Economics of surplus trading

I know one scrapper, he often stops by my warehouse on his way to scrap yards, and sells me something or other.
Last week he sold me a 15HP food processing machine for $X.
I am guessing that he paid $X/3 to $X/2.
I promptly turned around and sold it to a process industry dealer for $7X.
I am pretty sure that this dealer will turn around and sell this same machine to his contacts for $20-30X.
What interests me is, what is the difference, why did someone sell this to the scrapper for so little, why did he have to sell to me for lessthan what he could get etc.
And I do have some answers. The scrapper had no idea what he was selling. The company who sold it to the scrapper probably did not care about the money and its manager probably pocketed some cash. I cannot get the price that the "process industry dealer" will get, because I do not have the buyers lined up and because I do not have the capital or room to sit on this item for a long time.
Still, it is fascinating how much is this "value chain" stretching.
i
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On 8/22/2012 7:02 AM, Ignoramus5048 wrote: ...

...
Another factor is that many large companies simply contract stuff to a scrap dealer at a bulk tonnage price for the service of not dealing with it internally other than once it's in the bin it's gone. No employees' time involved in one-of-a-kind efforts to move it, etc., etc., etc., ...
Also is it's more efficient for the scrapper to basically deal scrap rather than try to mix salvage/resell operation in w/ the scrapping one. The guy here (who has done and continues to do) _very_ well is in that same category. For the most part he doesn't care what it is other than how much it weighs and what grade it will be at the mill and how little effort he can expend into getting whatever it is to the point it's ready to make the trip. Anything else is more distraction than otherwise.
On occasion as in your above example there will be a piece of usable gear that perhaps/often isn't much mass as just the material so he may call around a few folks and see if can unload it for a little more than it would bring as scrap. This area is much smaller (we had the relative population discussion a few weeks ago :) ) so there aren't any general salvagers similar to your operation around since just isn't the demand nor the supply of interesting things but there are some useful pieces/parts (the farmers' co-op where I trade has been upgrading several service buildings and he had a hauloff there for almost a year. There was a very servicable high-bay rollup door complete w/ motors, controls, track and all in it one day when I went for a trailer of anyhdrous. I _almost_ went back the following day w/ the big truck but I'd have had to then bring back the tractor or some other way to lift and load it so didn't bother. [X] did put it in one of his shop buildings instead... :) )
--
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Just one more thought on scrapping- The person or company that is getting rid of the thing may need to get it out of their hands from a liability standpoint these days. ----As quickly and as quietly as possible. Example from personal experience: I grew up in Rockford, Ill, once the "machine tool capital of the world", it was said. I went back there a few years ago, looking for air, steam and hydraulic forging hammers. Went to the largest scrapper in the area to ask about them. Here's the answer I got (more or less): Those old, dangerous, pre-OSHA machines must never be put to work again, so this scrapper only accepts them to "prepare for foundry", and is bound not to resell any parts of them.
I could see any piece of food processing machinery possessing a knife or even a pinch point as falling into that broad category.
Pete Stanaitis ---------------
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they're just being lame.
Nobody seems to have problems selling dubious chinese stuff that will hurt you.
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On 8/22/2012 11:48 AM, Cydrome Leader wrote:
...

Well, not so much. They've banned reselling children's books because of the supposed dangerous lead content...
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Actually, a lot of Chinese tools are not OSHA compliant, as far as I know.
i
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says...

OSHA-compliant != safe. Never forget that.
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On Wed, 22 Aug 2012 11:33:22 -0500, "Pete S"

Clutch operated punch presses of any size are sold the same way. In dark alleys for cash.... from and to nameless people.
Ive passed several along that way.
Gunner

One bleeding-heart type asked me in a recent interview if I did not agree that "violence begets violence." I told him that it is my earnest endeavor to see that it does. I would like very much to ensure - and in some cases I have - that any man who offers violence to his fellow citizen begets a whole lot more in return than he can enjoy.
- Jeff Cooper
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It looked fully OSHA compliant to me, with belt guards and everything. I did visit the manufacturer's website and read a bit about old machines and OSHA compliance.
i
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Ignoramus17021 wrote:

