Recycling Quality

Recycling Quality 1

Recycling Quality
Steven B. Kramer, Nova Southeastern University
Carolina De Leon, Nova Southeastern University
Bruce Wills, Nova Southeastern University
Cindy Silva, Nova Southeastern University

It was the end of 2015 and John Perry, Manager of Waste Management s (WM) newest
material recovery facility1 (MRF, pronounced “murf ) was concerned about the
sustainability of the MRF given changes in demand and competition. WM serviced
municipal waste and played a critical role in the recycling supply chain of the reclaimed
materials markets. “The municipality s goal to recycle, was independent of demand. It
was not a supply and demand driven market. … the expectation [was] that if we collect
it then someone will need it somewhere, Perry expressed.

For a number of years, paper recyclers in China, the MRFs primary customers for
fiber (cardboard, newspaper and mixed paper), were rejecting or downgrading
container after container due to quality issues. That was the start of many changes in
the reclaimed materials markets. MRFs were springing up all over the world and by
the end of 2015, world-wide fiber commodities pricing was in decline and fiber
represented 50% by weight of Perry s recycling collections.

It was harder and harder to break even, but profitability was only a crude litmus to
Perry as an indicator of the viability of the Pembroke Pines, Florida MRF. He was
tired of reacting to crises. He was concerned that the processes of collection and
sorting were not necessarily aligned to the value proposition of recycling. Perry was
hired in 2011 and while Perry had no prior experience in the solid waste management
field, he was a six sigma process expert from automotive assembly and manufacturing
and he understood the importance of quality.

Perry started a sampling initiative at Pembroke Pines in 2012 to characterize the
collected materials in the loads from the municipalities but had yet to look at that data
closely. He felt it was time to analyze that data to develop an understanding of quality
as it related to the various stakeholders. Perry wanted to pinpoint what quality was,
for whom and move to implementing a quality management system. He was
accountable for the bottom line of his MRF and was in many regards his own small
business: expected to be and remain viable by his regional management. He had the
autonomy to implement changes as long as they didn t require unbudgeted corporate
resources. That was fine with Perry, he knew the issues here were not strictly a function
of capital equipment. Perry knew he was not dealing directly with quality in recycling.

Perry had to decide what to do next.

—————————–
Copyright © 2019 by the Case Research Journal and Steven B. Kramer, Carolina De Leon, Bruce
Wills and Cindy Silva.

1$����

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2 Case Research Journal x Volume 39 x Issue 2 x Spring 2019

T H WM W RHE ISTORY OF AND ASTE ECYCLING

During the 1950 s, the waste industry consisted of many local and regional collection
companies. WM was created in 1968 in Chicago when H. Wayne Huizenga merged
with Dean Waste Management and Larry Beck s disposal companies2. The company
pursued an aggressive acquisition strategy, expanding beyond Chicago and went public
in 1972. In 2015 WM was a multinational corporation with waste collection, landfill,
and recycling operations throughout North America. WM s focus was service
operations–their 35,000 employees were mostly collectors and truck drivers.

Perry believed that the recycling industry was not born out of a customer need for
recycled commodities. Perry called this the “municipality s pursuit of environmental
goodness … they [were] trying to divert things away from landfills and make sure that
they [were] used. Municipalities paid for this service. Depending on the diversion
level desires of the municipality (which was specified in collection contracts as
minimum requirements), this impacted the costs. If the collector was able to offset
their additional collection, as well as the MRF sorting and baling costs by selling some
of the collected materials, then the municipality might receive a rebate, effectively
lowering the total cost to the municipality for disposing of the entirety of their solid
waste. If there was no market for the separated materials and/or the price did not
cover the additional processing costs, then the MRF transferred those costs back to
the municipality, increasing the net disposal fee for their solid waste. According to
Perry, “aside from … the price point of that commodity the [sorting cost] is not tied
to a price point. [The municipalities] don’t really care how much commodities are
worth they still want to divert it.

The industry was concentrated in the hands of a few recyclers up until the mid-
1990s. “As late as 1995 there were really only five single-stream recyclers in the US. By
2001 there were 70 and there were 160 in 2006 … it was a big change that … really
occurred recently, expressed Perry.

WM responded to demands for recycling by building or acquiring “single-stream
and “dual-stream MRFs. In 2015 WM operated approximately 50 single-stream and
30 dual-stream MRFs. In single-stream recycling, the homeowner deposited all
recyclable materials in one container, separated from their household trash. Dual-
stream recycling placed the onus of categorizing and separating the recyclable materials
on the homeowner: typically, glass, plastic, and aluminum were co-mingled and
separated from paper products.

