Solid waste container manufacturers find ways to remain successful despite dramatic cost increases in resins and components.

By Lynn Tilton

While the building market has lamented the more than 40% increase in product prices in the past 18 months, the loss of sources for raw materials has boosted the cost by more than 100% of making something as simple as a collection cart or container. Although most manufacturers don’t include tsunamis or hurricanes in their budget projections, successful operations have found ways to help lessen any market impact to ensure that their companies remain steady during rocky times.

Lessening the Impact
John Scott, president and CEO of Toter Inc. in Statesville, NC, comments, “Polyethylene prices fluctuate. During the last 15 years resin prices have stayed within an acceptable cost range with normal ups and downs, but in the last two years the prices have steadily increased and are up as much as 120%. Over the years, it has not been uncommon to see 10% to 20% fluctuations, but never have we seen anything of this magnitude. When you are hit with this type of raw material increase, there’s only so much production efficiency you can do, so the other way to combat it is to pass along the higher costs to your customers.”

He reports Toter has approached this situation with a twofold strategy: The first part has been to immediately try to control all of its costs by soliciting cost reduction ideas from its 600 employees. “We’ve received close to 100 ideas, and at this time about half of them have been adopted. Those ranged from modest to significant savings. They ranged from doing in-house landscaping at our five locations rather than contracting that work out. At the other end we’ve taken a close look at our product line and discontinued non-profitable items and streamlined our production facilities to improve manufacturing efficiency.”

The loss of sources for raw materials in recent months has boosted the cost by more than 100% of making something as simple as a collection cart or container.

Toter also met with its customers and explained the price increase for future orders. “We provided documentation on the raw material increases, showing we weren’t trying to increase our profit margin but were trying to recover some of the dramatic raw material cost increase,” says Scott. “Most of our customers understood the dilemma and were willing to share in that raw material cost increase. One thing that has to change in our industry is the use of price adjustment mechanisms in long-term contracts.”

The challenge of meeting projected sales despite the dramatic increase in raw materials has also aided companies such as Toter. “It’s made us a leaner, more efficient company, and it’s made us a smarter company,” Scott explains. “We used to be driven by volume; now we’re really driven by profitability. We’re not willing to take just any business. It’s got to be good business. It has to be profitable business that fits within our current business model and long-term strategic plans.”

While not offering a cost savings, Toter can use recycled material in the production of its carts. “We average about 20% to 25% recycled material,” says Scott, “but what we supply on each particular order depends on customer requirements. Some don’t want any recycled material, while others want as much as they can get. We can produce carts with up to 50% PCR [post-consumer recyclables].”

Product durability and performance are two key considerations. Hence, Toter is determined to never compromise on durability. “Our superior product durability is who we are and what has made Toter the company that we are. We make sure any material we source meets strict quality standards and won’t affect impact strength or durability. We give a 10-year warranty, but most of our carts last 15 to 17 years,” continues Scott, noting that the 64- and 96-gallon sizes are the most popular with residential collection.

He then comments that when Toter got the 100 ideas, the first task was to eliminate any that might compromise quality, service, or product performance. So, how successful has its strategy been? “Our sales backlog is the largest that it has ever been,” he replies.

A Double Whammy
Dempster Industries Inc. in Beatrice, NE, began operation way back in 1878, and the firm has seen numerous challenges over the years. Today, Dempster’s specialty in the waste industry is trailers for recycling. Its AlleyCat, which first saw life in 1994, features industrial-sized polyethylene bins that aid in sorting and hauling recyclable solid waste. “We’ve had two serious impacts in the last two years,” reports Bob Hemphill, sales manager. “One, the price of steel has gone up dramatically and has hit everybody dealing with steel. The other impact is plastic parts, which come from petroleum. As the price of petroleum has gone up, so has the price of plastics. But if one is running a recycle center, a shrewd businessman can make some money on plastics today.”

That’s because plastics have become valuable enough that it pays to keep them out of the landfill and put them into the recycling industry stream. Still, Hemphill emphasizes that the margin between success and failure is narrow. He advises, “You can get caught on a long-term contract. It’s not a joke—you still have to really know what you’re doing and realize that local recycle centers have a valuable product.

“The energy savings are huge. When we recycle a ton of aluminum, the energy savings are equivalent to 42 barrels of oil. That’s why we recycle all of our aluminum cans at the plant. Our bin doors are made from old milk jugs; we bought the material in four-by-eight sheets from local lumberyards. Also, our plastic bins and roof sections are made from industrial regrind.”

He notes that Dempster’s AlleyCats consist of a minimum of 70% recycled steel and plastic. Furthermore, the company has several new products under development that “further address this need to utilize recycled products for both cost savings and enhancing the image of the product. Again, there’s a huge amount of energy savings as well.”

Separate But Equal
One of the dangers with recycled plastic is that it can shorten the life of the cart or container, says Kathy Bolhous, vice president of industrial solutions for Cascade Engineering in Grand Rapids, MI. “Like the rest of the industry, we’re paying more than double what we were paying for polyethylene two years ago. Polyethylene prices are driven by natural gas prices. Since the hurricanes last year, several of our suppliers have declared it a force majeure. That basically means they can get out of their contract because of a natural disaster.”

