This blog is the second in a series on The First Mile Problem and how to solve it with a reverse supply chain. The first post explains why this model is a solution to today’s reusable goods challenge, and the third assesses how the program could be applied in Portland, Oregon.
Solving the First Mile Problem, or how to get reusable goods into the market and out of the landfill, isn’t a faraway goal — it’s achievable and cost-effective today using a geography-based reverse supply chain. To test this idea, I worked with a group of graduate supply chain management students at Portland State University’s School of Business to prove out the operational feasibility study. Here’s what we found:
An area-driven reverse supply chain can keep reusable goods out of the landfill
Our feasibility study utilized two models:
- A curbside pickup model, with a purple bin placed at the end of each driveway, just as with standard glass or recycling pickup.
- A neighborhood drop-off model, in which residents of a local area drop off items in a larger container similar to those used by Gaia Movement. A single pickup container could serve an entire neighborhood or apartment complex.
We interviewed leaders at commercial and municipal waste collection companies, and at donation organizations to determine typical collection variables and their costs. For each scenario, we examined pickup truck size, gas cost, mileage to return point, people per square mile, total square mileage of area, average pickup truck speed, insurance cost, staffing levels and costs, bin pickup time, and the cost of each bin.
After assessing variables, we settled on these assumptions:
- Purchase of used 20-ft. and 17-ft. trucks for $16,000 or less. The curbside pickup model requires two 20-ft. trucks, while the neighborhood pickup model requires one 17-ft. truck.
- Hire one driver per truck paid at $17 per hour.
- Purchase of collection bins, costing $4 per plastic residential purple bin and $2,000 per neighborhood steel drop-off bin.
- Delivery of reusable goods to a single central collection facility approximately five miles away.
- No payment to donors for their goods — all reusable products are given away freely, willingly.
- 6,000 people live in a square mile, based on the density of a typical Southeast neighborhood in Portland, Oregon.
We also assumed that all donated goods would be items asked for by an organization, so no sorting would be required. For example, a homeless shelter could request only socks and luggage, so only those items should be put into the collection bins, but of course mixed items would increase cost and the need for sorting. Our supply chain assessment didn’t include any administrative costs such as warehousing, program managers, or other employees.
Our results showed that the area-driven reverse supply chain is an effective method to divert reusable goods from the landfill and get them into the hands of those who need them, and is line with other similar pickup companies operating today:
- The curbside pickup model could operate with $160,000 in start-up costs and a $290,000 annual operational budget, with pickup costs averaging 25 cents per pound.
- The neighborhood drop-off model could operate with 15 bins for $25,000 in start-up costs and a $50,187 annual operational budget, with pickup costs averaging 17 cents per pound.
Success hinges on overcoming three key challenges
As we developed the model, three key challenges emerged that must be solved for it to be successful:
- Identifying the reusable goods: The receiving organization and its beneficiaries goods set its parameters for use, and therefore the donation parameters, not donors. Identifying and creating the demand for the donated product mix is set by the receiving organization, and precedes the need for the collection system.
- Sorting donated goods: The model assumes that only the items asked for by the requesting organization are put into the bins. This would be a significant change from the current state of recycling. Currently, about 9% of Portland’s recycling is actually trash, and that number is even higher in other areas: Medford Oregon’s Rogue Disposal and Recycling recently found that 24% of its recycling was made up of non-recyclables. It’s likely that rollout of the model would need to be paired with a strong communications campaign to ensure donors understand how the bins should be used, e.g. a Facebook group.
- Distributing goods effectively: We estimate that more than 8,000 pounds of reusable products can be collected each week from a single Portland neighborhood. If scaled across the city, that would add up to tens of thousands of pounds of goods that need to be processed and distributed. Identifying partner agencies or organizations that can get these goods into the hands of those that need them is essential to success, such as homeless shelters, refugee resettlement programs, and targeted for-profit enterprises seeking specific products. The receiving organization should be able to distribute the goods at scale across a city, and its costs are assumed outside of this evaluation.
Our modeling didn’t show the costs to operate this reverse supply chain were cost prohibitive, but organizations using this model must overcome the challenges we outlined to keep goods out of landfills, and ensure that the needy can use them. Organizations discussing potential initiatives using either the curbside pickup or neighborhood drop-off models should ground their discussions in these challenges to launch programs that stand to change how we recycle locally and globally use goods.
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.