Cleaning Up Internal Waste

By Larry Dignan  |  Posted 2004-08-25 Print this article Print

Cleaning Up Internal Waste

The WasteRoute project is part of Waste Managements 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 1998, No. 3 player USA Waste bought No. 1 Waste Management when the larger company was facing financial ruin, Securities and Exchange Commission probes and class-action lawsuits seeking undisclosed damages. USA Waste then adopted Waste Managements name and promptly stumbled, cutting earnings estimates three times in July and August 1999 for the quarter ended June 30, 1999. The class-action lawsuits soon followed; Waste Management settled them in November 2001 for $457 million.

In 1999, Waste Management began centralizing the company and revamping its management team. The goal: Give two decentralized businesses a common objective. 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. Before the restructuring, daily operations were conducted with customized IBM AS/400 software distributed to more than 400 remote servers. 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, which is similar to Mapquest, can account for parameters that influence routes monthly. For instance, when schools are in session, Waste Management doesnt 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.

Alex Popov, vice president of logistics at Waste Management, says the company is 60% done installing WasteRoute in its high-margin commercial accounts, 30% finished with its residential services, and is just beginning to roll out the software to its industrial customers.

Executives first tackled routes that were the easiest and most profitable. For instance, commercial accounts—strip malls, restaurants and small offices—are predictable because they have similar containers and regular pickup hours. Commercial accounts also generate more income because Waste Management hauls away more tons of waste with two or three trips to a landfill on average compared to residential.

The wild cards include blocked containers and new customer stops. Mileage is another issue. One driver may travel 150 miles to pick up 60 customers where another may drive 400 miles in a rural area.

For residential waste, the biggest change was more stops, potentially more drivers leaving cabs, and restrictions such as trash pickups on only the right-hand side of the street. The goal is to cluster customers in dense residential areas and reduce operating costs by traveling fewer miles as efficiently as possible.

The third target for WasteRoute will be the companys industrial business, which covers construction sites and manufacturers. WasteRoute needs to be linked with data throughout the day on driver location and incoming requests for service from the billing system and dispatchers, since routes arent planned in advance. Currently, Waste Management can upload and download customer information daily to WasteRoute, but it isnt a real-time link, according to Schmidt.

Surya Sahoo, IITs CEO, says there will be different constraints for the industrial business that will require a new algorithm. A typical industrial pickup vehicle can only service one container at a time, and 70% of the pickups are not scheduled in advance. An industrial container is picked up, emptied at a landfill and then brought back to the customer. Waste Management can also bring an empty container to the customer and swap it with the full one. When the container is emptied, the truck can go to another customer. The problem: Customers have different container sizes and service requirements. The new algorithm will also have to account for vehicle, container and material types, security clearance and weather patterns, Sahoo says.

Next Page: Throw out those pushpins.

Business Editor
Larry formerly served as the East Coast news editor and Finance Editor at CNET Prior to that, he was editor of Ziff Davis Inter@ctive Investor, which was, according to Barron's, a Top-10 financial site in the late 1990s. Larry has covered the technology and financial services industry since 1995, publishing articles in, Inter@ctive Week, The New York Times, and Financial Planning magazine. He's a graduate of the Columbia School of Journalism.

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