Team turns costs of wastes into profits
William Atkinson -- Purchasing, 5/2/2002 2:00:00 AM
Over the years, one of Weyerhaeuser Corp.'s wood panel plants generated so much waste in the form of sander dust that it ended up filling a landfill several acres wide and several feet deep. "When the plant closed, an environmental team estimated it would cost the company $5 million to abate the material," recalls Dennis Knutz, C.M.I.R., A.S.A., director, mobile equipment, investment recovery, for the $15.5 billion company located in Federal Way, Washington. Enter Knutz's department. "One of my recovery specialists began looking around and ultimately found a customer who was willing to purchase the dust to burn for fuel." A $5 million expense was avoided and replaced with an actual profit.
Knutz, who wears two hats—purchasing mobile equipment for Weyerhaeuser and handling the company's investment recovery activities—reports that the company has been involved in the latter for 31 years, and he's been there for 28 of those years.
"Being predominantly a forest products company, we recover just about anything and everything that it takes to make lumber and paper," he states. This includes manufacturing machinery, transportation and material handling equipment, support equipment, and so on.
For most items, each business unit makes the decision when to sell 
equipment. "For example, they decide when it is time to renew their manufacturing equipment based on the latest technology," he explains. The primary exception to business unit decision-making relates to the company's fleets (automobiles, lift trucks, etc.), which have predetermined target date renewal schedules created at the corporate level.
Business units want two things when they contact Knutz's department with equipment or material to sell: the best possible price and velocity (speed of the sale). "As such, we create a plan for each item," he states. "If it doesn't sell in the first planned way, we select the next way." Choices near the bottom of the ladder include wholesaling or even scrapping. Knutz and most of his staff members are professional appraisers, so they are able to provide business units with realistic expected fair prices from the start.
There are several options for equipment in the recovery process. The best one depends on the item being sold. Examples:
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The department's investment recovery specialists each have their own specialized customer bases. "They engage in direct mail or telemarketing with these customers for most items," he states.
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The department may employ the services of a broker for unique equipment that involves a specialized market.
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For items that lend themselves to stocking, the department frequently contacts dealers who will purchase the material to resell it.
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"If we have a large spread of diverse equipment, or a piece of equipment that specifically lends itself to the auction process, we will go that route," he adds.
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The department has done some trade journal advertising in the past, but does not do much of this anymore.
Do the same customers continue to come back? That depends. "Some of our customers are wholesalers who buy frequently for their stocking inventory," he replies. "However, most end-use customers are one-time buyers."
While most of the recovery process involves selling equipment or material that has obvious value, the department enjoys opportunities where it can. As Knutz says, "Turn a sow's ear into a silk purse. We pride ourselves on being able to take things the company was ready to spend money on to get rid of and find a way to turn them into positive cash flow," he states. "The sander dust landfill is an example of this, but we have had success in dozens of other cases like this," he reports.
Knutz offers four recommendations on what it takes to succeed in an investment recovery process. First, realize that investment recovery is process-driven. "You need to understand the discipline behind creating a marketing strategy, making good decisions on when to dispose of assets, and how to redeploy the assets within the company if it makes sense," he emphasizes.
Second, create a different strategy for each category of equipment. "You can't use the same strategy for everything," he cautions. "Different categories require different marketing strategies."
Third, seek third-party assistance. For example, he recommends seeking the assistance of consultants to help you get started, working with dealers and brokers to help create the best marketing strategies, and joining the Investment Recovery Association for education and networking opportunities.
Finally, work to attain top management support. "When the Investment Recovery Association conducted a survey to identify the best practices of the top performing companies, the first key to success noted was the commitment of top management," he states. "This doesn't mean just a nod of the head, but real verbal support." To maintain this support, he recommends continuing to show the cost benefits of the recovery activity, which, if you do it well, can be impressive.
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