I – Introduction and Meaning

It goes without saying that in a production process, remnants streams

and waste arise. This concerns materials that can be confused or further
processed in this production process itself, or waste materials that are to be
disposed of, Waste management and waste handling in a production process
need to be characterized by efficiency and reliability.

The industrial waste and scrap consists of spoiled raw-materials,

rejected components, defective parts, waste from production departments etc.
involves some commercial values. They should be disposed of periodically
and proper credit of the amount should be taken in the books of accounts.
Hence, waste management places an important role in managing operations.
Wastes can be categorized into obsolete, surplus and scrap items.
 Obsolete items: These are those materials and equipment which are
not damaged and which have economic worth but which are no longer
useful for the Company’s operation owing to many reason such as,
changes in product line, process, materials, and so on.

 Surplus items: These are those materials and equipment which have
no immediate use but have accumulated due to faulty planning,
forecasting and purchasing. However, they have a usage value in
future.

 Scrap: It is defined as process wastage, such as, turnings, borings,

sprues and flashes. They may have an end-use within the plant having
commercial values. Hence, should be disposed of periodically

II – Reasons for Generation and Accumulation of Obsolete, Surplus and

Scrap Items

Following are the reasons for the generation and accumulation of

obsolete, surplus and scrap items:
1. Changes in product design: This may lead to some items getting invalid
so far as the final product is concerned. Hence, the entire stock of such
items as surplus obsolete.

2. Rationalization: Sometimes raw materials are renationalized so as to

minimize variety and simplify procurement. The rationalization process
renders some items as surplus or obsolete.
 3. Cannibalization: When a machine breakdown occurs, sometimes it is
rectified using parts of an identical machine which is not functioning
due to various reasons. This process of ‘cannibalization’ is not
uncommon in many project-based industries. When continued
unchecked, this results in obsolete and scrap items.

4. Faulty planning and forecasting: The marketing department may have

projected a sales forecast which might be on the higher side. Any
material planning has to be based on sales forecasts and this could
result in surplus items. Wrong indenting by the user departments also
leads to accumulation.

5. Faulty purchase practices: Sub-optimizing decisions like buying in bulk

to take care of discounts and transportation economy without taking
into account factors such as, shelf life, storage space requirements and
technological changes once again lead to the accumulation of surplus
and obsolete stocks.

6. Other causes: Many items are held as insurable spares for many years
without any consumption. Faulty store-keeping methods, without
adequate preservation, lead to spoilage. Inferior materials handling,
improper codification and poor manufacturing methods also result in
obsolete, surplus and scrap items. Poor maintenance of machine tools
may result in excessive tools wear and greater process scrap.

III – Identification and Control of Wastes

The combing process of combining the stock records and movement

analysis has been found very effective in locating such stocks in the total
inventory. Stock issue cards should be combed and items which have not
been consumed (non-moving) for a period of one year must be isolated. A list
of such items and their value in terms of money and time must be made.
Similarly, such lists must be prepared for items which have not moved for 2
years, 3 years, 5 years and above. Such lists can then be put up to top
management for disposal action. Care must be taken to prepare a separate
list of imported spares and insurance items. Such combing and movement
analysis must be done on a continuous basis. A typical movement analysis
statement.

Movement analysis statement

 Whenever changes in production program, design and product lines
are contemplated, a senior executive from materials management must
definitely be kept in the picture. This helps in several ways. He is in a position
to inform top management of the amount of stock of materials on hand that
are likely to be rendered obsolete if and when the changes are introduced.
This could even guide the management as to when the changes could be
made so that the existing stock can be consumed in full. The materials
manager in turn can freeze further orders for such materials and try to
negotiate with the suppliers to take back the stock. For some items he can
introduce the buy-back clause wherein the suppliers takes back items not
consumed within a specific period. For new items which may be required, he
can try to develop sources and place orders so that changes can be
expeditiously introduced. All this highlights that a close coordination is
required in order to avoid stock pilling obsolete and surplus items. Selective
control based on ABC analysis, accurate forecasting techniques and proper
preservation minimize such accumulation.

