overy will likely bring an improvement of 20% or more. For those without a central program, the improvement potential can easily exceed 60%.

The other area to consider is idle equipment. It is typically estimated that 10% of the average company’s assets are idle. These are the items you see in the “bone yard” at the back of the property, or equipment from a line no longer used, or an air conditioning unit purchased but never installed, or the stack of used computers in the closet. In most companies, it’s just out of sight, but everywhere. Take a conservative estimate of 5% of the company’s capital assets and then assume you will get 40% of the book value. It’s not an exact science but it should frame the size of the opportunity and it will likely have at least seven figures.

It’s not just the money

For most companies there are sizable direct cash contributions, savings and cost avoidance that can be brought to the bottom line through improved investm

Corporate Investment Recovery Programs

Every business eventually has items they no longer need. For some businesses this may be machine tools, processing lines, and even complete plants, while for others it’s overstocked inventory, end of life products, computers or vehicles. Most everything that flows through the billion dollar purchasing channels and supply chains of the world will some day be discarded or sold. In some situations these items may be relatively new and still in original packaging or recently installed, while in other cases the asset may be 50 years old and held together by duct tape. Managing items when they arrive at the end of their initial planned use is something that I, and others, call the Disposition Chain Management. This function is also referred to as “Investment Recovery” or “Surplus Asset Management”. By whatever name you call it, this is one of the single largest overlooked areas for most businesses.

The Missed Opportunity

Think of all the technology, resources and effort applied to purchasing management. The purchase of a $20,000 asset will likely involve certified purchasing managers, an RFQ, pre-approved vendors, multiple bidders, advanced purchasing systems and a well structured process to approve the purchase. If the $20,000 budgeted asset is purchased for $19,000 through these efforts the $1,000 savings is important and measured cost avoidance. Now consider the sale of a used piece of equipment with a market value of $20,000. In many company’s this task will be delegated to someone with little experience in asset sales. In addition, there are few controls on vendors, no standard bidding process, and there may be no formal approval processes for the transaction.

So, whether the asset sells for $4,000 or $30,000 or is scrapped there is no tracking, no performance incentive, and the investment recovery that was lost or gained, goes un-noticed. Is there any other place in your company where you could save, or lose $200,000 a month and not notice? It happens all the time, even in otherwise well run companies. I’ve met with engineers who admit they scrap equipment rather than have the company sell it because they feel it’s easier to scrap it and there’s no incentive to do otherwise. I’ve seen companies sell assets for less than 5% of their current value, and on more than one occasion buy the same exact item back at another plant for twenty times what they sold it for. And then there is all the idle equipment that nothing is done with while companies pay taxes and insurance on these idle assets, and their value disintegrates.

If you don’t think these issues are present in your world just walk the plant floor and talk to a forklift operator, open a few closets, follow up on the next asset being written off and see what happened. I’m not talking about a few hundred dollars here and there; this is low hanging fruit that can make a difference to the bottom line. If you look in enough places it will be there. In most cases it’s not that anyone is doing anything illegal or even intentional, it’s just that the process is either not in place or has issues.

Estimating the Opportunity

The used equipment industry is estimated at $100 billion a year so if companies are leaving even 10% on the table, that is significant. In most cases it’s a lot more than 10% but this issue still has not caught the attention of many CFO’s. For purposes of this article we’ll focus on two areas, used asset sales and idle equipment.

First, how much used or overstock equipment did your company sell last year, and how much can you improve that. For most companies, even many of those with an Investment Recovery department, the sale of used equipment is so fractioned that this will not be an easy number to find or estimate. For companies that already have a central program, additional focus on Investment Recovery will likely bring an improvement of 20% or more. For those without a central program, the improvement potential can easily exceed 60%.

The other area to consider is idle equipment. It is typically estimated that 10% of the average company’s assets are idle. These are the items you see in the “bone yard” at the back of the property, or equipment from a line no longer used, or an air conditioning unit purchased but never installed, or the stack of used computers in the closet. In most companies, it’s just out of sight, but everywhere. Take a conservative estimate of 5% of the company’s capital assets and then assume you will get 40% of the book value. It’s not an exact science but it should frame the size of the opportunity and it will likely have at least seven figures.

