Everyone from your Company’s CFO to the Purchasing Manager understands negotiating leverage based on volume. As Company’s grow they are able to gain more favorable pricing and better terms and conditions. What many Companies fail to realize when it comes to Waste & Recycling is that a “good” Management Firm is able to negotiate “much” lower rates than the Company would be able to achieve on their own. How much lower will depend on a couple of main factors.
When analyzing the right 3rd Party to manage your Waste & Recycling program, a couple of the main factors to consider are, how much business volume (number of Client locations) they manage “AND” whether they have a top-tier relationship with the Haulers. Both of these factors significantly impact their ability to negotiate the most aggressive rates with the Haulers. I made the “AND” big on purpose. Why? One of the interesting aspects of the Waste & Recycling industry is what Haulers value in their relationships with 3rd Party Management Firms. After moving past the obviousness of the Firm having to have been in business for a decent amount of time, with a good credit rating, etc., we get down to what makes the difference with Haulers.
Haulers respect, and will go the extra mile for, 3rd Party Firms who have a significant amount of business (i.e. Client locations in all 50 states), but actually more importantly… how consistently “AND” timely they pay their Client’s invoices (paid in 30 days or LESS). In other words it matters most to the Haulers that they get paid quickly and consistently. You would be surprised how many “very” large 3rd Party Management Firms “do not” get the most favorable rates from Haulers because they pay their Client’s invoices anywhere from 30 to 90 days “after” their due date. Haulers do not like having to be a Bank for these Management Firms, so one of the ways they make up for this is to charge them higher rates. A great way to check how Haulers feel about the Management Firm you are considering is to call the Haulers for references. I know it sounds weird but it will be invaluable to find out how the Management Firm “actually” conducts business with the Hauler, and especially if the Management Firm pays their Client’s invoices on-time.
So, how much does meeting the top criteria of Haulers impact a “good” 3rd Party Management Firm’s ability to negotiate the most aggressive rates? Believe it or not, a “good” Management Firm can negotiate rates anywhere from 30% to 80% lower than what the Company (with a self-administered program) could achieve on their own. Sound crazy? It might, but it is true. So before you put your next self-administered Waste & Recycling program on the agenda, remember just how much of an advantage a “good” 3rd Party Firm’s volume-based negotiation can benefit your Company. Why not finally make it easy on yourself and let a good 3rd Party Firm do the heavy lifting.
