Valuation of Scrap is very subjective. And, If you are not well connected and know the best end use for the Scrap generated; you would not be able to put a pricing benchmark.
In the Indian Corporate, be it Offices or Factories, we have seen that in 50 instances out of 100; the Vendor who collects the Scrap is actually acting as a refined middleman who goes one step ahead then acting as a pure Agent. Such Vendors buy at a cheaper price, and re-sell it. The crux of this story is that the Scrap is being sold at a much lower price then it should be. Loss to the company. To add to the pain, un-ethical practices are being practiced too; wherein malpractices are being carried out at Weigh Bridges where at times upto 2000 to 3000 kilograms gets wiped out from a full truck load. It is not possible to put a weighing benchmark here as the Scrap being sold cannot be standardized on size and weight.
There is another 40% cases in which the malicious Scrap Vendors would quote a price that is much higher than the best value a particular Scrap can be sold for. This sect of Vendors ride on malpractices at Weigh Bridges wherein a truck carrying an actual load of 10,000 kilogram would be actually shown as carrying 7000 kilogram or 8000 kilogram, translating into an erosion of 3000 to 2000 kilogram per truck load. This difference easily offsets the artificial price hike that they do in their quotes.
The Management need to be smart enough to understand this and plug these malpractices. But, how to do it again is very Subjective.
The most important aspect that the Seller need to introspect is, that they are selling Scrap and that to on an "As Is Where Is Basis"…..Go one step ahead and try to know the best intrinsic value of the Scrap that you sell.
How Can PRC be of HelpPRC is a professionally managed with ethics and standardized business practices being our driving force. To be honest, our existing clients are those clients who sell Scrap as Scrap and do not consider the realization fro Scrap as a source of Income.
PRC has helped many Corporates / Factories / Metal Processing Centers with our "Scrap Valuation Services"; whereby we give a detailed analysis of the Scrap Valued; with the report containing the details like:-
- Original weight of the Sample
- The general composition of various units that the unit of Scrap is made of
- The % composition of the individual components
- The weight wise composition of the individual components
And finally, the best price you should sell the Scrap for. We arrive at the suggested price after factoring in the most likely cost of loading, transportation, storage, breakage / dismantling.
How Can Companies Help ThemselvesPrevention is always better than cure. As such, there are many ways by which Companies can being more transparency in their "Scrap Disposal Program".
Here are a few suggestions that would help:-
- It is best to have a weighing bridge inside the Company / Factory premises. In 90 out of 100 instances, Weigh bridges are the hub for malpractices.
- If you have already have a Weigh bridge inside the premises, Calibrate it periodically
- If you do not have a Weigh Bridge inside, tie-up with up to minimum 4 different Weigh Bridges near your facility. Get the weighs from all these 4 Weigh Bridges and apply the average weight. It would be very expensive for the Scrap Vendor to indulge to malpractice at all the 4 Weigh Bridges. For your information, Weigh Bridges charge around Rs 5000/- per truck to under-weigh; wiping out around 2000 to 3000 kilograms
- Never regard realization from Sale of Scrap as an Income Stream
- Never put a collection target on realizations from Sale of Scrap. This is when Scrap Vendors jack-up their prices and submit unjustified quotations; and resort to malpractices