Bob Wallace, President of WIH Resource Group, was recently interviewed and featured in the Environmental Business Journal’s (EBJ) “Industry Overview 2018” Issue and the contents of the interview follow.
ABOUT WIH RESOURCE GROUP
WIH Resource Group (WRG) is a global provider of professional, technical, and busines management support consulting services in a broad range of market sectors including waste management, recycling, financial, operational improvement, alternative fuels for fleets, route auditing, safety, transportation, mergers and acquisitions, expert witness, facilities, environmental, and renewable energy for both private sector businesses and government clients alike. As President of WIH Resource Group, Bob Wallace brings WRG’s clients more than 28 years of operational strategy and improvement expertise in all WIH service areas
INTERVIEW WITH BOB WALLACE OF WIH RESOURCE GROUP
EBJ: The municipal solid waste business is about 2/3 private industry and 1/3 public sector. Do you think it will remain the same? Or do you think there will be different trends in landfill ownership vs. collection networks?
Bob Wallace, WIH Resource Group, Inc.
Wallace: The ownership division will remain virtually the same. As public sector landfills close across the country, alternatives are reviewed, and in most cases, municipalities are not bearing the cost of building new landfills. Instead, they enter into long term transport and disposal (T&D) agreements with large, privately owned, regional landfills.
EBJ: When you say the public-sector portion of the industry will remain about the same, does that mean it is unlikely that many major cities that still have municipal collection assets are unlikely to change? So, has the pace of privatization slowed or stagnated there?
Wallace: Correct, it is unlikely that major cities that have their own municipal owned and managed collection assets will change. However, we may see some additional privatization efforts in some cities, or at least more contract or franchise agreements with private companies like we’ve seen with the City of Los Angeles, where they instituted contract/franchise agreement for commercial collection (WIH Resource Group was part of the team over the past several years that consulted on that transition).
EBJ: In your opinion, which are the main challenges that the country faces in terms of solid waste management and how can the private and public industries contribute to its solution?
Wallace: The US government and industry need to determine if finding a viable, sustainable, profitable and long-term solution (business / industry use) to beneficial reuse of our stateside generated and collected recyclables can be achieved in the US without having to rely on countries like China that now dictate and control the recyclable commodity markets here.
EBJ: We know the number of landfills in the USA has declined, although the pace of decline has slowed. Do you think the numbers will continue to go down for some time or will we reach a sort of equilibrium?
Wallace: I think it will remain steady with some minor changes. As an example, we know of a several municipalities in the western US that are facing closure of their landfills in the next 2-5 years and are currently contemplating their alternatives – one in Oregon and in Colorado. We anticipate this will result in them utilizing larger, regional, privately owned landfills, not building new municipal owned landfills.
EBJ: Why do we keep seeing a high number of small to medium size companies within the solid waste industry?
Wallace: There are a lot of former employees in the marketplace from the larger publicly traded companies, as well as out-of-industry players that find the waste and recycling sectors intriguing and figure out ways to do things differently and a bit better. In addition, while equipment is somewhat expensive, there are always niche business service segments that large companies overlook or can’t best serve with their business models. These gaps leave some opportunities for smaller players who can provide excellent customer service at a fair ROI to themselves and / or their investors.
EBJ: What impact can the tax reform bill have in the industry?
Wallace: It may allow smaller companies to benefit in buying newer or later model equipment with the tax savings and/or allow them to offer a bit higher pay to attract drivers and staff to compete with larger companies. The large companies will of course benefit too as their vertical integration will reap increased profits with lower tax rates, yielding greater return to stockholders – a great reward for the waste industry.
EBJ: How is technology shaping the industry? Which are these technologies? What opportunities do you see in technology and automation?
Wallace: As we know, and following the trends in the electronics technology arena, the word “smart” is the new buzzword in the waste and recycling industry today as it is applied to cities, garbage trucks, container management, route optimization, onboard fleet management, telematics, alternative fuels such as compressed natural gas (CNG) trucks and robotics in the MRFs, among other things that utilize technology to collect data and manage waste and recycling operations – both in the public and private sectors. The waste industry has made great progress towards the future of collecting, transferring, separating, managing and the disposal of waste through technology.
While all of these added technologies are great, WIH Resource Group has encountered that more data does not necessarily lead to greater productivity and efficiency. It all depends on how the data collected it is utilized, managed and how both management and operators are held accountable for their actions and roles in their performance. A true strategic approach to the data management and repeated use of it to improve both performance and productivity is required in order for the results to drop to the top and bottom lines of any organization – public or private.
EBJ: What transportation, logistical and operational issues are companies struggling with the most and how do you suggest they overcome them?
Wallace: One issue is queuing / waiting times at transfer stations, MRFs and disposal sites to unload both collection trucks and transfer trucks. This has been, and continues to be, a productivity time waster for the industry. There doesn’t seem to be a “magic bullet” for overcoming the issue and in many cases, it depends on the site owners and how receptive they are at working on enhancing their site’s capacity to handle fluctuating volumes of garbage and transfer trucks throughout a typical work day.
One observation is that quite often, garbage truck drivers or transfer truck drivers tend to like to leave the main truck yard or transfer station in groups and at or around the same time, creating a pool of trucks arriving at the destination – MRF, transfer station or WTE facility, AD facility or landfill, all at the same time. Management of collection trucks and transfer trucks need to hold route supervisors, dispatchers and operators accountable for this behavior in order to improve their own bottom line and that of the receiving facilities.
EBJ: Your comments on queuing are intriguing. We have heard the solid waste business is like ‘Fedex in reverse’ or effectively a logistical equation of vehicles, routes, timing and personnel to maximize productivity. Do you agree, and is it the smaller companies or municipalities that suffer lack of sophistication here? Or is it TS or LFs that take waste from all sources so they can’t integrate data?
