Learn: Case Studies
Let us suppose for a moment that Company A is a manufacturer with its headquarters located in Wichita, KS and that they have ten plants located in various towns around the United States. They’ve been in business for over thirty years making quality metal products that include partitions, plumbing fixtures, pipe, wire, cable and fencing. Each plant handles their own scrap metal sales, which are to local scrap processors.
At the end of every month, the responsible employee receives scale tickets from the processor with payment (generally…). Being that they have many other responsibilities, and are often overwhelmed by them, they take a cursory look at the paperwork and send it to the accounting group in Wichita at the end of every month.
The accounting group receives ten different copies of scale tickets and checks, files the paperwork, deposits the checks and concludes the bookkeeping. When payments for the materials are not received on time by each plant, the tasked employee must place calls to the scrap processor to find out the status. The plant employee must file a reminder to keep checking on the payment status until the check ultimately arrives. When it does, it is forwarded to the accounting group, which disrupts their flow of operations. This takes several people’s eyes off the ball of what they could be doing to grow a manufacturing business instead of being in the scrap business.
One day, unexpectedly, one of the plants receives notification from the Department of Transportation that their scrap processor picked up materials from their plant, that the container holding and transporting their scrap metal leaked fluids onto the highway since it was raining, and that there is to be an investigation for the spilling of hazardous fluids onto the public roadways.
Several months later, the Environmental Protection Agency notifies them that there has been an inspection of their scrap buyer’s facility and that per the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), the scrap buyer’s yard is being investigated as a Superfund site that will require clean up due to the improper storage of scrap metal materials with coatings and solvents leaking on the property and leaching into the ground water.
As a result of this, the manufacturer joins the group of potentially responsible parties (PRP) of contamination on the site and invests a significant amount of money to investigate the impending remediation and natural resources damage claims, that are likely substantial, for which they may all be accountable contributors. Additionally, the publicity for all companies involved will be very unflattering. After several years of employee time and resources spent searching for and providing paperwork and answers to the EPA investigators, as well as hefty attorney fees, the manufacturer is fined $1.2M and is required to pay $750K for their portion of the cleanup fees.
Their ignorance about their burden of proof requirements to mitigate their downstream environmental liability was not an excuse.
Now, suppose that Company B is a manufacturer with headquarters located in Ft. Worth, TX and thirty-one plants located in various towns in the Southwest and Midwest. They’ve been in business for twenty-one years making aluminum siding, windows, storm doors and steel buildings.
They have contracted with a subject matter expert partner in scrap metal management that acts as their single-point-of-contact handling all of the scrap metal sales for all of their plants. At the beginning of their relationship, the partner, after having created a customized Request for Proposal and sending it out to the top scrap buying processors in each town in which Company B’s plants are located, has increased the amount Company B receives for its scrap metals by an average of 20% and 50%.
This partner has a customized, simple communication channel for setting pickup schedules, or accelerating new ones as their output changes. At the end of every month, their accounting group deals with just one person (one of the partner’s Customer Service Reps) instead of thirty-one, and receives a full, detailed spreadsheet report containing data for each location, payment from the proceeds of the sale of every plant’s materials – this partner is responsible for all payment collections and paying regardless as to whether or not the scrap buyer pays, reconciling scale tickets – any mistakes/issues/price changes (spot metal prices are monitored and the agreed upon pricing formula is adhered to) are negotiated by the partner directly with the scrap buyer, compiling Bills of Lading, capturing driver signatures, attaining Certificates of Recycling, packing slips, photos and other pertinent information that shows care, diligence and provides a full audit trail in the event of an investigation by a local, state or federal authority investigating any downstream environmental issue that they could be party to.
Their risk has been mitigated because of these efforts. Further, they know the complete chain-of-custody of their materials from the time it leaves their facility until it reaches a mill where it is melted to be used again in manufacturing – cradle-to-grave. Some of Company B’s facilities didn’t have scales for weighing materials prior to placing it in the processor’s containers, so their partner supplied them and has them calibrated annually for accuracy.
Lastly, they receive monthly, quarterly and annual reports documenting changes in scrap flows and other useful data, and a Corporate Citizenship report that their marketing department uses to advance public relations articles expressing how much material they recycled for the year. In the event of a Superfund site investigation, they have a comprehensive audit trail showing they were diligent in their efforts to meet the standards of SREA and mitigate their liability in the cleanup effort.