Special Edition: Pioneering the Circular Economy

Speaker 1: 0:01

Although I wouldn't say that Shapiro is a marketing company. Everything we do is marketing really. I mean every solution, process, system, success story, learning from a failure. They're all opportunities to market and talk about how we're different, and that, I think, is the fundamental aspect of marketing, anyway, is to be able to articulate your differentiation and what makes you interesting. You are listening to the Marketer podcast for modern day marketing professionals.

Speaker 2: 0:44

Bob, welcome to the Marketer. It's really a pleasure to have you on the show. I've really enjoyed getting to know you over the past few months. The Marketer is a show that's intended for marketers, as we talk through different marketing strategies and the way we get our businesses accelerated and moving and marketing qualified leads and communicating a message and stuff like that. So I'm usually bringing marketers on to the show. You are the president of Shapiro, but the reason why I'm bringing you on the show is you guys are starting something very unique and niche within your industry and I thought it would be worth bringing you in to talk about it and then to talk about how you go about taking something that's new, that's not custom to what Shapiro actually is, and take that into the marketplace. So you want to have a discussion about that.

Speaker 1: 1:53

I'd love to. It's a pleasure to be here and thank you for the invite, and although I wouldn't say that Shapiro is a marketing company, everything we do is marketing Really. I mean every solution, process, system, success story, learning from a failure. They're all opportunities to market and talk about how we're different, and that, I think, is the fundamental aspect of marketing, anyway, is to be able to articulate your differentiation and what makes you interesting, without question.

Speaker 2: 2:38

So why don't we do this? Why don't we start just to set it up for my audience here? Tell me about Shapiro briefly, what Shapiro is, and then let's talk about this new strategy and direction that you're going.

Speaker 1: 2:55

Yeah, I don't. I don't know how to actually define new. It's been a work in progress for probably 120 years. Wow, so Shapiro is 120 year old. St Louis based companies with locations 10 different locations across the company that for a long period of time was primarily a metal recycling company that worked with manufacturers to help them repurpose their byproducts from their process, and that business has evolved over that 120 years rather significantly. In fact, as you allude to, we are now three different divisions. Are word business the basis for what Shapiro has always been, which is a scrap metal recycling company. It's evolving into other services. It is the infrastructure that enables the strategies to work.

Speaker 1: 4:01

10 locations, mostly in the south and southwest. If you drew a triangle from St Louis down to El Paso, texas, and over to Jacksonville, florida, we're under that umbrella. We serve accounts in Nebraska and other parts of the country, but that's primarily where we operate. Our second division kind of grew out of that business model where we now take the scrap, we melt it and turn it into something with much more value and helps companies achieve their scrap or recycling content as well as the elements they need for their alloys. And we buy some scrap from other people, add it with the scrap we already have, blend it into some recipes that help the marketplace improve their recycling content and perhaps even lower CO2.

Speaker 1: 5:06

And, last but not least, our circular by Shapiro division our newest division, albeit a work in progress over the last four or five years essentially helps our customer optimize their waste streams, an area that is often neglected in the business because it's just service take care of it but what we do is we optimize it for environmental impact and for cost, and we do that with a technology enabling it to provide information to help with ESG metrics and environmental measures as well as improvement. There's all kinds of tech in our roadmap that makes that a really interesting solution that we're offering to the marketplace. And that particular division is even more unique in that it is handling customers today from Mexico to Canada and from the Eastern seaboard to the Western seaboard. It doesn't have to utilize our infrastructure to facilitate it, so it's opened up an entirely different kind of possibility with regards to customers, and our customers are responding really in an exciting way.

Speaker 2: 6:37

That's amazing. That's really where I want to focus the conversation, because that you know of the 120 year history, this new thing that you're bringing on, when I heard about it is fascinating because you wouldn't think that a metals company would be starting something like this. So you know your vision in doing this, I think is quite impressive. But let me take a step back a minute just for the sake of our audience and really for myself. If I Google circular, you get all kinds of circular things, you know, but not necessarily the circular concept in what you're talking about. So treat me like I'm six and six years old and give me, walk me through an example, tell me a story, if you would, about how this works.