It’s not just the money

For most companies there are sizable direct cash contributions, savings and cost avoidance that can be brought to the bottom line through improved investme

Missed Opportunity

Think of all the technology, resources and effort applied to purchasing management. The purchase of a $20,000 asset will likely involve certified purchasing managers, an RFQ, pre-approved vendors, multiple bidders, advanced purchasing systems and a well structured process to approve the purchase. If the $20,000 budgeted asset is purchased for $19,000 through these efforts the $1,000 savings is important and measured cost avoidance. Now consider the sale of a used piece of equipment with a market value of $20,000. In many company’s this task will be delegated to someone with little experience in asset sales. In addition, there are few controls on vendors, no standard bidding process, and there may be no formal approval processes for the transaction.

So, whether the asset sells for $4,000 or $30,000 or is scrapped there is no tracking, no performance incentive, and the investment recovery that was lost or gained, goes un-noticed. Is there any other place in your company where you could save, or lose $200,000 a month and not notice? It happens all the time, even in otherwise well run companies. I’ve met with engineers who admit they scrap equipment rather than have the company sell it because they feel it’s easier to scrap it and there’s no incentive to do otherwise. I’ve seen companies sell assets for less than 5% of their current value, and on more than one occasion buy the same exact item back at another plant for twenty times what they sold it for. And then there is all the idle equipment that nothing is done with while companies pay taxes and insurance on these idle assets, and their value disintegrates.

If you don’t think these issues are present in your world just walk the plant floor and talk to a forklift operator, open a few closets, follow up on the next asset being written off and see what happened. I’m not talking about a few hundred dollars here and there; this is low hanging fruit that can make a difference to the bottom line. If you look in enough places it will be there. In most cases it’s not that anyone is doing anything illegal or even intentional, it’s just that the process is either not in place or has issues.

Estimating the Opportunity

The used equipment industry is estimated at $100 billion a year so if companies are leaving even 10% on the table, that is significant. In most cases it’s a lot more than 10% but this issue still has not caught the attention of many CFO’s. For purposes of this article we’ll focus on two areas, used asset sales and idle equipment.

First, how much used or overstock equipment did your company sell last year, and how much can you improve that. For most companies, even many of those with an Investment Recovery department, the sale of used equipment is so fractioned that this will not be an easy number to find or estimate. For companies that already have a central program, additional focus on Investment Recovery will likely bring an improvement of 20% or more. For those without a central program, the improvement potential can easily exceed 60%.

The other area to consider is idle equipment. It is typically estimated that 10% of the average company’s assets are idle. These are the items you see in the “bone yard” at the back of the property, or equipment from a line no longer used, or an air conditioning unit purchased but never installed, or the stack of used computers in the closet. In most companies, it’s just out of sight, but everywhere. Take a conservative estimate of 5% of the company’s capital assets and then assume you will get 40% of the book value. It’s not an exact science but it should frame the size of the opportunity and it will likely have at least seven figures.

It’s not just the money

For most companies there are sizable direct cash contributions, savings and cost avoidance that can be brought to the bottom line through improved investm

other place in your company where you could save, or lose $200,000 a month and not notice? It happens all the time, even in otherwise well run companies. I’ve met with engineers who admit they scrap equipment rather than have the company sell it because they feel it’s easier to scrap it and there’s no incentive to do otherwise. I’ve seen companies sell assets for less than 5% of their current value, and on more than one occasion buy the same exact item back at another plant for twenty times what they sold it for. And then there is all the idle equipment that nothing is done with while companies pay taxes and insurance on these idle assets, and their value disintegrates.

If you don’t think these issues are present in your world just walk the plant floor and talk to a forklift operator, open a few closets, follow up on the next asset being written off and see what happened. I’m not talking about a few hundred dollars here and there; this is low hanging fruit that can make a difference to the bottom line. If you look in enough places it will be there. In most cases it’s not that anyone is doing anything illegal or even intentional, it’s just that the process is either not in place or has issues.

Estimating the Opportunity

The used equipment industry is estimated at $100 billion a year so if companies are leaving even 10% on the table, that is significant. In most cases it’s a lot more than 10% but this issue still has not caught the attention of many CFO’s. For purposes of this article we’ll focus on two areas, used asset sales and idle equipment.

