12 Jul 2019
Metal Recycling: will digitalization solve key industry challenges?
The global metal recycling industry is growing at an unprecedented rate due to factors such as urbanization, the spread of industrialization, concerns over environmental sustainability, and laws and regulations pertaining to metal scrap. Currently, the raw material that produces 40% of steel worldwide is recycled steel.
Obviously, the opportunities are boundless, but as the industry grows so, too, do the challenges for C-Suites, indicating that new solutions and ways of thinking will be needed to succeed.
Let’s first take a look at the industry as it currently stands and then address solutions to challenges.
The state of the industry
The global scrap metal recycling industry is worth U.S. $280 billion (€250 billion). Expect growth in revenue of 3% by 2024, reaching U.S. $340 billion. Forecasts vary, with Reportlinker projecting the industry to hit U.S. $434.55 billion by 2023. To quibble over differences in value at this point is to miss the bigger picture: the industry will continue to grow at a rapid rate.
One reason can be attributed to emerging economies, such as China, India, Brazil, and South Africa. With economic development comes the need for metal, which presents opportunities for industry players. Meanwhile, Europe is a mature market, but North America, South Korea, and Turkey are catching up.
Trends and drivers
Another major trend that’s feeding global growth: key industries are turning to recycled metal. Those key industries, such as automotive and construction – a booming sector thanks to urbanisation – are opting for recycled metal. Behind these industries’ decisions are multiple drivers. Recycling metal repeatedly does not degrade the materials’ properties, while it also helps curtail landfall usage, reduce costs and efficiently manage resources.
Sustainability is a major issue. It’s not only about moving in the direction of a circular economy by directing solid waste away from landfill and turning it into useful products. By using recycled metals, these industries don’t have to rely on mining operations that destroy habitats.
And here we get to the matter of laws and regulations, a critical business driver for the industry.
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Brochure: Enterprise Management for Metal Recycling Industry
Different rules for different countries
Traditional flows of scrap to China have been turned upside down by legislation over the last five years, resulting in limits and bans on certain types of scrap. Metal traders who want to do business with China have to meet extremely high standards. (U.S. firm SA Recycling installed a new line to wash recycled aluminum so that it’s pristine.)
What’s happening in China is the emergence of processing markets. That is, scrap is imported for processing, sorting and sometimes smelting or refining into copper and aluminum that can be exported to other markets for use as a manufacturing material.
Naturally, every country has its own agenda regarding scrap metals, which dictates its laws and regulations. For instance, some impose restrictions, taxes and duties on the export of scrap metal with the purpose of keeping the stuff at home. Their purpose is to gain easy access to raw materials at a price they can afford. Then there are countries with coastlines who invested in extensive shipping infrastructure, such as Great Britain and the Netherlands, who rely on exporting metals. The U.S., in an attempt to reduce their reliance on imported metal, has slapped hefty tariffs on steel and aluminum imports.
For metal traders, keeping track of the different laws and regulations is a full-time job in and of itself.
Nothing has changed here, but the problems persist, continuing to agonize companies. A business might have bales of material sitting in a scrapyard, yet not have any idea if it’s for sale. Someone within the company, perhaps at another site, might have committed it to a sale. Without proper inventory management you may have exposed your organization to a long position, or overcommitted to sales.
Then there’s the dilemma of dealing with a material that might have been purchased as one classification or grade yet might sell as something else. And how is the material tracked? The challenge here is to organize and maintain efficient inventory management.
Supply chain challenges
Everyone in the supply chain, whether municipals or private companies are feeling the strain to find ways to reduce costs in the recycling process.
Market factors reduce profit margins. And then there’s the difficulty that arises from recycling so much of today’s products – a mobile phone, for instance, contains around 40 different metals. Recycling has to make economic sense in order to be viable.
What can help is simplifying the coordination of individual supply chain members while increasing efficiency. Breaking down silos, both internal and external, are critical, as are other factors.
How do you find economies of scale? Where is the competitive advantage? These are the questions being asked. The answer is to cut out the waste in their own processes and work in an integrated, collaborative manner,
The next question is, how can that be accomplished?
Competitive advantage: digitalization
With so many process inefficiencies in the industry, metal recycling is ripe for disruption. Municipals and companies who want to jumpstart their metal recycling efforts need to look at the component that empowers the circular economy: digitalization.
Anyone still relying on paper processes is working in the Cretaceous period. One meteor and they’re wiped out. Metal recycling is just too complex to work any other way than digital, especially when each area hinges on the other, such as compliance and inventory management.
Digital is about the user experience and the value it brings, which can be felt in everything from inventory control and barcoding, to improved automation, reconciliation – what we’re talking about here is making it easy to simplify processes. Digital provides a window into a company’s entire operations. That’s how businesses can cut the waste in their processes.