The business model was “fee for service, meaning customers specified what and
when they wanted service and WM responded. WM s first automated single-stream
plant opened in 1993. Historically, recycling plants processed approximately 15 tons
of material per day and this was accomplished by manual sorting. This was a stark
contrast when compared to a 2015 normal, large-scale facility such as the one in
Pembroke Pines, Florida, which typically processed approximately 450 tons of material
per day. There were few viable alternatives to recycling services or landfills for
disposing of solid waste and so MRFs became integral parts of the community.

Perry believed that WM entered the recycling business “naively without a full
understanding of the complexity of the supply chain. WM was familiar with the
collection side, but “there was so much more to it than that, Perry recounted.
According to Perry, WM s MRFs “evolved over time. He reflected on the WM
evolution.

WM created a corporate group in approximately the year 2000 to figure out
MRF design and operation. They formed a group called WMRA, … kind of

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Recycling Quality 3

an independent subsidiary … like a little think tank and gave it gave [MRFs] a
kind of opportunity to grow. They pushed very hard for single-stream
recycling [as opposed to dual-stream]. This group was in place for
approximately 10 years.

Each MRF manager was responsible for regional customer interaction including
negotiating the contracts with the municipalities and managing capacity to the varying
level of daily collections. Each local WM business manager was also responsible for
both short- and long-term strategies to meet the corporate WM goals. WM s corporate
business unit set WM MRFs overarching recycling goals including residue percentage,
system effectiveness, and revenue growth (in addition to WM corporate goal of safety)
and reviewed them monthly. System effectiveness measures included equipment
uptime, tons per labor hour, tons per production hour, and quality composition audit
(sampling) data by commodity including residue. Safety (training, incidence, etc.) was
deemed to be of primary importance. Each MRF was expected to project monthly
performance and account for the previous month s performance. Corporate
management compared site performance and looked for opportunities to leverage best
practices from other WM MRFs.

COLLECTION PROCESS

Each municipality contracted for curbside pickup of single-stream recycling material
with a collection company. The “collector was a collection company, a transfer
station, or even a MRF with collection capabilities (See Figure 1). A transfer station
was a place that consolidated large amounts of materials – typically both recycling and
trash for subsequent transfer to MRFs and landfills. The recycling collector might not
be the same as the household garbage collector. The municipality could split their
sourcing of recycling collection service within their region, each contracted separately.
These collection contracts were not standardized, so each municipality was likely to
have a unique style of contract. Pricing was always clearly stated in the contracts: all
contracts included some type of rebate agreement as a function of the collected
material composition. The contract duration varied from 1 – 10 years and some had
auto renewal clauses at the sole discretion of the municipality. The dated contracts
typically included a fixed rebate and did not account for recent collection practices or
changes in commodity values, nor did they incentivize the municipalities (residents) to
improve on material quality. Perry noted that these contracts were born from the
“early days of recycling when demand (and prices) for MRF sorted materials was high,
globally, and quality expectations were low. He also knew that the residents were not
part of the bid request and evaluation process, these were handled by the administrators
in each municipality, so any resident interests (such as ease of collection safety, ease of
storage/sort at residence and percent of household waste recyclable ) outside of
collection costs and rebates were not considered.

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4 Case Research Journal x Volume 39 x Issue 2 x Spring 2019

Figure 1 Municipality Agreement

Source: Author

In a similar fashion to the municipalities, the collectors created their own contracts

with transfer stations and/or MRFs to receive their collected recyclables from the
municipalities (See Figure 2). Transfer stations then contracted with hauler(s) to get
their consolidated materials to one or more MRF. Recycling materials sent to MRFs
were hauled mostly in 100 cubic yard bulk trucks.

Figure 2 Collector Transfer Process

Source: Author

Adding to the agreement complexity, collectors could subcontract some or all their

collection, transfer stations used their own hauling trucks or subcontracted some or all
their hauling, and MRFs used their own trucks for both collection and hauling or chose
to subcontract.

Perry s MRF assessed a tipping fee based on a pre-agreed price/ton for each third-
party delivery to the MRF. The MRF provided load quality feedback to all suppliers

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Recycling Quality 5

of deliveries (based on load quality sampling data) in addition to penalties/rebates as a
function of the terms of the contracts.