First, how much used or overstock equipment did your company sell last year, and how much can you improve that. For most companies, even many of those with an Investment Recovery department, the sale of used equipment is so fractioned that this will not be an easy number to find or estimate. For companies that already have a central program, additional focus on Investment Recovery will likely bring an improvement of 20% or more. For those without a central program, the improvement potential can easily exceed 60%.

The other area to consider is idle equipment. It is typically estimated that 10% of the average company’s assets are idle. These are the items you see in the “bone yard” at the back of the property, or equipment from a line no longer used, or an air conditioning unit purchased but never installed, or the stack of used computers in the closet. In most companies, it’s just out of sight, but everywhere. Take a conservative estimate of 5% of the company’s capital assets and then assume you will get 40% of the book value. It’s not an exact science but it should frame the size of the opportunity and it will likely have at least seven figures.

It’s not just the money

For most companies there are sizable direct cash contributions, savings and cost avoidance that can be brought to the bottom line through improved investm

a difference to the bottom line. If you look in enough places it will be there. In most cases it’s not that anyone is doing anything illegal or even intentional, it’s just that the process is either not in place or has issues.

Estimating the Opportunity

The used equipment industry is estimated at $100 billion a year so if companies are leaving even 10% on the table, that is significant. In most cases it’s a lot more than 10% but this issue still has not caught the attention of many CFO’s. For purposes of this article we’ll focus on two areas, used asset sales and idle equipment.

First, how much used or overstock equipment did your company sell last year, and how much can you improve that. For most companies, even many of those with an Investment Recovery department, the sale of used equipment is so fractioned that this will not be an easy number to find or estimate. For companies that already have a central program, additional focus on Investment Recovery will likely bring an improvement of 20% or more. For those without a central program, the improvement potential can easily exceed 60%.

The other area to consider is idle equipment. It is typically estimated that 10% of the average company’s assets are idle. These are the items you see in the “bone yard” at the back of the property, or equipment from a line no longer used, or an air conditioning unit purchased but never installed, or the stack of used computers in the closet. In most companies, it’s just out of sight, but everywhere. Take a conservative estimate of 5% of the company’s capital assets and then assume you will get 40% of the book value. It’s not an exact science but it should frame the size of the opportunity and it will likely have at least seven figures.

It’s not just the money

For most companies there are sizable direct cash contributions, savings and cost avoidance that can be brought to the bottom line through improved investm

overy will likely bring an improvement of 20% or more. For those without a central program, the improvement potential can easily exceed 60%.

The other area to consider is idle equipment. It is typically estimated that 10% of the average company’s assets are idle. These are the items you see in the “bone yard” at the back of the property, or equipment from a line no longer used, or an air conditioning unit purchased but never installed, or the stack of used computers in the closet. In most companies, it’s just out of sight, but everywhere. Take a conservative estimate of 5% of the company’s capital assets and then assume you will get 40% of the book value. It’s not an exact science but it should frame the size of the opportunity and it will likely have at least seven figures.

It’s not just the money

For most companies there are sizable direct cash contributions, savings and cost avoidance that can be brought to the bottom line through improved investment recovery projects. Beyond the money, it’s the legal matters that corporations also need to watch. From environmentally friendly disposition to terms and conditions of sale to protect you from liability, these are critical functions you need to be aware of. For example, let’s say a company decides to have a college intern, handle the sale of a machine tool. They get top dollar from a factory down the road…but…the machine had alterations prior to sale that caused an injury after the sale. Worse yet, the alterations were not documented and weak terms and conditions were used with the sale.

Can you say major liability exposure? The sale of anything, especially used equipment is full of legal pitfalls. If you have people handling the sale of your assets, without the industry knowledge to avoid the major areas of exposure, you are opening yourself to financial and public relations risk.

Change is coming

With the increased requirements of Sarbanes Oxley, and added pressure from shareholders for efficient management, I believe that we will see a change here in the next 5 years. Then consultants will be crawling out of the woodwork touting total cost of ownership, disposition chain management, investment recovery, yadda yadda yadda. Companies ahead of the game will be well positioned and those looking to catch up are going to find skilled resources difficult to find.

There are substantial benefits to establishing and supporting and effective investment recovery program today and it should be on every company’s radar.