Speaker 1: 7:48

You're presuming I haven't been treating you like you're six all the way.

Speaker 1: 7:55

Good point. Well, in a real basic way, you know, first of all, is it unique? Perhaps it's unique, it's more, that our customers have a problem that is, they're being challenged to do, be better stewards of the environment, to fulfill their business obligations, and for us to help them with that. We first thought, you know that it was going to take the service, so handle the cardboard, handle the wood, and a lot of companies in this industry are reluctant to move in this area because it's not got the value that the metal has. And we looked at it a little bit more holistically and said, you know, our customers have this problem. They need the data to facilitate their reporting. That's today not so much regulated, but eventually potentially could be people see it coming.

Speaker 1: 9:18

So the first thing we kind of did was we thought let's offer services and we started down that road. We had one particular customer in 2018-2019, somewhere around there, come to us and say we'd like to go zero landfill and our current partner wouldn't help us. Well, that was the impetus for our start, because we already were moving in the direction of sustainability services. Well, let's tackle this one. Well, that particular project. We saved over 400 truckloads of material going to a landfill and reduced them to zero, saved them a ton of money, got an international sustainability award, learned a ton on that first project. So our first project, we won a sustainability award. We were kind of hooked and validated for sure.

Speaker 1: 10:16

We learned through that entire process how important the data, the technology, was going to be and that this really isn't about Shapiro offering a service. This is about Shapiro building a solution that is simple, streamlined and managed by Shapiro, but not executed in all parts by Shapiro, wrapped in an umbrella of data and technology, which basically means we capture all of the information and we package it, regardless of who the vendor is. Our customers in manufacturing today. They're as overwhelmed as every one of us all are. They got lots of demands. They're facing lots of experience retiring in the workplace I read somewhere recently four million people are going to retire from the marketplace this year and if each of them only had 15 years experience, we'd be losing 60 million years of experience.

Speaker 1: 11:27

Well, you could imagine the impact on an operation replacing that talent and what their bandwidth becomes and their capability for change. In addition to that, the demands just will not relent. There's additional demands being placed on people all the time, so we try to build a very simple solution that starts with an audit. We look at what's in the trash can and right, there is your first opportunity. Almost every time, there's almost 70% of what's going to the landfill is recyclable in some way shape or form.

Speaker 1: 12:05

Some of it's not and some of it will be soon. Sometimes we have products that are very difficult to recycle, so we have a team assembled to find and fix solutions for. We call it find and fix the hard stuff, that's stuff that's hard to recycle we're trying to find solutions for, and the technology and the sustainability area and the investment going into it is generating solutions almost every day that are new, unique, interesting. Some will work, some won't, but the evolution and the innovation is certainly being applied to this problem. And so we kind of come in, we do that audit, we look at what's possible and then we build a supply chain or have built one in that particular part of the country to provide the best solutions for the different waste streams they have that are available. That includes recommending the equipment, because the biggest challenge in this, both from a carbon standpoint and a cost standpoint, is transportation.

Speaker 1: 13:18

So figuring out how to do things locally or aggregate them and handle the logistics in the most efficient way is a real important part of our process. And then, once that then we put the proper equipment in, we help manage that, those workflows. We capture the data through the workflows and transactions and things that go on. We compile that data into reports, given our customers the impact and the cost and the cost savings that all of that work entails, and it really ends up being an important strategy to help reduce both environmental impact and cost. Then on top of that in our roadmap, being manually done right now, will be some artificial intelligence that helps us point to continuous improvement opportunities. And then we're also building certain automations and tools in that platform that allows our third party partners that could range from the most sophisticated to a mom and pop to provide data into the system in real time. And then we're also working on tech to make the scheduling and the pickups less onerous on the operations themselves by automating them or using the IoT type stuff of the world to help enable that.

Speaker 1: 15:00

So that's kind of our model. I don't know that it was at a six-year-old level, but it's kind of what we do. We're passionate about it. It's informed us of a purpose at Shapiro, which is to make the planet better together, and I think together is really important. Making the planet better is pretty straightforward it's about making permanent positive impact. But together is really really important, because no one's going to do this and make the impact we need to make by themselves.

