Activity Based Costing Pays Off

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timmins-transfer
City of Timmins Transfer Station Source: City of Timmins

Timmins has the largest municipal Blue Box program in the Northeastern Ontario waste shed area. The city offers automated cart-based collection plus depot services to a population of 43,165 in 18,806 households, resulting in about 3,000 tonnes/year of Blue Box materials marketed.

Throughout 2015, Timmins struggled with residue management issues. Unacceptable materials in the blue box material stream had reached as high as 48% by weight and resulted in a $10/tonne increase that was projected to add $40,000 to the cost of recycling.

Timmins approached CIF for funding for an Activity Based Costing Analysis
With pressure to address escalating costs, Timmins staff took a step back to assess the bigger picture and identify opportunities to improve efficiency and/or cost savings, beyond simply fixing the residue issues. Ultimately, they approached CIF and secured funding to hire a consultant to complete a performance audit, which included an Activity Based Costing (ABC) exercise.

Study highlights opportunities to cut costs
In Timmins, recyclables collected at curbside were taken to a transfer station, then placed in compacting trailers, and sent five or six times/week to a MRF 300 km away. At the onset of this program, this MRF was the approved processing facility for the region.

Compacting recyclables and hauling them to the processor accounted for more than 20% of the entire recycling program costs. Timmins staff considered two options to lower this cost:

  • increasing payloads and decreasing the number of trips to the processor, and
  • working with a smaller local MRF.

In exploring the second option, the City issued an RFP for processing and carried out the business case analysis based on bids submitted.

Staff recognized that finding a local processing facility would eliminate the need for long distance hauling and after considering potential savings, explored opportunities to work with a smaller, local operator. After agreeing on a trial period, Timmins tested running their materials to the local facility to ensure there would be no adverse effects on municipal service levels. Following a successful trial, the City is now preparing to award a contract to a local processor in accordance to its municipal procurement policy. As an added benefit, the savings generated will cover the cost of the P&E campaign to address the original concern of high contamination levels.

“An activity based costing analysis not only identifies opportunities for savings, it helps municipalities to prioritize them. For Timmins, completing this study set us on the path to clear and achievable goals that will result in annual cost savings for the City.”

– Luc Duval, Director of Public Works and Engineering for the City of Timmins

Ripple effect: Benefits for Timmins = Benefits for the entire waste shed
The new multi-municipal partnership for processing in Northeastern Ontario is ideal as the new processor’s location requires only short distance hauling for neigbouring communities. With all communities in the waste shed collecting a consistent suite of materials, Timmins staff are working to establish a cooperative arrangement for processing services with surrounding programs. This partnership permits consolidation of tonnage and will strengthen the negotiating position for municipalities in the future.

Bottom line
Performance audits or ABC exercises require time to analyze and reflect on what’s happening with recycling programs yet they often reveal opportunities to save and improve that are well worth the effort.

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