GPI 372 – Assign one employee to your scrap problem and give him a bonus to minimize the cost on your bottom line.

All businesses end up with trash, scrap material, leftovers, irregular or off-spec products. Whatever your business, you want your firm to obtain all of the money you can get from scrap revenue or you want to minimize the cost of disposing of that which you must discard. If your operation generates a large enough volume, assign an employee to this responsibility and tie his or her efforts into a bonus program so they take it seriously as a worthwhile endeavor.

Questions to ask about scrap every month/quarter/year:

• Machine scrap rates: Before you buy any new production equipment, ask what the scrap volumes will be and ensure their disposal/sale are calculated in the payback calculation of the machine purchase.  Do not disregard this exercise prior to committing capital funds.
• Scrap in estimates: Make sure customers pay for offal and scrap within the calculation of their gross profit margins.  Do not ignore scrap or that material which is not used.
• Compare vendors: Reevaluate and compare companies that come and pick up your excess metal, wood, plastic or other large amounts of scrap generated in your operation or business. Look at pricing, measurement accuracy (weights of roll-offs or bins), penalties imposed on mixed scrap sources, times of pickup and other relative issues to that scrap which your operations generate.
• Cost or revenue: Assign your scrap designee to look for buyers of your scrap versus paying for it be hauled off.  See buyers in the market first.
• Hire knowledge: If necessary, hire an outside independent scrap sales representative in your area who does nothing but match buyers and sellers of various materials.
• Measure yield: Evaluate the original cost of the material and the cost to dispose or revenue of removal to see if that variance is widening or narrowing. (i.e. purchase metal at $2.00/pound and sell the scrap at $.12/pound.  If a new dealer comes along offering to sell the material at $1.80 and buy the scrap back at $.08 pound, it may be worth changing since the net difference will drop.)
• Recycle your waste: Find a company that wants to use your scrap in their product and eliminate your disposal cost.
• Products from the scrap bin: Find a company or consider starting a new firm which makes products from your scrap pile. This will cut your overall disposal cost, but also feed into the green marketing aspect of your business.