A Dirty Indirect Spend Category With Significant Savings

The following story doesn't involve a Source One-led initiative, but details a savings initiative that impacted me personally. My neighborhood has a new trash provider (I can feel your excitement...).

The township where I live, in lower Bucks County, PA, has about 56,000 people in it living in 20,000 homes, and since 2011, has had its garbage picked up twice a week from a company I'll call Company A. Company A won the business by coming in $140,000 lower per year over Company B, who was, at the time, a 15-year incumbent. Their three-year agreement came to an end, and the project was put out to bid again. This time, Company B came in substantially cheaper, to the tune of $3.4 million (23%) less over the first three years, and took the business back.

So how did such a large savings come about? A number of factors:

• A usability study conducted throughout the township showed that most residents were not taking advantage of the second collection day (I certainly never did). Company B leveraged that study in its proposal to reduce collection days to one per resident.
• Company B will distribute large, single bins for garbage (95 gallon) and recycling (65 gallon). Company A planned to rely on the existing system of whatever bins the residents already had. This change had several benefits:
• The bins allowed for automatic collection via robot arm-equipped trucks, while Company A would still require manual dumping. 
• Company B's automated trucks require a two-man crew. Company A's require four or five men.
• The mechanical lifting allows Company B to remove bulk items during the regularly scheduled pickup. Company A's required a third, resident-paid, manual pickup, which added to their operational costs, and further cost to the residents. 
• Company B operates an incinerator nearby. The additional business increases the facility's efficiency, and means their trucks have to travel a lesser distance/use less fuel to empty. Both factors reduced Company B's costs, allowing them to lower their bid even further. 
• Company B proposed, and received, a five-year agreement instead of the township's usual three years.

So, to condense all that:

• My township took a look at its actual needs vs. what it always had done, and made a change. Altering its processes to accommodate a single trash pickup allowed the township to arrange significant savings with the service provider. By promising a longer term agreement, in addition to the day cut, the township leveraged loyalty for even more savings. 
• Company B streamlined its processes to facilitate lower-cost collection processes, and by factoring in some indirect benefits (smaller fuel budgets, higher usage of an existing, under-utilized facility) was able to make the more competitive offer.

With our own clients here at Source One, waste collection, and other rarely-thought-about indirect categories like facilities maintenance and MRO, are often ripe with savings categories. As senior project manager Jen Ulrich explains "With some indirect spend categories, like office supplies, procurement departments know there is savings from going to market and pitting suppliers into a competition. But with waste disposal and other facilities maintenance-related categories, they often don't take the time to search, simply going with the biggest name or the local provider. With the right market intelligence and a comprehensive analysis of the need and the market availability, these dirty 'hidden' categories can offer significant savings."

Have some indirect categories you haven't looked at in a while? You may be missing out on some savings. Don't have the time or manpower to dig around? Consider bringing in an on-demand resource that can do the rooting for you with a guaranteed ROI.