Warehousing, Labour & More: Scrap Collection & Aggregation India

Last week I wrote an article titled “Calculating Cost of Logistics: Scrap Collection & Aggregation India” as part of this four-part article series. This is the fourth & final article in which I will discuss about four critical cost heads and how selecting & managing them efficiently can translate not only into higher productivity but also profitability. As always, these learnings are derived from my personal failures & successes of over 15 years in the waste management field & the opinions in the article are strictly personal.

 This article will discuss the following points:

 1.    Warehousing

2.    Machinery

3.    Labor

4.    Administrative

 Warehousing: Man, have I lost productivity & money by selecting the wrong layout pertaining to warehousing. Many of you who are into the waste segregation business may relate to this & those who are looking to enter the sector, do pay attention! Your warehouse is a fixed cost, rent is due every month & this expense must be justified through selecting the correct warehouse to meet your needs & then efficiently managing it. Why is warehouse design & layout important? Well because, it helps you reduce costs while increasing your productivity drastically.

 Importance of warehouse layout & design: One of our oldest waste segregation and aggregation sites in Noida is a factory, which does not enable our trucks large or small trucks to enter the facility. This means that all goods loaded in the truck must be first unloaded outside the facility and then carried into the facility manually by labor. How bloody unproductive & cost intensive. So now like some of our other facilities across the country we are moving into a covered shed that allows our vehicles to enter the facility & unload the goods right next to our machines or areas demarcated from segregation. This reduces the cost of labor by at least 65% & increases productivity by upwards of 90%. Of course, the labor cost and productivity can be further increased if you have a tipping system on your vehicles. But most in this sector operate rigid body trucks which have to be unloaded manually. Imagine unloading cardboard first on the ground, then picking it up again and walking with to your bailing press. Now imagine unloading the load right next to your bailing press. Not only have you saved valuable time but also saved labor which can then be deployed to do other tasks. A lay out plan within your warehouse is also of outmost importance. Things that you should consider are: How do I demarcate different areas for different materials? Where should inbound and outbound goods be stocked? Unloading and loading areas? Waste segregation & value addition area?

 Cost Allocation: If you are planning to run a facility that will be managing multiple waste streams, like cardboard, paper, metals, plastics then the appropriate costs associated to warehousing must be allocated to those items. In order to derive these costs, you must first know the quantum of each type of waste that you are collecting & the cost of collection associated to them (Read How To Calculate cost of collection) First figure out the cost of collection, then the quantity collected monthly and finally the preprocessing cost at your warehouse. Stuff like, value addition, bailing, conversion and area occupied by each product.

 Machinery: Automation is the way to go! Not only will it reduce your labor costs, but will also increase productivity. How much you can and should automate depends upon the type of material that you are dealing with, the volumes & of course access to funding. You can get fancy with automation, so for the purpose of this article I will stick to what we are doing and the advantages associated with it. Our automation process starts with unloading. In many of our trucks, we have a jack system that tilts the body to unload the content onto the ground.

 The second process is that of segregation. This is manual, although there are fancy machines available out there if you can afford one to sort waste according to category, colour & type. In our segregation process for cardboard, the coloured is separated, brown board is separated and core pipe is separated. We also deploy a manual process because we want to recover as much fresh sheet cardboard as possible to sell directly to box manufacturers. This helps us increase our profits, as we typically fetch 30-40% more in selling this material directly to box manufacturers than to mills. These box manufacturers then use this material to make new boxes of different sizes.  

 Post the manual segregation, the material is then bailed using a two chamber semi-automatic bailer. This bailer has two rotating chambers, so while in one chamber the material is getting bailed, the other is getting filled. This insures a continuous cycle and labor is kept occupied throughout the process. The bale weighs around 200 kilograms and on average we send trucks with loads that very between 11 tons and 15 tons to the mill. In many places the process of loading such heavy bails is done manually, but the best option is to put up an overhead chain crane that is not only cost effective but also cuts down on labor cost while improving productivity and reducing the chances of injury.

