Challenging conventional wisdom: the art of the possible.

FINDING PROFITS IN WASTE

Mill managers who fail to recognize the real and total cost of waste are missing a great opportunity to improve profits. Unfortunately, we don't know what we don't know, and with respect to waste, frequently we have only scratched the surface on the true costs. Most mills don't go far enough with their War on Waste and are giving up income because of it.

Waste Reduction Opportunities

If you look, you will find waste reduction opportunities in every facet of your operation. Here are a few places to start the hunt:

* Unusable raw materials. If you pay $75 per ton for chips and accept deliveries with only 85% usable product, your real material cost is $88. By working with your suppliers to improve their quality to 95% usable material, you save $9 per ton. Technological advancement enables some equipment to produce a return on investment in short order. Stay current on what's available and what's possible to increase usable materials.

* Landfill costs. Disposal costs can run as much as 10% of manufacturing costs. That's huge. Look at per ton fees for municipal landfills along with labor and equipment required for hauling. Add on time and expense for obtaining necessary licenses. Industry best practices include operating your own landfill where you can cut municipal fees in half or more, turning waste into a profit center by creating soil aids or landscaping material, or mining current landfills to extract usable raw materials.

* Secondary Materials. Disposal of dunnage, damaged pallets, and cores for paper represents significant expense to the industry. Look into current options, some of which might cost more initially but save money in the long run because of a longer life or lower disposal cost.

* Inefficient manufacturing processes. Too often senior management chooses band aid approaches over capital investment to reduce waste. The cost of waste can be disguised as additional safety expenses or extra personnel costs. If you only focus on doing the same thing better to reduce waste, you will be missing the chance for a significant improvement.

Action Steps

In the mill:

If you are responsible in any way for your mill's profitability, continual improvements in waste reduction should be high on your priority list. You will find that the more you "peel the onion" the more opportunity you'll find for savings. In one instance, on the first pass the mill identified waste reduction opportunities that equaled 300% of profits. In the process of eliminating waste and looking deeper, they found more opportunity that equaled annual profits yet again.

Look at the long term with respect to your waste disposal requirements. In some cases, it takes years and millions of dollars to obtain necessary licenses. An increase in capacity may mean that you need to act sooner than you expect. Conversely, waste reduction steps taken now can save millions later.

Do not underestimate the size of the endeavor. This study is more than a few days or a simple spreadsheet. You must understand the operating implications of the changes you will make. For most mills, the rewards will be worth the effort.

In the North American Industry:

We are at a cost disadvantage globally because of the legislative issues that surround our environment. Our industry needs to work together to make sure that we deal with waste as smartly and efficiently as possible Action required includes more education on best practices in the industry and more benchmarking information available to mill operators.

A program called "Industries of the Future' has been initiated in some states. This effort shares best practices and innovative ideas on conservation and waste reduction across industries. One company in our industry saved several hundred thousand dollars within a few months by embracing an idea suggested by a different industry. Even though the program is endorsed by the AF & PA, many mills do not take advantage of it when it is available to them. Ultimately, the industry will make advances in waste reduction by looking with a fresh eye. We cannot let ourselves be constrained by conventional wisdom, and we must be willing to invest in new approaches to increase profits.

Doug Daniels bases his columns on a 40-year career in the pulp and paper industry. He currently serves as an advisor to Heads Up Systems, a company whose methods and tools enable operating managers to make better and faster decisions which, at times, challenge conventional wisdom while leading to greater profits. Send questions or comments to Doug at [e-mail].