Reverse Logistics - the Recycling Company Problem

Problems

The company only provides basic disposal services to its customers. Currently the company charges $350 per load to the customers and pays $200 per load at the depot; leaving $150 as margin to cover fixed overhead such as labor costs and company owned fleets. Profit stays low.

Causes

The issues derive from both internal and external.

Only providing basic services is the main reason why only low margin could be charged. This practice is extremely dangerous from the business operation point of view. First, since any supplier can perform the same type of work, customers can become solely price driven and could walk away to competitors at any time. Secondly, with this type of services, the company’s dependency to the recycling depot will never decrease. If at any point the depot raises their charges per load, it will leave the company with even thinner margin. Finally, although the owner has realized some new business potentials such as pickup and resell the used metals that are discarded by its customers, lack of industry knowledge and quantitative analysis hindered him and the company from actualizing the new idea.

Beside the internal reasons, external environment may have also placed influences on the issues. The government or regulatory agent may have not raised enough awareness from construction and demolition (C &D) industry, and due to lack of industry standards, the reuse and recycling of debris are not being handled in the most economic way.

Analysis

If the company wants to survive and grow, it has to enrich the services that it’s currently providing.

Beyond garbage pickup services, the company could make profits from managing, recovering and reselling construction and demolition debris. The materials that may qualify for this business approach includes but not limited to:

* For reuse: miscellaneous metals, bricks, carpets, insulation, plumbing fixtures, doors, cabinets, windows, light fixtures, ceiling, plywood, frames etc;...