Speaker 1: 15:36

No one you want to be an ecosystem, a network, a combination of partners leveraging their strengths to achieve the outcomes that are necessary to just deal with the consumption that we have in the world and in the US, and it's probably you know. We can argue about a lot of things, about ESG and climate and all of that, but at the end of the day, we can't argue with. There's finite resources and we're consuming them faster, is it?

Speaker 2: 16:13

So the company it sounds like at least that branch of the company, your circular branch is really a technology company. Is that what I'm hearing because you've got? I've heard you mention a number of different technologies around data and tracking and managing and stuff like that. So when you were looking at this possibility and how do we make it profitable, was that what you had in mind or did it evolve into becoming more of the technology centric?

Speaker 1: 16:50

Yeah, I think it was an evolution. I mean, like I said, initially, you know you're a service centric company. You view everything through service centric mindset, and we certainly did. But we quickly became aware that our customers, you know. I mean just to give you another statistic this is I don't recall where I got it, but there's a statistic out there that says 50% of the companies out there, no matter their size, have less than five people in their ESG department. Well, that means those people aren't really working on impact. They're working on measuring where they are finding time to work on impact the best they can. And then you got to work on the next month's reports and data and so forth. So we try and help that and became keely aware of the need for it. And we also became keely aware because of their efficiency, the need for their efficiency. We need that data as real time as possible.

Speaker 1: 17:58

I don't know what. I'd go as so far as to say we're a tech company, but I'd go this far. I'd say that every company that operates in the 21st century, today, with the rate of change in technology, you're either going to be one parting one or attached to one in some way or some fashion. And so you know we can only do so much in that area. We're making make versus buy decisions on solutions all the time, but all of us are going to be tech enabled to facilitate this work because of the demands for the information and for the demands that offer continuous improvement and the difficulty in hiring talent to help do things. I mean, I just think it's where we are in almost every business today, some ahead of others. I don't know if we're ahead in this industry or not, I just know it's the right thing to do. How?

Speaker 2: 19:04

do you go about communicating the need to an industry or industries that maybe don't value it and see it the way you do?

Speaker 1: 19:18

Well, you know there's a certain amount of that question that is all about how we market and tell our story. In that question there's also a little bit of strategy and how you have to approach that, and I'll try and speak to both. You know we try and talk about the impact we're able to help companies make, recognizing that this is in very early stages with some companies. You know there are people at the tip of the spear. Some of them may have European parent companies. They might have a different motivation to be more sustainable than others, and so certainly we try and appeal to those companies and interact with them and talk about the solutions, tell our stories, provide evidence, be considered a thought leader. We do those kind of things on the marketing front. You having me on today is an example of that. On the strategic side, it's really about targeting those customers that have, I would say, either a mandate because they're in a supply chain and it's being demanded by the OEMs. It could be companies that are concerned about it and want to make an impact, are their CEO that's committed to a certain outcome, and so we try and keep tabs on all of those different dynamics and make sure we're making them aware of and getting to know that we're out there to help. You know there's a lot that goes into that, from the standpoint that not everybody is the right time, but if regulation happens, it's likely everybody will be in the need to do it. So that's also helped us be confident in moving in this direction.

Speaker 1: 22:02

It may not be if and it may not be what we think it's going to be, but there is going to be more and more call for waste reduction, better utilization of our raw materials and natural resources, and the generations that are coming into the workplace the millennials and the alphas and all of them.

Speaker 1: 22:24

You know they're essentially born with this mindset and they've been educated with it and thoughtful about it and they care about it. And so that's another part of what kind of informs our confidence and encourages us to keep pursuing it. And it is it's a good purpose for us too. We attract talent and initiative and innovation because people care about this. And so you know, when we have a problem, that's find and fix the hard stuff and the team goes to work on that. It's kind of really rewarding work for them as well as developing an outcome for somebody, whether it's a fiberglass solution or a casting sand solution, you know, and then you got to figure out after that how do you, is this a cost savings? Does it come at a cost? How do you price it? How do you manage all of this? All of that is kind of just a big work in progress right now that you know, we continue to experiment around and make sure we understand, since your answer to your question.

