Sheri Hinish: Welcome to the Supply Chain Revolution Podcast. I'm your host Sheri Hinish also called the Supply Chain Queen, And this is episode three of our mini-series with the Circular Supply Chain Coalition. Today we're going to talk all about the buyer consortium, turning recovered materials into buyer ready supply. For circular supply chains to scale, operators must understand what buyers can qualify and use while buyers must create credible demand signals and procurement pathways for secondary materials. This is part of a five-part series produced in partnership between Pyxera Global, the Circular Supply Chain Coalition, and Supply Chain Revolution platforms. That helps people understand how to build the circular economy moving from coalition to community. Let's dive in. It's so great to see you all again and host you finally on the podcast. But let's kick off with a little bit about yourself and your origin story. Anita, over to you.
Anita Schwartz: thank you, Sheri I am Anita Schwartz. I am co-founder of the Circular Supply Chain Coalition. I came from Waste Management Inc., where I worked there for over a decade, in Zero Waste and Circular Economy, and then went over to WSP under the division of sustainability, energy, and climate change, where I led their circular economy and zero waste team there. Worked with private sector, I've worked in public sector and have had a little bit of experience in terms of building out reverse supply chains. And I'm very excited to be here and talk a little bit more about how this works in real life and with companies that both produce materials but then also utilize materials. So thank you so much for having me.
Sheri Hinish: Amazing, Anita. And Ryan, over to you.
Ryan Melsert: Thank you, great to be here. So my background really is in the manufacturing of different types of critical minerals, specifically for the battery space. So I worked in a few RD institutes really developing fundamental technologies for how to manufacture these types of critical minerals. I went to work at Tesla for about four years, was part of the initial team to design and build the first gigafactory in the world outside of Reno. Then I went over to the I formed my own team in the RD division, the battery material processing group. And really started working with fundamental ways we could make these types of critical minerals and active materials that go inside batteries. And then after spending several years seeing all these different types of waste pile up in manufacturing plants and end-of-life batteries come back from the field, a group of my colleagues and I decided to leave and form our own company. So we formed the American Battery Technology Company. We built our own battery recycling facility to take in all different types of manufacturing scrap, as well as end-of-life materials. And we've had that plant running for about three years now. So we're selling about a thousand tons per month of these critical minerals back into the market and really starting to make a difference. And if the amount of batteries in the field was fixed, recycling alone could provide pretty much what is needed. But the amount is growing so quickly that in addition to closing the loop through recycling, we also have to fill that loop the first time. So we've also developed our own lithium mine right here in central Nevada. So we're constructing a 30,000 ton per year lithium refinery in addition to all of the products that we make from our battery recycling facility.
Sheri Hinish: That is so incredible, Ryan. Thank you for sharing. Raphael, over to you for your introduction and
Anita Schwartz: I'm going to do it with my eyes closed.
Sheri Hinish: a little bit about yourself and your role.
Rafael Vasquez Lombardo: Sure, thank you, Sheri so my entire career I've actually spent it here in Cummins, a large industrial manufacturer based out of Columbus, Indiana, over a hundred years in operations. I lead our sustainability strategy and customer solutions team within our corporate sustainability organization. but I did not start my career in sustainability per se. I started my career in engineering and product engineering in particular. so having the experience to really understand the specifications that go into the components down from the material level specifications in order to actually achieve the performance requirements that our components needed to meet the functions in the field at launch. Then I spent some time actually in the other end of our operations lifecycle, which was our manufacturing operations, also looking at those same components after they came back from the field. And understanding what are the ways that we can actually repurpose and reactivate the functionality of those components so they can get a full second and third life out in the field and meet the same performance requirements that the customers need. Before joining the sustainability organization, then and having had some of that background, I also spent some time in one of our business segments. We have five operating segments globally. One of those is dealing with our distribution network, which is actually our sales and service arm, really a footprint in almost every country in the world. This is how our customers really get to continue using our products and keep them running through uptime and excellent service. But also that's the same arm that we utilize to really feed our manufacturing operations by getting product back from the field once it reaches its end of life cycle. And being able to re re-establish a life cycle for those products based on our remanufacturing operations and specifications that really match our first fit products. so in our my current role, I really lead our our sustainability strategy for for the company, but also our circular economy strategy in particular. So having that background in our distribution network and understanding what it really takes for an operation that involves not only the logistics but also that customer engagement, what really makes the customer decide to part ways with old product and allow us to take it back. it isn't it isn't an obvious transaction. So so some of those things I've I've brought back to to really helping the develop a circular economy strategy that maximizes and optimizes our ability to do more of the circular operations that we do today through our remanufacturing and rebuilding operations. So that's a little bit of what I bring to the table.