In the case of storage of perishable items the Central Warehousing

Corporation has devised a scheme to enlarge its scope to cover certain
specialized lines of storage. The schemes drawn up by the corporation
include setting up a chain of cold storage plants for potatoes, and fruit, and
storage facilities for certified seeds.

Many organizations have introduced formal documentation in

introducing changes in design or product. It is called the ‘Effective Point
Advice.’ This is popularly known as EPA. Here, the proposed changes, details
of new materials and products required details of materials and the products
which will be invalid/obsolete when the change occurs and the approximate
date when the change is expected to be introduced are detailed and
circulated to concerned departments. EPA thereby helps in tapering off the
stocks of ‘invalid’ items, cancellation of orders for such items, placing orders
for buying and/or manufacturing new items and related activities. EPA
systems help in better coordination for profitable introduction of changes with
minimum ‘side effects’ such as the accumulation of obsolete items.

The reclamation of scrap has not attracted the attention of the top
management in Indian Industry. Optimal utilization of scrap would allow
conservation of the use of scarce natural resources, such as iron ore. This is
because scrap is an important element which goes into the manufacture of
steel and castings.

It is possible to salvage scrap for usage within the firm in some cases.
Press parts are normally made from sheets and plates. The off-cuts
generated during such process can be profitably utilized in making smaller
press components such as washers. Rationalizing the supply size, changes in
process such as reversing the dies may result in minimization of scrap. Big
organizations have a full-fledged scrap salvaging department. These
departments segregate the scrap into categories, like turnings, borings, plate
cuttings, end pieces of billets, punching etc. Color coding the scrap is also
done to avoid the mixing of different categories of scrap. It is also
advantageous to the end-users in each category and supply of scrap at the
appropriate time for production. Often informing the production department at
the right time about the volume of scrap generated enables prevention of
excessive scrap through timely changes in production methods, tooling and
materials.

IV – Disposal of Wastes/Scrap

Disposal of scrap when handled in an imaginative manner can result in

handsome returns to the organization. An effective disposal requires a
compact disposal organization reporting to the materials manager, continuous
market survey on the prices of various categories of scrap generated in the
plant and constant touch with the industries which generate similar scrap and
with the end-users.

Disposal action follows when the scrap cannot be utilized within the
organization. In practice, it has been found that it is profitable to dispose the
scrap directly to end-users rather than to middlemen who normally form a
cartel of their own which leads to lower returns. Before disposal action it is
essential that the scrap is segregated according to metal, size, etc. when the
scrap is mixed, the return is even lower than the lowest element in the
mixture. This is because the buyer of scrap will have to segregate it at an
extra cost. A cursory analysis of scrap prices will reveal that sheet and plate
cuttings will fetch fewer amounts per a tonne compared to that of turnings and
borings. Also when costly scrap such as copper, aluminum and tungsten are
involved, it is imperative that they are segregated as returns are huge and
price levels are different. Since scrap is generated process-wise, it comes out
in a segregated condition and there should be no difficulty in sorting.

Auction and Tender methods are frequently used for disposal of scrap.
Parties in both the cases are normally required to inspect the scrap in the
scrap yard and deposit earnest money. Very often the company insists on a
basic price depending upon the category of scrap. The disposal section
works, in this aspect, in close coordination with the finance department. In
many cases the disposal section may try to enter into a long-term contact with
end-users such as steel plants.

Many companies have found to their displeasure scrapped

components appearing in the market and competing with their parts as
‘original equipment’. This is the price which organizations pay for not
dismantling and disfiguring the scrap before disposal. Automobile spare parts
and bearings especially are prone to such dangers. For this purpose some
organizations go to the extent of requesting vehicle users to demolish filters
and plugs before scrapping them. This is very important aspect.

