If You Really Want to Reduce Costs, Reduce Waste!

SI recently asked if you, like your peers, were chasing the lost cause of cost reduction, giving the recent findings by Supply Chain Insights that, from 2000 to 2011, 75% of companies in process industries lost ground on margins despite best efforts to reduce costs over the last decade or so. That being said, there is one cost that can be reduced -- and that's the cost associated with waste.

As per a recent article in Forbes on How GM Makes $1 Billion A Year by Recycling Waste (which should be titled how GM reduces costs by $1 Billion a year) that referenced a GM media publication on how GM Makes the Business Case for Zero Waste, the US generates 7.6 Billion tons of industrial waste a year that ends up in landfills. Given that the average tipping fee for a ton of waste exceeds $53/ton, industrial manufacturers are wasting over 402 Billion a year!

And that's the losses assuming that the best that could be done with the waste is diverting it from the landfill. If the waste is scrap steel, which can be melted down, or cardboard that can be recycled, or smaller batches of chemicals that can be resold, the cost reductions can be extremely significant. Furthermore, 98% of these cost reductions go straight to the bottom line. As per the GM press release, the waste manage costs associated with its mature waste management program are about eighty cents per ton of solid waste reduced! In other words, in the long run, it costs pennies to save tens of dollars (and at the rates tipping fees are increasing and metal costs are rising, it will soon cost GM pennies to save hundreds of dollars). And once GM converts the other half of its manufacturing facilities to landfill-free facilities, it's savings will double!

So if you really want to reduce costs, stop burying your money in landfills.

 

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