Sheri Hinish: Amazing. Thank you so much for that context, Raphael. So Anita, I want to ask you a foundational question. What changes when the
Anita Schwartz: Okay.
Sheri Hinish: coalition moves from convening organizations
Anita Schwartz: Yeah.
Sheri Hinish: into active matchmaking for reverse supply chain operators and industrial buyers?
Anita Schwartz: Yeah, I think you're going from a broad industry perspective to a more pointed issue, in terms of supply chain. So you're really looking at what is a a buyer's constraints, where are they finding risk, and then how to mitigate that risk. And then bringing the supply chain along. To be able to help identify what solutioning could look like. And I think a big piece of that to as we look at you know sort of this broad convening into more of a narrower focus is that connectivity, not just for the OEM, but for their suppliers as well.
Sheri Hinish: Thank you so much, Anita, for laying the foundation. And now we're gonna get into the nitty-gritty. operator perspective from ABTC, Ryan, from the operator and technology side, what
Ryan Melsert: And we wonder what it's
Sheri Hinish: does it take to move from collecting battery feedstock to producing materials that industrial buyers can actually evaluate, qualify, and make it real in their supply chains?
Ryan Melsert: Exactly, an important question. And I would say there's a lot of different steps in series that can be taken. So there's some companies for recycling recovery, they'll take end of life or scrap material and do just a very, you know, coarse pre-processing, maybe some mechanical processing, mix things together. It can be sold as a mixed material, but for relatively low value. And it's sold to other refiners to then continue to process it. So different companies can choose being different parts of the supply chain. On the battery side, you can go into simply dissecting packs into cells. You can physically process cells into byproduct metals. And then with all of the active powders are mixed up, they can be sold as something called a black mass, which is kind of moderate value. It can be taken further into battery-grade metals. So transition metals and lithium that can be sold. And go even further into the precursor for cathode or cathode itself. So many steps in series. Each one has its own challenges, each one has its own value add. The further you go, the more complicated it gets, but essentially the higher value the product is. So we work very closely with a lot of the automotive companies, the battery cell providers, and the cathode manufacturers. If you want to make, you know, shredded material or a black mass, the requirements are relatively low. You can sell to really anybody. They can have any type of quality. It'll affect the price, but there really isn't a real concrete standard because it's still an intermediate material. But if you go one step further and try to sell battery-grade metals or any real component that goes in a battery, it's an extremely rigorous process. But that ultimately is how you end up
Sheri Hinish: Wow.
Ryan Melsert: closing the loop and really redelivering those materials. So we're happy a few years ago, one of the largest chemical companies and cathode manufacturers in the world is BASF. They evaluated every battery recycler in North America that they wanted to work with to start to source these types of recycled battery metals because they're a big customer of them. And then they take those metals and they make them into materials that go into batteries. And after about six months of review, they gave us a call and we actually signed a strategic partnership agreement with BASF, where we are their battery recycling partner for all of North America.
Sheri Hinish: Incredible.
Ryan Melsert: So it's a very rigorous process to work with these very large chemical companies. So you can sell, you know, scrap material relatively easily, or you can try to go a few more steps in the supply chain. Go through that rigorous process and work with these large corporate partners.
Sheri Hinish: Yeah, and Ryan, to your point, we're living on a very finite planet, that as, you know, this becomes more commonplace, maybe the rigorous process that you described, do you envision that cycle time shortening? Is it more because people aren't necessarily used to this sort of trade and procurement process, or do you think that it's rigorous because it needs to be?
Ryan Melsert: I don't see it getting short or it's rigorous because really the consumer is such high demand. So whether you're a buyer of an electric vehicle, of a cell phone, of a grid scale battery, people have no tolerance for components that don't work. You need it to work under every condition, under every age, under all these different applications. And if the consumer is such high demand, then the quality control in the manufacturing process has to be so high. that you really do have to put your suppliers through that type of rigor.
Sheri Hinish: Incredible context. Thank you so much for sharing. Now we're gonna jump over to the buyer perspective from Cummins. And so Raphael, what does a large industrial buyer like you need to see before it can treat a recovered material stream as a repeatable source of supply?