Wallace: It’s a combination of both. It’s interesting to talk about data integration and technology in the waste industry. Back in 2004, before I left Waste Management, we were integrating onboard computer technology, GPS, routing software and other fleet management optimization tools, and here we are 14 years later — and to a degree — things are largely still the same. Waste and recycling collection is always driven by the following primary factors: operator / driver on route productivity (homes serviced per hour), off route travel time to and from the transfer station, MRF or disposal site & related facility queuing times, and truck downtime (due to maintenance or accidents).
These are very basic factors that aren’t really going to improve, even with a lot of technology added to manage the drivers and fleet. Driver productivity, driver accountability, good fleet maintenance (reduced fleet downtime), driver safety and route manager accountability (through driver ride-alongs and regular and frequent route audits) and quick queuing times at facilities, are the real key drivers in operations being profitable and providing a good ROI for both public sector and private companies.
As the old saying goes, where we focus our attention, we see improvement.
All the technology being used is only as good as the people managing it and utilizing the data to improve their operations. There really isn’t one “silver bullet” to fix any operation. If the data provided by the use of technology isn’t used properly, and drivers and managers aren’t held accountable, no improvement to the operations will result. – Bob Wallace, WIH Resource Group
EBJ: What do you think have been some of the more important M&A transactions in the waste management business in the last 12 months or so? What should we expect in terms of industry consolidation?
Wallace: Republic Services’ acquisition of ReCommunity was the big one of 2017. The industry will continue to see small to medium size plays in terms of M&A deals and will most likely continue to see private equity investors placing bets (investing) in the industry as the waste and “environmental” industries always have strong curb appeal to private equity firms with industry profit margins offering stable and reliable return to investors. In 2017, we saw how a private investment firm bought the glass recycler, Strategic Materials, along with other smaller investments in the industry by private equity firms that are continuing into 2018.
EBJ: Could you provide some information regarding the Chinese ban on solid waste? Which are the types of waste included in the ban?
Wallace: The regulation was announced in July 2017 and bans 24 types of waste under four categories: certain types of mining slag, household waste plastics, unsorted waste paper and waste textiles. It came into effect on January 1st, 2018.
EBJ: How can this ban impact various industries in the United States (solid waste, recycling/scrap, manufacturing or other)? What could be some possible outcomes?
Wallace: Less recycling and more landfilling of materials that could otherwise have been recycled or beneficially reused. While China enacted these laws that impose strict purity-demands on certain materials, along with outright bans on other materials, this trash must now go somewhere else, so where is it going? To put it in simple terms: trash that cannot leave the country, must be disposed of within the country. Larger waste companies will benefit from this as disposal fees at landfills yield a higher margin for the waste companies than their return on the MRFs.
Also, the China ban on the import of 24 types of waste will send a wake up call to waste exporting countries and increase pressure to find more sustainable ways to dispose of and recycle waste, as well as tackle the issue at source by reducing the production of plastics and other disposable goods.
EBJ: What role does globalization play within the solid waste industry? How does it compare to other environmental industry sectors?
Wallace: The obvious one significant “play” point is the China ban affecting the U. S. recycling markets. In terms of other areas such as technology and equipment, the overseas barriers – shipping, warranty, customer service support, span of coverage, etc. – provides a competitive advantage for U. S. manufacturers of traditional equipment and technology to that of overseas competitors making solid waste more of a local issue and less global.
One area to watch will be the development and potential for EV garbage trucks to come to the US. These trucks are already growing in use in China. While there are a few EVs pilot programs in certain US cities, and a few private companies utilizing them, the Chinese are a bit ahead of us and their EVs appear to be more reliable and cost effective than their US counterparts.
EBJ: What is your personal belief about the U. S. data on per capita generation plateauing at 4. 4 lbs/day and the ‘recycling rate’ plateauing at 34% in EPA’s latest stats. What trajectory do you see most likely for these figures or possible scenarios?
Wallace: Any significant increase in recycling and reduction in per capita waste generation is only largely changed by local government and state mandates, such as California, to increase waste diversion and recycling – often and largely subsidized by government with incentives.
In other states and communities, the rates seem to have plateaued. Even California jurisdictions “recycling / recover rates” are skewed as they include items that really should not be considered true diversion or recycling. The individual jurisdictions aren’t really to blame as the State mandates have forced cities and counties to become creative to meet the State standards, so the posted recycling / recovery rates are inaccurate by national EPA comparative figures for other states.
In other words, better standards need to be agreed upon to obtain accurate data collection and reporting of recycling rates.
EBJ: Are there better macro-stats to measure and monitor trends?
Wallace: Not at present and only when national agreed upon standards could be applied for each State so that true comparisons can be made as to the real recycling / waste diversion rates on a State by State basis.
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WIH Resource Group is global leader providing of diversified environmental (waste and recycling), financial, expert witness services, transportation / logistics consulting solutions to its Clients throughout North America and internationally.
WRG provides solutions to complex challenges to its clients in the areas of environmental, alternative fuel fleet conversion studies, customer satisfaction surveys, fleet management matters, equipment and assets valuations, mergers & acquisitions (M&A), landfill gas management, renewable energy, waste & recycling collections, business process improvement, procurement services assistance, waste management operations, recycling processing, transfer stations, operational performance assessments (OPAs), recycling facilities (MRFs) studies, transportation and other feasibility and related financial analysis.
Formed in 2005, WRG’s Team consists of subject matter experts from the waste, recycling, alternative fuels, and transportation industries from both the public and private sectors. WRG’s Team of experts have over 150 years of combined experience.
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