Let’s look at the current trends in digital solutions and why companies are implementing them:
The value of an ERP
Enterprise Resource Planning (ERP) will – if it’s best in class – streamline operations by integrating every aspect of a business, from procurement to supply chain – all the way to finance, and scale with businesses as they grow.
This is all about information that’s accurate and easily accessible. A best-in-class ERP solution is much like a swiss army knife. It packs quite a lot into one package, from commercial and operational to logistics and finance tools.
Easier compliance reporting
A good ERP makes dealing with trade compliance and regulations easier and faster to report. It removes the complexities by automating and standardizing processes. It differentiates for the user local, national, and global laws. For instance, particular compliance requirements for any material is highlighted.
The right ERP provides full transparency into every aspect of a company: purchases, sales, contracts, prices, inventory, yard operations, freight, settlements, scale transactions – you name it. With everything right in front of the user, he or she can even spot internal fraud. If a load has been overstated, or a ticket has inflated inventory, the user will see it.
Transparency also gives you an accurate picture of your inventory. A company doesn’t always know what they’re paying for during the transfer of raw material to finished goods. An ERP can provide an efficient scrap processing and distribution system.
With the use of barcodes, every time a transaction is made at the scales, the inventory is adjusted in the ERP in real time. This enables the user to know exactly what is going on with materials and the cost of that material grade. This reporting completely removes the guesswork. The company now has a true and accurate picture of their inventory and can track its lifecycle.
The value of mobile workforce management
A mobile solution with a touch-screen device is invaluable when it has features specific to recycling and is linked to your database. This is about better asset management, made possible by digital technology.
The yardmaster can not only control the trucks in the yard but grade the material as well. This is especially advantageous with packaged non-ferrous inventory management, providing better control and the ability to track the lifecycle of that material.
How it works is simple. The scale master registers the first weigh in. The yardmaster can then see the truck on his device and select the commodities with the touch screen. He can assign the load into multiple commodities by percentage and add deductions for the whole load, or by commodity. The data can then be made available at the scale, where the scale master can see that the grading is completed. This significantly reduces the risk of miscommunication. An additional bonus: the device can also take photos and link them to the commodities on the ticket.
Mobile workforce management makes the process automated and more efficient with improved reconciliation, which results in significant cost savings.
Transportation of scrap is another area where costs can be reduced by creating efficiencies. A best-in-class Intelligent optimization is an incredibly easy-to-use digital solution. It drastically cuts logistics costs with capabilities that range from route optimization to supporting operational and post-operational business processes. Among other things, this includes automated route slotting and time slotting for price optimization, resource management, sub-contractor co-planning, and self-billing.
The ease in use derives from a visual presentation of unscheduled and scheduled orders. Opt for ones that use the drop-and-drag method, which makes dispatching or changing existing orders seamless. Intelligent optimization can work with RFID tags, transponders and GPS to track the location of their containers and trucks at any given moment. Truck drivers can carry mobile data collectors to work with barcodes or transponders, which enables automatic operation of the scale. Simply download the information stored on a complete run. That’s it. Users can save anywhere between 25% -- 75% in administrative planning time while reducing their number of trucks on the road by up to 15%.
For all of these solutions, it’s worth a reminder: we’re talking about best-in-class solutions.
Not all ERPs, mobile workforce solutions, intelligent optimization systems, or any other digital tool are created equally.
Advice on choosing digital solutions
An ERP solution is at the heart of your platform, so let’s start here. First, go with a cloud ERP so that it scales to your needs and growth. This takes maintenance and security out of your hands. Your provider will do a better, more regular job at taking care of those things anyway, while continuously keeping your ERP up to date.
Always choose an ERP backed by providers who are experts in the industry. This can not be stressed enough. If the providers have their hands in other industries, completely unrelated to metal recycling, then no, they are not experts.
True experts will understand how pricing, notification, quality, settlement and payment exceptions impact scrap purchase agreements and supporting transactions. They know that the nature of supplier communications is irregular, and the time involved to answer questions for the procurement team is no small thing. They understand all of this, and their EPR solution reflects that understanding.
Another point to consider: a provider experienced in industry ERPs is already ahead of companies when it comes to factors such as trade compliance and regulations. They keep an eye on changes in laws around the world, so that companies don’t have to.
For example, AMCS’s lifeblood is waste and recycling management. We have contacts within governing bodies and relevant associations around the world. We’re in constant talks with policymakers. This is how we anticipate new regulations ahead of the game and implement changes accordingly to clients’ ERP systems.
Our knowledge and understanding of the metal recycling business is also why our AMCS Platform solutions are best-in-class. We know the features that the industry needs and how to make the user experience easy and seamless.
The opportunities to take your company to a new level are there. Tap into digitalization and you’ll have a good head start getting there.