Waste Management Outsourcing

One value of utilizing a good 3rd Party Waste & Recycling Management Firm is the experience and insight they gain from day-to-day interaction with the Waste & Recycling Haulers throughout the Country. If you are the CFO or COO of a Company, you are very well aware that conditions in the marketplace change, sometimes very quickly. To be able to effectively run your Company you have to stay up-to-date on or even ahead of the changes. As well, changes take place in the Waste & Recycling Industry on a consistent basis which can significantly impact your Company. The following are just a few “real” scenarios.

The Waste & Recycling industry is constantly in flux. For instance, Haulers will actually change a service areas or the amount of resources allocated to part of their territory due to loss of business in one area or additional business gained in another area. If your hauler reduces the number of trucks running in your area, what do you do? If you manage your own Waste & Recycling Program, you may have to pay a higher rate per haul, pay for a larger container do they do not have to pick it up as often, etc. What typically happens if a good 3rd Party Waste & Recycling Management Firm is managing your program? Due to the volume of business that they do with the Hauler, they are usually given a heads up by the Hauler that some changes are in the works, and asked how they can work with the Management Firm to still provide top notch service to their Customers. The difference is a self-administered program where you receive notice of changes and pay more, or with a Management Firm, advanced planning and keeping cost and service under control. The Management Firm’s day-to-day interaction and relationship with the Haulers makes all the difference.

Another scenario is following and understand the flow of market competition. There is a constant ebb and flow of competition in different markets. Except in very rural markets, franchised or municipality areas, every contract cycle you can expect 1 or more new competitors to have entered a territory. If you have a self-administered program, you will most likely be totally unaware of this new option/opportunity in your location’s areas. If you work with a good management firm, they will know if the additional competition is a positive or negative to your market(s), and whether or not to consider them at the end of your current contract cycle. You see, whenever a hauler expands into another market, their first call is to their best current partners (i.e. The good management firm) to see if they can expand their current relationship in this new market. If the good management firm has determined the hauler entering the new market to be a high quality service provider, then they may possibly be the best option to look at during the next contract cycle. The hauler is considered a very “welcome” addition to the market(s). On the other hand, if the hauler is one notorious for providing bad service, or billing practices, etc., then the good management firm’s day-to-day interaction in the market place saves their client from any potential heartburn.

Next let’s discuss the scenario in markets where a Hauler buyout or consolidation occurs. This kind of thing happens everyday… all the time, right? Sure, but what the Company with a self-administered program has no clue about is how the buyout or consolidation will affect their relationship with the Hauler, their quality of service, or issue resolution capability going forward. What a good 3rd Party Management Firm’s day-to-day interaction and experience in the marketplace tells them in this scenario is the next best step for their Customers in the effected markets. Sometimes, a buyout or consolidation is a positive, other times it is a negative. The more important aspect is that based on relationships in surrounding or associated markets, the good 3rd Party Management Firm will know in advance and will game plan the most advantageous steps for their Customer.

Some market changes are a little less subtle, but can have as much or even more of an impact. As tends to be the case in other industries, but especially the Waste & Recycling industry, some Hauler philosophies can change on a dime. One minute they can be undercutting the price of every competitor in their markets to gain market share. The next minute they can switch to a profitability philosophy where they (or their stakeholders) decide each of their accounts has to be profitable, so they quickly raise their rates on existing Customers. If you have a self-administered Waste & Recycling program you are very unlikely to know who these schizophrenic Haulers are. A good Waste & Recycling Management Firm’s day-to-day interaction and experience allows them to steer their Customers away from this type of relationship, which prevents a lot of future headaches.

