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Sep 21, 2017, 19:51 PM
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September/October 2017

ARCOA has weathered ups and downs over 27 years in the e-scrap and electronics remarketing sectors by following two philosophies: Work hard and have fun. 

By Megan Quinn

Wired-RideIt’s 3 p.m. on a Friday, and the employees at ARCOA Group are gathering their things, clocking out, and heading home. It’s not a holiday weekend. It’s not a special occasion. It’s just how the 27-year-old company operates. “Our staff works hard during the week,” says George Hinkle, the company’s president. “They deserve to go home early on Fridays.”

ARCOA (Waukegan, Ill.), an electronics remarketer, IT asset disposition service provider, and e-scrap recycling company, has a lot of balls in the air, but the company’s leadership team—a group of five men who run various aspects of day-to-day operations—is as serious about keeping things fun as it is about keeping the company successful. The team members believe that outlook will help them stay strong through the next 27 years in business, all while tackling challenges that include quickly changing technology streams and lower commodity prices. “Having fun is really our unofficial motto,” Hinkle says.

Growth and Expansion

The quest for fun—or at least free time—is even part of the company’s origin story. As owner E.J. Spriegel recounts, in 1989 he and a friend bought a van and started Midwest Copier Exchange, a company that picked up, cleaned, and resold old copiers. The running joke is that Spriegel landed in that line of work “because I didn’t want to work weekends,” he laughs.

Spriegel found himself working pretty hard, and business began to outgrow the garage where he stored the copiers. As he expanded into bigger and bigger warehouses, he started talking with Hinkle, who sold trade-in copiers to Spriegel but wanted to get out of that business. In 2009, Spriegel and Hinkle started a side business, Midwest Electronics Recycling, to deal with the spare parts and scrap that accumulated from Spriegel’s copier business. “We had so much material that couldn’t be resold, and we wanted to get some value from recycling it,” Hinkle says. There was just one problem: They had never worked in the recycling industry before. “There was a lot of trial and error and asking advice from scrap guys and recyclers,” he says. He asked a lot of “dumb questions,” he jokes, “and my new best friend was Google.” When the company began working on its R2 certification, Spriegel and Hinkle recruited one of their regular scrap buyers, Terry Levy, to join the company as the president of the e-scrap division. Levy had a background in scrap recycling and was able to make business connections and teach them the more complex aspects of finding value in scrap materials.

As the partner companies continued to grow, they expanded their IT asset management and data destruction services and began accumulating more devices—not just copiers, but also LCD screens, printers, laptops, and other electronics. To reflect those changes, Midwest Electronics Recycling changed its name to Asset Recycling Co. of America in 2011.

In 2013, the partners formed ARCOA Group to acquire Midwest Copier Exchange and ARCOA. Today, the companies occupy a 110,000-square-foot facility with 85 employees, who divide their time among sorting e-scrap, cleaning and testing electronics, performing data destruction services, and remarketing their inventory of copiers and other electronics. The company also provides logistics services for shipping copiers and other electronics around the country and globally. Hinkle estimates ARCOA will process 30 million pounds of electronics this year, though he says the amount destined for resale versus recycling is a “lightly guarded secret.”

Because of its wide range of remarketing and recycling efforts, Hinkle says it can be tough to give a solid elevator pitch about what the company is really about, even 27 years in. That’s why the company is in the process of rebranding and clarifying ARCOA’s mission, not just on its website and business cards, but also in the way staff members talk about and highlight its services. “A lot of people still don’t know about our remarketing services, even though it’s about 55 percent of our annual revenue and where we started,” Hinkle says.

Levy says current market factors make it timely to highlight ARCOA’s expertise. In the past five years, commodity prices for e-scrap materials such as gold and copper have fallen, but companies are becoming more willing to pay for asset management services and remarketed equipment as part of the effort to help meet sustainability goals or save money.

A recent study by ITAD company Cascade Asset Management (Madison, Wis.) says consumers are becoming more willing to purchase refurbished equipment and pay higher prices for it. Consumers paid 21.6 percent more for secondhand electronics in 2016 than they did the year before, the report states. That’s good news for ARCOA, Hinkle says, because its best customers are refurbishers and dealers looking to take copiers—as well as laptops, printers, and computer monitors—off its hands.

ARCOA’s diverse offerings also have helped it weather the recent industry downturn, adds Jeff Datkuliak, the company’s vice president of sales and marketing and a member of the leadership team. “We’re doing something no one else is doing. Very few ITAD companies have copier remarketing and a linked-in recycling and logistics platform. And our cost structure is cheaper because those elements are all linked together,” he says.

