Managing Landfill Rate Increases

Credit: Neal Bolton
Dozer landfill work

If you’re in the landfill business, hopefully, you’re running your landfill like a business. And in that regard, one of the most fundamental business rules is that there’s more money coming in than going out. Because when that is happening, you can pay your bills, buy good equipment, put adequate money into your closure or post closure fund, and even stash some money in the cookie jar for a rainy day.

But when that financial model gets upside down you have to make a decision. There are three choices. You can reduce costs, you can raise your tipping fee, or you can find some way to bring in additional tonnage, which might increase revenue enough to make the first two options unnecessary. Unfortunately, when faced with these choices, too many managers take the path of least resistance. They go to the board and ask for approval to raise the tipping fee.

Now you might be thinking to yourself, “Least resistance my foot! Hey Bolton, you obviously don’t know my board.” True, but I still think that’s the easy way out, and though it may work fairly well in the short-term, the long-term outlook of relying on raising tipping fees to fix your financial mess, is bleak indeed.

First, raising rates can make your facility less competitive, and might force some of your customers to start looking over the fence—to see if things are a little greener . . . and perhaps a bit less expensive. Sometimes, raising rates can let you avoid asking tough questions—questions that a good manager has to address. You know what I’m talking about.

If you’re not asking these questions—and working hard to find answers—you’re not really managing your landfill . . . you’re just showing up for work.

Okay, let’s pause right here. Sometimes a rate increase is necessary, and I’m certainly not suggesting that every manager who’s ever asked for a rate increase shouldn’t have. But in many cases, raising rates is not the answer; at least, it’s not the best answer.

While conducting operational assessments, we most often find that landfills with money problems have underlying operational problems, and those problems are usually the result of following the same traditional practices year after year without ever stopping to ask: “Why are we doing it this way?”

Comparing your operation to standard industry practice may highlight certain inefficiencies and provide some ideas on how to reduce operating costs. However, it usually takes a more focused approach, requiring you to apply some specific process improvement tools. Tools such as Six Sigma, Lean, or Value Stream Mapping.

This may sound confusing if you are not familiar with these terms, but in essence, they are simply techniques that let us zero in on specific parts of your operation. They lead us through the process of asking tough, probing questions, such as: “Are we doing this work in the most efficient and most cost-effective way?” Very often, the answer is “No.”

Here are a few simple (but specific) questions you can ask about your operation that may give insight of whether or not there is room for improvement.

  • Do I have too many machines?
  • Do I have too much staff?
  • Do I ever spend time, effort, or money to move materials (i.e., stockpiles) more than once?
  • Do any of my machines have excessive idle time? This can vary from one machine to another, and it can vary based on the task that machine is performing, but generally, if you see idle times in an excess of 15 to 20%, you should be taking a closer look at what those particular machines are doing.
  • Is my airspace consumption rate consistent . . . and as good as it can be?
  • Has every employee been trained to excel at his or her specific job?
  • Am I planning the development of the site—and the associated cash flow—to maximize efficiency and minimize cost?
  • What is the utilization rate for my machines? We’ll explore this question in more detail.

The utilization rate is a simple measure that looks at how many hours a machine works, compared to how many hours it could work. For instance, a machine that works four hours out of a potential eight-hour work day has a utilization rate of 50%.

Generally, a machine that is fully utilized will be somewhere around 85 to 90% utilization. So when you evaluate utilization, you’re looking for machines that are underutilized, which might indicate that you actually don’t need those machines at all. Or if you do, maybe renting on a part-time basis is a ­better option.

You’re also looking for multiple machines of the same type that have low utilization rates. We often find multiple dozers, loaders, scrapers, or haul trucks that each have low utilization rates. In essence, there are several machines (each working a little bit) that are cumulatively doing the work of perhaps one machine.

Here’s an example: If you have three scrapers, each with a utilization rate of between 20 to 25%. This begs the question: “Why have three machines of similar type doing the work of essentially one machine?” Well, we often hear about needing a backup machine . . . and another spare in case the backup breaks down. But in the end, it’s hard to justify having machines worth a million bucks a piece . . . just sitting on the bench.

When we conduct a machine utilization study, we’ll use some fairly complex models; sophisticated Excel spreadsheets with complex formulas, differential equations, and lots of advanced math. But sometimes, problems with machine utilization are easy to identify. It’s like the prospector who picks up a rock to throw at his stubborn donkey and then realizes it’s a big hunk of gold! Yes, sometimes the solutions you’re looking for can fall right into your lap. But that won’t happen if you aren’t at least looking for them.

Consider the landfill that typically uses three bulldozers to push, spread, and cover trash. They’ve been doing it this way for years. Three dozers, three operators. Every day it’s the same old process. Then one day, two of the bulldozers break down . . . they just quit.

And without getting them into the shop, the mechanic doesn’t know if it’s hydraulic, electrical, mechanical, or supernatural. They just won’t run.

Point is, now you’re down to one bulldozer—to do the work that three have been doing. You and your crew initially freak out, but surprisingly, at the end of the day all the trash is pushed, spread, and covered.

Now how in the world did that happen? Well, the operator on that one remaining bulldozer didn’t have a choice. There was no extra time to back-blade the tipping pad—over and over—after every single load of trash was pushed. The operator didn’t have time to make two to three clean-up pushes after every (full) production load. There was no time to park the dozer during breaks and lunch. Instead, when one operator got off the machine, another operator got right on it and kept working.

This should sound familiar because it’s the same phenomenon that occurs the day before you go on vacation. You know what I mean. That’s the day when you get more things accomplished than any other day of the year because you have to. There’s no loitering in the lunch room, no solitaire on the computer, there’s just work. You’re going on vacation and you’ve got one day to get these last few projects done, so you do.

If you’re not paying close attention to the day that both dozers quit—and one dozer handles all the work—it will simply be written off as a bad day, a hectic day, and you won’t be able to wait to get back to your traditional three dozer operations . . . and never recognize that with two dozers out of the mix, you saved nearly $2,000 that day!

But, if you’re paying attention—if you are watching and learning—that day could be a turning point in your operation. We’ve all had those, and when we do, we need to brainstorm with our crew regarding what just happened. How did we do it? What did we do on that day that allowed us to get things done with one machine, and what are we doing on those other days when it takes three machines to get the same amount of work completed?

Okay, enough said about that. The point is, most operations have plenty of room for improvement. And by looking at the operation through the perspective of process improvement, there’s a good chance you’ll be able to find some.

That means you can reduce costs, be more efficient, create a safer work environment, and in the end, solve your financial problems without a rate increase. Sounds pretty good, but it can get even better. If instead of increasing your rates, you reduce operating costs, and if at the same time your competition takes the easy way out, and simply raises rates, those customers who are looking for a good deal might come your way.

If that happens—if you’re able to attract more customers and more tonnage—you’ll generate even more revenue. And the more efficient your operation becomes, the more likely you are to find yourself in this very desirable situation. So, instead of choosing between raising rates, attracting more revenue (i.e. tonnage), or cutting costs, you can actually double dip, cut costs, increase revenue, and leave the rate increases to somebody else who chooses to take that easy, but slippery, path of least resistance. MSW_bug_web

Comments

Leave a Reply

Enter Your Log In Credentials
×