Scrap As Inventory: Converting Waste into Assets

Scrap As Inventory: Converting Waste into Assets

Thinking of scrap as a product can bring a new level of professionalism to a plant manager’s sustainability quest. Plant managers know the value of the scrap they produce, and typically dedicate one or more service providers to keeping plants clear of waste. An efficient, well-run production team follows strict procedures for capturing, segregating, consolidating and queuing scrap. Yet, many of today’s plant managers following the best of best practices still tend to manage scrap materials as a waste stream.

Fortunately, the new breed of forward-looking plant managers have stopped regarding scrap as mere waste and begun considering its full market potential instead. This turnaround in thinking benefits the environment as well as the bottom line because it can raise the pricing floor compared to strict commodity trading. Converting the scrap disposal management task into a product management mission is necessary if scrap is to evolve in value to both its generator and its buyer.

Scrap has been considered waste with residual value since the dawn of industry, and its potential as its own legitimate product line is ripe for exploitation. In traditional manufacturing, the main product is usually managed and marketed by someone else who is even located someplace else.  On the other hand, the “waste-as-product” is produced and managed directly from the plant. Therefore, the plant manager that wants to “close the loop” must become a de facto product manager.

As soon as waste starts becoming a product, its “arising” requires that it be treated as inventory. Considering waste itself as a product can be daunting to a plant manager whose primary duty is producing her company’s “real product.” Buyers have reasonable expectations that the supply forecast, consistency, quality, packaging, transportability, labeling and volume will be stable as they strive to redistribute or process these materials. A smart manufacturing operation will ensure that they are. Treating these scrap materials as true inventoried products literally reframes their value by making their production focused on serving customers instead of a necessary result of producing the real product. The good news is that in acquiring the capacity to monetize scrap, the plant manager maximizes the value of the scrap materials while adding value to their own role, too.

To become a smarter scrapper, consider the scrap-generating part of the plant a “business within a business” and determine if the scrap, as a product, can become part of your company’s product family from a management and systems perspective. However, be realistic, as it may be impractical or inefficient to do so. The scrap business may best be treated as a standalone business from an information tracking perspective. The typical spreadsheet arsenal associated with managing scrap supports this standalone idea. Taking it to the next level means upgrading what is measured and accounted for in order to maintain the same level of information about the scrap products as any other product your company makes. This will enable efficiencies, and also set up the scrap business to be optimized as your core business changes, as new opportunities arise for scrap, and to accommodate emerging standards and strategies for sustainable business.

Embracing the trash-to-cash opportunity involves a time investment and possibly some added responsibilities, but the outcome is a better economic and environmental picture for scrap materials management. Diverting waste while creating revenue is a distinct win-win – and a surprisingly simple, yet profitable sustainability strategy that any size manufacturer can follow.

Picture of cartons via technologyed.com

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