Report reveals how to trim the #1 most often overlooked expense category
First reported 5/11/2006
Report reveals how to trim the #1 most often overlooked expense category
In today’s market, waste disposal costs should be triggering some alarm bells. Companies like Waste Management Inc., and Allied Waste Systems, the two largest companies in the waste industry are focusing on return on capital, a big part of which is coming from price increases. What’s more, all businesses have seen a significant run up in their costs of doing business over the past three years due to the rise in materials, transportation and fuel costs.
Fuel in particular is a pass through cost that adds anywhere from seven to eleven percent on top of the standard service fees that hauler’s collect. Virtually all waste vendors’ contracts have a clause that allows them to pass through their diesel costs. “If you’re obliged to buy them their diesel, then it’s just smart business to see that you get the service you need, at a fair rate, in the fewest amount of trips possible,” says Tim Johnson, President of cost containment firm Midas Management Consulting LLC.
While every business generates waste and recyclable materials, Johnson says most firms have not yet awakened to the cost containment opportunities available in their waste, recycling and by-product disposal programs.
This disturbing trend is the rationale that led Johnson, to publish the just-released report, “5 Warning Signs of ‘The Sucker Punch’, How to make sure your solid waste management program isn’t hitting you where it hurts!”
“It’s a classic vicious circle that has most firms unintentionally limiting their profits,” says Johnson. “Senior executives and small business owners view waste as an afterthought because it’s a comparatively small expense – they see it as an inescapable cost of doing business. Meanwhile, line management doesn’t pay waste much attention because it’s not on senior management’s priority list. Consequently, this low hanging fruit is ignored.”
The report is designed to help executives establish, improve, and benchmark waste and recycling cost containment initiatives. It contains an original analysis designed to help executives understand:
* Why relying on haulers for industry expertise is often expensive.
* The myth of “national purchasing leverage” in the waste industry.
* Benefits of maximizing recycling opportunities.
* Three basic options available to executives the benefits and risks associated with working internally, hiring a broker or hiring a consultant and who chooses which model.
* Four case studies from different sectors.
It’s clear from the report that those firms that move to create or improve their initiatives now can look forward to hefty returns on their investment. For firms that fail to address these expenses, their costs will continue to spiral, unnecessarily limiting their profits.
What Waste Consultants Look For
In our detailed analysis of all areas of your waste disposal and recycling solution, a waste consultant will:
- Pinpoint over-payments, errors, and overcharges
- Ensure the relationship between the landfill and your hauler is to your benefit
- Identify the primary drivers of your vendors’ costs and use them to your advantage
- Consider access technology that may be helpful to you, speeding processes and cutting costs
- Evaluate costs versus benefits for technology upgrades so you can make informed decisions
- Identify cost recovery and recycling alternatives to create new revenue streams
- Provide accurate long-term waste disposal costs – no surprises
- Advise you how and when to renegotiate your contracts to your advantage
- Seize new revenue opportunities for you from market trends
- Help you understand which taxes, tariffs and fees are your responsibility – and which are not!
We will make best-practice recommendations, tailored for your situation, and implement only the strategies you approve. And since we share in the profits we create for you, we’re always seeking out new ways to save you money and enhance your revenue streams.
Managing Waste & Recycling Costs to Find Profits
After a preliminary phone call or meeting to determine your company’s needs, you authorize us to conduct an audit of your current waste management program, including your solid waste, recycling, and by-product disposal services.
We examine your contracts, visit your facilities, and peer in your dumpsters. Then we make best-practice recommendations tailored for your operation. Typically, we find that businesses treat their waste disposal solution as a low priority or a fixed expense, which may result in over payments and needless cost overruns. These fall into roughly four categories, all of which ultimately result in higher costs for you…
(1) Conflict of Interest Relationships
Businesses typically rely on the waste haulers to set up their disposal solution. But haulers have no economic incentive to save you money because they get paid for every truck they drive on site, and every dumpster they haul – whether full or not.
This is like the fox guarding the hen house – a true conflict of interest.
If the relationship between hauler and client has been abused, we’ll find over-service, overcharges and fee increases – it happens to companies of all sizes.
(2) Incompatible Business Strategies
Haulers follow an operational efficiency model. If they help you save money, they lose money. And most haulers simply will not swap short-term revenue gains in exchange for long term customer loyalty.
(3) Withholding Technology Improvements
New technology and equipment improvements can save a customer’s cash, but customers rely on their waste hauler to provide them with the latest news and information. And, not surprisingly, many haulers consider it counterproductive to provide information, advice and technology that will reduce a customer’s costs. After all, the hauler’s revenue and profitability is closely tied to their customer volume.
(4) Automatically Renewed Contracts
Many businesses are operating under their original (and outdated) waste disposal agreement. Often, the hauler’s contracts will have automatically renewed several times since inception – with no attempt at new price negotiations.