The Copier Side

Though Midwest Copier Exchange and ARCOA merged four years ago, staff still refer to the “copier side” and the “recycling side.” It’s easy to tell which is which. Copiers—more than 5,000 of them—crowd ARCOA’s warehouse, each wrapped in plastic and tagged with its own individual ID number. Most of the 35,000 copiers that move through ARCOA each year, which come from across the country, are destined for a new life in another office or school. Those that are too old or too broken get dismantled, sold for parts, or recycled. Many of these machines come to ARCOA from companies whose leases on them have ended, but it also buys copiers from manufacturers, refurbishers, and other recyclers. Employees note the status of each machine carefully, including the date and time it arrives and its condition. The leasing company needs this information to determine that the lessee followed the terms of the lease—breaking these terms can cost companies thousands of dollars, Hinkle says. After checking in each copier, workers test every function to make sure it is still in good working order, make minor repairs, and scrub down the machine so it looks like new. Any customer data is destroyed. 

In a way, the copier side is like a used car lot, Hinkle says. Copiers are like cars, with varying makes and models and mileage (in this case, page counts) that affect the resale or scrap value. “Schools are notorious for having beat-up copiers,” he says, whereas small offices might return a copier after a three-year lease “and it still looks pretty good.”

Regardless of their condition, most copiers can fetch higher prices if resold than if they are scrapped. Just one machine may cost $40,000 new, and depending on its age and condition, it could sell for $10,000 used. That far outweighs its worth in scrap, which is mostly plastic and metal. Workers also have to remove mercury-containing fluorescent bulbs and toner to prepare the machine for recycling, which takes time. “There’s not a lot of value on the recycling side of things,” Hinkle says. “But whole copiers? There’s value there.”

So who sees value in an older-model copier? The majority of ARCOA’s copiers are exported, he says. Southeast Asia, South America, and the Middle East are the biggest markets for refurbished copiers, which can be 50- to 75-percent less expensive than new models. On a recent day, workers hustled to pack 124 copiers into a shipping container destined for Colombia. ARCOA has seen an uptick in these exports since 2009, Hinkle says. “The overseas markets really changed. A lot of places we once called ‘Third World’ are becoming more developed, they’re growing, and there’s a demand.”

But before a copier—or any other electronic product ARCOA handles—can leave the facility, it goes through a rigorous data destruction process required by R2 standards and NIST 800-88 guidelines for media sanitization. Clients dictate the method used for data destruction, Hinkle says, which could be degaussing, wiping a drive, or even completely destroying the drive to avoid security concerns.

A lot of manufacturers don’t want their products to be remarketed because of liability concerns, such as a recent shipment of vehicle jump starters that ARCOA agreed to destroy because they have a manufacturing defect. Yet in the case of reusable, perfectly functioning equipment such as computers or copiers, it can be an uphill battle to convince previous users, such as medical offices, or even the manufacturers themselves, that ARCOA’s data destruction techniques are robust enough to avoid data security issues without completely destroying the whole machine. “Some want [products] physically destroyed to protect the brand or for quality control,” Hinkle says. ARCOA can still recover the metals and plastics for recycling, but those commodities don’t fetch the same prices as a whole, functioning machine. Copier manufacturers are starting to warm up to remarketing, however. “We have to do a better job of educating them,” Hinkle says. “Some recognize [the value, so] instead of destroying their equipment, [they are] allowing us to remarket it for them. They now generate revenue not only through the resale of their copiers, but also through increased distribution of parts and supplies for those same machines.”

Adding Value Through Recycling

When a product can’t be resold, it finds its way over to the “recycling side” to be manually dis¬≠assembled, sorted into commodities, and collected in Gaylords or baled. Levy says recycling is a value-added feature for customers, and it’s also a relationship-builder for the company. Scrapyards sell him old printers and IT equipment, which ARCOA might successfully remarket. He sells the scrapyards copper wire and other commodities salvaged from broken equipment. “It makes good long-term business sense to do business with our competitors sometimes,” he says, because diversification is helpful to keep the business expanding. Building these good relationships has helped him sell challenging material—black plastic from those defunct jump starters, for example—and find ways to work with partners in China and Hong Kong, even amid trade restrictions.