EMBROKE INES P P MRF

The Pembroke Pines MRF was originally constructed in the 1990 s for another
purpose. It was converted to a MRF in 2008. It was designed expecting 60 to 70
percent newspaper, however in December 2015 newspaper (ONP) was running 20 to
25 percent. The Pembroke Pines MRF processed solid materials such as paper,
plastics, and aluminum from many south Florida municipalities residential recycling
collection points. It was a single-stream recycling facility. Facilities such as the one in
Pembroke Pines used various methods (manual and automated) to separate the
material into individual commodities.

When a truckload of recyclable material arrived at the MRF, the truck dumped its
load onto the tipping floor (See Figure 3). Regular garbage trucks carrying single-
stream collections drove through and disgorged their load unassisted, while larger
trucks required a hydraulic lift to empty their trailers and thus, were “tipped.

As a pre-sort process, the tipping floor operator then mixed the piled material to
more uniformly distribute its contents using a very large front-end loader. The
operator would then scoop the material onto a conveyor running at just over six miles
per hour (about nine feet per second), feeding a stream of one ton per minute to the
downstream continuous sorting process. This speed reflected the original design of
the Pembroke MRF based on throughput requirements to support customer quality
requirements, anticipated local market single-stream market, standard sorting cost-per-
ton metrics and profitability. Operator loading was based on the December 2015 20%
by weight residue yielding 0.1 ton or 200 pounds of residue per minute to be removed.
This required six people picking at the standard (based on Industrial Engineering work
sampling methods) of 35 picks per minute per person.

There were several measures of efficiency or effectiveness checkpoints throughout
the sort process: in addition to visual assessment of the flow of materials on screens
and bottleneck areas, the MRF conducted conveyor audits of glass and residue, paper
bale composition, bales per hour and moisture measures on fiber bales. Assessing
quality and projecting profitability was difficult. According to Perry, this was linked to
the philosophy of each municipality s desire to recycle.

In municipal recycling there was this expectation that if we produced it,
somebody was going to need it somewhere. There were no signals from the
marketplace to help determine what the quality should have been or what the
price point should have been that actually tied back to that municipality. Our
revenue came from the commodity we sold so it was really important to know
the quality, the composition, and even the average material value of that
[collected] material. Although you saw a big pile of what looked like garbage it
had a value – like if you had a pocketful of change: you knew the value
depended on how many quarters you [had] and pennies in that combination.
It was the same thing with the [single-stream] material that came in [to our
MRF].

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6 Case Research Journal x Volume 39 x Issue 2 x Spring 2019

Figure 3 – WM S e-Stream Processing3

Source: Company website: http://www.wm.com/thinkgreen/how-we-thinkgreen.jsp

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Recycling Quality 7

The most valuable commodity was used beverage cans (UBC) that often topped
$700/ton in sales price. UBC only accounted for approximately 1% of each load by
weight, but almost 20% of the load s value. The non-fiber, plastic (valued at $200-
$300/ton) and metals, were not affected by moisture. The primary customers of
plastics and aluminum cans were in the southeast United States. Approximately 40%
of revenue for Pembroke s MRF was derived from the sale of baled fiber commodities
(OCC, ONP, MixPpr) which in December of 2015 was valued at $75-$110 per ton.
Ninety percent of Pembroke s sales of baled fiber were to customers in China. In late
2015 their contract specifications were reflecting significant increases in quality levels,
specifically reductions in organic and non-organic contaminants, as well as moisture.

“Residue was defined as any material that was not recyclable, therefore, less was
better. It was measured by accumulation (weight) after the MRF sort and calculated as
a fraction of the original sort weight input. It did not include any loads shunted directly
to a landfill rejected prior to sorting as unsuitable for processing. Residue level in
December of 2015 was approximately 20% by weight of the received materials.
Generally, each individual MRF manager at WM determined the best strategy for his
or her MRF to minimize residual. Residents were major contributors to the residual
level, putting trash or contaminated recyclables (like a cardboard pizza box with food
waste) in the recycling bin. The recyclable fiber materials (newspaper, cardboard and
mixed paper), when not contaminated with trash waste, were susceptible to moisture
contamination.

The MRF paid to haul away the residue to a landfill or a close by waste-to-energy
facility. Generally, WM was able to haul the residue to a WM landfill, but it still
represented a loading and hauling cost. The WM landfill total capacity (and revenue)
was reduced to accommodate this WM-owned residual. The waste-to-energy facilities
charged significant tipping fees and in addition their rebates were a function of current
energy costs (their source of revenue) making this option on par (regarding cost) with
disposal in a landfill.

