John Underwood sees huge opportunities for efficiency in the management of raw material inventories for recycling companies and the steel and foundry industries.
Underwood, president of Systems Alternatives International LLC (SAI), has made the Maumee, Ohio-based software firm a byword for computerized management of operations and finance for scrap companies worldwide. Now he wants to expand that customer base to include the raw materials end of the global steel industry.
When you look at steel, theyve done an unbelievably good job in recent years at getting their costs down. Theyve reduced electric consumption by 30 percent, labor costs by 80 percent, he said. What they havent done is reduced costs in handling raw materials coming in and managing inventory. Right now, scrap is 50 to 60 percent of the cost of finished steel. Most mills today have software systems that literally run the hot end. But their systems are just terrible for raw materials.
Underwood noted that ferrous scrap prices have increased about 350 percent since 1992, so deploying technology to control and manage raw material costs makes sense. Its where the money is, he said.
SAI develops and sells software and information technology systems that allow companies to automate each aspect of their raw material operations, from purchase orders to paying and posting accounts. The systems also provide additional benefits, including fraud prevention and detection; complete transaction audit trails in support of Sarbanes-Oxley Act compliance; automated reapplication of shipments of some orders; and freight handling and accounting, including weight guarantees, automated chargebacks and unnoticed shipment penalties.
Automation in the steel industry will continue, Underwood said. The opportunity for interfaces and automation going forward is pretty amazing.
SAIs roots in the scrap business go back more than 30 years. Underwood, the son of a Dayton, Ohio, foundry executive, was bitten by the computer bug back in the 1970s. He worked on a team that helped the former Institute of Scrap Iron and Steel, predecessor to the Institute of Scrap Recycling Industries, to automate its accounting system, then branched out on his own.
I thought scrap was junk, Underwood said. I visited about two dozen scrapyards and found out different.
Underwood established SAI in 1981, and the firm has catered to the information technology needs of the metals recycling sector ever since. In the beginning, SAI served a number of regional metals recycling companies. As consolidation began sweeping the industry in the 1990s, many of the firms clients also got bigger. Today, SAI serves such firms as Alter Trading Corp., David J. Joseph Co. (DJJ), Metals Management Inc., OmniSource Corp., PSC Metals Inc. and Schnitzer Steel Industries Inc.
Weve just been growing with a lot of these companies, Underwood said. Weve tended to focus on the big boys. As a result, weve started writing more sophisticated software systems. The market has really shifted in the last 10 years.
SAIs growth also has been driven by much stricter reporting requirements for public companies, which came to include such industry giants as DJJ and OmniSource.
The globalization of the nonferrous segment of the industry also has helped drive SAIs growth. Nonferrous is truly a world market, Underwood said. Companies have now opened centralized trading offices. They need to know markets across that entire enterprise.
Finally, the metals recycling industryÑonce run by individual scrap brokers on deals cemented with a handshakeÑhas caught up with modern times. Recycling executives today not only need to know where markets are in real time, but where they are going tomorrow, Underwood said.
Fifteen years ago, state-of-the-art financial reporting in the metals recycling industry involved closing the books the second week of the month and faxing the results to the chief financial officer. Today, Underwood said, SAI software does an automatic close every evening. The software can create an income statement tailored to the clients specific needs, including operating expenses, sales, freight costs and the like. For an export yard, the statement might include currency fluctuations, letters of credit and vessel loadings.
Those are the kinds of reports that the clients want, Underwood said. We want that number to be meaningful, and it has to allow the client to drill down to the details he or she needs to know. Ten years ago, the daily financial report is something the industry had not even thought of.
As part of its financial reporting software, SAI has integrated programming that allows clients to keep track of their Sarbanes-Oxley compliance requirements. Thats a big item for public companies, Underwood said. David J. Joseph has 70-some locations it keeps track of. OmniSource has 80. SAI promises clients Sarbanes-Oxley compliance features that help even the largest multinational commercial recyclers stay ahead of the financial regulatory curve. Our (Sarbanes-Oxley) software can tell clients not only what they are doing, but are they doing it right.
SAI prides itself on providing browser-based financial statements that deliver transparency and bottom-line accountability consistent with each managers level of authority.
The sophistication of the software was matched by the growing prevalence of the Internet. At the beginning of the 21st Century, SAIs software engineers discovered that most people in the metals recycling business would never touch a keyboard. We decided to take our analytical and reporting software in the direction of a Web-based browser format, Underwood said. SAI knew its clients were starting to use the Web for such information as weather, news and sports results. They werent intimidated using the Web, he said, so we took advantage of that simple fact.
SAI developers started creating software that allows clients to look at real-time data, even while traveling. The company took a calculated gamble that wireless Internet hookups would become standard at hotels across North America. Today, many of the companys clients get their data from touchscreen devices, such as smartphones and iPads.
At the same time, Underwood said, as good as we were, we only hit about 60 percent of what we really needed to offer our clients. As a result, SAI started inviting clients to participate in the design process. We didnt just develop software internally, he said. We actively solicited clients help in designing new software.
At first, clients that had been competing against each other for generations were rather wary about being in the same conference room together. But as they saw the benefits of input and feedback to software development, they became less concerned about who else was in the room. Today, if a client hears through the grapevine that we had a design session and they werent invited, they get upset and let me know about it, Underwood said. The sharing of information and ideas in this industry is totally different than it was 15 years ago.
Today, e-mail is part of the lifeblood of the metals recycling industry. Brokers check their laptops, tablets or smartphones dozens of times a day.
SAI realized several years ago that e-mail commerce was becoming more and more common in the industry, and the company designed software that could send automatic e-mails when certain levels in their accounting or operations databases were reached. Youve got scrap guys trying to monitor conditions for simple things like credit limits, Underwood said. We added a self-initiated check that triggers an automatic e-mail to selected users. An e-mail itself might contain quite a bit of summary data, but SAI made it even more relevant by inserting a link in the e-mail back to the daily trial balance.
The e-mails also are tailored to the operations side, where purchases, sales, yard operations, freight settlements, scale transactions and the like can all be monitored in real time. Say an (operations) guy wants to make sure that the average time to get a vehicle through a remote facility is working according to plan, Underwood said. The software can trigger an e-mail to him when the average time, say, has just exceeded 40 minutes. Its all about linking back to information.