Recently we were engaged by a major national manufacturing and distribution firm considering options for closing down one manufacturing division and consolidating its west coast and east coast distribution centers to one facility. For obvious reasons this company must remain nameless but some of the results were quite fascinating.
As with every project, we needed to assess the expected return on asset value. How else can we set a price, right? However, in this particular case, we had much longer than normal advanced knowledge and ability to plan (6 to 8 months) and to arrange sourcing for secondary market sales. That´s more than twice as long as our typical job with generally attached deadlines in the 60 to 75 day range.
Our estimate is that we would return an extra 3% to 5% per month yield on assets each month for up to 4 months. That´s 12% to 20% greater yield realized back to the organisation because they strategically prepared further in advance for this option. We also estimated that we could recover an extra 11% to 13% of otherwise unusable assets into cash with the extra time.
Overall, we estimated increase in the recovery yields of up to a 33% more simply by exploring options and engaging an industry expert (Asset Impact) in the early stages. That´s millions of extra dollars that can be used to fund severance packages and/or any other critical company expenses associated with the transition.
The lesson is: It´s never too early to get a true assessment of what your assets will yield on a secondary market and what it will really cost to implement a dramatic corporate change involving a shutdown or major structural facility changes. We can´t predict your organization´s success in ´your´ marketplace, however, we can unequivocally tell you that if you do think ahead, where in ´our´ market and industry, names, brands and chains that have lasted a century are closing every month, we´ll absolutely reduce the fallout significantly.