Glass, a material often perceived to be recyclable, was detrimental to the WM MRF
profitability in 2015. Glass items broke throughout the separating process, tore up
rubber conveyor belts, spilled out through small crevices, and created heavy (typically
making up 15% of the incoming stream s weight), difficult piles to clean up under the
equipment. Glass fines (small glass shards) were indistinguishable from dirt and were
contaminated with a variety of materials. Likewise, the glass fines became embedded
in the fiber materials, contaminating them. The abrasive glass-based dust reduced the
life of all mechanical systems and surfaces it encountered including the cement floors
and hauling truck beds. The glass was separated into bunkers where trucks arrived
daily to pick up loads. The cost of sorting and then hauling the glass to a customer
that would use it was only partially offset by that price the customer paid, however was
less than the disposal cost in a landfill. The glass “value was therefore negative at this
facility. The time and effort required to clean up glass piles and repair equipment made
the glass a challenging commodity to manage.

Perry also faced a continually fluctuating price for their processed, baled materials
(prices as of the December 2015 are in Table 1). In addition to supply and demand,
material integrity significantly impacted prices of the shipped commodity. Thus,
Perry s operation had to keep the commodity bales pure and keep the fiber bales dry
to get the best price at the market. Recycled materials from residential collection were
generally sold as “low grade product to their recycling customers. Most commodities
were also available to recyclers in higher grades from other sources. For example, retail
stores that sorted and baled their own cardboard (OCC), would be able to command a

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8 Case Research Journal x Volume 39 x Issue 2 x Spring 2019

higher price because it was generally free of non-cardboard contaminants and
protected from moisture. The MRF s burdened sorting price for received material was
steady in 2015 at approximately $60/ton (including the cost of overhead, facilities, etc.).

REGULATIONS

Municipal waste disposal was heavily regulated including restrictions on handling and
disposing of hazardous materials. The MRF operated under these same restrictions.
Like municipal waste, hazardous recyclable municipal waste was prohibited from the
single-stream collection, but scrutiny was typically in place only at the MRF, and not at
other points in the collection stream (e.g., transfer station or curb side). The MRF
regularly received a variety of hazardous materials mixed into the collected stream such
as syringes, car batteries, and chemicals which added to the challenges of MRF
management. MRF employees removed those hazardous materials from the stream in
accordance with the federal and state regulations of hazardous waste handling. The
MRF was then required to send them to appropriate disposal areas. The MRF
mandated employees wear personal protective equipment and be trained in handling
hazardous waste.

In 2008, the Florida Legislature enacted House Bill 7135 which created Section
403.7032, Florida Statutes. In this bill, the State of Florida listed a goal of recycling
75% of all municipal solid waste material and sending only 25% to the landfills before
the end of the year 20204. This legislation mandated municipalities to adopt the state
goal but allowed each to set their own county goals on how much material they should
be recycling. WM as a recycled material handler became responsible to provide
tonnage tickets (receipts) to the municipalities to enable their diversion percentages to
be calculated and reported back by the municipalities to the state. Those tickets,
however, were only required to list the tonnage amounts received at the MRF, not the
fraction of the receipts truly recyclable. In 2015, the Florida municipal recycling rate
was listed as 54% according to the Florida Department of Environmental Protection5.
While waiting for this loophole to be corrected, Perry s MRF took it upon itself to
provide its receipt tonnage tickets as recyclable materials only.

HB 7243 passed in 2010, followed up on HB 7135, amending Subsection (5) of
section 403.7049, Florida 276 Statutes applying to county owned MRFs and provided
a precedent for commercial MRFs to negotiate contracts based on the received
recyclability of materials. It did not just acknowledge residue in terms of recyclability
of the commodity, but also the quality of the commodity as in the case of fiber.

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Recycling Quality 9

Table 1 – Material Re-Sale Value per Ton (12/2015)

UBC
Used Beverage

Cans
$1300.00

ScrpAlu
Scrap

Aluminum
$753.80

HDPE-N

High-Density
Polyethylene

Natural, Plastic 2
$538.80

HDPE-C
High-Density

Polyethylene
Pigment, Plastic 2

$437.60

PET
Polyethylene

Terephthalate,
Plastic 1

$193.60

BlkyRgd
Mixed Rigid
Plastic

$116.00

OCC
Old Cardboard

$88.75

MixPpr
Mixed Paper

$88.13

ONP
Old News
Paper

$79.00

ScrpStl
Scrap Steel

$76.72

Aseptic
Aseptic/Gable top

$71.67

Plastic 3-7
PVC, LDPE,

Other
$30.00

Tin
Tin/Steel Cans

$22.08

GP-3Mix
Three Mix Glass

($12.00)