Building good relationships also helps ARCOA stay nimble as electronics markets and the flow of electronic materials have changed over the years, he says. In just the past five years, copiers have gotten smaller and lighter, meaning they hold less commodity value. “I’d say copiers have lost about 60 percent of their weight over the last 10 years,” he says. The same goes for laptops and tablets, which are lighter weight and sometimes more flimsy, meaning they don’t last as long as previous models. “That really hurts the resale value,” he says—but they still have commodity value.

Building Employee Loyalty

Markets will always go up and down, but Spriegel says one key to ARCOA’s stability as a business is low employee turnover. Closing early on Fridays is just a small part of a larger philosophy that ARCOA employees are family, he says. Sometimes that means loaning an employee money to fix his or her car or water heater, or helping employees find counseling services when they go through personal challenges. “I trust them. … It takes a team to make things work. You have to let people do their jobs and have faith and trust in them,” he says. The family-centered philosophy even extends to buyers from overseas. When they come to visit the facility, “they often stay at our homes,” he says.

ARCOA rolled out a quarterly profit-sharing initiative at the beginning of 2017, which is open to any employee who has worked there for 90 days or more, regardless of job title or duties. In addition to putting some extra money in employees’ pockets, the profit-sharing structure has encouraged more employees to speak up with improvements and ideas, Hinkle says. For example, drivers are more careful because they know they directly benefit when the company has lower insurance rates, and several employees have stepped up to do facility repairs that normally would have been outsourced to outside technicians. “We’re open with our books. Employees can see how we spend our money, and they’re more conscientious about waste,” he says.

Dana Larsen, copier operations manager, says he appreciates the perks, but the real reason he has stayed on for 18 years is because he feels his input is valued—even on something as small as suggesting what type of roofing materials the company should use for an upcoming repair. “If you have an idea, you can walk right up to the owner’s desk and ask, ‘Can we do this?’ There’s no bureaucracy,” he says. Larsen says he isn’t the only employee who has worked with the company for almost 20 years—ARCOA has a low turnover rate because “people want to actually stick around here.”

Employee buy-in means things get done more effectively, but it also means the team will happily go above and beyond if a job calls for it, Spriegel adds. In fact, on a recent Friday, several employees were making plans to come in early on Saturday to load up a big shipment of copiers. That means a lot at a company that famously hates working weekends, Spriegel says. “All we do is ask for help, and they come through for us,” he says. But he adds that the philosophy only works because the leadership team isn’t above doing manual labor, too. “There isn’t a job in the place we haven’t done,” he says.

Overcoming Growing Pains

The company is proud to have built employee trust, Hinkle says, but it came with some growing pains. When Midwest Copier Exchange and ARCOA merged, the two companies knew there might be some rough patches while they worked to synchronize schedules and organize leadership roles, but they didn’t know how badly market conditions would affect the copier side in 2014, which was followed by a nosedive in commodity prices on the recycling side—a stroke of bad luck that shook the newly merged company to its core. “I never had a bad year until 2014,” Spriegel remembers.

Business wasn’t doing well. Personalities, ideals, and expectations clashed. The members of the newly formed leadership team, some of whom had just been hired, didn’t know what to make of one another. “It was a huge challenge at first. We’d just argue and argue. We all had different perspectives and didn’t realize we were all arguing for the same goal,” Datkuliak says.

ARCOA decided to hire Johnny Shumate, who had recently retired as a director from Allstate Insurance Co., to come in “as the adult of the group,” Spriegel jokes. Shumate’s new job as administrative director was to implement a business system designed to get everyone on the same page and to strengthen the company’s accountability and focus. The system also helped the leadership team work together in a more unified and functional way, especially in the face of one of the worst industry downturns in recent memory.

The company also improved its inventory management system, focusing on more efficiently tracking and turning over inventory, and it has beefed up its online presence and marketing strategies. Oversight is more streamlined and formalized, Datkuliak adds.

“It helped us improve as a company, but it also helped us see how we can do business in our own way,” he says. As the markets—and everyone’s tempers—evened out, the leadership team members began to feel they were truly on the same page. “The hard times really test you, so when we have successes now, they are much more enjoyable,” he says.

Today, ARCOA’s leadership team is planning to expand the company outside the Chicagoland area to Colorado, Nevada, or South Carolina, and it also is pursuing acquisitions. The group feels well-positioned to move forward now that it has made improvements that will help the company weather future economic hardships. “We want to grow, but grow smarter,” Spriegel says. “We’re not the biggest, not the fastest growing, but we’re here for the long term.”

Megan Quinn is reporter/writer for Scrap.

ARCOA has weathered ups and downs over 27 years in the e-scrap and electronics remarketing sectors by following two philosophies: Work hard and have fun.
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