Speaking of price increases, the majority of Hauler contracts allow for the Hauler to increase their rates by 3% to 5% annually. I have never understood why a company would agree to this, but this is the case. Other Haulers do not have anything at all in their contracts regarding rate increases, but allocate them whenever they feel it is justified or needed. There is even a practice by some Haulers to allocated price increases to Customers who originally negotiated price increases out of their contracts. In this scenario the Hauler does an across-the-board price increase on all Customers. If a Customer has negotiated price increases out of their contract, the “Customer” not only has to recognize there is a price increase, but they also have to contact the Hauler and notify them (many times in writing) that their contract does not allow for price increases. Then the Customer has to wait patiently and in some cases follow up for months to get the appropriate credits and rate adjustments. For the Company with a self-administered Waste & Recycling program, this scenario is wrought with pain and headaches. What would be the difference with a good 3rd Party Management Firm? Night and day. Due to the huge volume of business that the good 3rd Party Management Firm does with these Haulers, the Management Firm is contact by the Hauler in advance of the price increase. In the majority of cases the Management Firms keeps the price increase from being applied to their Customers. On the rare occasion when this is not the case, the Management Firm makes plans in advance to replace the Hauler with a better Hauler at the effected locations. The day-to-day interaction and experience with these Haulers typically prevent their Customers from being assessed “any” type of price increase. If a Hauler goes “rogue” and mandates a price increase on the Management Firm’s Customers, the loss of a significant amount of the Management Firm’s Customers is the result. So this scenario very rarely occurs. There is definitely strength in numbers / volume.

Next let’s discuss the scenario when a Hauler’s service quality changes. This can occur for a number of reasons. For instance, a Hauler adds a significant amount of business in an area without proper planning. The Hauler is very unlikely to turn the business down, but rather take the business on, as well as the associated service quality issues for their other Customers. It can take a significant amount of time for the Hauler add enough resources (employees, equipment, etc.) to regain the ability to provide a decent service quality in the affected area(s). Another scenario if simply a change in Hauler Management. In this scenario, the management philosophy of the previous regime is overridden by the new Management. For instance, going the extra mile for Customers, or taking a loss of profitability on a Customer in order to maintain the Customer’s trust or simply to maintain their business, can go out the window. This can cause a significant upheaval for Customers in the affected areas. If you have a self-administered program what are your options? Typically, you are locked into a long-term contract with the Hauler, so you have to “deal with” the lack of service quality and the negative change in management philosophy. This means that most likely, for a significant period of time, your Company suffers from both a service and financial standpoint.

Wouldn’t you agree that this should be unacceptable? Absolutely! And if you are working with a good 3rd Party Management Firm, you don’t deal with it. The 3rd Party Management Firm will be proactive in these situations. They will be in the loop on upcoming changes due to significant business acquisition or management changes. What will happen. Well, due to the volume of business that they do with the Hauler, the Hauler will typically make sure that the 3rd Party Management Firm’s Customers are given 1st priority service so that no service issues arise. When a Management change occurs, the 3rd Party Management Firm will be one of the 1st Partners that the new Management will meet with to discuss the Hauler’s plans going forward. The new Management team will want to know how they can “increase” their business with them, instead of causing their Customer’s issues. If an issue in either case does arise, the good 3rd Party Management Firm will have contract terms that state that they can replace that Hauler for “any” reason with simply a 30 day written notice. Why would you want to deal with all of the hassles of a self-administered program, when the pricing and service issues are easily mitigated and/or resolved by a “good” 3rd Party Management Firm.

The final example we will use is what happens when Environmental Regulations change. Since changes in these type of regulations can occur on any of the following levels; National, Regional, State, County, City, etc., it can be very difficult to keep up with either major or minor changes due to the variance in “where” they take place or are being enforced. What does this mean for the self-administered program? It can mean that some or many of your Company’s locations receive fines, etc., for non-compliance, due to the Company not being “in the know” or just unaware that Environmental Regulations had been changed. A “good” 3rd Party Management Firm will be “in the loop” on all upcoming Environmental Regulation changes, and will in communication with the effected Company locations. If needed, they will develop a plan to meet the upcoming changes and keep all Company locations in compliance. The “good” 3rd Party Management Firm’s day-to-day interaction and experience with service providers is invaluable to the smooth operation of the Company’s business.