John Underwood sees huge
opportunities for efficiency in the management of raw
material inventories for recycling companies and the steel and
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
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
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
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
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
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.