The Acme Corporation considers increasing its recycling efforts as a part of the green manufacturing initiative by the local government. The Acme Corp. prides itself on being a good corporate citizen and has committed to taking any and all feasible actions to reduce the volume and weight of material it sends to the local landfill. The local landfill offers to rebate $5 for each ton less than the current 12-month average that the plant sends to the landfill. The plant does not foresee any changes in the current levels of waste generation due to volume or product changes.
Consider the following assuming that the manufacturing plant for the Acme Corp operates 5 days a week, 50 weeks a year and the minimum attractive rate of return is 15%.
Currently, the manufacturing plant sends its waste to the landfill in containers. The containers average 10 tons of waste when loaded. The landfill charges $40 per ton to receive the waste. The waste hauler charges $80 per load (one container) to transport the waste.
The company has identified two potential sources of waste reduction: cardboards and wooden pallets.
Cardboard, if bundled and prepared for shipment, can be sold for $95 per ton. The plant estimates that it currently sends 2 tons of cardboard a day to the landfill. Preparing the cardboards will require one janitorial associate for 3 hours per day at a cost of $20 per hour. The baling equipment will cost $30,000 for installation, $45 per week to operate, $4500 per year to maintain, and last 12 years. The equipment will have a salvage value of $3000 at the end.
Currently, 25,000 wooden pallets per year are scrapped each year because they are damaged or because they are not of the standard size used by the plant. The pallets average 13 pounds each. A pallet recycler has offered to purchase pallets, which are of certain sizes and in good condition. The pallets that are in these sizes and in acceptable condition amount to half the scrapped pallets. The pallet recycler is offering to pay $1.00 per pallet. Preparing the pallets in an acceptable form will require a cutting machine that will cost $12,000 for installation, $3000 per year to operate and three hours of labor per day. This job can also be done by a janitorial associate. The machine will have a useful life of 6 years and no salvage value at the end.
Finally, purchasing has identified a company, that will pick up the damaged and unusable pallets and process them into wood chips, which this company then sells. The cost of this service is $1.25 per pallet.
Using this information, find the best recycling strategy for the company among the
following options:
- Option 0: Status quo (no recycling)
- Option 1: Recycling cardboards only
- Option 2: Recycling cardboards and usable wooden pallets (without selling the unusable
pallets)
- Option 3: Recycling cardboards, usable and unusable wooden pallets