OmniSource Corporation - Company Profile, Information, Business Description, History, Background Information on OmniSource Corporation

1610 N. Calhoun Street
Fort Wayne, Indiana 46808

History of OmniSource Corporation

OmniSource Corporation is one of the largest scrap metal processors in the nation, with more than 20 trading offices, processing divisions, and collection centers scattered throughout the Midwest and the South. OmniSource buys, collects, and processes scrap metals like copper, steel, iron, and aluminum, and then sells the material to manufacturers of finished metal products.

The company that became OmniSource traces its roots to the bed of a Russian immigrant's pickup truck. Irving Rifkin fled the Bolshevik revolution in 1920 and came to the United States to start a new life. "My father, Irving Rifkin, journeyed to America searching for personal freedom and the opportunity to build a life and a family," related Irving's son Leonard in company literature. "His future," the younger Rifkin observed, "was guided by the philosophy that hard work, perseverance, and personal integrity would provide the foundation for future growth and success."

Rifkin settled in New York City, where he ran a restaurant and deli business during the 1920s and throughout most of the Great Depression. In 1940 he decided to move to Lima, Ohio, to get involved with his uncle's scrap metal business. For three years Rifkin drove around Ohio in his pickup truck brokering scrap. He would buy discarded metals and try to sell them for a profit to scrap processors and metal manufacturers. He eventually tired of that job and, at the suggestion of another of his relatives, decided to start his own scrap business. Rifkin moved to Fort Wayne, Indiana, in 1943 and purchased his first scrap yard. He dubbed it Superior Iron and Metal Co., launching an operation that was destined to become a leader in the U.S. scrap metal industry.

Superior Iron and Metal grew slowly during the 1950s and 1960s as a result of Rifkin's hard work and determination. The company supplied scrap for the war effort during World War II and managed in the 1950s and 1960s to establish a reputation as a dependable and fair buyer, processor, and seller of scrap. During that time, the metal scrap business was a relatively crude, unglamorous trade. Scrap was used by automobile or rail manufacturers, for example, to help make new iron and steel products. But the cost associated with making metals from freshly mined materials was not significantly greater, in most applications, than the cost of producing metal using scrap. That was largely because resources were abundant and because technologies related to making steel and integrating some types of scrap into the production process were crude.

By the early 1970s, Rifkin had grown Superior Iron and Metal into a successful, though small, regional scrap company. He had four scrap operations that served customers primarily in the upper Midwest and had expanded the operation, according to son Leonard, by focusing on long-term opportunities rather than short-term benefits. He had also differentiated his scrap business from others in the region by both processing and brokering the scrap. Indeed, while most of its competitors were involved in either the brokerage or processing end of the business, Superior profited by integrating both activities into its operations. Superior was also distinguished by its conservative Depression-era financial strategy, which emphasized low debt and minimal operating costs.

Superior had carved out a profitable niche in its locale by the late 1970s. Still, the metal scrap trade was a relatively low-margin, low-tech business. Scrap operations were generally associated with junk yards, barking dogs, and rusted cars. To keep costs down, scrap yards typically operated with old, beat-up trucks and antiquated cranes, shears, and balers. The days of the traditional scrap yard were numbered going into the late 1970s, however, because a variety of influences would soon transform the scrap business and elevate it to a new stature in the metal manufacturing industry. Leading Superior through that industry transformation would be Leonard Rifkin and his three sons.

The metal scrap business was impacted by some negative influences during the 1980s. One such influence was the increased use of synthetic metal substitutes for a variety of applications ranging from car bodies to home siding. Another was a significant decline in U.S. steel output caused primarily by low-cost imports. But pivotal positive developments outweighed those problems. Importantly, the scarcity of basic metal-making resources, including the electricity needed to make metal from base materials, became apparent beginning in the late 1970s. That point was highlighted during the energy crunch, created by the Organization of Petroleum Exporting Countries (OPEC) oil embargo, during the late 1970s and early 1980s. One result was a newfound emphasis on conserving and recycling some metals, particularly aluminum.

Also bolstering the scrap industry was an improvement in steel and iron manufacturing technology during the 1980s, as U.S. steel and iron makers took advantage of new equipment and techniques that allowed them to produce more efficiently. That drive for efficiency was largely the result of intense competition from Japan and other metal importers. In the past, U.S. manufacturers had utilized techniques that created a substantial amount of their own 'home scrap' that was generated during the production process. When new technology eliminated much of that residue, demand for outside scrap from companies like Superior increased.

Perhaps the biggest boon for scrap metal companies, however, was the advent of the minimill. Minimills differed from traditional integrated steel mills in that they typically started the production process using scrap materials, rather than with base materials like iron ore, limestone, and coke. The scrap was typically melted in advanced electric arc furnaces (EAFs), rather than traditional blast or basic oxygen furnaces, and 'continuously cast' into basic shapes. Minimills proliferated during the 1980s and early 1990s, given their big cost advantages over integrated mills. For example, minimills were not confined to operating near raw material supplies, so their transportation costs were lower. Furthermore, advanced manufacturing processes centered around the use of scrap reduced energy consumption and, in many cases, proffered higher quality steel.

