Site Closures and Footprint Reductions: What Every Asset Manager Needs to Know

Site Closures and Footprint Reductions: What Every Asset Manager Needs to Know

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Table of Contents

Introduction ..................................................................................................... 3

The Project Lifecycle ....................................................................................... 4

Step 1: Initiation .............................................................................................. 4

Step 2: Planning ............................................................................................... 5

Step 3: Execution ............................................................................................. 8

Step 4: Close Out ........................................................................................... 11

Conclusion ..................................................................................................... 12

Many organizations will eventually face the challenge of closing a facility. Closing is no small task, as it usually involves redeploying, selling, or disposing of millions of dollars of real estate, manufacturing equipment, systems, and other surplus assets. Not to mention potential personnel management, logistics, inventory, budget, timeline, and safety challenges. In addition, asset disposition and redeployment processes must strictly adhere to government regulations and comply with industry standards. Finally, many organizations have their own sustainability metrics to meet.

A facility closure and ensuing dismantlement can be thought of as a major construction project in reverse i, with the added complexity of undoing years of operations and changes. That is why every phase of the closing process must be carefully planned and monitored to avoid safety, environmental, legal, and financial problems.

Critical Steps to Realizing Opportunity from a Closure

Introduction


This white paper will outline the critical steps you will need to take in order to ensure your business achieves maximum recovery in a distressed situation.

The Project LifecycleSo how do you successfully navigate all of these issues while maximizing value for your surplus equipment and mitigating potential risks? Although closing a site is a complex challenge, the process can be simplified by following the four key steps of the Project Lifecycle: Initiation, Planning, Execution, and Close Out.

Step 1: Initiation

During Initiation you define the preliminary analysis of the project

objectives and ensure that further project work is authorized.

Effective pre-shut down management entails a closely coordinated effort among all involved to develop a road map for moving the plant from production mode to shut down, cleanup, Investment Recovery (IR), and dismantlement. To get the process started, the manager first needs to define, in writing, the scope of the work, the timeline, and any local issues (safety and environmental concerns, unemployment, etc.) that might affect the project. The manager should seek the assistance of the IR department in providing quality processes and best practices during this project development stage.iv

iii

• Project definition

• Setting goals and objectives

• Documenting project costs and benefits

• Developing a project charter

• Obtaining project authorization

Project Initiation includes:

ii

THE

PROJECTLIFECYCLE


Step 2: Planning

A comprehensive closure plan will help you determine the budget and timeline for the management, valuation, redeployment, sale, and removal of assets. Also, be sure to set a firm closure deadline and stick to it.

When creating your plan it’s important to include:

Statement of work: This formal document captures and defines the work activities, deliverables, and timeline one must execute in performance of specified work. It usually includes detailed requirements and pricing, with standard regulatory and governance terms and conditions.

Project cost elements and benefits: This is a documented project cost and benefit analysis.

Confirmed corporate goals, timeline, and executive sponsor (the highest ranking member of the project): This requires careful coordination with management to ensure alignment.

Questions Your Plan Should Address

• Is the facility being shut down completely or partially? If partial, how can work continue uninterrupted in the areas not scheduled to close?

• When is the last job scheduled and when must the facility be vacated?

• What in-house resources do you have to support the closure?

• What potential legal, environmental, and safety risks exist, and what steps will be taken to mitigate them?

• How will raw materials be managed?

• What conditions are the assets in?

• Do you know what the assets are worth?

• Can certain assets be redeployed to other facilities? Which ones?

• Should you partner with an outside organization to help you in the process?

• If you use a partner, will it be one who can maximize the financial return and provide necessary resources?


Identify Your Team

The success of any project depends on the people involved. Your team, which typically includes internal personnel, should be very familiar with your facility to ensure a streamlined, compliant closure. Your team will most likely include:

It’s conceivable that your company might not need all of these team members. It is very much dependent upon the nature of your business. It is highly likely that your team will include personnel from your company’s Information Technology, Human Resources, Legal, Finance, Supply Chain Management, and Engineering departments. If your organization doesn’t have all of these resources, it might be appropriate for you to consider working with an outside partner with extensive expertise in your industry who will have the means to efficiently tackle the issues involved, saving you time, personnel resources, and money.