Fortunately, Cascade has made it a practice to source more than one supplier. Bolhous reports that while supplies have been very tight, able to get ahead of the curve. “We were able to continue to meet all our production demands. There was no disruption at all. What we’ve done to minimize financial impact for our company is to use recyclable material, but in an innovative way.”

She explains that when 20% recycled material is mixed with 80% virgin material it adversely impacts the cart performance. “Blending changes the whole structure of the plastic and will affect the performance. What we do is co-injection. One barrel contains recycled material, one contains the virgin material, and we keep the two materials separate. We use recycled material on the inside wall of the cart and 100% virgin on the outside. It makes a plywood effect and makes the cart stronger. In some cases, the co-injected cart is better than a 100% virgin cart.”

Another advantage to co-injection is it allows for use of any type of recycled material or mixed color PCR and still produces an attractive cart because the recycled material is hiding on the inside. “The second advantage is it has reduced cost because recycled material is 10% to 15% less than virgin materials,” says Bolhous.

A third advantage, according to Bolhous, is that co-injection allows for use of a wider range of recycled material. “Municipalities like to see a higher recycled material content. It’s a good selling point. Co-injection enables us to get a higher percentage of recycled material in the container without affecting cart performance.”

At the same time, this manufacturer is seeking ways to ensure further performance improvement. “We take PCR, mix in additives, and re-compound the material to create properties more similar to virgin materials. We have a very strong material science group working with this concept,” Bolhous notes. Basically, Cascade is addressing the challenge by co-injection and up-cycling the recycled polypropylene.

The reaction? Bolhous comments, “It’s new to the waste industry, but the reaction has been very favorable. Our market penetration continues to grow. We continue to grow because we introduce new technology to the market.”

John Kowalski, senior manager of marketing communications for the company, points out, “We’ve introduced a different type of cart to the market that is designed specifically to work with fully automated pickup systems. This fully automated container comes with a 10-year warranty and is designed for long-term use in every region of the county. There’s a UV packet in the resin, so it holds up to the sun but still is flexible in below-freezing temperatures. It’s designed so users can get high productivity, yet not break or damage the carts.”

Winning Ways
Fred Fisher, sales manager for American Rolloff in Trenton, NJ, points out that the ongoing costs of anything with petroleum content affects the cost of doing business. “In our business, major players are out of the rolloff hoist manufacturing business because they simply didn’t or could not charge enough. We’re down from 12 to eight rolloff hoist manufacturers.”

He emphasizes that while the cost of materials has generated recent headlines, labor costs also have increased because of a shrinking labor pool. “Health benefits are another factor. So is business insurance. All affect the bottom line.” Basically, while the boost in plastic and steel prices during the past two years has been dramatic, the smart operator still looks at the rest of the contributors to the cost of doing business.

Another factor has helped Automated Waste Equipment enjoy a better market penetration: taking the time to make sure customers and prospective customers understand that rolloff hoists and hooklift hoists can actually save the end user money. “The use of a rolloff or hooklift allows the end user to decrease the amount of trucks used, cut labor, and decrease insurance costs. Our customers are working more efficiently and smarter so they can take trucks off the road. They are using rolloffs and hooklifts for more than the standard waste container moving. Today, both products are viewed as quick-change body systems allowing the end user to switch easily between containers, flatbeds, saltspreaders, and other types of specialized truck bodies.”

Elements of Profitability
Bakers Waste Equipment Co. in Morganton, NC, is a regional supplier of rolloff containers. Founded in 1981, the company has 60 employees and ships to seven states in its region. About 60% of its production is tailored to specific customer needs. “We’re putting a lot more emphasis on purchasing and processing,” says Ric Raines, president. “Steel alone accounts for 55% of our manufacturing cost, and differences in steel prices impact us in a big way. We’re always searching the market for prices.”

At the same time, Bakers has sought ways to cut production waste. “I bought this company in 2001, and we’ve cut our waste in half. For example, we used to buy small parts from other shops. But we realized that we could cut those out of waste materials, so now we do that. The ROI [return on investment] on the equipment used for cutting gussets, for example, was just two years.”

Speaking from 30 years as a steel market researcher, Raines reports one savings could come from more effective use of production space. “With the gussets we had the shop space. We didn’t have to increase the building size. Furthermore, it took just six weeks to train an existing employee how to make gussets. Now, that individual spends two to three days per month taking care of gusset and other small part needs.”

Another strategy has been buying steel in larger lots, keeping an eye on imported as well as domestic steel. “It all gets back to the price tag. We’ve increased our vendor base and we’re getting more competitive prices. At the same time, we’re marketing what waste there is. I go to scrap dealers. I try not to beat them too much over the price, but still negotiate. We have a 30-yard container, and they use the rolloff we sold them for picking up three loads per month.”

