requiring
managerial due diligence. There are no less than three separate acts
(CERCLA, Title VI of the Clean Water Act, and Low-Level Radioactive
Waste Policy Act) that warrant regulatory consideration in the scrap
metals arena.
Securing a competitive pricing model is an important step in the
process. Receiving payment for each pound is just as important as
securing a proper penny per pound. Without appropriate controls, the
scrap process can be vulnerable to errors, omission, fraud, and
outright theft. While the risk associated with an unscrupulous vendor
is an obvious area to monitor, others can be more difficult to predict.
The risk of theft by outsiders is legitimate, as seen during the metals
market bubble of the recent years and the resulting increased instances
of theft of corporate metals and metal assets. Instances of copper and
other metal theft are easy to find on court dockets across the globe.
Ensuring your scrap management process is supported by corporate
security measures to protect the corporate assets, as well as to
provide adequate protection and deterrence is important.
Regardless of shifting market conditions or economic cycles, the
goal of an elegantly designed scrap metal management system is to
efficiently preserve a  valuable asset while providing both fiscal and
environmentally-responsible service.
An integrated scrap management system should provide a cohesive
approach to collection, sorting, pricing, transporting, monitoring,
tracking, reporting, and analysis. Contracts and pricing that correlate
to a published index with definitive date sensitive touchstones is a
widely accepted best practice. Spot order bids also are best when
priced in terms of a percentage of a published index to provide
transparency as well as performance analysis and historical comparison.
Reprinted from ASSET 2.0, the Investment Recovery Business Journal, Vol. 1, 2009

© The Investment Recovery Association