Contractor Evaluation and Selection

When closing a facility for any reason, a best practice is to have a process in place for the management of surplus assets. This is usually a large undertaking, as businesses create teams and fill roles dedicated to inventory counting, valuation, sales, removal, shipping, and dozens of associated tasks. If these processes are not streamlined or efficient, organizations will fail to get their full return on investment.

Often internal asset disposition teams or facility managers need assistance when closing down offices and production lines. Closing down a branch or facility is difficult, and it’s a task that requires help from a trusted asset management service provider. Many businesses turn to asset management partners to make the closure process easier. But how do you select a partner? A trusted surplus asset management provider should be able to help determine your assets’ value, make value-based decisions about whether to sell or redeploy, sell your assets for maximum recovery, and mitigate all potential risks.

Look for an Outside Provider Who Can:

• Leverage metrics and marketing strategy best practices

• Drive “green initiatives” and sustainability programs

• Provide solutions to mitigate compliance and ethics risks

• Seamlessly meet international business needs through a global operational footprint

• Offer robust, wide-ranging services

• Maximize recovery through multiple sales methods

• Achieve a high sell-through rate, minimizing the number of assets going into a landfill

• Offer redeployment solutions

• Unit/business manager

• Facilities manager

• IR manager

• Environmental manager

• Safety manager

• Engineering manager

• Procurement manager

• Site security

• Labor relations manager

• Public relations manager

• Project attorney

• Contractors


Inventory Assets and Determine Whether to Redeploy or Sell

The last step in the planning process is to inventory all assets in your facility and determine which should be redeployed and which should be sold on the secondary market. This should begin three to six months prior to the plant closing its doors. An outside partner can efficiently inventory your assets, saving you time and money. Should you work with an outside partner, be sure to select a partner with extensive expertise in your industry and asset categories. Once you’ve compiled a full inventory list, make it available in a web-based solution or distribute it across your organization so team members can select assets to redeploy. Set a hard deadline for these selections. Generally, high-value assets – especially those with long expected lifespans – should be redeployed if possible. Conversely, assets should be sold if they have lower values or if their breakdown, removal, shipping, and installation costs exceed the costs of purchasing new. If you plan to redeploy or sell a large number of assets, or assets that are unique or highly valuable, consider enlisting an outside partner to manage this process. Outsourcing these functions to an experienced provider will allow you to focus on core business while maximizing value for your facility closure.

Inventory Procedures

• Inventory, catalog, and photograph all physical assets

• Inventory building infrastructure to be salvaged (copper wire/pipe, stainless steel, etc.)

• Identify any decommissioning, permit, removal, and health and safety issues and costs, and develop an environmental assessment and waste disposal plan

• Provide visibility of all site assets for internal redeployment using an enterprise-wide web-based software tool

• Develop a schedule based on approved changes and project team support


Step 3: Execution

The execution phase involves the solicitation and award of agreements, project management team activation, the start of the project, and monitoring, controlling, and reporting performance.

Sell Surplus in the Secondary Market

Surplus that has value and cannot be redeployed should be sold in secondary markets. Adhering to these best practices will help you maximize recovery.

Estimate values for assetsKnowing how much your surplus is worth will help you set appropriate recovery expectations. A trusted asset management partner will tap market and asset expertise to efficiently value your surplus.

Determine sales channel(s)Auctions (online or live) and private treaty sales are both highly effective methods. Private treaty, which focuses on a select group of prospective buyers, is the preferred sales method for specialized assets. Auctions are preferred for general assets with high demand. A reverse supply chain partner can determine the appropriate sales channel(s) based on your assets, buyer base, location, anticipated interest, and other factors.

Go globalEquipment considered outdated in your region may be in high demand in developing areas. For this reason, if you use outside resources to help, look for a partner with access to a global buyer base interested in your obsolete assets.

Implement a targeted marketing strategyYour buyer base will vary depending on the condition, age, and location of your assets. Identify your target buyers, determine the best channels to reach them (email marketing, print ads, trade shows, etc.), and craft targeted communications designed to get their attention.

Schedule a preview periodAllowing potential buyers to inspect your assets in person will help them feel confident the assets meet their needs, increasing their interest and bidding.


