By 1999, most people had given up trash-hauling giant Waste Management for dead. The company lost more than $2 billion between 1997 and 1999 due to accounting mismanagement and its decentralized structure, which caused huge disparities in the costs of running its fleet of 26,000 refuse trucks. That all changed, however, when A. Maurice Myers became chairman and CEO that year.
Maurice, who is a former chairman and CEO of Yellow Corp., instituted an ambitious three- to five-year turnaround plan aimed at cutting costs and improving service levels largely by centralizing control of the company, especially where the fleet was concerned.
The results have been impressive. After losing $398 million in 1999, Waste Management cut its losses back to $97 million by 2000, followed by profits of $503 million in 2001 and $822 million last year, despite a decline in revenues. Profits have continued — Waste Management earned $477 million on $8.61 billion in revenue through the first nine months of 2003.
Some of those gains come from costs savings generated from fleet changes, overseen by Thomas Derieg, vp-fleet services and logistics, who joined the company in early 2001. “We're just trying to make the fleet run better; we weren't happy with what the fleet was costing us in terms of the quality of trucks we had, their durability, and the number of spares we had to maintain,” he explains.SPECS, QUALITY, MAINTENANCE
Derieg uses three principles to guide the improvement of Waste Management's fleet: setting better vehicle specifications at the outset; being much more demanding about the quality of the vehicle the company gets from truck and body OEMs; and focusing more on preventive maintenance and improving the quality of the maintenance operation as a whole.
“We had a lot of this going before I got here,” Derieg says. “I've just helped refine and focus on improving those areas of our operations.”
His team of fleet professionals has already generated big costs savings for the company. The fleet reduced the number of spare trucks it keeps on hand by 5,000 and spent $85 million less on maintenance in 2002 than in 2001.
New efforts include the use of new maintenance software systems to track a variety of vehicle parameters. To date, 100 of the fleet's 400 maintenance facilities are now up and running on the system, which will help the fleet better control a range of costs. “That's especially true in component life and repair costs in terms of getting warranty coverage,” Derieg notes. “The small stuff can add up to big savings if we monitor it.”
In the future, he hopes to collect vehicle-reliability data from the various Waste Management locations and look at how truck specs perform under different geographic, climate and driving conditions.
“To grow in the waste business today, you have to increase your share of market — and to increase market share you have to be cost-competitive,” says Derieg. “That's what we're trying to do with our fleet. Truck maintenance is an issue that never goes away; you have to focus on it every day. The minute you take your eye off it, costs go out of control.”<</div>