A lot of old machines were modified to meet OSHA requirements. I used to repair & install paging systems in paper mills. Some of the machines were built in the late 1800s, and still in daily use. They used angle iron and expanded steel to make belt & pulley guards. Stop switches were added in easy to reach locations, and some had fire suppression systems added, where they dried the paper they were making.
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Yes, I have seen that also. Also some very scary, non-compliant stuff.
i
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Ignoramus17021 wrote:

Apparently it satisfied the OSHA inspectors during their visits. Sometimes the modifications are removed when a machine is sold for scrap, so the material can be reused. I've seen a pile of the stuff in more than one plant. Sometimes it's damaged by a careless forklift driver, so the keep them for spares.
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My standard bill of sale says explicitly that the buyer is responsible for bringing this item to OSHA compliance. For the exact reason that you outlined.
i
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wrote:

Sell EVERY machine a "parts" - the buyer/installer becomes the "manufacturer" and bears all of the risk. You don't get as high a price, of course - - -.
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wrote:

I have noticed one thing with scrap/surplus traders- they virtually never involuntarily go out of business unless they get sued and/or get into trouble with the government (taxes, environmental, zoning etc.). Unless, of course, the main guy gets sick or dies, which doesn't count.
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On Wed, 22 Aug 2012 07:02:28 -0500, Ignoramus5048

Finally waking up to the realities of the "deal" eh Comrade?
Isnt capitalism a wonderful thing?!
Gunner
One bleeding-heart type asked me in a recent interview if I did not agree that "violence begets violence." I told him that it is my earnest endeavor to see that it does. I would like very much to ensure - and in some cases I have - that any man who offers violence to his fellow citizen begets a whole lot more in return than he can enjoy.
- Jeff Cooper
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Gunner wrote:

Iggy isn''t even a guppy in the surplus business. One place I used to deal with in Ohio did over 100 MILLION dollars in sales in 1986. They would pay cash for entire businesses, then sell it off to their list of customers that they had built since the end of W.W. II. Their dad was at the docks buying entire shiploads of surplus, and again after the Korean War. They owned millions of dollars worth of commercial property, and their retail operation was two city blocks in downtown Dayton, Ohio. One was a parking lot, the other a six story building that covered the entire block.
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That's great, sounds fun. I want to extract the maximum possible amount of sales per month, or year, from my existing business. It other words, I want to optimize my turnover. I do not want to grow in terms of buildings, for now.
Right now I am growing my listing capability.
i
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Ignoramus17021 wrote:

They would fly around the world to buy surplus. They had 1.5 million pounds of surplus hardware on the first floor. A lot of it in 55 gallon drums, and priced by the pound as Regular, SS, Brass or Nylon/plastic. I would buy the screws I used, 25 pounds at a time. They had a couple tons of new drills, by the pound and most were packed ten to the envelope. They had thousands of electric motors, from miniature, to 100 HP. It took days just to walk through the place & see everything. If you found something unusual, you bought it, and went back to scouring the shelves for more. :)
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Sounds quite interesting. I would like, eventually, to grow my capability to the point of being able to buy and liquidate whole factories. I was able to buy out some small shops, but I cannot take on the large ones.
I wrote an internal IT system, with a MySQL database and intranet websites, that allows people to list stuff for sale, by adding it to the database, and not directly to ebay. I can review their listings prior to being posted. The approval process lets me make final changes, and a "posting process" actually submits approved items to ebay.
This is a scalable system and I can have as many or as few people doing this, as necessary. Last month was a blowout month in terms of me buying huge amounts of resellable stuff for next to nothing. So we are very busy listing stuff for sale, testing stuff etc.
I bought about 20% of assets of a bankrupt Hyster forklift dealer. This brought along a library of 600+ forklift service manuals, it took one guy 1.5 weeks to list them all for sale.
So, I am saying, we are staying busy, but small.
i
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