Are You Tossing Out Money Along with Your Waste?
by Mary Lemm
While we advocate for the least waste possible in manufacturing processes, there will always be something left over. You may see it as waste, but we see it as an opportunity. With some out-of-the-box thinking, we’ve helped companies not only experience better recycling but see better financial returns.
Setting a Baseline
Before you can set a goal, you must know where you’re starting. The most important step of a waste audit, or any utility assessment exercise, is determining your baseline. A baseline helps a business or organization determine its start line. Baselines help companies assess progress, set goals, and make informed decisions along the way.
A waste baseline accounts for all waste generated by a facility including details around type, container size, service frequencies and any associated hazards. At minimum, a baseline should cover a full calendar years’ worth of data; this provides visibility into the ebbs and flows of seasonal production and subsequently waste volume generation.
Performing a Waste Audit
A waste audit is a comprehensive analysis of a waste baseline. It specifically looks for opportunities in waste reduction, program efficiencies, and often cost savings.
Waste audits assess programs through a holistic lens, understanding that businesses need to weigh benefits for their bottom line with stewarding the environments and local communities. At Foresight, we believe sustainability and economic profitability are not mutually exclusive but in fact, mutually inclusive. Waste management is a great example of this – companies can do better for the environment and discover financial wins along the way.
Waste Profitability Case Study
A great real-world example comes from a Foresight customer who, among their large portfolio of manufacturing facilities, operates two distribution centers (DC) tasked with warehousing inventory and drop-shipping orders across the country. Naturally, both DCs generate a large volume of cardboard waste and, while they were sending it for recycling, the program at one facility was not economically beneficial.
After metal, cardboard is one of the most easily and widely recycled materials in the waste industry. Like any commodity, the current prices or rebate structures can vary by type, condition, or geographic location and can be subject to great volatility. As such, consistent economic returns are difficult to ensure. While this DC was recycling the cardboard for a net-neutral with the cost of transportation (a perceived “win” in this market), they were leaving money on the table.
As seen in the table below, the distribution facility was averaging two pick-ups per week at an annual cost of just under $40,000. The average rebate for cardboard at that time and geographic location was around $30 per ton, with a prior year total of 1631 tons recycled. Empowered with this knowledge, Foresight waste experts renegotiated a new, industry standard rebate structure which resulted in not only $40,000 in savings but an additional $9,000 in profit.
Similarly, this customer’s other distribution center was managing another common commodity – pallets and small wooden crates. The previous year, it recycled over 2,400 tons of wood, costing close to $150,000. While these small crates are useful, they pose a significant disruption to the recycling process due to the large metal bindings holding them together. These bindings are not easily removed and frequently break chipping machines, making them very undesirable to any recycler. On the other hand, pallets require minimal work to be refurbished or, if broken beyond repair, can easily be chipped and resold as mulch.
For this company, the pallet vendor only charged for transportation and the cost of new or refurbished pallets. At first blush, this may sound like a great deal, but the recycling costs were adding up – quickly. Foresight experts worked with a new vendor to provide a more comprehensive and cost-sensitive solution for the company.
Immediately, the new program cut transportation costs by $150,000. Additionally, the new vendor offered the same grade pallets for $9.50/pallet instead of $11/ pallet, saving over $500,000 annually. Lastly, the vendor offered a $4.50 rebate for each pallet in relatively good condition. While a specific number could not be projected, we conservatively estimated between $50-100,000 in possible savings. Even without including the rebate, this company saw $689,450 in annual savings, just by assessing two of their waste streams.
Just because you are currently recycling, doesn’t mean you have to accept less than beneficial economic programs. Theoretically, anything can be recycled if there is a business case to invest; it just requires enough volume and creative problem solving.
At Foresight, we take a holistic approach to sustainability that encourages curiosity, partnership, and profitability.
Interested in knowing what your waste is worth?