The presenters represented 50 years of combined experience working in the world of surplus and industrial assets. Michelle Lester, NRI's Senior Business Development Manager, specializes in providing strategic asset-recovery solutions for multinational organizations with surplus MRO, spare parts inventory, machinery, and equipment. Steve Stipanovich, an Executive Purchasing Manager, knows all aspects of industrial equipment and has expertise in storeroom MRO and Industrial parts.
The presentation offered a look at what asset recovery is, why it is essential, and various solutions. Additionally, the importance of coming up with an overall long term strategy was explained.
The presentation began with a crash course from Steve Stipanovich about what industrial asset recovery is before exploring why it's so important, including its main benefits, as well as the different methods by which asset recovery can be accomplished. Steve then broke down the principles of creating long term asset recovery strategies, including viewing the other methods as operating on a spectrum. Finally, Steve focused on asset recovery related to reselling, which should be one of the most effective ways to gain the benefits of recovering the value of surplus and obsolete inventory, but faces a host of challenges and limitations in the marketplace.
Michelle Lester then offered a look at sustainable long term solutions. With three main branches of services, including direct purchasing, consignment services, and marketplace services, NRI creates custom-tailored solutions for a wide variety of companies across any number of industries.
In this article, we will be covering the topics from the presentation, beginning with a look at what asset recovery is. From there, we will discuss the importance of finding a long term asset recovery strategy, including the related difficulties with implementing a truly effective one. We will then explore how NRI creates solutions that are different and effective.
At its most basic, the definition of asset recovery is the process of recovering the capital spent on assets that are surplus to an organization's needs. This involves taking tangible assets, like installed equipment or obsolete inventory, and converting it into a different form of capital, often cash. The goal of an asset recovery strategy should be recovering the maximum value from an asset.
Before we get into how you can extract value from obsolete inventory and what forms the value extracted through an asset recovery process can be, we will discuss the need for asset recovery and examine how other organizations manage their asset recovery operations.
According to research conducted by the Investment Recovery Association, "on average, 20% of an organization's assets are surplus to its needs". Consider your organization's capital expenditure over the past couple of years. How many assets have become surplus to your operations? How much capital has been spent on inventory that is sitting idle in your facilities? Think about the redundant assets that are currently sitting in your plants. Do you have slow-moving inventory? Do you require warehouse expansion?
Without an asset recovery process, this inventory would sit idle, either costing your business more in holding costs or once inventory levels become too much be disposed of.
An asset recovery strategy allows you to recapture some of the asset's remaining value. As we continue to push deeper into unprecedented times due to the COVID-19 global pandemic, it is vital for organizations of any size to explore any and every avenue that will allow them to increase capital.
Asset recovery operations are not a one-size-fits-all model. Each organization structures asset recovery differently to suit their organization's specific needs. Let's examine some other organizations to see an overall trend in how organizations manage asset recovery.
Using the research provided by a joint benchmark study by CAPS Research Group and the Investment Recovery Association, here are five key findings your organization should be aware of.
A cost-benefit ratio in this context refers to the average cost of an asset recovery initiative compared to the average benefit experienced from the initiative. According to the benchmark study, the average cost-benefit ratio was 27:1, meaning for every dollar spent on asset recovery initiatives, there is a 27 times return.
Of all the 40 companies included in the industry benchmark, the average value recovered from surplus assets was $11,233,922 a year. This figure outlines the potential monetary value of an asset recovery strategy and can illustrate how lucrative asset recovery initiatives can be.
When comparing a centralized approach to a decentralized, 91% of the organization included in the benchmark utilized a centralized asset recovery model. A centralized approach to asset recovery operations refers to when asset recovery operations in an organization are handled from one group or location. Conversely, a decentralized approach is when AR operations are conducted at the individual plant level.
According to the benchmark study, 65% of the organizations surveyed outsource some aspect of asset recovery to an outside vendor. This shows that most organizations felt that they needed some form of external expertise to implement an asset recovery strategy.