Rafael Vasquez Lombardo: Just building on what Ryan expanded on, I think that's spot on what an upstream manufacturer like ours would be looking at in order to really shift away from some of the incumbent sources that we actually have already been using for some time. So we're not talking about necessarily introducing new materials and new technologies. We're introducing A new source of material into existing technologies, which means we've already established some validation practices that work for us. And it's very hard in a large industrial player like Cummins and others to really shift away from that without minimizing making it more difficult to actually minimize risk. For a large industrial manufacturer like us, we would typically approach material sourcing decisions based on two primary drivers. one is performance, the other is cost. That doesn't mean those those are the only drivers, but they do command a large share of the focus when it comes to those decisions. And then if you start with performance, this considers not only the ability of the material to perform the intended function, but also consider also the quality of the material, ultimately feeding into Highly engineered components that have to perform consistently over a very long period of time. These are not fast fashion products. They they really have very long durability cycles. and there is, as Ryan mentioned, very little tolerance for for downtime and for for breakdowns. In some of our applications, an hour of unexpected downtime can really translate to hundreds of thousands, if not millions, of dollars in lost revenue. for every hour that they are not functioning. And so that that is something that is really sensitive, and that's why performance to some extent comes first, but cost is very, very close behind. the first step in that material feeds feedstock then concerns itself with the question: does the material need meet the design and performance specifications that our engineering teams have set forth? and then the next question that comes to mind is. Does the material source deliver consistent and repeatable performance parameters over large scale production volumes? So translating this, we're essentially looking for materials that meet our engineering specs and deliver against supplier PPAP specifications. And those are not new specifications, those are the same specifications that we are already asking for established material sources. The question of cost is seems obvious in paper, but there's also elements of risk. That have to be incorporated. When we are making sourcing decisions based on cost targets, we also have to account for supply continuity, other supplier risk factors. Those are often harder to measure than performance specs. So there's also an element of trust. When you're working with established suppliers, you've already gone through those cycles with them, you understand their risks. That trust helps bridge some of that uncertainty gap. Then we start to introduce new material sources and even maybe new suppliers. you have to actually build that trust that requires a lot of extra scrutiny over the validation processes, the level of of rigor that we are subjecting the materials to our validation process, how much data are we collecting, and ultimately making the decision based on that risk factor consideration. So unless there's an external driving force pushing for structural change in the way we do business, think. like regulations and policies or strategic customers that are pressuring us to move in a certain direction because they might also have specific objectives either from a sustainability or regulatory perspective or even geopolitical risks that we're very much aware of these days. What we need to see in order to introduce more recovery material into our manufacturing streams, established manufacturing streams, is really the ability of that material to match or exceed the performance, quality and risk profiles of incumbent material sources. and the only way we can achieve that is by subjecting those materials to those and those suppliers of those materials to the same level of validation rigor that the incumbents have had over years. And to to Ryan's point earlier, that's exactly what I would expect to see in order for the a company like ours to really establish confidence and and really move in that direction.
Sheri Hinish: Incredible. That was such a detailed answer and I really appreciate it because I think for people listening, they really want to know how to get started, how to make it work, how to make it operational and make it real. And so I'm gonna invite all three of you to answer this question. We're gonna get into day of the life. So CSCC has brought you two together, the buyer operators together. What happens after the introduction? What conversations, tests, data exchanges, how does it happen? And if you could, maybe each pepper in your perspective when you move from that early pilot stage to scale, give some hard earned lessons or tidbits for folks listening.
Ryan Melsert: Yes, now we'll tell there's much more than just the early days. It's not that it's you establish relationship and then you you go away. It is recurring, you know. Multiple audits, multiple quality reports sent to our customers. You know, some of them have turnover in their company, so getting new people up to speed even after a relationship is established. You know, touring our plant it's every other week we have an automaker or battery cell company coming in. So I would say it's an ongoing relationship, especially on our side as we continue to grow. So we're increasing capacity of our current plant. We have two new facilities that we're going through design and construction on now. So it's it's not the kind of relationship where you establish it and then you kind of coast. I would say it's just it's continuous and ongoing. Because again, if
Rafael Vasquez Lombardo: Okay.
Ryan Melsert: if you make high quality product at the beginning and then for any reason it would taper off, there are real repercussions to your customer and to their customers, whether they're you know electric vehicle buyers or electronics, it's a a very big relationship and it's continual. So the the counterparts that you know my team has with our customers, they talk almost daily. You know, it's an ongoing relationship to make sure that we're aligned and that we maintain that quality and delivery schedule for an indefinite period.