 Type of machinery: This will solely depend on the type of material that you are dealing with & the quantity. For example, for PET, we segregate the coloured from the clear, have a label remover that removes the labels and then we deploy various process such as cutting the neck and shredding the bottles (only clear bottles are shredded). The coloured bottles are bailed in the same bailer. So, when selecting a bailer, try to select one that can bailer multiple items such PET, cardboard, metals etc. I will be doing a more in adept article on machinery in the coming weeks, focusing on bailers & PET preprocessing & recycling equipment.

 The important aspect to keep in mind here is that of cost of operations and maintenance. How many employees are operating the machine, how much electricity is it consuming (load per hour times the number of hours its operating) maintenance costs (hydraulic oil, servicing, wear and tear, parts replacement etc.)

 Labor: Labor is major cost head at any facility. How we break down our labor cost is in three different ways.

 1.    Segregation labor

2.    Bailing labor

3.    Collection labor

 Segregation labor: The labor segregating waste is paid a per kilogram rate not a fixed salary. We have found that they are lot more productive this way and they also end up earning a lot more than they would on a fixed salary. Of course, you need to ensure that you have enough material for them to segregate. We typically deploy contractors for this purpose who get paid a fixed per kilogram amount depending on the material that their labour segregates.

 Bailing Labor: Again, these individuals are paid on a per kilogram basis, depending on the material that they are bailing. They money paid to them also includes the cost of loading our trucks. Once again, these individuals work under a contractor and you need to provide them with a minimum quantity daily. If you don’t have the quantity, you can still deploy this method depending on your ability to convince your employees by showing them the advantages of this method. In most cases when quantity is less its best to stick to a fixed salary till such time as you build up to a certain level (7-10 tons a day of a single type of material)

Collection labour: These employees primary task is to visit the clients site and collect scrap. Their tasks include a quick segregation process at the clients site before loading the material onto our truck. For example, if it we are loading PET, they will insure that there is no liquid in the bottles, if there is then they would empty it out. If possible they would fill sacks according to colour so that the same does not have to be segregated at our facility. For cardboard, they carry a small box like structure, in which they manually bale the cardboard at the clients site and then load our trucks. They work ten hour shifts and are responsible for collection, loading and unloading of goods. If collection volumes are not present, then they can be used at the warehouse for various tasks. These employees are paid on a fixed salary basis. The number of employees that you use will depend on the type of collection activity that you are undertaking, plus the quantity of material.

To determine their cost, simple divide their monthly salary by 30 to arrive at a per day rate. Then multiply this rate to the number of employees being utilised and divide it by the total load per collection. If multiple collection then calculate the collection cost per load collected.

 Administration: Administrative cost would include, office staff, accountant, your salary, supervisors etc. This cost should also be incorporated into your final costing. We use a simple process for this. Add up all the administrative salaries and then divide it with the number of items that we are dealing with. We further break it down to arrive at a per kilogram cost per material depending on the volume in weight of the concerned material. The greater the volume the less the per kilogram cost, the smaller the volume the greater the cost.

 The waste collection, segregation, aggregation and processing business in India is mostly unorganised. This business is a volume-based business if you are planning to do most things yourself. There are many in the industry who outsource the entire activity, from collection to processing to third party vendors and keep a margin for themselves in between. The model you choose will depend on many factors including how much headache do you want to take, money you have access too & finally your long term vision of why you want to get into this business. Personally, we use a mix of both models and the decision is based solely on volumes and profitability. If you are sure that your third-party vendor is working within the legal preview, is doing exactly or somewhat close to what you would do, then outsource the work. Why re-invent the wheel! If the volumes are too little, outsource the work.

 Only set up your own infrastructure when you understand how the system operates, you are willing to take risk and ok with repeated failures. Through this series I have tried to touch on all aspects of running a scrap collection, segregation & aggregation business & I hope that this series has added value to you the reader.

Next week I will be deep diving into the world of PET collection, segregation & aggregation! Until then have a fabulously sustainable weekend!

Here is a list of articles that are part of this series:

1. The Business of Cardboard Scrap: India
2. Economics of Scrap Collection & Aggregation India
3. Calculating Cost of Logistics Scrap Collection & Aggregation India

 Manik Thapar (Founder & CEO)

 Eco Wise Waste Management Pvt Ltd.