In view of the paucity of raw materials and shortage of credit, it is

necessary that optimum usage of materials is made and funds tied up in
obsolete surplus and scrap items minimized. This is only possible when top
management shows commitment and support. The employees of the
organizations are naturally the best people to suggest improvements in
materials, processes and new end users for scrap. It is they who can minimize
the accumulation of scrap through coordination.

Therefore, top management should work out formal reward systems to

promote employee participation in this matter. A few organizations have
suggestion box schemes which pay rich dividends to the organization.
Employees, too get rewards and recognition in the process.
V – Conclusion

Waste, by definition, is something that the producer no longer requires

and therefore discards. In many industrial economies, the traditional approach
to waste has been to dispose of it as cheaply as possible, without much
concern as to what happens once the waste leaves the producer’s premises.
This attitude is now changing as greater environmental awareness is reflected
in more stringent waste management legislation and a genuine desire on the
part of industry to improve environmental performance and meet customers’
expectations. The environmental risks associated with poor waste
management are well known and understood. Fly tipped wastes can poison
and injure children and animals as well as creating an eyesore. Carelessly
disposed of liquid wastes, such as solvents, can leach into the groundwater
and contaminate drinking water supplies. Poorly planned and managed
landfills will create a significant neighborhood nuisance, and where landfill gas
and leachate are not properly treated there will be a serious threat to the
safety of local residents. Old, closed dumps and landfills are likely to be
contaminated land which may be difficult or dangerous to remediate and
redevelop. Incinerators operated without adequate pollution abatement
equipment will release highly toxic dioxins. Even recycling and composting
facilities can be a source of litter and unpleasant odor if not properly
regulated. Waste producers carry their share of responsibility o ensure that
such polluting incidents do not occur.

What is often overlooked by manufacturers is that waste is not only a

potential source of environmental damage, but also represents a waste of
their resources – raw materials, energy, water, etc. By reducing, reusing and
recycling waste, manufacturers can cut costs considerably, create a cleaner
and safer working environment – and perhaps even improve the quality and
safety of their product. Good waste management protects the environment
and improves profitability – but for those who are not sufficiently motivated by
these incentives, increasingly stringent national and international legislation is
compelling many producers to review their waste procedures.

Poor industrial waste management can lead to those wastes getting

into the local environment and then causing possibly irreparable damage. For
example, chemical pollutants from manufacturing and similar industrial
processes can enter the water and get into the bodies of everything living in
that water. Certain chemicals can build up if ingested, meaning that higher
and higher concentrations build up in the bodies of animals higher on the food
chain, including potentially humans. Proper industrial waste management will
help deter such outcomes while also ensuring that less hazardous industrial
wastes are recycled, which is something that comes with its own benefits.

Improper handling and disposal of industrial waste can contribute to

increased incidents of serious medical conditions among the human residents
of the local region. For example, if the run-off from a cattle ranch enters the
local river, residents living down-river from that ranch can find themselves
falling ill with diseases such as e-coli infections. Effective industrial waste
management will not only do a better job of ensuring that such outcomes
never happen, but also reducing the amount of industrial waste that is
produced in the first place.

Businesses have the obligation to effectively manage and dispose of

their industrial waste. If they fail to do so, they will become liable for the
damages caused through their negligence. Even in cases where the
businesses win their cases, they will still lose out on legal fees and time spent
defending themselves in the courts.

VI - References

Elias-Ozkan S.R. and Duzgunnes, A. (2002) An Overview, Proceedings of the

CIB W107 1st International Conference: Creating a Sustainable Industry in
Developing Countries, 11 – 13 November, Stellenbosch, South Africa.

Shen, L. Y, Tam, V. W, Tam, C. M, and Drew, D, (2004), ‘Mapping Approach

for Examining Waste Managemen, Production Management, Vol.
130, No. 4, July/August 2004, pp. 472-481

Coventry, S. and Guthrie, P. (1998) Waste Minimisation and recycling –

Design Manual CIRIA London