Sheri Hinish: Yeah, and I think that what you're bringing to life is the nature of the high touch, ongoing, auditable r points in the relationship is actually what reinforces that high trust environment that Raphael mentioned earlier. And so Raphael, I wanna bring you in from the Cummins perspective, what data points or validation steps do you think are the most important from the buyer side to build confidence in a recovered material stream. And I think you touched on some of this earlier, but just to get like super concrete for people listening.
Rafael Vasquez Lombardo: Sure. So if we maybe projected this over our process to validate and assure that we have a product that meets the performance needs. I think we would obviously start with the pilot phase, but we really before that we actually have to understand what problem we're trying to solve. we're not going to go and engage on an exploratory project unless we really know that there is something that we really need to solve. So that's the first question. And and some of that might really come from engineering. There might be quality considerations. There might also be inputs that come from supply chain as far as already risks that have been observed with an existing supplier or a sub supplier to that supplier, that maybe this could be an avenue that we want to explore. So that brings us to the pilot. And then if a pilot the deliver some proof of concept, we might start bringing this through a part of our prototyping phase of validation. And that's really where our engineering teams that would typically get involved with some of our product development schedules would really start testing and evaluating these materials within the context of the components that we're using against the established specifications. So so really that's where that that initial exploration, more serious exploration starts to take place. one thing that I forgot to mention, if we're talking with a new supplier, of course a lot of a lot of this hinges on sharing information and and being able to to share that in in confidence. So we really have to be able to establish that that that level of trust but also verification through NDAs and and some of those agreements and and really understand where These suppliers operate, where is the material coming from? What are the types of products that these materials might need for us to ultimately then hone in on where we actually would try to scale this up beyond a prototype level? One consideration that I would maybe throw in here is as we are maybe displacing some of the material sourcing that goes into our products today, we also have to consider existing agreements. with suppliers and what
Sheri Hinish: Mm-hmm.
Rafael Vasquez Lombardo: is the schedule for those. We can't just go flip a switch and say, all right, we're just gonna switch this over here. There is already an agreement that is in place. So we also have to understand where's the right place and what's the right time to really introduce this into our product base. some of that is driven by regulations that's that's easier in a sense that it's more prescriptive. not easy from a technical perspective necessarily, but for for things that are outside of that, maybe it it does become a question of Of understanding the the full ramifications of commercial agreements, both existing and new.
Sheri Hinish: Yeah, that's a great call out. And I'm sure people listening will know all about minimum order quantities and getting to volume economics. And so it is a great consideration when you're thinking about moving into more of a circular or regenerative procurement process. I really appreciate the call out there, Rafael. Okay, so now we're gonna do something fun. Now it's a quick fire round. So I'm gonna ask a super easy question, and I want each of you to respond as quickly as you can. Don't overthink it, just blurt out the first thing that comes to your mind. Are you ready? Question number one. What should companies stop doing when they talk about circular sourcing?
Ryan Melsert: I think maybe not appreciating the timelines, what it takes to really make a high purity chemical. You don't turn a switch overnight.
Sheri Hinish: Love it, love it, love it. And Raphael.
Rafael Vasquez Lombardo: Stop talking about circular sourcing. This is just sourcing. Let's make it actually mainstream.
Sheri Hinish: Love it. Okay, next question. what is the one piece of data that would make reverse supply chain matchmaking easier?
Ryan Melsert: Actual demand from customers if it is really meaningful to them or if it's more lip service.
Sheri Hinish: Love it. Raphael.
Rafael Vasquez Lombardo: Location, location, location. Where the material is needed,
Sheri Hinish: Incredible. And last question, what gives you the most optimism about scaling these sorts of buyer operator partnerships?
Ryan Melsert: I think the fundamentals that it actually can be much lower cost than sourcing primary materials. So there's a real below it.
Sheri Hinish: lower cost and lower risk potentially as well when we start to bring in planetary intelligence and finite materials boundaries. Raphael.
Rafael Vasquez Lombardo: I think the supply resilience that has come to to light with the the fragility of our our global supply chains today when they're concentrated in locations is actually creating more appetite for near shoring and looking at more localized flows which actually benefit more circular sourcing.
Sheri Hinish: Absolutely. I want to thank you so much for joining all three of you. We've reached the end of the podcast, but before we wrap up, how can folks get involved? How can they reach out with each of you and get involved with CSCC and your partnership?
Ryan Melsert: Right at American Battery Technology dot com a lot of our social links and our information reports are all right up there.
Sheri Hinish: Incredible. And last but not least, Raphael in Cummins.
