Waste Management Fleet Seeks to Eliminate Waste
Kristine Schmidt plays a variety of roles depending on what the day has in store for her: project manager, logistics and operations analyst, information-systems expert, or interpreter between top Waste Management Inc. executives and the folks driving the company's trash collection trucks, according to the eWeek Web site.
As fleet optimization manager for the New Jersey market area, her job is to free colleagues such as Steven Masterson, senior district manager for Waste Management of Delaware, from using highlighters, string, pushpins, and maps cut into pieces and then pasted together to create routes for his drivers. Those were Masterson's tools until early last year.
"Our system was antiquated," says Masterson. "By the time we were finished, six months to a year later the routes had to change [due to new customers and acquisitions]." Enter Schmidt. Her goal was to centralize the most basic, and arguably the most important, process the trash-hauling giant faces every day: the sequence of stops each truck must make to pick up the daily refuse of American life.
It's no small issue. At the end of 2003, the company operated 18,850 routes in every state in the U.S. Eliminating one route, which includes a truck, a driver, fuel, and maintenance, can save waste management $10,000 a month. That's $120,000 a year per route. In 2003, Waste Management was able to save $18 million and is on track to save $44 million in 2004, a boost of 7 percent for a company that earned $630 million in 2003. Over a five-year period, Waste Management plans to save $498 million on operations, resulting in a cash flow increase of $648 million.
Not bad for a $10 million initial investment in a homegrown application it now calls WasteRoute.
Each of the company's 66 market areas—with a geographic region such as New Jersey and Delaware comprising an area—includes an average of 285 routes. Rerouting the trucks in a given district took six to 12 months five years ago; now, it takes four weeks. If the company can map the route system efficiently, the savings can last a year or more.
The WasteRoute project is part of Waste Management's effort to instill management rigor to a company that in the 1990s was muddled by hundreds of acquisitions—one a day on average in 1999—shaky accounting practices, weak internal controls, and investigations by state attorneys general.
In 2002, Waste Management collapsed more than 1,200 operating sites into what are now 66 market areas such as the New Jersey/Delaware region and Northern California. It also consolidated its information systems. Today, Waste Management operates under a consolidated, internally developed system for accounting, billing, and customer service dubbed MAS. The system is centrally distributed to market areas and districts.
Those consolidated systems feed customer data into WasteRoute, which then maps the information to a route. The application, similar to Mapquest, can account for parameters that influence routes monthly. For instance, when schools are in session, Waste Management doesn't pick up schools' trash during recess because of safety concerns. In the summer, school pickups drop from five days a week to one or two, and timing is more flexible. At the same time, pickups increase at resorts along the shore.
When changes are needed, a manager can add parameters such as road construction and generate a new route. Customers, meanwhile, expect drivers to hit designated times for certain pickups. "In Delaware, people set their watches by the mailman and the garbageman," Masterson says.
The industrial rollout offers more of a challenge, but Waste Management executives are confident after recent successes.
To verify data, Waste Management drivers fanned out with Nextel phones that can capture the coordinates of any spot on earth and relay it by satellite to the company's databases. Drivers simply pressed a button whenever they passed a new address. The process confirmed the location of commercial and residential sites, and allowed the company to cluster addresses.
Also entered into WasteRoute were the type and size of waste containers — larger ones for commercial, smaller for residential — and estimated time to serve based on driver input. Once the data was entered and functional, Schmidt and the managers set about selling the system to drivers.
To alleviate drivers' first concerns, Waste Management made it clear that WasteRoute would not eliminate jobs. The system cut routes, but reallocated drivers and trucks. Any job losses would occur through attrition. Waste Management started the project with 19,600 routes and plans to end the year with 15,000.