RES
Residue
($54.00)

Source: Author

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M M S FANAGING OISTURE IN OUTH LORIDA

MRFs in South Florida faced unique challenges in the form of wet weather. The wet
season, spanning May through October, saw roughly 75 percent of the area s expected
60 inches of annual rainfall. Much of that came in heavy downpours with high winds.
Windy, wet weather increased the likelihood that the material arriving at the MRF was
exposed to excessive amounts of water. Wet material (both within the MRFs and at
the final customer s location) clogged processing chutes and required a partial or total
system shutdown to clear each obstruction. Fiber also lost much of its physical integrity
and tended to disintegrate in the mechanical sort process when it was soaked and
reduced it from a sellable commodity to RES (residual). MRF s customers for fiber
(paper – either mixed paper, coded MixPpr, or old newspaper, coded ONP, and old
cardboard, coded OCC), included moisture tolerance limits for the material in their
contracts. Assuming the material survived the sort, if the material was baled wet, the
bale s weight was exaggerated due to the water content. An even bigger concern was
that wet fiber deteriorated quickly into compost. The process of creating compost
involves four main components: organic matter, moisture, oxygen, and bacteria. South
Florida had plenty of each in its wet fiber and it could take weeks for the baled fiber to
reach the customers, primarily Chinese companies. Transport in steel containers also
promoted the formation of condensation on the interior of the container which was
then absorbed into the interior of the bales, exacerbating the overall moisture level and
resulting in moisture level measurements even greater than when shipped.

Customers could downgrade the quality of material upon receipt. In the case of
fiber, the common moisture tolerance was 12%. When a customer downgraded
material received, the price per st (st = short ton, 2000 lbs) was reduced from the
original agreed price or the MRF paid a credit for the variance (See Figure 4). During
2014 Pembroke Pines paid back credits of $50-$100K.

PERRY S CHARGE AT PEMBROKE PINES MRF: IN SEARCH OF
QUALITY

Perry was recruited because WM wanted a manager who understood quality and
continuous improvement. The Area Director at the time, wanted to model another
MRF located in Twin Cities, Minnesota, one where continuous improvement efforts
and methodologies were embedded in processes. Perry came with quality expertise
from the automotive and manufacturing industries.

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Recycling Quality 11

Figure 4 – Detail of Downgraded ONP (Old Newspaper)

Source: Company documents

Within the first month of his hire, Perry visited the Twin Cities MRF. He saw that
the manager developed a scientific approach to its sorting process management and
designed “composition audits to understand what materials were in the pre- and post-
sorted collected material optimize their sorting operations. Perry came back to
Pembroke and instituted similar audits. The Pembroke MRF had no quality system in
place upon Perry s arrival. There was no process documentation, there were no quality
standards. He recalled,

When I was brought here from outside of the industry as a manufacturing
person that managed processes, a key measure for me, especially, was how
many widgets we made that month and what my necessary labor cost was …,
but quality measures were really important. When I worked for a company that
was a supplier to the automotive industry the key measure as a manager was
your quality record and not so much profit and loss because you were making
a component within a larger assembly. … You really were focused on process
and gave little thought to the expense side of things.

In this environment it was almost the opposite, we were very accounting
focused not process focused. I couldn t look at the end of the month and [use]

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12 Case Research Journal x Volume 39 x Issue 2 x Spring 2019

how much money we made [to determine] if we did a good job – that [was] no
way to run a business. I was trying to find out how [to] get my hands around
this and in digging in I didn t see any metrics whatsoever except for how many
bales we produced every day. I started looking for was how I [could] tell in my
paper, for instance, what percent of it was actually paper once I separated a big
pile of mess [incoming material]. How [well] did I do in separating paper out
of the plastic and plastic out of the paper?

Perry started by measuring –

We took a bale and broke it apart and then weighed everything. That gave us a
measure that we could look at on a daily basis to tell how well our equipment
was being adjusted and what impact different material may have had on the
sort to be able to adjust a process or repair equipment more promptly. That
then naturally led to the next hurdle: what was the specification (from each
customer) for each commodity?

Perry implemented standard procedures and visual reference signage as well as
audits of methods upon arriving at Pembroke Pines. He also instituted “pre-shift
huddles to facilitate communication …