Rafael Vasquez Lombardo: Yeah, so if anybody is curious about what type of products do we work with, which is really the crux of you know all this material that we need, you can check us out at Cummins.com. from a sustainability perspective, you can also look at our sustainability progress report most recently released in July of this year. we definitely have a lot of information around our climate transition plans and what are we doing from a circular perspective. in in those reports.
Sheri Hinish: wonderful. Thank you so much, each of you, for joining. And I hope that you all enjoyed episode three. Stay tuned for episode four coming up next.
Ryan Melsert: Thank you.
Anita Schwartz: thank you, Sheri I am Anita Schwartz. I am co-founder of the Circular Supply Chain Coalition. I came from Waste Management Inc., where I worked there for over a decade, in Zero Waste and Circular Economy, and then went over to WSP under the division of sustainability, energy, and climate change, where I led their circular economy and zero waste team there. Worked with private sector, I've worked in public sector and have had a little bit of experience in terms of building out reverse supply chains. And I'm very excited to be here and talk a little bit more about how this works in real life and with companies that both produce materials but then also utilize materials. So thank you so much for having me.
Sheri Hinish: Amazing, Anita. And Ryan, over to you.
Ryan Melsert: Thank you, great to be here. So my background really is in the manufacturing of different types of critical minerals, specifically for the battery space. So I worked in a few RD institutes really developing fundamental technologies for how to manufacture these types of critical minerals. I went to work at Tesla for about four years, was part of the initial team to design and build the first gigafactory in the world outside of Reno. Then I went over to the I formed my own team in the RD division, the battery material processing group. And really started working with fundamental ways we could make these types of critical minerals and active materials that go inside batteries. And then after spending several years seeing all these different types of waste pile up in manufacturing plants and end-of-life batteries come back from the field, a group of my colleagues and I decided to leave and form our own company. So we formed the American Battery Technology Company. We built our own battery recycling facility to take in all different types of manufacturing scrap, as well as end-of-life materials. And we've had that plant running for about three years now. So we're selling about a thousand tons per month of these critical minerals back into the market and really starting to make a difference. And if the amount of batteries in the field was fixed, recycling alone could provide pretty much what is needed. But the amount is growing so quickly that in addition to closing the loop through recycling, we also have to fill that loop the first time. So we've also developed our own lithium mine right here in central Nevada. So we're constructing a 30,000 ton per year lithium refinery in addition to all of the products that we make from our battery recycling facility.
Sheri Hinish: That is so incredible, Ryan. Thank you for sharing. Raphael, over to you for your introduction and
Anita Schwartz: I'm going to do it with my eyes closed.
Sheri Hinish: a little bit about yourself and your role.
Rafael Vasquez Lombardo: Sure, thank you, Sheri so my entire career I've actually spent it here in Cummins, a large industrial manufacturer based out of Columbus, Indiana, over a hundred years in operations. I lead our sustainability strategy and customer solutions team within our corporate sustainability organization. but I did not start my career in sustainability per se. I started my career in engineering and product engineering in particular. so having the experience to really understand the specifications that go into the components down from the material level specifications in order to actually achieve the performance requirements that our components needed to meet the functions in the field at launch. Then I spent some time actually in the other end of our operations lifecycle, which was our manufacturing operations, also looking at those same components after they came back from the field. And understanding what are the ways that we can actually repurpose and reactivate the functionality of those components so they can get a full second and third life out in the field and meet the same performance requirements that the customers need. Before joining the sustainability organization, then and having had some of that background, I also spent some time in one of our business segments. We have five operating segments globally. One of those is dealing with our distribution network, which is actually our sales and service arm, really a footprint in almost every country in the world. This is how our customers really get to continue using our products and keep them running through uptime and excellent service. But also that's the same arm that we utilize to really feed our manufacturing operations by getting product back from the field once it reaches its end of life cycle. And being able to re re-establish a life cycle for those products based on our remanufacturing operations and specifications that really match our first fit products. so in our my current role, I really lead our our sustainability strategy for for the company, but also our circular economy strategy in particular. So having that background in our distribution network and understanding what it really takes for an operation that involves not only the logistics but also that customer engagement, what really makes the customer decide to part ways with old product and allow us to take it back. it isn't it isn't an obvious transaction. So so some of those things I've I've brought back to to really helping the develop a circular economy strategy that maximizes and optimizes our ability to do more of the circular operations that we do today through our remanufacturing and rebuilding operations. So that's a little bit of what I bring to the table.
Sheri Hinish: Amazing. Thank you so much for that context, Raphael. So Anita, I want to ask you a foundational question. What changes when the
Anita Schwartz: Okay.
Sheri Hinish: coalition moves from convening organizations
Anita Schwartz: Yeah.