Speaker 1: 23:50

I hope I answered your question.

Speaker 2: 23:52

Yeah, yeah, you did To piggyback off of that. How is the message being received, like when you're communicating it not? And maybe talk to me about how the message is received internally, because I know you've got the younger generations, that they've kind of been raised up on understanding the importance of this, but then you've got businesses and stuff that maybe haven't, and so how have you been able to craft a message that resonates? Are you keying in on the benefits? Are you keying in on the problem that it solves, or both?

Speaker 1: 24:36

I think we're trying to speak to the problem more than anything and ideas that we might have around it, supported by whatever evidence we might have to substantiate those ideas.

Speaker 1: 24:55

But largely what we're trying to do and I think this is just where we are from this process is, I think, it's about clarifying and understanding that problem better every day than really thinking you got your finger on it, because there's so much variation from both the objective of the client to the evolution of solutions and technologies and things that people are inventing to solve these things. I think that's just all of big work and process and it'll evolve over time. So we're speaking to what we know at the time as the problem. We adjust that to based on what we're learning about what the problem is as it evolves, and we have to appeal to a lot of different people with different needs who might be trying to solve different problems All under that one umbrella, if you will, of sustainability or ESG, and we're almost exclusively focused on the E and the ESG. So it really just ends up being what can we do to reduce waste, minimize impact while we do that and make things better?

Speaker 2: 26:29

Can you give me a story, maybe or two, about some successes that you guys have experienced? Ok, let's get to it, let's do a little bit more.

Speaker 1: 26:40

Yeah, I mean there's quite a few. I mean, you know, we have all kinds of different stories.

Speaker 1: 26:47

We've worked on circular projects where people have a material they want to get back to their sourcing company that sources that material for them to reuse that byproduct and come back and then keep track of that all the way through the cycle.

Speaker 1: 27:08

We've had opportunities, like I mentioned earlier, to reduce landfill cost. We have a program being developed right now that saves the landfill, reduces cost, improves recycling value for the customer, additional revenue from what was going into the landfill. In addition to that, saves the labor and time because of how we organize it and look at you know the number of steps or how long it takes them to drive to that particular apparatus to take care of that material and how that can be better optimized. So those would be some examples. One I'm particularly proud of is a Shapiro designed product to help recover cutting fluid for CNC machines, where we take the fluid that comes with the chips from the CNC and we get that coolant back to the customer as it transfers into the container, saving them a lot of cost plus a lot of disposal, and I'm real excited about the potential of that. We have that installed in two locations in St Louis and are anxious to install more.

Speaker 2: 28:34

So just for clarification for the audience, what that is is typically.

Speaker 1: 28:38

The CNC machines take water to cool the bits right as it's cutting they have water in a very sometimes expensive coolant additive that they right, that comes in and concentrate, they dilute that down and then, when it cools the tooling to cut the material, would that material that, should the chips come off of that cutting cutting fluid? And what the concert? The diluted cut cutting fluid comes with it and we return that back, saving both water and cost.

Speaker 2: 29:16

Whereas in a typical shop, if you would, that's just disposed of correct, they just live it down the drain. Well, they lose it.

Speaker 1: 29:27

It comes to whoever that material goes to, and then it has to be properly disposed of, and adding cost to the supply chain and returning that fluid is something that we're really, really excited about. But that's another kind of breakthrough type thing that we're just beginning to tell the story about the problem and one possible solution, which is ours.

Speaker 2: 29:59

Yeah, so I. It's just in that example alone I can see where, if a machine shop doesn't really realize that they can capture that material and save it, recycle it back right there, that's got to be some huge cost savings.

Speaker 1: 30:25

It. It can be, and you know, I think the the issue that that presents for Shapiro is that it it's been a problem and a challenge with CNC shops for years. So they have tried all kinds of things and have settled on whatever their approach to it is, and now you're introducing a new concept. They've tried a lot. There's a little hesitancy just on that end and then on top of it, you know they're so accustomed, I think, to how things have been that it it's just kind of a challenge to look at a new way to do it, you know, and so breaking through is really the the opportunity in front of us.

