Opportunity #02

Investment Recovery Idea #1

Savings Potential $200,000,000.00+

 

†† I.R. has generated their own income since at least 1920. In 1920 they generated just over $63 thousand dollars in earnings and have increased their earnings every year of their existence except in years where they were touched by outside influences. Earnings grew to over $1 million dollars by the depression years in 1929. In 1930 earnings dropped to just under $800,000 and continued to decline to a low of about $287,000 in 1933, a 10 year low that hadn't been seen since 1924.

 

†† By 1937 earnings had again reached the million dollar mark and continued to grow until the 2nd World War reaching over $2 million dollars in 1941/1942. Earnings then declined through the war years not to reach $2 million again until 1947. During this time, in 1943, League of Goodwill came onboard in Investment Recovery, or Salvage as it was formerly known.

 

†† By 1950 a new earnings milestone was reached of over $3 million. Earnings reached $5 million in 1955, $10 million in 1970, $15 million in 1982, $20 million in 1983 and $25 million in 1990. 1994 was probably the record year, reaching almost $26.9 million.

 

†† I say 'probable' because right after downsizing during re-org, (1994) earnings information was not captured for 1995 & 1996, likely because little or no knowledge transfer took place. In I.R.ís 85 year history there are no other dates where earnings information were not captured. From there, the represented Stores members and the office staff began declining in numbers and the operation started becoming more of a contracting process through on site League Of Goodwill, which became Goodwill Industries Of Greater Detroit in 1985.

 

†† Earnings also started moving downward in 1997, leveling off and floating around $10 million a year through the first half of this decade, except in 2001 when earnings dropped under $10 million for only the second time since 1970.

 

†† Since 2002, the amount of material leaving W-100 to the Service Centers has dropped somewhat, which explains the drop in material returning to I.R. from the secondary warehouses. However the drop in earnings is multifaceted, brought about by fewer returns from D.O, inadequate onsite storage space, not enough knowledgeable represented personnel to sort and identify material nor enough office staff to find and leverage buyers. Because of these reasons, I.R. has also been unable to grow through new venture work as they have been accustomed to doing in the past, nor are they able to continue expanding current programs into areas of the company not yet engaged in deploying all their salvageable and scrap resources back to I.R.

 

†† Represented staff reductions on the floor dropped from roughly 13 to15 employees in 1994 to the 8 we have today. These reductions of represented personnel on the floor has compromised I.R.'s ability to adequately sort, identify and direct material to it's most profitable distribution/redistribution point, and the reduced office staff has been similarly affected, compromising their ability to find and leverage buyers.

 

† †At one time Investment Recovery sorted, identified and/or cleaned and refurbished stock, tools and equipment which they returned to the system eliminating the need to buy new stock, tools and equipment from vendors. This process saved the Company untold millions. The near cessation of this process has brought about tremendous additional costs to the company. Items are getting scrapped because of insufficient resources rather than being returned to the system. The achievable savings from re-implementing this process isnít even factored in this opportunity, but it amounts to millions yearly.

 

†† The demolition of storage buildings in 2001/2002 seriously compromised I.R.'s ability to store material. (reduced storage/work space from about 300,000 square feet to 30,000 square feet) Floor space is key for a several reasons, (1) provides storage space for material awaiting sorting, (2) provides space to sort and identify material, and (3) provides storage area for sorted material while seeking and leveraging buyers, which is significant when selling items that bring their best price when sold in bulk.

 

†† MichCon, who we merged with in 2000/2001, didn't have a salvage process, thus increasing potential for salvageable material and increased earnings for I.R. To this point, we havenít been able to take full advantage of their salvageable material. In 2001-2002 MichCon scrap returned just under $12,000.00, almost $37,000.00 in 2003, over $165,000.00 in 2004, and almost reaching the half million dollar mark in 2005. ($485,370.21)

 

†† Thus far all weíve done is scratch the surface. Little else has been done to take advantage of the salvageable material on the MichCon side of the house. There's little urgency at this time to pursue that avenue much beyond current efforts due to inadequate personnel resources and storage space.

 

†† Goodwill Industries employees are a good value especially when you factor in the Public Relations DTE receives for having them in their employ. DTE has had a long association with Goodwill Industries, (60+ years) which in a limited capacity can be a good thing, filling peaks and valleys as is done in Material Transportation with Kennie Annex. As the contractor role expanded and DTE employee roles have diminished, it has affected the efficiency and profitability of the unit, primarily because of inadequate experience and skills to identify salvageable stock and tools from scrap materials and direct proper distribution and disposal of same.

