Life in the Recession

In a wide-ranging Q&A, commercial collection operators discuss how they're coping with the economic downturn.

May 1, 2009

10 Min Read
Life in the Recession

The solid waste industry is often described as “recession resistant.” However, that doesn't mean it's recession proof. For instance, because of less consumer activity, commercial properties often generate less waste.

Waste Age recently discussed, via e-mail, the state of commercial waste collection with three executives.

The Q&A participants include:

  • Tony Rosback, vice president of operations support for Phoenix-based Republic Services;

  • Kevin Downey, director of hauling for Cincinnati-based Rumpke Consolidated Cos.;

  • Mary Margaret Cowhey, vice president of Park Ridge, Ill.-based Land & Lakes Disposal Services; and

  • Mary O'Brien, chief marketing officer of Jacksonville, Fla.-based Advanced Disposal.

The executives not only discuss how the recession has impacted their firms, but also talk about how they maintain their fleets, how commercial customers are demanding more recycling services and what are the biggest challenges facing their companies.

Waste Age (WA): How has the recession affected the amount of waste you're collecting from commercial properties?

Rosback: Our commercial volume is down slightly. As a result, we have adjusted routes to maintain efficiency. Over the past two years, C&D volumes have been impacted the most. Fortunately we are able to scale our business according to the amount of work that we have and orders placed.

Downey: The recession has created an overall erosion of business. The combination of less manufacturing and business closures has resulted in decreased waste volumes.

Cowhey: Our commercial volumes have remained steady. We've seen a slight decrease (3.9 percent) in roll-off volumes.

O'Brien: It has caused some businesses to reduce services, resulting in decreased volumes from these businesses. In addition, some businesses have had to close due to tough economic times, thus terminating their collection contracts.

WA: How has the recession affected the pricing of your commercial services? Have you been able to compensate for any decline in volume?

Rosback: Pricing is holding steady. Keep in mind, the recession has not lowered the cost of delivering service. It still takes equipment, people and facilities to service our customers. Also, they are still interested in the best value offered — price is simply one component of that equation.

Businesses that do business with us will be guaranteed that they receive service that is reliable, cost effective, environmentally sound and in compliance with all applicable laws.

As for compensating for declines, our managers are constantly tweaking routes and our cost structure to mitigate volume declines with improved efficiency.

Downey: The recession has not particularly affected our prices; however, in some instances Rumpke has altered customer collection schedules to accommodate a reduction in waste production.

It is difficult to compensate for less volume. We remain focused on conservation and efficiency to reduce overall expenses.

Cowhey: In the Chicago market, substantial annual increases in union wage rates are a fact of life. We've seen commercial pricing increase to accommodate those higher wages.

O'Brien: We have had to focus on cost savings for our customers and potential customers in order to be more responsive to the needs of our customers.

WA: To what extent, if any, have you had to lay-off workers in your commercial collection operations?

Rosback: We have seen some reduction in workforce; however, it is nothing compared to the layoffs associated with the roll-off business that was significantly impacted by the housing slowdown that started in 2007.

Downey: Lay-offs at Rumpke have been minimal. Rumpke's goal is to maintain a well-trained and experienced team to sustain excellent customer service. Rumpke's focus is continuous improvement and evaluation. We work incessantly to enhance our processes so we can do more with less. When employees have left, we have not necessarily replaced each position, but instead our firm initiates new processes to achieve our same goals.

Cowhey: The only reduction in commercial drivers has been the result of switching rear-load routes to more efficient front-load routes.

O'Brien: We have not laid-off any employees and do not foresee having to do so in the near future.

WA: What new services are your commercial customers asking for?

Rosback: Commercial customers are still looking to recycle more. We are always working to educate our customers and work with them to determine the most effective way to manage their waste stream. Commercial customers are always interested in our suggestions that focus on sustainability and efficiency.

Today, more than ever, people understand the need to intelligently manage waste. For a growing percentage of the population, this means looking for more opportunities to reduce, recycle and reuse.

Downey: Commercial customers continuously request more recycling options, including cardboard, paper, single-stream, universal waste and even composting. At the same time, firms that are attempting to reduce costs are requesting waste audits and services to make their waste collection and disposal programs more efficient and cost-effective.

Cowhey: We are seeing an increased demand for commercial recycling.

O'Brien: In order to save disposal costs, many customers and potential customers are inquiring about recycling services. If the customer can save money and help the environment, this business option is expanding. In addition, certain customers are exploring converting to compactor service from FEL or open roll-off containers to reduce pulls and/or approaches. These are not new services for Advanced Disposal but may be new services to the customer.

WA: Do you collect recyclables from commercial sites? If so, are they in a single stream?

Rosback: We offer a wide variety of recycling services to commercial customers. The type of service really depends on the needs of our customers and the type of waste they generate. Single-stream is a great option for many customers. It is simple and allows us to efficiently collect recyclables for processing.

Downey: Rumpke offers various types of commercial recycling services. Throughout many of our service regions, we possess single-stream technology to accommodate mixed recyclables; however, there are areas where single-stream recycling is not an option because of routing structures and/or lack of proximity to a single-stream material recovery facility. Although we can't always offer single-stream recycling, we are still able to offer some cardboard or paper recycling programs in most areas.