Speaker 1: 31:19

We get a lot of interest on them and we can calculate a good savings for many of these locations. Some have built processes that require labor and so the cost savings aren't there. But there's labor savings there. Some of it is handling savings, you know. It just really depends on where and the solution when those operations settled and how they're accommodating an ongoing problem and a long time problem. How they're accommodating it there's there's lots of different opinions on that, but this was one that you know. We use these fluid recovery systems in our locations and we're real optimistic about their potential. Now we just got to make it happen.

Speaker 2: 32:20

Yeah, totally so. Let's talk about making it happen. So you have, you've got an environmental message right, the environmental impact that you can communicate clearly out to the marketplace. You've got an economic impact that you can clearly communicate out into the workplace. So between the two, you know the environment. The environment one is obviously hot button in our culture and generation. You know that's many, many businesses are very focused on the environment and that creates definitely a positive marketing spin for companies. You know that are engaged in that, as well as all the other things that it actually produces for the environment. But then you've got the economics, which is, you know, saving and circling it back into. You mentioned that you were focusing on thought leadership to get that message out there, which I think is fantastic. It's an excellent strategy. Are people listening? Are you?

Speaker 1: 33:35

getting some good feedback. Yeah, I think we have some, have had some real exciting, you know we we are doing presentation and speeches, demos, all kinds of environmental events and got really warm recessions and in those areas, in addition to that, you know, I think one of the real hurdles that we have to continue to overcome is most people know that you know believe that green is expensive that it comes out of premium and so to one of your points, we have to help them understand that not always is it more expensive, just sometimes it might come with a cost and and I think that's that's one of the myths out there that we have to use our thought leadership to help overcome.

Speaker 1: 34:41

And we are.

Speaker 2: 34:43

Excellent. Let's let me ask you this so this is a new product slash service. You guys have a lot of development that's gone into it. How long is it taking you to get to this point, and how long do you think it'll take to kind of get the plane off the ground, if you would?

Speaker 1: 35:07

say boy, what a nice question. I mean, you know I can answer that in a couple different ways, and I think the most significant way I'd answer it is it's taken us 120 years to get here.

Speaker 2: 35:20

And the reason I'd say that is all along that journey.

Speaker 1: 35:26

Shapiro has been a very entrepreneurial and innovative company that tried a lot of things and I don't think they recognized those trials. Some worked, some didn't. They were usually opportunistic, market-driven things and innovations to do that ended up being experiments that we could lean on now to help inform our strategy. So on that level, a lot of the progress, the systems, the thinking has evolved through Shapiro over that time we kind of moved in this direction, albeit in our core business. For many years we were doing these things but we didn't link them to sustainability. We linked them to getting the metal business and did them as a side. Now we think we see there's a whole lot more value in integrating those services, leveraging that infrastructure and wrapping it in the data.

Speaker 1: 36:47

As far as how long it might take to get to some magnitude of scale, that's really going to be more dependent on the market and the market's bandwidth. Somebody way down in the tiers of a manufacturing supply chain probably have less initiative right now to do it. That is top-down pressure. They might have their own initiative but it could. So those are a little bit rare and then as you move up that supply chain the dynamics kind of change, but I would like you to understand that one of the things we encounter a lot is there's a lot going on in a manufacturing location. Those guys are really, really big. I came out of that world and I can respect the challenges they're up against Supply chain disruptions that aren't fully recovered from COVID, labor shortages, industries people don't prefer to work in all of those challenges. And then they have all kinds of initiatives that need to be completed strategically, and ours is just another one of them, and so we got to kind of fit into that priority, adjust the priority, make it easier for people to work with us so that it doesn't burden them. Those are all things that are going to have big implications on how fast we can get to the scale you're asking me about. It's very difficult to predict from where we are today. I think it's really going to be more about measuring progress and growth and impact and building solutions, solving more problems, and then I think it'll start to kind of take on. A lot of times we'll help one location with a client and then end up with more than one, and that's kind of fueling our growth.

