By John Kmitta
If you are chipping wood waste and then dumping the chips, or paying to have them dumped, then perhaps adding a grinder — and creating a saleable end product — might make sense for your business (while adding a new revenue stream at the same time). But before you purchase a horizontal grinder or a tub grinder, there are many factors to consider.
“Any tree service that regularly generates chips or other green waste should at least consider what a grinder can add to their business,” said J.R. Bowling, VP of sales and marketing at Rayco. “The ground mulch product can be either sold at the retail level or sold at wholesale to a larger mulch operation.”
According to Jerry Roorda, environmental solutions specialist at Vermeer Corporation, every tree service should look at its business plan to determine their need for a grinder.
“If tipping fees for wood debris and travel time to the dump locations are costing the company in dollars and lost revenue, they should run the ownership and operation costs of a grinder,” said Roorda. “If their waste stream could become a value stream in the production of mulch, animal bedding, compost, boiler fuel or some other niche product, a grinder is an excellent investment.”
Jason Morey, assistant marketing manager, Bandit, recommends contacting your local government and area landfill to see how they are currently disposing of their wood waste. “We have numerous customers that are currently taking in wood waste from different agencies and turning it into a salable end product,” he said.
According to Chris Edmonds, assistant regional manager at Morbark, Inc., do your homework, talk to other successful operations, and check local regulations and permitting. Then try to secure tentative contracts for both intake and end product to help ensure your ability to keep their grinder busy.
“The first thing a potential buyer should do is to figure out how much material he will have access to,” said Bowling. “This will determine the amount of mulch that can be produced and how much cost savings can be gained from avoidance of dump fees, if applicable. Next, learn what the potential mulch buyers in the area are looking for and how much they pay for the product. Some wholesale buyers want a rough product they can re-grind to a particular size, whereas retail buyers will require a more finished, double-ground product that is suitable for spreading. Just these two factors will go a long way toward figuring out how much revenue can be generated by the grinder.”
According to Roorda, look at the market, market opportunities, and potential competition. “Quality and consistency of product will attract market share in whatever market you are serving,” said Roorda. “Maybe offering a different product type to an existing market that is new and has greater value is your niche. Whatever you do, be creative.”
Morey urges buyers to evaluate the piece of equipment, and get an idea of the quantity of material they expect to be grinding — then buy the right size of machine for the operation. “You don’t want to over-buy, have this big payment and the daily operating costs that go with it, and then not have enough material to keep busy,” said Morey. “But if you buy something too small, it will not perform to your needs either, so determine the amount of material you will be grinding.”
According to Edmonds creating salable mulch allows you to not only make money on intake of raw material, but on the sale of the end product (without the expense of disposal).
“Another aspect is that it gives the tree contractor a way to diversify his business,” said Bowling. “Diversification comes not only from the sale of mulch, but it can also come by way of charging dumping fees for others to dispose of their green waste, and by adding a grind-for-hire (contract grinding) side of the business whereby the contractor can bid for jobs such as pallet grinding for factories or waste grinding for municipalities, compost yards, large groundskeepers, etc.”
According to Bowling, the challenges of grinder operation for mulch production include regulatory issues such as environmental laws and permits for storage of biomass, noise restrictions, and storage space for the machinery and for the mulch product. Other challenges are customer based, such as monitoring production to make consistent product, and adopting the product to meet changing demands or to satisfy multiple customers’ tastes. Sometimes, a problem can develop in that the mulch demand outweighs the contractor’s ability to take in enough material to make the mulch.
“In my travels lately in this down economy, the challenge is sourcing wood product to produce mulch,” said Roorda. “The lumber industry is depressed due to a depressed housing market, and the slabs and sawdust usually produced as a byproduct are no longer available or command a premium price. This can also be said for logging slash. Another factor to consider is the biofuels market that is competing for wood waste and diverting product away from the mulch market.”
If wood is being sourced from other contractors, care must be taken as to the cleanliness of the product, Roorda added. Contaminates can, and do, cause costly damage to grinders. If your profit margins are slim, repairing a damaged grinder can impact your profit in down-time and repair costs if not taken into account.
According to Edmonds, some other factors to consider before purchasing a grinder include the type and size of material coming in, whether you will be grinding at only one site or looking for outside contracts, your operating budget, as well as the manufacturer’s reputation and equipment options
“Know what your wear parts cost and known maintenance costs are before making an equipment decision,” added Edmonds.
Bowling added that contractors should determine roughly what they will be feeding into the machine most often (logs, brush, chips or pallets) and what they want it to produce (fine mulch or coarse mulch). Some machines will work better than others depending on those factors.
Morey also recommends checking with local power plants that are using chips for fuel. Many of these plants are looking for local suppliers to help meet the demand. As a result, they are another potential customer for the processed end product.
The biggest factor is knowing your costs, added Roorda. “Too many times I have seen the cost of operation and ownership not figured into a business plan,” he said. “Hidden or unexpected operating costs can creep up behind you and affect your bottom line.”
According to Roorda, the cost of ownership is the expense incurred by the municipality or contractor whether the machine is working or not. This includes the purchase price, finance charges, depreciation, and projected hours of use within the depreciation period, insurance and the cost of operation. This is reflected on a per-hour basis. The cost of operation also includes maintenance and operation expenses. The cost of operation is also closely tied to the production of the machine giving you a finished unit (tons, cubic yards and cubic meters) or hourly cost.
“Cost of operation can and does affect the overall cost of ownership,” said Roorda. “If a more expensive grinder greatly reduces your day-to-day operation cost and gives you a lower-cost finished product, over the life of the grinder the higher-cost unit may be a better overall value.”