Waste Management Scrap and surplus disposal, Salvage and recovery

11th April 2021 0 By indiafreenotes

Waste management places an important role in managing operations. Wastes can be categorized into obsolete, surplus and scrap items.

  • Obsolete items: These are those materials and equipments which are not damaged and which have economic worth but which are no longer useful for the Company’s operation owing to many reason such as, changes in product line, process, materials, and so on.
  • Surplus items: These are those materials and equipments which have no immediate use but have accumulated due to faulty planning, forecasting and purchasing. However, they have a usage value in future.
  • Scrap: It is defined as process wastage, such as, turnings, borings, sprues and flashes. They may have an end-use within the plant having commercial values. Hence, should be disposed of periodically.

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.

Following are the reasons for the generation and accumulation of obsolete, surplus and scrap items:

  • Changes in product design: This may lead to some items getting invalid so far as the final product is concerned. Hence, the entire stock of such items as surplus obsolete.
  • Rationalization: Sometimes raw materials are renationalized so as to minimize variety and simplify procurement. The rationalization process renders some items as surplus or obsolete.
  • Cannibalization: When a machine breakdown occurs, sometimes it is rectified using parts of an identical machine which is not functioning due to various reasons. This process of ‘cannibalization’ is not uncommon in many project-based industries. When continued unchecked, this results in obsolete and scrap items.
  • Faulty planning and forecasting: The marketing department may have projected a sales forecast which might be on the higher side. Any material planning has to be based on sales forecasts and this could result in surplus items. Wrong indenting by the user departments also leads to accumulation.
  • Faulty purchase practices: Sub-optimizing decisions like buying in bulk to take care of discounts and transportation economy without taking into account factors such as, shelf life, storage space requirements and technological changes once again lead to the accumulation of surplus and obsolete stocks.
  • Other causes: Many items are held as insurable spares for many years without any consumption. Faulty store-keeping methods, without adequate preservation, lead to spoilage. Inferior materials handling, improper codification and poor manufacturing methods also result in obsolete, surplus and scrap items. Poor maintenance of machine tools may result in excessive tools wear and greater process scrap.