In 91% of the organizations surveyed for the benchmark reported that asset recovery is a function of the supply chain.
Asset recovery can be exceptionally beneficial for organizations in more than one way. From the standard recovering capital that can be added to a company's bottom line to environmental and corporate sustainability benefits. Below is a list of the main advantages of implementing an asset recovery strategy.
The most critical benefit is, of course, recovering capital. It is the primary function of asset recovery and is more important than ever to convert assets to cash on hand in a world constrained by the challenges of COVID-19. At the same time, asset recovery provides more benefits than just recovering capital.
Asset recovery also can save on the expenses associated with storage space. And while environmental benefits don't directly involve financial benefits, some companies see this as a factor. For many organizations, a strong corporate sustainability plan is critical to investment, and an effective asset recovery solution is a crucial part of that.
Now that you can see the benefits an organization can experience by implementing an asset recovery strategy, the question becomes, what are the options for recovering value? When considering asset recovery, your approach should be a systematic process that aims to recover the most value possible.
It is critical to focus your efforts on the recovery method that will allow you to recover the most value. Below are several different ways of recovering value ranging from most value recovered to least value recovered.
One method that most organizations opt to pursue to recover value is the resell option. However, as previously stated, these organizations lack the experience required to maximize surplus or obsolete assets' resale value.
To help combat this deficiency, vendors offering different methods of selling are available to help organizations. However, not all vendors are equal. Each method of selling with a vendor provides its unique benefits and challenges. Here are the four main ways by which to resell surplus inventory:
When selecting a vendor, it is vital to align your organization's goals with the vendor's strengths or selling method. Not all vendors and not all selling methods are equal, so it pays to conduct research when choosing what option is best for you.
In formulating a long-term strategy, it is most beneficial to view the different methods of the recovery of surplus and obsolete equipment and inventory to operate on a spectrum. Previously, we looked at the six main recovery value methods as a list descending in order of effectiveness.
This spectrum can be viewed as a chart that runs the gamut from providing the lowest recovery rate (disposal) to the highest (prevention and redeployment). By viewing asset recovery as occurring on a spectrum, it is much easier to see the process as one that always has room for further improvement, but one which merits the investment in a long-term strategy.
The six main methods on the spectrum can be broken down into three broader categories:
In creating a long-term strategy, the most space for improvement is on the spectrum's asset recovery section.
Using NRI's warehousing, logistics, and sales channels, business with ongoing surplus generation can free up warehouse space and achieve a high recovery rate. With MRO, indirect inventory, and obsolete inventory, NRI will sell the assets on a company's behalf. The client ships the assets to an NRI facility, and NRI catalogs, markets, and sells the inventory. The timeframe is 8-14 months, and NRI will holds inventory for up to 24 months. This method yields a recovery rate of 25-40% of book value.
This method allows companies who want to manage their asset recovery to self-liquidate to sell surplus inventory from anywhere in the world. With access to multiple platforms, including Aucto, NRI offers a better solution with an industrial only marketplace ideal for self-liquidation of industrial surplus to a massive global buyer base. The cataloging of assets can be done directly by the organization or by NRI. The winning buyer is responsible for shipping, and payment occurs before shipping.
NRI directly purchases surplus MRO, indirect inventory, and industrial equipment, focusing on MRO and spare parts. Acquisitions can range from lists of parts to entire facilities. There is a fast timeframe of 2 weeks to three months. NRI offers turnkey operations with as-Is, where-Is terms, with payment upon agreement.
For nearly two decades, the team at NRI Industrial Sales has been helping companies worldwide liquidate and manage their surplus MRO and obsolete parts, along with other capital equipment, through direct purchase and consignment. Our solutions are designed to be turnkey and minimize the impact on your day to day operations while at the same time maximizing the value of your surplus MRO and spare parts.
Whether you are looking for a quick solution to sell your surplus inventory, such as our equipment purchasing solution, or wish to maximize your recovery value and remove your excess inventory from your warehouse with our consignment solutions. We have the right approach to help your organization through our industry-leading asset recovery solutions.