Chapter 11 Investment Recovery

McGraw-Hill/Irwin Purchasing and Supply Management, 13/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. Scrap Recyclers Handle 120 Million tons/year 60 million tons of scrap iron and steel 47 million tons of scrap paper and paperboard 5.1 million tons of scrap aluminum 1.7 million tons of scrap copper 1.1 million tons of scrap stainless steel 1.4 million tons of scrap lead 248,000 tons of scrap zinc 2.3 million tons of scrap glass 745 million tons of scrap PET plastic bottles 734 million tons of scrap HDPE plastic bottles

McGraw-Hill/Irwin Purchasing and Supply Management, 13/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. Four Pieces of Federal Legislation Impact the Scrap Disposal Market and Sourcing Procedures Resource Conservation and Recovery Act (RCRA) -Ensure that suppliers are competent and reputable and have an EPA permit -Require the supplier to warrant that employees are trained in handling the specific waste -Insist on the right to inspect the facility and the EPA permit Toxic Substances Control Act (TSCA) -Requires suppliers to warrant that any chemical or chemical mixture they provide is listed by the EPA

McGraw-Hill/Irwin Purchasing and Supply Management, 13/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. Four Pieces of Federal Legislation Impact the Scrap Disposal Market and Sourcing Procedures Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) -Purchasers must track the amount and type of chemicals that enter and leave the plant and consult the Material Safety Data Sheets (MSDS) Clean Air Act Amendments -Purchasers can choose environmentally friendly products, establish criteria for supplier selection that limits purchases from suppliers that sell damaging products, and be alerted to alternatives, substitutes or new technology that may help their companies meet the goals of the act.

McGraw-Hill/Irwin Purchasing and Supply Management, 13/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. The EPA’s Voluntary Compliance Programs Climate Wise Commonsense Initiative Design for the Environment Electronic Commerce/Electronic Data Interchange Environmental Accounting Project Environmental Leadership Program National Environmental Performance Track Team Sector Facility Indexing Project Sustainable Industry Project WasteWise

McGraw-Hill/Irwin Purchasing and Supply Management, 13/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. Environmentally Responsible Purchasing Practices Can Reduce Costs Reducing the obsolescence and waste of MRO supplies through better inventory management Reducing costs from scrap and materials losses Lowering costs of handling hazardous materials Increasing revenues by converting wastes to by-products Reducing the use of hazardous materials through more timely and accurate materials tracking and reporting systems Decreasing the use and waste of chemicals and solvents Recovering valuable materials and assets with efficient materials recovery programs

McGraw-Hill/Irwin Purchasing and Supply Management, 13/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. Environmental Management Reduce Reuse Recycle less risk less complexity easier to implement smaller environmental benefits

McGraw-Hill/Irwin Purchasing and Supply Management, 13/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. Materials Recaptured from a Computer Personal Computer Plastic Pothole Filler Aluminum Cans, Foil Steel Cars Construction Beams Nonleaded Glass Usable Glass Copper Wiring, Pipes, Computer Circuitry Lead Car Batteries, Film Leaded Glass Asphalt, Industrial Abrasives Precious Metals Jewelers, Dentists, Chip Makers

McGraw-Hill/Irwin Purchasing and Supply Management, 13/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. ISO Framework Environmental Management Environmental Performance Systems Environmental Auditing Environmental Labeling Life Cycle Assessment Environmental Management Systems Environmental Aspects in Product Standards Organizational EvaluationProduct and Process Evaluation Source: Melnyk et al., ISO 14000: Assessing Its Impact on Corporate Effectiveness and Efficiency, Tempe, AZ: Center For Advanced Purchasing Studies, 1999.

McGraw-Hill/Irwin Purchasing and Supply Management, 13/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. Benefits of Effective Disposal Programs Cost recovery Cost reduction and avoidance Customer service Quality control Protect intellectual property and brand identity Comply with government regulations Reclaim valuable materials from customers Control product liability Improve public image

McGraw-Hill/Irwin Purchasing and Supply Management, 13/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. Categories of Material for Disposal Excess or surplus materials Obsolete material or equipment Rejected end products Scrap material Waste Hazardous waste

McGraw-Hill/Irwin Purchasing and Supply Management, 13/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. Reasons for Assigning Disposal of Materials to the Purchasing Function Knowledge of the materials, equipment or substances being disposed Knowledge of price trends and the market Contact with salespeople and information as to possible users of the material Familiarity with the company’s own needs for the material The company may not have a surplus material disposal group

McGraw-Hill/Irwin Purchasing and Supply Management, 13/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. Disposal Channels Use elsewhere in the firm “as is” Reclaim for use within the plant Sell to another firm for use on an “as is” basis Return to the supplier Sale through a broker Sale to a local scrap or surplus dealer Donate, discard or destroy the material or item

McGraw-Hill/Irwin Purchasing and Supply Management, 13/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. raw material processing The Reverse Flow of Materials in the Supply Chain manufacturing distribution consumption recovery recycleremanufacturereuse waste processing disposal resell

McGraw-Hill/Irwin Purchasing and Supply Management, 13/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. Selecting Disposal Partners Selling, not buying materials places the purchaser in a new role Understand regulatory issues -fines, penalties Disposal practices have implications for operations -impact on processes, labor costs Use appropriate segregation and transportation methods based on volume of material Internet and technology applications -Internet marketplaces provide access to a large number of potential bidders