Sheri Hinish: into active matchmaking for reverse supply chain operators and industrial buyers?
Anita Schwartz: Yeah, I think you're going from a broad industry perspective to a more pointed issue, in terms of supply chain. So you're really looking at what is a a buyer's constraints, where are they finding risk, and then how to mitigate that risk. And then bringing the supply chain along. To be able to help identify what solutioning could look like. And I think a big piece of that to as we look at you know sort of this broad convening into more of a narrower focus is that connectivity, not just for the OEM, but for their suppliers as well.
Sheri Hinish: Thank you so much, Anita, for laying the foundation. And now we're gonna get into the nitty-gritty. operator perspective from ABTC, Ryan, from the operator and technology side, what
Ryan Melsert: And we wonder what it's
Sheri Hinish: does it take to move from collecting battery feedstock to producing materials that industrial buyers can actually evaluate, qualify, and make it real in their supply chains?
Ryan Melsert: Exactly, an important question. And I would say there's a lot of different steps in series that can be taken. So there's some companies for recycling recovery, they'll take end of life or scrap material and do just a very, you know, coarse pre-processing, maybe some mechanical processing, mix things together. It can be sold as a mixed material, but for relatively low value. And it's sold to other refiners to then continue to process it. So different companies can choose being different parts of the supply chain. On the battery side, you can go into simply dissecting packs into cells. You can physically process cells into byproduct metals. And then with all of the active powders are mixed up, they can be sold as something called a black mass, which is kind of moderate value. It can be taken further into battery-grade metals. So transition metals and lithium that can be sold. And go even further into the precursor for cathode or cathode itself. So many steps in series. Each one has its own challenges, each one has its own value add. The further you go, the more complicated it gets, but essentially the higher value the product is. So we work very closely with a lot of the automotive companies, the battery cell providers, and the cathode manufacturers. If you want to make, you know, shredded material or a black mass, the requirements are relatively low. You can sell to really anybody. They can have any type of quality. It'll affect the price, but there really isn't a real concrete standard because it's still an intermediate material. But if you go one step further and try to sell battery-grade metals or any real component that goes in a battery, it's an extremely rigorous process. But that ultimately is how you end up
Sheri Hinish: Wow.
Ryan Melsert: closing the loop and really redelivering those materials. So we're happy a few years ago, one of the largest chemical companies and cathode manufacturers in the world is BASF. They evaluated every battery recycler in North America that they wanted to work with to start to source these types of recycled battery metals because they're a big customer of them. And then they take those metals and they make them into materials that go into batteries. And after about six months of review, they gave us a call and we actually signed a strategic partnership agreement with BASF, where we are their battery recycling partner for all of North America.
Sheri Hinish: Incredible.
Ryan Melsert: So it's a very rigorous process to work with these very large chemical companies. So you can sell, you know, scrap material relatively easily, or you can try to go a few more steps in the supply chain. Go through that rigorous process and work with these large corporate partners.
Sheri Hinish: Yeah, and Ryan, to your point, we're living on a very finite planet, that as, you know, this becomes more commonplace, maybe the rigorous process that you described, do you envision that cycle time shortening? Is it more because people aren't necessarily used to this sort of trade and procurement process, or do you think that it's rigorous because it needs to be?
Ryan Melsert: I don't see it getting short or it's rigorous because really the consumer is such high demand. So whether you're a buyer of an electric vehicle, of a cell phone, of a grid scale battery, people have no tolerance for components that don't work. You need it to work under every condition, under every age, under all these different applications. And if the consumer is such high demand, then the quality control in the manufacturing process has to be so high. that you really do have to put your suppliers through that type of rigor.
Sheri Hinish: Incredible context. Thank you so much for sharing. Now we're gonna jump over to the buyer perspective from Cummins. And so Raphael, what does a large industrial buyer like you need to see before it can treat a recovered material stream as a repeatable source of supply?