Cowhey: Yes, we provide single-stream, unless the customer is a large-quantity producer of a particular recyclable like wood, metal or corrugated. In those cases, the large-quantity item is collected separately from the rest of the recyclables.

O'Brien: We do collect recyclables from commercial entities who contract for the service. In certain areas, we can offer single-stream commercial recycling but not in all service areas.

WA: Fuel prices appear to be slowly climbing back up after being down for a while. How are rising gas prices affecting your operations, and what other expense increases are you dealing with?

Rosback: Almost every aspect of our service has increased in cost. We have seen dramatic increases in labor, equipment, trucks and fuel. As a result of our cost structure increasing, we have increased prices to ensure customers pay a fair price for the services they receive.

Downey: Fuel prices have been elevated for some time and although prices decreased during the fall of 2008, the price reduction did not transfer to other supply or delivery costs. Instead, the elevated pricing structure remained in place. Therefore, as prices creep back up, Rumpke is continuing to implement the same practices we adopted when the prices first increased.

Rumpke employs fuel conservation programs and relies heavily on an aggressive route auditing system and maintenance program to minimize costs. Simultaneously, customized training and safety programs are utilized to reduce accidents, worker's comp claims, insurance claims and other expenses.

Cowhey: In the Chicago market, fuel surcharges have dropped substantially, but we expect them to creep upward again. In addition to fuel, increased costs for steel are affecting the cost of trucks and containers. Of course, in this market, keeping up with union wages and benefits is always an issue.

O'Brien: Fuel is a significant expense in the solid waste collection business. Advanced Disposal, as well as our competitors, implement commercial fuel surcharges on our invoices to offset fuel increases where it is allowable by contract. Other petroleum-based products such as landfill liner and motor oil affect our business and have an expense impact with rising fuel costs.

WA: What is the biggest challenge facing your operation, and what are you doing to address it?

Rosback: Two years ago, our biggest challenge was getting qualified, professional drivers. Today, finding good drivers is easier — mostly because of the employment situation, but also because they recognize that Republic is a company committed to safety and high-quality service.

Republic Services has a simple operating strategy that will result in our long-term success: growing our commercial services through well-managed sales and marketing activities to enable the company to capitalize on its leadership position in the marketplace.

I see the biggest challenge we face as looking ahead to determine how to stay ahead of complex issues that affect our business — issues such as workforce demands, technological advances, and environmental and regulatory changes. It takes discipline to keep an eye on the future in the economy we're in today.

Downey: Rumpke's biggest challenge operationally is maintaining the integrity of the commercial routes to ensure optimum efficiencies, while continuously meeting and exceeding the expectations of our customers and regulators.

Rumpke has initiated continuous assessment procedures to analyze and improve route densification. Employee education programs and driver observation processes further secure efficient and compliant habits among Rumpke's team members.

Cowhey: It is difficult to provide long-term pricing to customers when we've encountered so much short-term volatility in pricing and demand.

O'Brien: Adjusting to the downturn in new business start-ups, increased requests for reduced services, and closed businesses.

WA: What initiatives have you taken to grow your business? Do you have any plans for future initiatives?

Rosback: Republic Services has developed a hard-earned reputation for delivering outstanding service at a competitive price. We are always focused on growing the business. However, our growth is strategic. For example, our priority is to focus on improving the efficiency of existing routes by increasing the number and proximity of customers in a specific geographic area.

Another major initiative is to use and continue the testing of alternative fueled vehicles, including electric-diesel hybrids, as a potential cost savings. We are on the forefront of research in our industry.

Downey: Rumpke constantly monitors the industry for possible acquisitions. At the same time, Rumpke has developed extensive training programs to increase sales potential, cross-sell products and retain existing customers. More employee education and greater customer convenience are keys to future growth.

Cowhey: Land and Lakes is increasing its commercial recycling programs. We're also working to develop food waste composting routes.

O'Brien: We have hired sales representatives and continue sales training to promote new sales. We are making more one-on-one contact with the customer base and are looking for ways to better service their needs.

WA: Describe your commercial fleet maintenance program. Do you outsource any aspect of the maintenance?

Rosback: We have a fleet of 16,000 collection vehicles on the road. To keep these trucks rolling we need a great fleet maintenance program. While we do almost all of the work in-house, some of the major rebuilds are outsourced. All preventative maintenance is conducted in-house.

Downey: Rumpke's fleet maintenance program involves very little outsourcing unless related to warranties. At Rumpke's corporate headquarters, we have a 37,000-square-foot, state-of-the-art vehicle maintenance center, as well as vehicle maintenance centers throughout our service regions. We also have our own Rumpke Hydraulics & Machining division, a vehicle overhaul center and a heavy equipment repair center.

Rumpke has developed a Rumpke Maintenance School to cultivate mechanics with various skill sets and to offer continuous education programs. By maintaining a top-notch in-house program, Rumpke controls costs and maintains effective performance.

Cowhey: Heavy equipment maintenance is outsourced to manufacturer dealers, but rolling stock maintenance is performed in-house.

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