DISPOSAL OF SCRAP - Production and Operations Management

Disposal of Scrap surplus and Obsolete materials

Disposal of scrap when handled in an imaginative manner can result in handsome returns to the organization. An effective disposal requires a compact disposal organization reporting to the materials manager, continuous market survey on the prices of various categories of scrap generated in the plant and constant touch with the industries which generate similar scrap and with the end-users.

Disposal action follows when the scrap cannot be utilized within the organization. In practice, it has been found that it is profitable to dispose the scrap directly to end-users rather than to middlemen who normally form a cartel of their own which leads to lower returns. Before disposal action it is essential that the scrap is segregated according to metal, size, etc. when the scrap is mixed, the return is even lower than the lowest element in the mixture. This is because the buyer of scrap will have to segregate it at an extra cost. A cursory analysis of scrap prices will reveal that sheet and plate cuttings will fetch fewer amounts per a tonne compared to that of turnings and borings. Also when costly scrap such as copper, aluminum and tungsten are involved, it is imperative that they are segregated as returns are huge and price levels are different. Since scrap is generated process-wise, it comes out in a segregated condition and there should be no difficulty in sorting.

Auction and Tender methods are frequently used for disposal of scrap. Parties in both the cases are normally required to inspect the scrap in the scrap yard and deposit earnest money. Very often the company insists on a basic price depending upon the category of scrap. The disposal section works, in this aspect, in close coordination with the finance department. In many cases the disposal section may try to enter into a long-term contact with end-users such as steel plants.

Many companies have found to their displeasure scrapped components appearing in the market and competing with their parts as ‘original equipment’. This is the price which organizations pay for not dismantling and disfiguring the scrap before disposal. Automobile spare parts and bearings especially are prone to such dangers. For this purpose some organizations go to the extent of requesting vehicle users to demolish filters and plugs before scrapping them. This is very important aspect.

In view of the paucity of raw materials and shortage of credit, it is necessary that optimum usage of materials is made and funds tied up in obsolete surplus and scrap items minimized. This is only possible when top management shows commitment and support. The employees of the organizations are naturally the best people to suggest improvements in materials, processes and new end users for scrap. It is they who can minimize the accumulation of scrap through coordination.

Therefore, top management should work out formal reward systems to promote employee participation in this matter. A few organizations have suggestion box schemes which pay rich dividends to the organization. Employees, too get rewards and recognition in the process.


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