A Middletown, Ohio-Based Scrap Metal Recycler Capitalizes on Volvo Skid Steers
Sometimes, when business is down, there’s very little a company can do to widen the profit margin. Pricing becomes brutally competitive. Customer wallets get thinner. And so you oftentimes must look to the back side of the business — to curb expenses — if you want to keep growing. Following the economic downturn of 2008, that’s exactly what Cohen Recycling found itself doing. The Middletown, Ohio-based scrap metal recycler is among the largest firms of its kind in the country. But the scrap metal business was hard hit by the Great Recession. Recyclers got squeezed. From the bottom, they were forced to pay top dollar for scrap metal. From the top, steel mills were trying to push prices down.
“Business for everyone has been difficult,” says Geoff Rosenberg, a top executive for Cohen Recycling. “Most recently, you’re talking about high fuel prices, you’re talking about a terrible winter and you’re talking about an economy that’s still trying to recover from 2008. That’s why you have to control your costs — your expenses. Profit margins in every business are shrinking.”
For Cohen Recycling, the answer to the profit margin squeeze lay in the middle. Rather than trying to push up its margins with greater production, the company opted to reduce expenses. Equipment was the No. 1 target. The company altered its philosophy for how it purchased and maintained equipment. Rather than holding onto older machines and patching them up over time, Cohen Recycling decided to buy new ones and secure comprehensive maintenance contracts with its equipment dealers — so comprehensive that the company essentially could establish a top number for its equipment costs. Surprise maintenance bills would vanish.
The change in philosophy took a year to implement. Cohen Recycling has about 100 material handlers and mobile shears. It has 30 skid steer loaders, 55 forklifts, 15 wheel loaders and dozens more. Huge savings resulted. “It’s six figures — high six, low seven. That’s how it was in the first year,” says Drew Lammers, another Cohen Recycling executive.
Family Business, Big Growth
Cohen Recycling is a family-owned company, founded in 1924, that has grown to employ more than 500 people. Through acquisition and new growth, the firm now operates more than 20 scrap yards in Ohio, Indiana, Kentucky and Tennessee. The company regularly ranks as one of the Top 100 firms in its region and is among the Top 20 scrap processors in the nation based on gross tonnage. It receives scrap from a variety of places, from demolition companies to retail recyclers. Cohen Recycling’s processed product is shipped to steel mills. It’s a company that prides itself simply on getting work done as efficiently as possible. There’s nothing flashy about the firm, from its Middletown headquarters to its staff. They all work together to accomplish the company’s goals.
Wearing Out the Equipment
The changing philosophy in its equipment line has been dramatic. The firm historically has carried a lot of equipment — much of it acquired as the company bought up scrap yards in its region. Many of those machines — cranes, wheel loaders, trucks, material handlers, skid steer loaders — came with significant maintenance needs. Single repairs could cost in the tens of thousands of dollars. On top of that, the firm operates 24/7 at its Middletown site, and that will put a lot of age on a machine in a hurry.
“You have to put a lot of your equipment in dog years — two for one,” Rosenberg notes. “In every level of business, you have to watch your costs and know when it’s time to replace an aging machine [before maintenance costs go through the roof]. Our philosophy is that we don’t want those peaks and valleys.”
Cohen Recycling has found that the cost of maintaining equipment over a long period of time is enormous — especially in a hard scrap yard environment. Rosenberg recalls one skid steer loader that cost the firm $30,000 to maintain in just three years. That’s a lot, considering the $40,000 to $70,000 price tag for a new machine.
Great Equipment Solid Service
Now the company puts a firm limit on the number of hours it will keep a machine. For skid steer loaders, it’s 3,000 to 4,000 hours. After that, the machine is unloaded. Cohen Recycling also has demanded thorough service and maintenance contracts from its equipment dealers. Breakdowns are to be serviced within hours — not just with loaner machines, but with actual repairs.
That’s a deal Cohen Recycling worked out with its Volvo dealer Rudd Equipment Co. in Cincinnati. In early 2014, they sold Cohen Recycling three Volvo MC135C skid steer loaders to work in the non-ferrous metal site at the company’s Middletown location. Volvo skid steer loaders come with side-door entry, which allows operators to enter the cab without having to step over the scrap grapple.
“Our safety department just loves that,” Lammers says. “Now you’re not climbing in and out of the machine over the bucket. It makes things much safer for the operator.”
The skid steer loaders also are equipped with salvage and demolition guarding kits and enclosed, climate-controlled cabs. That’s coupled with the Volvo Tier 4 final engine technology, which adds more fuel savings with higher torque at low rpm as the skid steer loaders constantly move material around the yard. The machines collectively move several million pounds of scrap metal per month, operating on a rough pad site and sometimes across a street — moving anything from shredded aluminum to bales of compacted metal. The equipment hasn’t suffered significant downtime.
“The Volvo — it’s a solid piece,” Rosenberg says. “It’s got a great entry system. It performs so well. It’s got beef to it.”
But good equipment has to be coupled with service to match, Rosenberg says. Rudd Equipment Co. has signed on to provide comprehensive preventive maintenance and near-instant response to breakdowns. But the deal is even more extensive than that. The dealer also analyzes the work that Cohen Recycling does with its skid steer loaders, critiquing operator use of the machines and offering advice on how to improve productivity and prolong the lifespan of the skid steer loaders.
“The Customer Service Agreement is not anything different from what we would do for any other customer,” says Chris Kirk, sales representative for Rudd Equipment Co. who put together the deal with Cohen Recycling. “But the level with which these guys track data and get engaged, I haven’t seen that. That’s what sets them apart — how they incorporate the program to benefit them the best. They take the data, utilize it, and then make decisions based off of it. That’s one extra level they go to in order to make this program benefit them.”
Lammers, who is a former demolition company owner and past president of the National Demolition Association (NDA), says it’s rare to establish such a comprehensive maintenance plan with equipment dealers.
“Most dealers don’t understand what we’re looking for,” he says. “They’re used to just selling a machine. It’s a one-shot deal, and they hope they get a shot at the next one. But we’re bringing in our partners and saying, ‘You are us.’ We want you coming in and looking at our machines. We want feedback from Rudd Equipment Co. about how we are handling our machines. That’s the feedback we want.”
Chris Moon is a freelance writer, based in Stanton, Ky.