E2B Project

E2B Case Project: South Post Oak Recycling Center South Post Oak Recycling Center (SPORC) is a family run metal recycling company that has been serving the Houston Texas community for over 25years. Metal recycling is a highly regulated, hyper competitive, commodity business. Brandi Harleaux, SPORC Chief Operations Officer, joined the family business seven years ago: Over the last two-and-a-half decades, we have been successful slowly and steadily developing the business out of two facilities. Recognizing our potential for growth and the needs of our customers we decided to diversify materials purchased. SPORC went from a sole focus on nonferrous materials to expanding into ferrous, as well as, some forms of electronics in 2014. SPORC also diversified service offerings and began a container service where we deploy roll off containers to large volume generating industrial and manufacturing companies. This aided in the company being able to buy, sell and service more scrap metal. In 2015, we expanded the existing warehouse at our South Post Oak location by 10,000 square feet to accommodate the increase in volume as well as storage capacity. The latest stage of growth included a 2,200 square foot office expansion to allow for continued growth, providing work space for additional team members/resources. Continued success requires that we grow revenues at a greater pace than we add resources. We have incorporated technology into the business to gain efficiencies in our operations, but there is still opportunity to become more efficient. We need to continue to explore changes or additions to processes and systems to aid in SPORC’s differentiation with existing and potential customers. Moving forward we need to anticipate ways to use technology to continue to streamline the business, maximize efficiency, and importantly — improve customer service. Business Overview Based in Houston, Texas, South Post Oak Recycling Center (SPORC) was founded in 1994 and still remains a family run business providing environmentally responsible metal recycling to Houston and surrounding communities through two locations. SPORC’s primary focus is on buying and selling primarily metals (ferrous and non-ferrous) and some electronics from households, industrial contractors, manufacturing based companies and

government entities in an environmentally-responsible manner. Annual recycle volume now exceeds 16 million pounds (includes a mix of ferrous (iron) and non-ferrous (everything except iron). Paper and glass are the materials most people think of when they think about recycling. However there is still a large percent of the population including households and representatives in manufacturing facilities that are not aware of the benefits of recycling metals and therefore place them with the rest of their regular trash. Metal is a non-renewable resource and metal recycling reduces the need for mining raw materials as well as reduces greenhouse gas emissions through energy waste. Recycled metals include: • Aluminum • Alloys • Batteries • Breakage • Brass • Carbide • Cast • Compressors • Copper • Electronics • PCs, including circuit boards • Hastelloy • Inconel • Incoloy • Magnesium • Lead • Stainless steel • Turnings/ shavings/ borings The recycling business is a two-sided commodity business. Recycling firms purchase from suppliers (whom SPORC references as Customers: people and companies bringing in or picking up product to recycle) and sell the recycled products to buyers of scrap; also known as Consumers. As this is a low margin business, success lies in generating volume and purchasing the right materials that garner the highest prices. The majority of SPORC’s supply of recycled products is sourced from contractors and individual consumers (45%) and specialty manufactures (30%). See Figure 1: SPORC Suppliers. Figure 1: SPORC Suppliers SPORC Suppliers include:

•   • _I_n_d_i_v_i_d_u_a_l_s_ _ •   • _H_o_u_s_e_h_o_l_d_s_ _ •   • _Window frame installers and manufacturers •   • _S_h_e_e_t_ _m_e_t_a_l_ _s_h_o_p_s_ _ •   • _E_l_e_c_t_r_i_c_a_l_ _s_h_o_p_s_ _ •   • _L_i_c_e_n_s_e_d_ _c_o_n_t_r_a_c_t_o_r_s_ _ •   • _Air conditioning technicians and companies •   • _P_l_u_m_b_e_r_s_ _ •   • _M_a_c_h_i_n_e_ _s_h_o_p_s_ _ •   • _F_a_b_r_i_c_a_t_o_r_s_ _ •   • _C_o_n_s_t_r_u_c_t_i_o_n_ _c_o_m_p_a_n_i_e_s_ _ •   • _Demolition companies •   • _E_l_e_c_t_r_i_c_i_a_n_s_ _ •   • _C_i_t_y_/_g_o_v_e_r_n_m_e_n_t_ _e_n_t_i_t_i_e_s_ _ •   • _C_o_r_p_o_r_a_t_i_o_n_s_ _ E2B Program Page 3 CONFIDENTIAL DOCUMENT