 

†† If we outsource I.R. as has been suggested, several things are likely to occur.

  1. Not having inside personnel with intimate knowledge of the material, some of the salvageable material will become scrap material, eroding profits.

  2. Once we lose control of the product, abuses are likely to occur which will further erode profits and the process will likely produce less and less profit each year instead of more and more as I.R. has had a long history of doing.

  3. There's a major problem in Distribution Operations that generates a large amount of salvageable material. Right now it's a problem we have the ability see and identify. Many resolutions have been offered but none as of yet have successfully stopped the flow of good material back to IR, but it's continually being looked at. If outsourcing is allowed to continue to grow through Goodwill Industries or by any other means, especially by taking it offsite, we'll eventually lose sight of our own internal waste and inefficiencies as well our ability to try and solve the problem.

††† Unknown to a lot of people inside and outside the company, there are a lot of projects I. R. is involved with, like, selling vehicles via the Investment Recovery web site as well as at outside auctions. They disburse and monitor brochures for Corporate Communications via the brochure web site, sell corporate commodities through the I.R. web site (www.Materialplus.com) thus providing a wide customer base, they manufacture products for Purchasing through the internal order process, manufacture wire-down material and tool bags for storm center dispatching.

 

†† I.R. cleaned out MichCons Guardian building and salvaged the materials, they sold locomotives recently to Ohio Central RR, and locomotive switcher units to Mineral Range. I.R. does lead abatement in the Power Plants & shops. I.R. dismantled the coal conveyor system at River Rouge Power Plant, removed stock inventory at Marysville PP when it closed, established paper recycling at Southfield Center, they do all the material write off's for the entire Company. I.R. cleaned & removed & stored insulation from Monroe Power Plant & re-staged it at Dixie Warehouse for future jobs, they remove transformers and breakers from Substations and dismantled a 300,000 pound power transformer at Wabash Station.

 

†† On Jan, 26th of this year, I.R. did last minute clean up downtown around Ford Field for the Super Bowl project. The work was originally contracted out but the contractor either failed to deliver or failed to meet expectations.

 

† †Investment Recovery is also a member of the Investment Recovery Association based in Kansas City, Missouri where they are held in high regard as best in class and are used as the ideal example for others to follow. People come from all over the country and the world to view DTEís salvage operation. People have come from nearby Canada, and as far away as Pakistan, China and Japan.

 

†† DTE and their consultants keep touting their current efforts will make DTE best in class, yet they are ignoring their most shining example and even considering I.R's demise.

 

†† Early in the PEP process, I was in meetings with Distribution Operations and Supply Chain, both of whom had people who wanted to diminish I.R. in size, outsource or eliminate them. I think following through with any of the 3 proposals would be a mistake. Maybe DTE doesn't consider I.R. core business, but then what is? Detroit Edison has splintered into about a dozen company's, so who knows what's core anymore? Depends on who you talk to. Maybe we should splinter again and make I.R. another stand alone company to assure their survival.

 

†† I.R.ís contract work force sometimes challenges Management with attendance problems and other reliability issues as a result of their large manpower turnover. Anytime something is contracted, reliability is always the first thing to boomerang back. Reliability issues are significant concerns in an industry such as ours, which I heard was relayed to DTE management last year by PA Consultants who did DTE's bench marking efforts.

 

A. If material were to be transferred to and sorted by a contractor or other vendor off site, there would be a need to establish

††† audit trails to show receipts and sales were accurate.

B. We would need to have people in place to assure all revenues are reported and appropriate percentages were returned to

††† DTE Energy.

C. We would have to maintain a staffing level to monitor the above as well as to make vendor site visits to assure reportings

††† were accurate and to assure scrap material is scrapped and salvageable material is salvaged and not lost, stolen or

††† misappropriated.

 

††† The end result is we're losing about $20 million or more a year in potential salvageable and scrap materials at DTE enterprises for want of 1 million dollars or less a year in additional office and floor staff plus storage facilities. The vacated area at Warren Service Center where the old buildings stood, offers adequate space to build. There are many metal building manufacturers that sell inexpensive buildings. A building, or series of buildings like these could easily provide the indoor storage and work space needed at very reasonable pricing. It wouldn't be necessary to spend millions of dollars for a state of the art facility solve this problem.

 

††† If we stopped ignoring the $20+ million in capitol thatís lost each year, and initiated an offensive to capture it instead, it could easily make a difference of 40+ million a year to DTE's bottom line. ($200 million over 5 years)

 

This page originally uploaded 05/03/06. Last revised on 07/08/06


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