Rafael Vasquez Lombardo: Just building on what Ryan expanded on, I think that's spot on what an upstream manufacturer like ours would be looking at in order to really shift away from some of the incumbent sources that we actually have already been using for some time. So we're not talking about necessarily introducing new materials and new technologies. We're introducing A new source of material into existing technologies, which means we've already established some validation practices that work for us. And it's very hard in a large industrial player like Cummins and others to really shift away from that without minimizing making it more difficult to actually minimize risk. For a large industrial manufacturer like us, we would typically approach material sourcing decisions based on two primary drivers. one is performance, the other is cost. That doesn't mean those those are the only drivers, but they do command a large share of the focus when it comes to those decisions. And then if you start with performance, this considers not only the ability of the material to perform the intended function, but also consider also the quality of the material, ultimately feeding into Highly engineered components that have to perform consistently over a very long period of time. These are not fast fashion products. They they really have very long durability cycles. and there is, as Ryan mentioned, very little tolerance for for downtime and for for breakdowns. In some of our applications, an hour of unexpected downtime can really translate to hundreds of thousands, if not millions, of dollars in lost revenue. for every hour that they are not functioning. And so that that is something that is really sensitive, and that's why performance to some extent comes first, but cost is very, very close behind. the first step in that material feeds feedstock then concerns itself with the question: does the material need meet the design and performance specifications that our engineering teams have set forth? and then the next question that comes to mind is. Does the material source deliver consistent and repeatable performance parameters over large scale production volumes? So translating this, we're essentially looking for materials that meet our engineering specs and deliver against supplier PPAP specifications. And those are not new specifications, those are the same specifications that we are already asking for established material sources. The question of cost is seems obvious in paper, but there's also elements of risk. That have to be incorporated. When we are making sourcing decisions based on cost targets, we also have to account for supply continuity, other supplier risk factors. Those are often harder to measure than performance specs. So there's also an element of trust. When you're working with established suppliers, you've already gone through those cycles with them, you understand their risks. That trust helps bridge some of that uncertainty gap. Then we start to introduce new material sources and even maybe new suppliers. you have to actually build that trust that requires a lot of extra scrutiny over the validation processes, the level of of rigor that we are subjecting the materials to our validation process, how much data are we collecting, and ultimately making the decision based on that risk factor consideration. So unless there's an external driving force pushing for structural change in the way we do business, think. like regulations and policies or strategic customers that are pressuring us to move in a certain direction because they might also have specific objectives either from a sustainability or regulatory perspective or even geopolitical risks that we're very much aware of these days. What we need to see in order to introduce more recovery material into our manufacturing streams, established manufacturing streams, is really the ability of that material to match or exceed the performance, quality and risk profiles of incumbent material sources. and the only way we can achieve that is by subjecting those materials to those and those suppliers of those materials to the same level of validation rigor that the incumbents have had over years. And to to Ryan's point earlier, that's exactly what I would expect to see in order for the a company like ours to really establish confidence and and really move in that direction.
Sheri Hinish: Incredible. That was such a detailed answer and I really appreciate it because I think for people listening, they really want to know how to get started, how to make it work, how to make it operational and make it real. And so I'm gonna invite all three of you to answer this question. We're gonna get into day of the life. So CSCC has brought you two together, the buyer operators together. What happens after the introduction? What conversations, tests, data exchanges, how does it happen? And if you could, maybe each pepper in your perspective when you move from that early pilot stage to scale, give some hard earned lessons or tidbits for folks listening.
Ryan Melsert: Yes, now we'll tell there's much more than just the early days. It's not that it's you establish relationship and then you you go away. It is recurring, you know. Multiple audits, multiple quality reports sent to our customers. You know, some of them have turnover in their company, so getting new people up to speed even after a relationship is established. You know, touring our plant it's every other week we have an automaker or battery cell company coming in. So I would say it's an ongoing relationship, especially on our side as we continue to grow. So we're increasing capacity of our current plant. We have two new facilities that we're going through design and construction on now. So it's it's not the kind of relationship where you establish it and then you kind of coast. I would say it's just it's continuous and ongoing. Because again, if
Rafael Vasquez Lombardo: Okay.
Ryan Melsert: if you make high quality product at the beginning and then for any reason it would taper off, there are real repercussions to your customer and to their customers, whether they're you know electric vehicle buyers or electronics, it's a a very big relationship and it's continual. So the the counterparts that you know my team has with our customers, they talk almost daily. You know, it's an ongoing relationship to make sure that we're aligned and that we maintain that quality and delivery schedule for an indefinite period.
Sheri Hinish: Yeah, and I think that what you're bringing to life is the nature of the high touch, ongoing, auditable r points in the relationship is actually what reinforces that high trust environment that Raphael mentioned earlier. And so Raphael, I wanna bring you in from the Cummins perspective, what data points or validation steps do you think are the most important from the buyer side to build confidence in a recovered material stream. And I think you touched on some of this earlier, but just to get like super concrete for people listening.