Depending on the customer segment, SPORC provides value in the following way: •   • _Service—Recycling reports for corporate clients, pick up within 24 hours of request, help with unloading recyclables •   • _Cleanliness and environmentally friendly designed facilities—Safe, clean and environmentally friendly facility design and recycling process. •   • _Education—Consult with customers on how to minimize waste and maximize return •   • _Proximity and geography—Two convenient locations which serve the Greater Houston and surrounding areas •   • _Price— Pay top dollar for scrap metal prices for a broad array of metals Industry Background Recycling is a heavily regulated industry. Regulations revolve around many elements of the business including environmental issues and metal theft. As such, the process of bringing metal to a recycling facility can be cumbersome. With all recycled product except aluminum cans and iron, SPORC is required to take a picture of everything that comes in and require each supplier to sign documents verifying the metals they are recycling are in fact theirs. The Institute of Scrap Recycling Industries, Inc. (ISRI) is the industries national trade organization SPORC is heavily involved at a local and national level. According to IBISWorld, The Scrap Metal Recycling industry collects and processes both ferrous (iron-based) and nonferrous metals and involves sorting, shearing, shredding and torching the metal before selling it to steel mills, foundries and other industrial consumers. Recycling metals have become more popular over the past few decades but industry operators have faced losses due to the sharp reduction steel, aluminum, copper and other metals prices. However, the price of metal is cyclical and is expected to increase over the next five years and the industry is expected to increase 1.9% annually through 2024 to $31.9 billion.1 That said, the industry is highly fragmented. A firm’s ability to effectively cater to localized buyers is critical for success. 1 Kalyani, D. (2019, April). Scrap Metal Recycling in the US. IBISWorld. Project Background With the growth in business prompted by product and customer segment diversification and increased volume, both the volume of activity and complexity of the operation has increased. Harleaux underscores: SPORC operates in a commoditized two-sided market. Success is driven by volume. But margins on metals can range significantly, from $.03 to $4.00 a pound. Generating supply of higher margin metals is a vital element of the business. While price is a critically important, price alone isn’t enough to win and keep our best customers. We need to provide excellent service. It is our service orientation that helps us differentiate SPORC from the more than 150 other recycling centers in the greater Houston and surrounding areas. Speed of service, congeniality, and transaction accuracy are critical as well as operating in an environmentally sound manner. The majority of the company’s employees work in operations. Corporate staff are located in the company’s South Post Oak Road facility. When the company opened its Holmes Road facility 10

years ago, it was set up with the same point-of-sale (POS) system used in its main facility but they weren’t integrated on an enterprise platform until January 2017. Additionally, a cloud workspace interface was recently added to allow management to access company files remotely. While the company’s POS system integrates with its accounting software, expenses at the second location are manually captured in a spreadsheet then sent to main office for processing. Current Systems & Tools • Microsoft Office for business https://www.microsoft.com/en-us/store/b/office • Quickbooks Enterprise https://quickbooks.intuit.com/ accounting, invoicing, expenses, financial reporting, and taxes • SPORC Server • Scrap Dragon https://tranact.com/products/scrap-dragon-x/ POS system used in “yard” at facilities —allows the company to manage inventory, facilitate buy and sell transactions, and integrates with Quickbooks • SalesForce IQ https://www.salesforceiq.com/ customer relationship management (CRM) — integrates with SPORC email system. SPORC use to invest in online marketing, which includes content management for the SPORC website, pay per click campaigns, social media marketing management and review sites were outsourced although intentionally stopped in July 2019. Since August 2019, SPORC relaunched a rebranded website and began managing business listings internally as well as our Facebook page and website/social media analytics. Project Scope/Objective The company wants to deliver an exceptional service experience to its customers. Periodically, errors in yard have hampered these efforts, such as customers getting a wrong ticket. As noted by Harleaux, “trust is critical to building customer —even though our overall error rate is small, errors can negatively affect customer loyalty.” Right now, much of the knowledge as to how the company operates in the yard is driven by personal experience. This makes it challenging when bringing new people into the business. Specifically, the objective of this project is to define how the company can leverage technology to better enable the company’s operational team to minimize errors when servicing customers. Of equal importance, both existing and future employees need to be able to easily operate the system. “We need to reduce the level of tacit knowledge required to be successful in the business,” suggested Harleaux. Critical questions that need to be considered in defining solutions include: •   • _Is there untapped functionality within our existing technology that we might use to improve customer service? •   • _What additional technology solutions might be needed? Can the solution be easily scaled for use in both facilities? •   • _What are the customers service business indicators that we can measure with the solution? Can these measures be captured in a real-time digital dashboard? •   • _What types of loss prevention and theft management processes can we put in place leveraging our existing systems?

In the first part of the project (work conducted for the “mid-point” presentations), students will study the current situation (people, processes and systems) and identify the areas of business that could benefit from technology or an improved technology solution. [NOTE: Management has asked that students look at all possibilities to include changes in processes, solutions using current IT systems, changes in IT systems, as well as opportunities with technology not yet foreseen.] Students will define the potential solutions (using matrix provided in report component outline). In the second part of the project (work conducted for the “final presentations”), students will take a deeper look into the top solutions contacting the vendors to gather primary insight for evaluating the feasibility of the alternative. Please remember that you are not to disclose specific information on the Company (including name and contact information) in your investigation of potential solutions. Last, students will develop an implementation plan for their recommended solution. See Report Elements below for an outline of the project component requirements.