The rise of Amazon and direct-to-consumer delivery gave rise to the supply chain concept of the Last Mile Problem, an operational attempt to constantly drive efficiencies up and costs down from the closest stocking location to a customer’s front door. “It is called the last mile, and it’s crucial to the future of all commerce,” said John Markman, a senior Forbes contributor in his essay.
Now the U.S. needs an equivalent focus resolving the First Mile Problem. How can we maximize the collection of reusable goods from US homes and get them into a reverse supply chain channel — a first mile of collection — and do so in the most cost-effective manner?
Solving the First Mile Problem, or how to get reusable goods back into a market channel and out of the landfill, isn’t a faraway goal — it’s possible today. The collection systems that are in place already for trash and recycling provide the foundations for a feasible take back operation, a reverse supply chain for reusable goods.
There’s a finite set of drop-off and pickup models in place for a community collection system, and tried-and-true methods for the USA’s trash and recycling are mature and efficient, processing 262 million tons annually in 2015, according to the EPA, and companies like Waste Management earning $15 billion in 2018. My city has issued me and all its residences a blue bin for recycling, a green bin for compost, and a grey one for landfill.
I also have other options for getting reusable goods back into a market channel, separate from trash and recycling collection. The largest option for most Americans is Goodwill, or other charities. By enabling me to drop off anything, an omnichannel for reusable goods collection, Goodwill has grown its network in 12 countries to divert 4 billion pounds of reusable goods from landfills in 2018 alone. Locally to me, there’s also multiple antique and resell retail shops in Portland, apparel drop-off bins in the neighborhood, and I can always post on Craigslist.
There are four basic models for establishing a collection system for reusable goods, based on a person’s drop-off location and the scale of the operation. Not all of them are currently in use at the same level though, and it’s in the less mature areas that a greater circular economy opportunity for reusable goods exists.
Private marketplace model
Craigslist and Rooster are two good examples of small scale Private Marketplace supply chain for reusables. For each listed item online, the final transaction is generally between one owner and one recipient, a 1-to-1 relationship, frequently without any kind of collection bin. Although Craigslist hosts millions of ads per month in the US, its private transactions approach doesn’t scale well, with so many transactions individually arranged and transacted, often in person and in cash.
My city also has several neighborhood ‘Free Libraries’ set up, decorated and posted wood boxes with shelves, where neighbors and anyone else can donate an old book or pick one up free of charge. It isn’t intended to be a coordinated scaled alternative to a library though. While there are several of them around, they aren’t meant to enable a tremendous drop-off volume nor a large variety of goods, and the drop-offs and pickup (collection) are random.
Both the Craigslist model for reusable goods, and the Free Library approach, operate well and are entirely feasible as models for transferring reusable goods. As a reverse supply chain though, they are inefficient and/or uncoordinated. In other words, Waste Management is not dumping research dollars into competing with Craigslist.
There are large volume retail operations that exist today for reusable goods, such as Goodwill. And smaller than Goodwill, but still viable in their own right, are other resell retail operations, like antique shops, and used clothing boutiques. Whether brick-and-mortar or online, this channel is already expected to top $24 billion for apparel alone. But with the millions of pounds of donations rising each year by 4%, many branches of Goodwill find that they are unable to even process their intake volumes.
It would be a wonderful trend to see new-goods retail locations, like Walmart and Target, act as collection points for reusable goods, to increase the number of possible drop-off locations. My local Goodwill region operates with 53 drop-off locations but there are 45 Walmart locations in Oregon and 21 Target locations in my metro area.
Curbside pickup model
As the current owner of something reusable, the easiest location for me to put goods back into a channel is at the end of my driveway, or at the end of my residence. Networks for collecting goods directly from homes, apartments, and businesses exist today; every week, at the end of my driveway, my city’s disposal department picks up a blue bin for recycling, a green bin for compost, and a grey one for landfill. This same bin approach can be used for reusable goods, a ‘purple bin’, for you to just as easily drop off your reusable goods, to be picked up by a separate organization, for an entirely different market channel.
Beyond a neighborhood, there’s currently one example of nationwide curbside pickup for reusable goods. Every May, the US Postal Service in more than 10,000 cities and towns across America collects food for its Stamp Out Hunger National Food Drive, the largest one-day food drive in the nation. Strip out the mail delivery. What if that approach existed weekly or biweekly to pick up your purple bin of reusable goods?
Neighborhood dropoff model
At the end of my block is a steel drop-off bin for apparel only, that stands about six feet high. A non-profit called Gaia Movement collects donations in its bins across the region, using a one-person crew and a small commercial truck. With its bins in place, Gaia has established a drop-off and pickup collection system, a small-scale, yet impactful reverse supply chain. Unlike the curbside pickup model, which maximizes the number of collection points for a neighborhood, this model reigns in the number of collection points and gives drivers just a few pickup locations for a neighborhood. It also requires residents to walk or drive over to the collection bin, but this travel, completed by the donor, makes this model a relatively cheap model versus the curbside pickup model or the retail model.
Goodwill has about 50 drop-off locations for my region, and more exist via resell retail shops. The neighborhood drop off bins, in our research, enabled this model to scale to many more collection points in a way that retail operations can’t as easily. A bin doesn’t have retail overhead nor employees at each location.
These four models for approaching the First Mile Problem leverage existing collection systems. Both the retail model and the private marketplace model are mature and yet we don’t have a channel for reusable goods that can scale to a disruptive level of greater volume.
Existing collection systems show the other two models are operationally feasible, and yet they aren’t fully exploited today. The curbside model maximizes convenience for the original owners but at a high cost for the collection system’s number of pickup points. The neighborhood drop-off model strikes a balance between the number of collection points, the startup costs, and the residents’ ability to easily drop off reusables.
As an approach, the neighborhood drop-off model’s most resolved the First Mile Problem, achieving costs about 30% cheaper than the curbside model per pound collected. By having donors amassed to a number of collection points between a curbside model and the retail model, this model balance the costs of collection versus the volume of material collected.
Adam Gittler is a Principal Consultant, with 25 years of experience in global Supply Chain operations and Continuous Improvement roles, and an adjunct professor in the Portland State U. Graduate Supply Chain Management program. His previous work includes director-level roles in lean six sigma, quality, international operations, and regulatory affairs, with expatriate assignments in Shanghai, Tokyo, Hong Kong and Malaysia.
He holds masters and bachelors degrees in engineering and operations, and a UC-Berkeley MBA, with experience in multiple industries including apparel, medical device CFR 820, food and hazard analysis critical control points, energy, public transit and automotive.
Categories: Faculty Research