Provide complete asset informationIf you’re selling surplus online, be sure to include detailed descriptions and compelling pictures to whet buyer interest. Liquidity Services’ recent survey found that nearly all buyers of surplus (95% according to the survey) want to see accurate, detailed descriptions of assets for sale. The “story” of how the asset ended up on the secondary market also interests buyers, as 61% of survey respondents found this important. That same survey revealed that 94% and 65% of buyers, respectively, deem photos and videos important to asset listings. Compelling photos and videos establish buyer trust – and drive higher bids and recovery – by providing clear evidence of your assets’ quality.v

Set a removal timelineEnsure a smooth removal process by defining and clearly communicating expectations for when assets should be removed (and make sure this date occurs before your closure deadline).

Address potential compliance issuesIf you plan to sell your surplus internationally, you’ll want to know which items may be subject to export controls regulations. An expert asset management partner will ensure you comply with all trade compliance protocols in the reverse supply chain. In addition, that partner will guide your organization through all data privacy requirements. That partner will also undertake a thorough screening of any potential buyers before they can bid or purchase, and then continuously afterwards, ensuring your surplus is never sold to the wrong buyers.


Manage Communications vi

Establishing open and clear communication channels is critical to maintaining an efficient operation. All concerned parties, such as the owner, contractors, and consultants, should meet regularly to review progress and identify potential problems. Additionally, the project team should meet on at least a weekly basis to discuss the current issues affecting the close. Key elements of managing project communications are:

• Review progress on a frequent basis with project stakeholders

• Resolve issues affecting the project

• Monitor satisfaction of key stakeholders’ expectations

• Manage team and contractor performance

• Meet and communicate often

• Discuss and assign responsibilities

• Recognize success – develop and implement processes for recognizing and, if possible, rewarding success as a way to enhance team morale

• Monitor team morale and if there are problems, find the cause and remedy as quickly as possible

• Conduct performance reviews

• Provide team training

• Review sales results (number of bidders, number of bids, percentage of items sold, etc.)

Manage Quality Assurance

• Participate in walk-throughs and reviews

• Conduct daily safety inspections and audits

• Carry out work inspections and audits

• Undertake project reviews

• Monitor costs and timeline variance

• Manage and maintain the financial plan

• Report monthly status


Step 4: Close Out

During the final phase of the Project Lifecycle, the project is completed. The remaining work of the project team involves releasing resources to other projects, developing lessons learned for future improvement, and closing out the administrative elements of the project from an organizational perspective.vii

A checklist of the final activities to be completed should be maintained and checked off as each is done: viii

Completing any close permitsDocumenting and sharing project results and lessons learned

Managing project acceptanceReviewing and recognizing team performance

Conducting a close out meetingReviewing and recognizing financial performance

Ensuring that all deliverables have been completed and all measurable success indicators have been met

Closing the project records, updating and archiving project documentation, and making sure that all close out conditions have been met


ConclusionFacility closures are often necessary if your business undertakes merger and acquisition activity, consolidates operations, or moves production to other regions. By following the steps in this white paper and by partnering with an experienced provider, you can transform facility closures from challenges into opportunities that maximize value to fuel achievement of your strategic goals.

About Liquidity ServicesEvery organization has surplus – assets or inventory no longer required. Liquidity Services (NASDAQ: LQDT) works with clients to ensure surplus is intelligently transformed from a burden into a liquid opportunity that fuels the achievement of strategic goals. Our superior service, unmatched scale, and ability to deliver results enable us to forge trusted, long-term relationships with over 8,000 clients, including Fortune 1000 and Global 500 organizations as well as government agencies. With over $1 billion in annual sales proceeds and nearly 3 million buyers in almost 200 countries and territories, we are the proven market leader in delivering smart surplus solutions. Let us build a better future for your surplus.

Learn more at LiquidityServices.com.

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i Investment Recovery Handbook, Adding Value to the Supply Chain, 2013 Investment Recovery Associationii Investment Recovery Handbook, Adding Value to the Supply Chain, 2013 Investment Recovery Associationiii Investment Recovery Handbook, Adding Value to the Supply Chain, 2013 Investment Recovery Associationiv Investment Recovery Handbook, Adding Value to the Supply Chain, 2013 Investment Recovery Associationv Maximize Recovery for Your Surplus by Building Buyer Trust, 2015 Liquidity Servicesvi Investment Recovery Handbook, Adding Value to the Supply Chain, 2013 Investment Recovery Associationvii http://playbook.amanet.org/5-stages-of-the-project-life-cycleviii Investment Recovery Handbook, Adding Value to the Supply Chain, 2013 Investment Recovery Association

Site Closures and Footprint Reductions: What Every Asset Manager Needs to Know

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