Superior benefited from positive trends in the scrap metal industry during the 1980s. It drew on its established reputation in the Midwest to boost sales and even to increase its share of the market. To usher Superior into a new era, Leonard Rifkin brought sons Danny, Rick, and Marty, as well as son-in-law Barry Dorman, into the executive ranks. Superior also purchased other scrap operations as part of an effort to diversify its offerings and to extend its network throughout the Midwest and even into the southern United States. To that end, in 1985 the company changed its name to OmniSource, which was intended to suggest that the enterprise was a single source for all types of scrap metal products.

Besides broadening its geographic and product scope, OmniSource thrived by implementing various quality and customer service initiatives. Those efforts reflected the changing dynamics of the scrap market, which was becoming increasingly characterized by specific needs and services. OmniSource adopted a 'Total Quality Management' (TQM) program in its nonferrous metals division and later implemented the plan in its ferrous operations. The program was designed to foster an atmosphere of continuous improvement where employees were constantly focused on improving not only customer service, but also manufacturing methods, employee relations, and all other facets of the business. "Our customers have remained loyal to us because they know that when the call us, they are going to get prompt, efficient service," explained John Marynowski, company vice-president, in OmniSource's January 1995 Scrap Rap Magazine.

OmniSource augmented its customer focus with heavy investments in new technology that allowed the company to produce high-quality scrap products efficiently. OmniSource had been one of the first scrap companies in the industry to adopt a formal quality control program, and its processing installations had been adapted during the 1980s and early 1990s to incorporate, for example, the most advanced production and statistical process control methods. Its overall quality efforts had earned it recognition from major customers. In 1994, for example, OmniSource became one of only 12 suppliers, out of a total of 13,000, to receive Chrysler Corporation's Platinum Pentastar performance and service award two years in a row.

In addition to its scrap collection and processing centers, OmniSource was operating a state-of-the-art scrap brokerage service in the 1990s. While scrap had traditionally been traded on a local and regional basis according to demand in the area, by the early 1990s the scrap market had become international in scope. OmniSource developed a corporate trading network that covered a broad range of products including scrap, primary metal, fabricated metal shapes, and more. The company's trading offices in the Midwest and southern United States tracked prices and activities in domestic and foreign markets to allow OmniSource to fill direct orders from customers at the highest possible profit margins.

By boosting sales and market share from existing operations, and by acquiring other companies to augment the company's expanding scrap metal and metal brokerage network, OmniSource was able to boost sales past the $300 million mark by the early 1990s. The still private and family-owned company managed to boost revenues throughout the early 1990s, despite a general downturn in the U.S. economy. Revenues jumped to about $330 million in 1992 and then to roughly $350 million in 1993. Healthy markets and prices in 1994 sent OmniSource's sales spiraling to a record $420 million for the year.

By the mid-1990s, OmniSource was operating a network of more than 20 trading offices, processing divisions, and collection centers that catered to a wide variety of needs in scrap and related markets. OmniSource's Defiance Briquetting Division in Ohio, for example, consumed scrap to produce iron and steel briquettes for use in foundry and steel mill furnaces. OmniSource was a pioneer in briquetting, and its Defiance plant incorporated some of the most advanced technology in the industry used to ensure high quality. OmniSource also operated a separate granulating plant to efficiently and cleanly separate copper and aluminum from insulated wire, and to process millions of pounds of the metals into new wire every month. OmniSource's precious metals and refining division employed advanced technology to recover silver from sources such as x-ray films, exhausted photographic supplies, and electroplated materials.

In 1995 OmniSource was focusing on improving service and sales to its existing customer base, and adding new clients in its existing midwest markets. Still under the tutelage of Leonard Rifkin and his three sons and son-in-law, OmniSource continued to pursue the strategy of long-term growth, fiscal conservatism, and customer service initiated by founder Irving Rifkin.

Additional Details

Further Reference

"Former Noranda Exec Gets OmniSource Post," American Metal Market, May 7, 1990, p. 13."Interview with John Marynowski," Scrap Rap Magazine, Vol. 5, No. 1, 1995, pp. 2--3.Marley, Michael, "Chrysler's Bundles Go to Broker; OmniSource to Take Warren Auto Scrap," American Metal Market, November 19, 1991, p. 2.Newman, Jeff, "The Indiana 100: OmniSource Built on Family Involvement," Indianapolis Business Journal, May 22, 1995, p. B24."OmniSource Awarded Pentastar Award," Scrap Rap Magazine, Vol. 5, No. 1, 1995, p. 5.

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