Green is good

What to do when management says, “Recycle!”

by Tim Johnson

When management mentions recycling programs, most distribution center (DC) managers think cardboard. The next morning, they cruise around the industrial park, taking note of the waste haulers their neighbors use.

The next time management brings up the topic of recycling, ask, “Why?” Is this a cost control initiative or part of a larger “green” or corporate sustainability effort? While related, the green and sustainability angles mean there is a public relations goal attached and you need to understand how to plug into those expectations.

Second, focus on improving the recycling you’re already doing. Recently, I worked with catalog and warehouse consultants F. Curtis Barry & Company to informally poll some of their clients about their recycling practices. Results varied, but the savvier operators moved beyond giving cardboard to a vendor who takes it away for “free.”

If you are giving cardboard away, STOP THIS NOW! Cardboard is worth on average more than $100 per ton nationwide and, in some markets, is above $150 per ton. As a supplier of used cardboard, you should demand revenue or recycling rebates from your vendors.

Our survey also revealed that most programs began and ended with cardboard. However, there are several other big revenue-generating materials including shrink wrap (stretch film). Most clients pitch this in the dumpster. Plastic is derived from oil and we all know oil prices are sky high and likely to stay that way. If you use a lot of plastic, you can get more than 20 cents per pound, and that price is likely to continue to rise.

Earning money
The key to recycling is to earn money. The chart below shows the pro forma financial impact a recycling program has for a large, multi-location packaging distributor client. Managers of large distribution centers should note how recycling can create a profit center. Smaller companies and single-branch operators should note how recycling can pay for their waste disposal, minimize costs and, with a little luck, become revenue neutral.

The right solution depends on how much material you have. You may want to install a baler and get top dollar for your cardboard and shrink wrap. But if you produce just one bale each month, given the baler’s cost and the cost of labor to produce bales, you may be better off putting your material in a compactor and accepting a lower price.

Evaluating these and other trade-offs are where things start to get complex. Choosing the best set up for your specific needs and geography involves research to answer several questions:
   • Will more efficient equipment save money,
     time, labor, etc.?
   • Exactly what is that equipment?
   • Is there some great equipment these vendors aren’t
     telling me about?
   • Should I lease the equipment? Buy it new?
     Buy it reconditioned? Or pay for it out of my rebates?
   • What will happen to recycling prices in 6, 12, 24, 36 months?
   • Should I sign an agreement with one recycler or
     maximize my revenues by bidding it out with each load?
   • If I lock in a recycler, what controls can assure me
     long-term, consistent, competitive pricing?
   • How long should I lock in for?

Third on the list is to adjust your waste hauling and equipment needs. Since cardboard is now out of your dumpster, you’ll need fewer pick ups. You can get paid for the commodity and save on the waste hauling.

The fourth step is to start the process over by attacking a new recyclable material. Here is a list of recyclable materials found at DCs:

Recycling is a numbers game. While you may want to recycle a given material, you may not have enough for a recycler to pick it up. Or you may have a decent quantity, but can’t find anyone locally who handles it.

Green only recently became the new red, white and blue. But recycling markets are growing rapidly. Materials you couldn’t recycle a couple of years ago may now (or soon will) have a local or regional market.

Managers often struggle with justifying the time and labor required in a quality recycling program. Waste and recycling are relatively small expenses, and addressing them comes at the expense of time spent on more pressing issues. In many cases, the labor expended to try to make smart decisions is greater than financial impact.

The solution is to engage the services of a pay-for-performance waste and recycling consultant to do the work for you and bring recycling-specific knowledge to the table, sharing the success with you on an agreed upon split. Be careful. There are different types of waste brokers and waste and recycling consultants

Brokers tend to wrest control of your program from you, guaranteeing you a certain level of savings but profiting on the spread between what you realize and what they actually achieve. Many waste consultants are ex-waste haulers and, while savvy, have relationships with their previous employers. Other waste consultants are products of franchises and licensing mills and are nothing more than sales agents for other companies. Ideally, find a consultant with the time and know-how to review your contracts, invoices and equipment and to recognize your specific opportunities with a minimum of disruption in your day-to-day business.

The combined revenues of the four largest waste haulers — Waste Management, Allied Waste, Republic Services, Veolia — top $20 billion. Managers who tackle recycling will find it deceptively complex. Once they get past the learning curve, they will find real opportunities to boost profitability and keep more of their hard-earned revenue in their pockets.

This article originally appeared in the May/June 2008 issue of Progressive Distributor. Copyright 2008.

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