According Raines, “The great thing about recycling steel is you really can’t tell the difference in the product. It’s still as strong ounce for ounce as if it were pure virgin steel. When it comes to containers, service life is more important than offering the absolutely lowest price. We never decrease the thickness of the steel we specify, and we still put two coats of finish on our products. Two coats of paint give the container more protection from a hostile environment.” He says this stoutness and paint explains why their roll-offs provide a minimum of five years’ service under the worst conditions, with some still at work 10 to15 years after purchase.

“Corrosion is probably the biggest problem,” notes Raines, “and we’re constantly looking for designs that tend to be more resistant to corrosion. For example, most rolloff containers have uprights run down the sides and are closed off at the bottom, but our standard design is completely open at the bottom so there’s no water collection in the shaft.”

Looking to the future, he comments, “We think that recycling will play a greater role. That’s why we’ve built a number of containers specifically for organics. With organics you have two things to deal with: moisture and odor. We’ve been asked to build refrigerated Dumpsters for use behind restaurants.” At the same time, the future is in compactors, and durability of the container becomes even more important. “You got to take care of that steel,” Raines emphasizes. “The real thrust is in recycling. We need to keep finding ways to help others collect waste and recycle it.”

Recycling Success
While other firms turn to recycled material as a method for surviving the upheaval in the cost of components, Windsor Barrel Works in Kempton, PA, has seen perhaps less impact in the past year and a half on material costs because it’s always used recycled material. “Since we’ve always used recycled materials in our products, we’ve not had to shift from virgin to recycled content,” emphasizes Phil Haas, president. After noting that the company began its operation in 1983 by supplying its Clusters containers for public parks, it now has a second product line, Canables, with dozens of models and options. Canables are found at festivals and special events, as well as in permanent locations such as schools, factories, and offices.

When it comes to containers, service life is more important than offering the absolutely lowest price.

Windsor Barrel Works began by addressing public needs, but its expansion into commercial markets has boosted the company’s marketing strength. “Our Clusters line uses woodlike slats made of 100% post-consumer recycled plastic. Plastic lumber is attractive and resists cracking, fading, moisture, and stains,” says Haas. Maintenance is reduced, when compared with traditional wood. Plus, Clusters can be tailored to the customer’s specific needs.

This relatively small company, with sales of between $1 million and $2 million annually, might have struggled had it been struck by the sudden, dramatic price increase common with virgin plastic. Instead, Haas reports, “The cost of our components, whether recycled plastic or post-industrial aluminum, which is used for the Clusters framework, have remained relatively stable.” Naturally, as more and more companies consider adding recycled material to their manufacturing operations, the cost of recycled material will be impacted, but being first with recycled plastic and aluminum has bought Windsor Barrel Works vital time.

Haas continues, “Our products are finding a solid niche in public and private waste collection sites. They’re easy to set up and maintain. Shipping costs, possibly, have been the greatest impact we’ve had to deal with. Our steel products average approximately 30% recycled content, so there’s been an impact there. Fortunately, we have open-ended contracts with our suppliers that ensure they can continue to afford to supply the product we need and maintain the quality we require.

“Our newest products, Clear Canables, are made of 100% recycled PET plastic. They can be taken apart and easily warehoused between special events or festivals.” Haas adds that placing the containers generously throughout an event site encourages attendees to use the containers instead of trashing the stadium or field. Ditto for permanent placement in downtown areas, city squares, shopping centers, and malls. After all, when getting rid of trash is easy, people tend to heed the call to put their paper, plastic, and aluminum items in the waiting containers. “These are not carts on wheels. Their visual appearance catches people’s attention.”

Haas recalls attending a trade show where the convention center manager had placed roll carts around for both waste and recyclables. But many attendees brought their empty beverage containers to his exhibit and deposited them in his display containers. “These clear containers made a stronger visual statement than the more familiar wheeled carts. In the end, encouraging recycling helps boost the supply of material that likely will grow in demand as the cost of virgin material continues to escalate.”

Maintenance Ease
Tim Hubbard, who was a film and commercial actor in Nashville before joining the family firm of Hubbard Rapid Tool LLC in Michigan City, IN, says, “Our mission is to provide tools for applying and removing the push nuts that keep waste cart wheels in place. Our Rapid-Press installation tool and X-Press removal tool are both able to work with nearly any brand and size of residential waste collection carts. The X-Press can fit in the back pocket like a common wrench. Paired with the Rapid-Press, an employee can make necessary repairs in a matter of seconds.”

Hubbard reports his father Noah invented the tools three years ago. The tools are used primarily by cart customers who do final assembly after delivery of their cart order. “By leaving the wheels off, plants can better nest the containers for shipment. Then, when the order arrives, it takes just seconds for the assembler to lock the wheels in place safely and precisely.” Plus, the tools are light and easy to use and can increase daily production while decreasing the number of crew members needed for the task.

Even better, no power source is needed; thus, should a field repair be necessary for an existing cart, it’s not a problem. Hubbard concludes, “Only one man is needed to use the tools, which can be kept in the back of the truck or even behind the seat.”

So it is that regardless of the outside sources that hit the industry—including tsunamis and hurricanes—resourceful individuals will find answers to the new problems. They will use the challenges that confront them as stepping stones for success. MSW

Lynn Tilton is a frequent contributor to Forester Communications publications.

MSW - May/June 2006