Speaker 1: 39:07

Right now Need more of those starters to keep us going, and that's what we're targeting. So we started working on this. Like I mentioned, 2018, 2019. We launched Circular by Shapiro last year in 23 at an ESG event in Denver and that was our official launch and our formal launch will be this year as part of our 120 year anniversary. So it is a brand new division inside of Shapiro, but it's getting some real traction and a lot of interesting discussions with a lot of interesting companies going on.

Speaker 1: 39:59

And what's really profoundly interesting about this and it illustrates a prior point I made is that every discussion is different. So we're scaling a kind of mass customized strategy and that's really really interesting. Eventually, it kind of all makes sense, but you kind of feel like things are not kind of in the same category sometimes on what you're working with, and then when you look at it from a zoom out, look at it, it absolutely is. You just couldn't see it. And then and that's happening to us almost on a daily basis you know the the priority for this one location is going to be different than the priority over here, different than the corporate strategy over there, and somehow you got to build enough efficiency in your process to accommodate that breath.

Speaker 2: 40:59

Let's look ahead 10 years. I love where you're at today. It's like a new journey, almost if you would, and I love hearing companies that like this, who can make a shift in their business, recognize a problem and a need and then go out and invent a solution. Right, it's awesome. Let's look at 10 years. Okay, and you, where do you want to be? And then back me up to today how are you going to get there?

Speaker 1: 41:38

I think what we got to look at to answer that question is where will this, this I don't know what to call it a strategy, an initiative, an idea? Where does it? Where does it need to be to be successful? And to me it's going to be a network. So, to answer that question, there are other people that can do other things to help manufacturers that aren't in the wheelhouse of Shapiro or this vision. How do we connect with them to bring our customer a combined solution that helps them inside the plant and then that's going to expand to other things design and things like that.

Speaker 1: 42:28

So what I would hope for the planet and for this strategy would be that we're at a place where that network is starting to come together or is in practice, where there are loosely formed partners that can help the client, and I think we see it in other industries. It's kind of maybe what Amazon was, and so I think you know you go from independent to dependent to interdependent. In 10 years I hope we're very interdependent, offering a very interdependent solution that is kind of vetted, working and and people know that that network exists and we'll be part of that network. You know, I don't know that we'll ever be. We might own a, you know, have a, have a interesting contribution and a niche. But there are. You know, there are things that just the engineering for example, on the design of a factory to reduce waste, or the parts design or water solutions. Those things aren't going to be in our wheelhouse but our clients might need it and we might be able to bring that solution to them from our network or our community, if you will.

Speaker 2: 44:01

in today's vernacular, yeah, has that community begun to? There's there's discussions out there.

Speaker 1: 44:13

I don't know if we know how to work together yet. We're we're in lots of discussions with people like that and trying to figure out how that partnership kind of works on the supply chain side and what we do in the alley. That's a little further ahead. But in a more macro, total service or that kind of enterprise wide network, that's real early stage. Now I'm sure there are private equity groups and things like that rolling up a strategy or a platform like that. But at the same time we, we, we are in discussions with really interesting people and that kind of realm and we are at the. We are literally trying to figure out well, what are we going to do together and how are we going to do it?

Speaker 2: 45:11

You know, I mean, that's where we are yeah, and it's exciting.

Speaker 1: 45:16

Everybody can see the potential of it, but how do you put it into practice?

Speaker 2: 45:21

Exactly, yeah Well, congratulations on pioneering in industry. I I know that the next 15, 20 years I'm going to be hearing about Bob Alvarez and how you were a pioneer on circular strategies and that a lot of these technologies and that are you guys are going to implement are going to show, be showing up everywhere. So I'm excited to watch your guys's growth and what you guys do.

Speaker 1: 45:53

Well, thank you for this opportunity, but Bob Alvarez isn't the pioneer, because this is. This is a need, and we've assembled a group of people here at Shapiro that are really passionate about it, and we're all learning from each other, and they're all contributing to whatever direction this thing goes. They're making it move in that direction and it's a privilege to be able to work with them.

Speaker 2: 46:23

The truth is Well said, well said, thank you. Yeah, it's going to take a lot of people, I know, and you definitely have a great team there.