Managing, Protecting Materials is a Priority

The black market in scrap metal material means your inventory is at risk.

We've all witnessed the severe rise in commodity prices and corresponding price increases for finished goods both within our industry and elsewhere. Things are so bad that thieves are stealing catalytic converters from car dealership lots and surreptitiously siphoning gas from parked construction vehicles in broad daylight.

Unfortunately, scrap metal recyclers in many areas aren't required to obtain proper ID from potential sellers. This creates huge black markets for stolen or “found” scrap materials, which means that your entire inventory of anything metallic is very much at risk — right now! If you don't believe me, take one of your typical mechanic's bucket of scrap copper pipe and old fittings to a scrap metal buyer and you'll be shocked at how much that little bit of stuff will earn you.

A single lineset might fetch anywhere from $50 to $100 or more while an old condensing coil might sell for a similar or higher amount. A box full of odd-sized brass flare fittings or black malleable iron fittings has a greater resale value than you think. In fact, people are willing to sit in line for two to four hours or longer to sell them. For this reason, you've got to rethink how you're going to keep from being robbed blind from even your most long-time and “honest” employees.

The first thing you need to do now is get a completely accurate snapshot of exactly what you have in inventory. Don't wait until this coming weekend or tomorrow. Pay your mechanics to inventory the items inside each truck on your lot (not their own). Then, generate a list of literally every piece of pipe and tubing, every fitting, nut, bolt and screw or anything that's not plastic. Also pay a couple of helpers to do a full inventory of your warehouse under your supervision.

Once this is done, you'll probably be shocked by how much “new” material, parts, pipe, valves and fittings you actually have at your disposal. You can use these on future jobs or to generate perhaps much-needed cash flow by selling the items to recyclers. Remember, an offer from a recycler is just that, an offer and not a contract. You always reserve the right to refuse any offer they make.

The next step is to gently lay down the law with your guys. Tell them old practices such as the “yearly BBQ scrap barrel” or a “Christmas party pile,” in which previously useless pieces of copper, brass, etc. were collected and sold to pay for an annual employee party, are things of the past.

Then you need to institute strict material-in/material out policies. Make your warehouse guy inventory every single item that comes in and pay them on the clock to do manual counts. Don't think you can afford to do this? Preventing just a couple of lengths of “L” copper or a few fittings from “disappearing” will make it worth the extra five minutes of labor.

Make your warehouse guys then do manual counts and not “grab and go's” when stocking out your trucks or sending material out to the job. At the jobsite, every single piece of the more valuable stuff such as copper, brass or bronze materials, needs to be counted at the end of each workday. If there's any discrepancy, then no one should be allowed to leave the job — on their own dime of course — until the item is accounted for.

I'm of mixed mind about letting your mechanics keep their scrap buckets. There will always be a need for the odd bits of scrap to prevent cutting new pieces of pipe or opening new boxes of fittings. Using this scrap also will enhance, not hurt, productivity and profitability. Just be sure the guys understand that more thieves than ever threaten the jobsite, and they need to keep their scrap buckets even closer within reach. In the end, what will make the difference is attention to detail.

Kent Craig is a second-generation mechanical contractor with unlimited Master's licenses in boilers, air conditioning, heating, and plumbing. You may contact him via email at [email protected].