We recently caught up with Curtis Hill, Fine Tune’s Vice President of Waste Services, on why waste is such a challenging and maddening expense for procurement.

Q: The waste industry has a reputation for being a “nuisance expense” for procurement professionals. Why does it have that reputation and what makes waste and recycling expenses so challenging to manage?

A: There are a variety of reasons.

One of the biggest is that it is a counterintuitive expense for procurement professionals. In most expenses, there is a “magic number” that you can drive toward, let’s just call it “rock-bottom.”

A purchasing agent says, “I need to buy ten million of these ball bearings. I’ll go to market and use the market forces available to me in order to find the rock-bottom price for these ball bearings.”

And at some point, you can figure out what that is if you’re good at your job and are a seasoned procurement professional.

With waste and recycling, though, there is no nationwide magic number, and frankly, there’s not even a regional magic number.

Q: Ok, but why is this the case? What makes the waste and recycling expenses different?

A: The answer to the question of “what is an optimal price for moving a cubic yard of trash?” is truly an address by address, zip code by zip code proposition. This makes the process of trying to understand the waste industry marketplace very difficult for a procurement professional.

It would be one thing if you had two or three plants around the country—that’s maybe a manageable workload. However, if you work in an environment where you have dozens, hundreds or even thousands of locations around the country, your process of identifying optimal marketplace costs for waste and recycling services is a very, very time-consuming endeavor.

It’s not ever going to be good enough to just call up a couple of national players and see what they offer. The key to finding optimal market pricing in any given zip code is figuring out who can offer that optimal pricing—and depending on where you’re located, the answer may very well be a local hauler or a regional player, and in some cases it may be one of the big national suppliers.

That is the first and foremost reason why it is a maddening expense for a procurement professional.

Finding optimal cost levels is difficult and time-consuming—enough so that most buyers leave meaningful money on the table in the interest of convenience.

Q: Sounds like geography plays a big role in this expense – why?

A: There are large pockets of the country where the major national players are not the most competitive option.

And in many of these cases, those national haulers are, in fact, dramatically uncompetitive—not just 20 percent higher than the optimal alternatives, but frequently double.

If you are “National Waste Vendor A,” and you own the landfills in a large percentage of the country, you’re paying yourself to dispose of trash in those markets. You’ve got local operations. You own the landfills and, therefore, you’re in your stronghold.

But, in other parts of the country, “National Waste Vendor B” owns the landfills, and in these areas they gouge “National Waste Vendor A” for disposal.

Whereas “Vendor A” might be able to service an account for $500 per month in the areas they own landfills, you’re not going to be just $550, or 10 percent, afield from what they can offer to the local community of accounts in that area. You may be twice as expensive.

So yeah, landfill ownership, in cases where hauling companies own the landfills, frequently causes the competitors of whoever owns the landfill of any particular area to be extremely uncompetitive.

And when you back out to the macro, all of this causes the national players to have a difficult time putting forth truly competitive nationwide proposals.

As a buyer for a company with a national presence, you’re always going to be leaving money on the table if you exclusively align with one of the big national haulers.

As a buyer for a company with a national presence, you’re always going to be leaving money on the table if you exclusively align with one of the big national haulers.

Q: What else is challenging about the expense aside from finding “rock bottom” pricing?

A: Well, to put it broadly, I’d say “getting what you sign up for.”

Here’s what I mean.

The agreements themselves are pretty onerous, so if you’ve got pieces of your business operating under the industry’s “boiler plate” terms, the haulers are going to be able to do pretty much whatever they want with your invoicing.

But, even when good deals are negotiated, it’s a challenge.

Put it this way—we see some pretty brazen practices, and I need to be clear that what I’m describing here is by no means unique to the waste industry. If anything, what we see throughout the indirect spend world is that the more “under the radar” a particular expense is—i.e. the lower the dollar volume tends to be—the more suppliers tend to take advantage of customers.

I think it’s fair to say that the industry has been, shall we say, “aggressively creative” on the imposition of a host of fees and surcharges.

From my vantage point, one of the things customers need to be aware of is that there are a lot of fees suppliers add or apply to customer invoicing, titled in such a manner that they seem mandatory or like regulatory charges. Those charges appear as though imposed by a municipality—by a municipal landfill perhaps—or by a state, when in fact that’s very frequently not the case.

Don’t assume when the ink is drying on your waste agreement that you’re necessarily going to get what you just signed for the next three to five years.