Group purchasing programs provide a way for independent haulers to compete against the big waste management companies, helping to level the industry playing field.
By Marc Spiegel
As a fourth-generation hauler, I’ve seen firsthand the hurdles that independent haulers must overcome to succeed in a historically asset-heavy industry. My family got its start in the waste world in 1909 with a scrap metal business in Louisville, KY. From there it evolved, with my grandfather starting a company in the mid-1950s that eventually grew into one of the largest independent hauling businesses in the area. As a kid, I grew up painting dumpsters and learning everything I could about the waste industry.
Independent haulers like my grandfather and uncle must compete in their local markets against big companies that have an advantage from day one. The sheer size of the large waste and landfill corporations allows them to service the same customer with lower overhead costs. They have the ability to purchase fuel, containers and trucks at cheaper rates because they buy in bulk. Even with historically low prices, fuel alone accounts for a sizeable piece of a hauler’s operating budget. Every cent adds up.
In addition to equipment acquisitions and maintenance costs, haulers also need to comply with driver compliance regulations, which causes significant administrative burden. Companies are required to keep up-to-date files on every driver, including regular drug tests and safety records. The big waste and landfill companies can adhere to driver compliance more cost-efficiently because of their size. They can outsource these tasks to third party vendors for a fraction of what small- to medium-sized haulers would pay.
These challenges make it difficult for independent haulers to compete for business and grow in their markets. They also pose extremely high barriers to entry for new haulers entering a market or markets. There are some amazing people who can run top flight hauling operations, but the barrier to entry is extremely high—even higher in recent years—making it virtually impossible for them to have success.
Independent haulers may not have power on their own, but what if they could come together and create group purchasing power? By joining a consortium program, small to medium sized waste companies can get price breaks and gain access to business resources typically reserved for large corporations. The benefits are two-fold. Not only do haulers secure pricing and products to help their businesses grow, but vendors are also able to reach a new customer base that they could not support independently.
An ideal consortium program should address many of the critical growth areas for haulers. Below are some categories to consider.
Equipment
Waste is an asset-heavy industry. From trucks to tires to containers, the equipment costs are high. Unfortunately, these costs aren’t exactly equal. While a large waste company might pay $600 for a new container, an independent hauler would have to invest around $850 for the same equipment, just to start a new account. A consortium program locks in bulk pricing to make it easier for haulers to grow their businesses.
Fuel
Fully loaded garbage trucks can weigh more than 60,000 pounds. With all that weight combined with a stop-and-go drive, it’s not too surprising that garbage trucks require a lot of fuel to operate. When considering a group-purchasing program, ask about price breaks on fuel. Though it’s not as large an upfront investment as purchasing new equipment, each re-fuel adds up to big expenses over the lifetime of the company.
Capital
Whether buying the first truck or expanding an existing fleet, waste management companies depend on low interest, competitive and flexible financing options. Consortium programs with strategic financial partnerships enable companies to finance growth investments like hiring additional employees, purchasing inventory or equipment, or even refinancing a business credit card.
Safety
Driver safety management is a drag on administrative resources. When buying as a group, haulers can afford to outsource these duties to a third-party vendor with a reduced rate for those services. This includes qualification file management; motor vehicle record monitoring; compliance, safety and accountability reporting; medical examination review; drug and alcohol testing; and employment screening services. Hiring and screening is a time-consuming process for any business, much less one with a lean staff. Consortium programs make that process efficient and manageable.
Paving the Way
Group purchasing programs provide a way for independent haulers to compete against the big waste management companies, helping to level the industry playing field.
There is great power in numbers. With pressure alleviated from high asset-related costs and administrative burdens, independent companies can concentrate on winning new customers, earning more profit and improving our environment. When we come together, we can continue to innovate, grow and move this industry forward.
Marc Spiegel is a native of Louisville, KY, and comes from four generations of waste and recycling hauling experience. In addition to overall strategy, Marc oversees the Hauler/Vendor Management team at Rubicon Global, a company he co-founded, which uses technology to help divert waste from landfills, reduce operating expenses, implement new programs and save money by finding new and innovative ways to reduce, re-use and recycle waste. Rubicon Global recently launched Rubicon Pro, a consortium program built on strategic partnerships, which is already helping more than 5,000 haulers grow their businesses. For more information, call (844) 479-1507, e-mail [email protected] or visit www.rubiconglobal.com.
The Benefits of Group Purchasing
RJ Recovery is a hauler out of Charlotte, NC. The company’s Chief Operating Officer Jimmy Contreras started his hauling business with one truck—bought when he was just 16 years old. He says that from day one, getting a break on things like fuel, tires and even containers were one of the biggest challenges he encountered in growing his business.
“When you’re independent and growing, it’s the continuous investment in the necessities like fuel, tires and maintenance that can make it hard to grow as fast as you’d like, because you don’t get the price breaks that the big haulers get,” says Contreras. “When you join a buying program you band together with other haulers and start to get those discounts that help you invest and grow and provide better service for customers.”
Today, RJ Recovery enlists 20 trucks and more than 35 employees. By tapping into group purchasing, the company has gained access to reduced rates and improved processes so that they can continue to expand.