Rafael Vasquez Lombardo: Sure. So if we maybe projected this over our process to validate and assure that we have a product that meets the performance needs. I think we would obviously start with the pilot phase, but we really before that we actually have to understand what problem we're trying to solve. we're not going to go and engage on an exploratory project unless we really know that there is something that we really need to solve. So that's the first question. And and some of that might really come from engineering. There might be quality considerations. There might also be inputs that come from supply chain as far as already risks that have been observed with an existing supplier or a sub supplier to that supplier, that maybe this could be an avenue that we want to explore. So that brings us to the pilot. And then if a pilot the deliver some proof of concept, we might start bringing this through a part of our prototyping phase of validation. And that's really where our engineering teams that would typically get involved with some of our product development schedules would really start testing and evaluating these materials within the context of the components that we're using against the established specifications. So so really that's where that that initial exploration, more serious exploration starts to take place. one thing that I forgot to mention, if we're talking with a new supplier, of course a lot of a lot of this hinges on sharing information and and being able to to share that in in confidence. So we really have to be able to establish that that that level of trust but also verification through NDAs and and some of those agreements and and really understand where These suppliers operate, where is the material coming from? What are the types of products that these materials might need for us to ultimately then hone in on where we actually would try to scale this up beyond a prototype level? One consideration that I would maybe throw in here is as we are maybe displacing some of the material sourcing that goes into our products today, we also have to consider existing agreements. with suppliers and what
Sheri Hinish: Mm-hmm.
Rafael Vasquez Lombardo: is the schedule for those. We can't just go flip a switch and say, all right, we're just gonna switch this over here. There is already an agreement that is in place. So we also have to understand where's the right place and what's the right time to really introduce this into our product base. some of that is driven by regulations that's that's easier in a sense that it's more prescriptive. not easy from a technical perspective necessarily, but for for things that are outside of that, maybe it it does become a question of Of understanding the the full ramifications of commercial agreements, both existing and new.
Sheri Hinish: Yeah, that's a great call out. And I'm sure people listening will know all about minimum order quantities and getting to volume economics. And so it is a great consideration when you're thinking about moving into more of a circular or regenerative procurement process. I really appreciate the call out there, Rafael. Okay, so now we're gonna do something fun. Now it's a quick fire round. So I'm gonna ask a super easy question, and I want each of you to respond as quickly as you can. Don't overthink it, just blurt out the first thing that comes to your mind. Are you ready? Question number one. What should companies stop doing when they talk about circular sourcing?
Ryan Melsert: I think maybe not appreciating the timelines, what it takes to really make a high purity chemical. You don't turn a switch overnight.
Sheri Hinish: Love it, love it, love it. And Raphael.
Rafael Vasquez Lombardo: Stop talking about circular sourcing. This is just sourcing. Let's make it actually mainstream.
Sheri Hinish: Love it. Okay, next question. what is the one piece of data that would make reverse supply chain matchmaking easier?
Ryan Melsert: Actual demand from customers if it is really meaningful to them or if it's more lip service.
Sheri Hinish: Love it. Raphael.
Rafael Vasquez Lombardo: Location, location, location. Where the material is needed,
Sheri Hinish: Incredible. And last question, what gives you the most optimism about scaling these sorts of buyer operator partnerships?
Ryan Melsert: I think the fundamentals that it actually can be much lower cost than sourcing primary materials. So there's a real below it.
Sheri Hinish: lower cost and lower risk potentially as well when we start to bring in planetary intelligence and finite materials boundaries. Raphael.
Rafael Vasquez Lombardo: I think the supply resilience that has come to to light with the the fragility of our our global supply chains today when they're concentrated in locations is actually creating more appetite for near shoring and looking at more localized flows which actually benefit more circular sourcing.
Sheri Hinish: Absolutely. I want to thank you so much for joining all three of you. We've reached the end of the podcast, but before we wrap up, how can folks get involved? How can they reach out with each of you and get involved with CSCC and your partnership?
Ryan Melsert: Right at American Battery Technology dot com a lot of our social links and our information reports are all right up there.
Sheri Hinish: Incredible. And last but not least, Raphael in Cummins.
Rafael Vasquez Lombardo: Yeah, so if anybody is curious about what type of products do we work with, which is really the crux of you know all this material that we need, you can check us out at Cummins.com. from a sustainability perspective, you can also look at our sustainability progress report most recently released in July of this year. we definitely have a lot of information around our climate transition plans and what are we doing from a circular perspective. in in those reports.
Sheri Hinish: wonderful. Thank you so much, each of you, for joining. And I hope that you all enjoyed episode three. Stay tuned for episode four coming up next.
Ryan Melsert: Thank you.
