Consolidations of Another Kind

Deana Rogers

As the wave of mergers and acquisitions swept through the solid waste industry, one company has been creating another type of consolidation. Columbus, Ohio-based The Ecology Group (TEG) merges the needs of waste generators with haulers, while managing billing, pickups, price negotiation and customer service.

The company was started by Ron Kletter, who worked alongside his father in a family owned outsource business, Industrial Waste Systems, Louisville, Ky. With a focus on the scrap metal industry, Kletter realized the potential to help chain stores and restaurants manage their solid waste services.

Working out of his bedroom with a phone and a fax machine, Kletter started the company in 1992, building a network of haulers who would service his clients. This one-man-show soon expanded into a successful business.

By 1997, however, Kletter began to pursue other business interests, and named A.A. "Nick" Nicholson CEO. Nicholson had consulted for TEG the previous year and grew sales 2,516 percent from 1993 to 1997.

Today, TEG is $40 million company that has attracted the national attention of Inc. magazine, which ranked the company No. 87 on its 1998 list of "500 Fastest Growing Companies." One year later, Business First magazine ranked TEG No. 28 on its 1999 list of "Fast 50 Greater Columbus Emerging Companies."

Creating Partnerships TEG has built a network of haulers, including Industrial Disposal in Louisville Ky.; Great Lakes in Detroit; Modern Disposal in Buffalo, N.Y.; Casella Waste Systems in Rutland, Vt.; Browning-Ferris Industries in Cleveland, Ohio; and Waste Management in Columbus, Ohio.

"We work well with these haulers because they listen and try to accommodate our requests," says Kevin Stallard, TEG's account manager. "[They] understand our role in the industry and work as advisors." Nicholson says that Casella has more than tripled its business with TEG because of its good relationship.

"The partnership makes it easy for haulers to make one call to resolve issues for multiple sites, rather than calling each site separately," says Dick Putnam, the company's vice-president of operations. "These and other haulers have made a business decision to work with management companies, allowing for better communication for customer service, pricing and alternative solutions."

TEG also provides haulers with additional business including national accounts unavailable because of contract agreements, corporate management or location.

Serving Clients TEG has created a network of more than 1,400 hauling companies across the country. With more than 25,000 client services throughout the United States and Canada, TEG provides a number of services for its clients, who include retail chains, grocery stores, and quick service and casual dining restaurants.

TEG services range from scheduling a simple pickup, to detailing each invoice. Clients also have saved money. For example, Snapps Restaurant, Columbus, Ohio, hired TEG to help reduce its more than $100,000 a year trash collection bill. TEG changed the size of the containers and scheduled pickups more efficiently. Snapps immediately realized savings from $16 per month to $20 per month per location totaling more than $10,000 a year.

Faced with rate increases, billing errors and unauthorized charges Rite Aid Drug Stores, Harrisburg, Pa., hired TEG to help. After monitoring collection invoices and disputing charges, TEG helped cut Rite Aid's costs by more than $1.2 million in the first two years.

Holding Costs Down Continuous price comparison, an aggressive bid and award program, and aggregated, large-volume purchasing is key to the TEG's success. By negotiating prices with haulers, TEG often is able to save clients between 10 percent to 20 percent on waste services. In fact, TEGs clients pay 5.9 percent less today than they did one year ago.

Customer service is another important factor at TEG. In fact, Nicholson holds a weekly meeting with the entire staff to review customer service and other company issues.

In addition to serving ordinary requests, TEG's customer service team was faced with the problem of finding a suitable, affordable hauler for a Kroger in a flood-controlled area. The current hauler could not do the job without a price increase of 100 percent. A month later, TEG hired a new hauler, avoiding the large increase. "The factors that helped us make this decision [to work with TEG] was the history of savings that The Ecology Group produced over time," says Chris Brown, Operations Specialist at The Kroger Company of Michigan. "Not only has TEG saved us money, but it has lifted a great burden off our shoulders."

Building a High-Tech Future TEG recently has created an electronic network for clients and haulers.

Using eHauler, haulers can receive purchase orders and payments, as well as send requests and invoices using e-mail. This service was designed to pay haulers faster and reduce stopped services, Putnam says.

Casella Waste Management was the first to try the new technology. The charges for each location are sent to Casella over e-mail, which are approved and paid by TEG. This speeds up payment by about two weeks.

"We're in the beginning stages of this program," says Martin Fazio, Casella's vice-president of major account services. "The use of technology is more efficient, and this program has the potential of being an excellent service," he says.

Kathy Talbot, Casella's office manager says she likes receiving the spreadsheet electronically. "It's much easier," she says. "There is less keying in and less revision. I just make any corrections and e-mail it back. For other companies, I have to make all the calculations and manage the entire spreadsheet. It's very cumbersome."

Putnam says TEG currently produces invoices this way for more than 600 services. "Within the next three months, we expect to handle at least 2,500 to 3,500 more services electronically," he says.

Customers also can take advantage of this technology. Having set up an eClient electronic account, Kinko's, Ventura, Calif., receives its bills via e-mail and has a record of all invoices. "Currently, TEG provides an electronic invoice, which Kinko's directly imports into its own accounting system," says Becky Kessinger, TEG's systems administrator. "We are working to get the company set up to pay electronically," she says.

The chain also uses e-mail for service requests and account questions. TEG guarantees questions to be addressed in one hour or the service is free.

"Waiting on the phone, printing several paper checks and paying postage is a thing of the past," Kessinger says. "With the push of a few buttons, Kinko's saves time and money on soft costs." One third of TEG's clients currently receive bills and reports electronically, and the company receives more than $1 million in electronic payments each month.

TEG is providing pre-configured computers with Internet access at a minimal cost for clients and haulers who don't have the technical capabilities to use the electronic services.

Preparing For Growth Nicholson says that TEG soon plans to announce a marketing alliance that will bring 60,000 more locations under its management. To handle this increase, TEG's eHauler program is critical. "We are looking for hauling partners who can work with us electronically to handle business, while still providing competitive pricing and great customer service," he says.

Nicholson says the company's purchasing power and other management tactics allow TEG to save a significant amount of money for its clients with multiple locations. "Coordinating technology into the management process is only going to make it better," he says. "It will change the way that the industry does business."

However, Nicholson believes potential clients are being left to fend for themselves. He says TEG has had to turn away business. "We can't use our volume purchasing power for businesses that only have one or two locations," he says. "We can't save them any money. Our business is to monitor and manage. We're not brokers."

Because of potential business loss, former TEG employees have developed an Internet site - wastedepot.com - for companies with only a few locations who need a better price on waste removal. Restaurants, convenience stores, hotel chains, supermarkets and other businesses post their sites online for free and let the bidding cycle begin.

"Although wastedepot.com is a separate entity from TEG, it has our full support," Nicholson says. "The haulers we work with can benefit significantly from the site to increase their business with qualified leads, as opposed to cold-calling. In the end, we just want to see the industry grow."