Asset Exchange Value Proposition / Customer Dynamics
Our Customer’s Mission:
In the manufacturing space, the two primary missions of our customer, the plant manager, are to produce high quality product on time and to increase their return on net asset (RONA) performance. When surveyed (23 OEM and T1 automotive plants surveyed), our customers indicated that the 4 major challenges they face on an ongoing basis are:
- Managing capital budgets relative to equipment needs.
- Ensuring the right equipment is purchased.
- Keeping the equipment base flexible enough to meet project demands
- Disposition of equipment.
The Asset Exchange value proposition addresses three of the four challenges our customers face. Within the current economy, plant managers must improve productivity with less available capital.
Our Value Proposition
The Asset Exchange
value proposition is hinged on providing solutions to our customers (plant managers) that meet their primary mission and challenges. Asset Exchange's value proposition is focused on providing solutions that build flexibility into the manufacturing production process and optimize return on net
asset performance. In e
ssence, we help the plant manager increase their RONA through a blend of products and services that provide the manufacturing equipment they need, when they need it, and dispose of less productive equipment on a timely, high value basis. Our solutions directly impacts three of the four major challenges our customers face on a daily basis and can directly impact RONA.
Plant managers have an understanding of their equipment utilization over time. To the equipment that will have high utilization over time, our clients will be advised to own the asset. To the equipment that has a questionable utilization or a declining utilization over time, we offer solutions to provide flexibility in ownership (operating leases, sale/lease-back, disposition strategies). To the equipment that has idle or low utilization, we offer disposition strategies. The combination of these offerings provides Asset Exchange the opportunity to be a ‘one stop supplier’ of asset management services, thereby developing into the premier business to business remarketer for manufacturing equipment and providing vehicles for our customers to maximize their return on net asset performance.
Today many of our customers treat the disposition of their manufacturing equipment as an event. All too typical are situations where our customers orchestrate an event where they ‘sell’ their equipment for pennies on the dollar to dealers. The dealer then offers/sells the equipment for profits ranging from 40% margins to over 100% margins. Our solution is to turn the disposition event into a process by providing a suite of services all targeted to optimize the investment recovery of our customer’s asset. As part of the service, Asset Exchange plans to offer remarketing where Asset Exchange margin generation will be based on a percentage of the sale price. This concept will allow a higher return to our customer base (and a lower risk factor).
The Asset Exchange concept is to hire and build the trade intellectual property in-house and to INITIALLY utilize a series of alliance partners for outsourcing of auction, storage and refurbishment activities in addition to our current capacities. Upon review of our first year performance, we can make more educated decisions on the segment and contract remarketing investments that would need to be made to optimize AMS returns.
A New Tool to Manage RONA
Four elements impact RONA performance; Sales Price, Labor Costs, Material Costs, Equipment Costs. Typically, our customer’s management of RONA performance is focused in on Labor Costs and Material Costs. Personnel layoffs and contract re-negotiations with suppliers of material are usually prevalent in times of manufacturing downturn. Since plant managers typically purchase their equipment, the ability to manage equipment costs are reduced. Asset Exchange, through our value proposition, allows another vehicle to manage an important aspect of RONA that in the past was not exploited.
Channels to Reach Customers
The primary channel to reach the automotive OEMs, T1s and T2s with equipment lifecycle management solutions will be direct sales, which are relationship based. Asset Exchange will target small to medium size manufacturers for the sale of used equipment. Unlike the equipment life cycle management targeted customer base, our used equipment remarketing efforts will be aligned to a much broader audience. It will require Asset Exchange to focus significant marketing efforts (telemarketing, fax blasting, web, print, trade shows, etc.) to reach an audience that represents several 100,000 potential domestic customers. Asset Exchange has built a 250,000 prospect database that has been segmented for remarketing initiatives.
Non-Recourse Debt Source – A vehicle for ongoing funding and growth
Depending on the appetite of our funding partner, Asset Exchange will seek a non-recourse debt source to allow for business scale-up. Many options should exist to secure this financing given the low risk nature of the equipment and our customer’s investment grade rating. If needed, Asset Exchange is confident that we can arrange percentage equity participation with our non-recourse debt source for an appropriate participation in the end of term equity transaction (sell in secondary market, sell to customer, etc).