Key Material Handling Fleet Management Partnerships Creates EBITDA Improvement & Sustainable Shareholder Value

Sep 26, 2024   |   OMNIA Partners

Facing continuous inflationary pressure, Private Equity (PE) firms are becoming increasingly innovative in their investment strategies and how they manage exposure with critical, but non-revenue generating assets. Firms are delving deeper into their playbooks to explore new capabilities that accelerate the EBITDA improvement and time to shareholder value (ROI). One portfolio intervention model gaining traction is TFS Material Handling Fleet Management.

Material Handling Fleet Management involves spend visibility, data driven analytics, outsourced expert managed strategic oversight,  and portfolio asset optimization of the  equipment used for the movement, storage, control, and protection of materials throughout the manufacturing, warehousing, distribution network of the portfolio companies.

Portfolio companies often have disparate, decentralized, and inefficient operating models.  With limited visibility to data, and deficient information systems, A centralized and controlled data driven  strategy allows the PE firm to have a holistic view  and control of performance metrics across all portfolio companies.

The Challenges of Mergers and Acquisitions (M&A)

Companies that are acquired by Private Equity firms will likely face similar challenges. A staggering 90% of M&A strategies fail, impacted by decentralized and fragmented information systems and multiple organizations simultaneously attempting to integrate disparate processes, policies, technologies, and people. In addition, there is a lack of spend visibility in these acquisitions, and poorly managed integrations erode investor returns, which can be a major issue during any rapid growth that could create significant competition for internal investment dollars.

For organizations that operate material handling equipment (MHE), acquisitions pose additional challenges in the form of siloed MHE strategies and lease contracts under old operating company names. These organizations are in desperate need of cost reductions, equipment optimization, and transformational shifts in productivity to ensure that their integration into the private equity firm accelerates growth and drives value to clients and stakeholders. The development and continuous monitoring of financial and operational performance is also critical to an integration’s success.

How Fleet Management Can Help

MHE, robotics, and automation are areas that most private equity firms leave untouched due to competing priorities, lack of spend awareness, and fragmented information. Unfortunately, however, financial engineering and surface-level integrations are no longer enough. New mechanisms like streamlined backend processes and the consolidation of departmental functions are required to drive cost savings, integrate portfolio companies, beat the competition, and outpace returns.

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Fleet Management from OnPoint Group through OMNIA Partners

TFS as a Valuable Fleet Management Partner

TFS recognizes that material handling equipment is complex, time-consuming, and costly to manage. They has proven successful at delivering brand-independent fleet management solutions to a wide range of industries for over 20+ years. As organizations transition away from managing their MHE, TFS supports these endeavors and offers solutions to streamline enterprise operations that are seamless, efficient, and cost-effective. TFS also maintains a commitment to customer satisfaction and works tirelessly to ensure that the MHE needs of its customers are met.

Let’s explore how a lead portfolio company was able to take advantage of the OMNIA Partners program to centralize their access to MHE data, gain visibility into their units, and optimize warehouse space and flow, all while saving costs.

As a lead residential and commercial building solutions provider, this portfolio company works to build stronger communities and provides a wide range of solutions to solve its customers’ challenges. With a list of over 10 established and leading brands through the consolidation of 40+ acquisitions, earns over $6 billion in annual sales, and maintains 200 + North American locations with over 3000 mobile material handling assets. This building products company was acquired in June 2022 by a Private Equity firm with 60+ portfolio companies and an aggregate transaction value of $200 billion. To date, TFS

This portfolio company contracted TFS in July 2022 to gain a trusted partner in addressing its MHE challenges. The company spending $4 to $5 million annually in rental equipment instead of 20% to 40% less for leased assets, ineffectively tracking maintenance data, overpaying for repairs, and suffering from the absence of a standardized process to manage asset life cycles and lease agreements. In addition, $1 million in avoidable lease return/termination charges had accrued over 24-36 months due to rented/leased assets being sold, disposed of, or transferred. Overuse relative to lease terms was also resulting in extreme overage charges.

Partnership Goals and Results

This building products portfolio company and TFS joined forces with five overall fleet management goals: lease and maintenance management, fleet uniformity, enterprise safety, corporate cost savings, and lifecycle asset management.

These goals were expected to have the following results:

  • 15% + Sustainable Category Cost Savings
  • 100% Visibility to Spend
  • Brand Independent Subject Matter Expertise
  • Equipment Standardization with Enhanced Safety
  • Fleet Right Sizing & Short-Term Rental Savings
  • Supplier Management and Flexible Financing Solutions

In a mere 12 months, many of the above results were realized by the portfolio company the guidance of TFS, Ltd., the company approved a formal lease strategy and adopted the enterprise fleet management program. 89 on-site equipment assessments were conducted, and assets from 153 locations were loaded into the TFS Fleet Management Database. 15 of the 76 proposed cost-savings solutions were either already being developed or awaiting site approval, and $1.8 million in annual cost savings has been documented. 

 

Group Purchasing as Your Catalyst for Success

Harnessing the right technologies to organize and interpret data and analytics is the key to helping companies like Cornerstone Building Brands drive growth. And, as the portfolio company was specifically dealing with MHE spend, the aggregation of this data was made possible with the fleet management expertise of TFS, Ltd.

At OMNIA Partners we work tirelessly to help our members find the right suppliers to fit their unique needs. The value that the portfolio company experienced was a direct result of the relationship between OMNIA Partners and TFS, Ltd., and the extensive variety of contracts in the OMNIA Partners portfolio. By partnering with a group purchasing organization (GPO), organizations nationwide experience an optimized procurement process through easy access to an array of contracts, spend visibility solution, and subject matter expertise.