Procurement Professionals - Learn best practices for how to reduce your spend on leased equipment. Centralize, consolidate and analyze leasing spend as you would any other category.

1. Spend Management for
Leased Equipment

2. Popular
Equipment
Leasing
Categories
Aircraft Trucks Autos
Computer
Material
handling
equipment
Laboratory
R&D
equipment
Industrial
manufacturing
equipment
Networking
&
telecom
equipment

3. $1
Trillion
of
CapEx Financed
in
2016
• 72%
of
use
some
form
of
financing
• Equipment
leasing
growing
8-­‐10%
annually
recently
U.S.
Equipment
Finance
by
End-­‐User
Industry
in
2011,
$Billions
Trade,
trans.,
&
utilities
Manufacturing
Professional
&
business
services
Information
Education
&
health
services
Finance,
insur.,
&
real
estate
Agriculture,
forestry,
fishing
Construction
Natural
resources
&
mining
Other
services
Leisure
&
hospitality
128.7
107.3
76.5
75.3
75.3
59.3
43.7
36.0
33.3
15.0
13.6
Source:IHS

4. CapEx – Highly
Variable
by
Industry

5. Why
Leased
Equipment
is
Poorly
Managed?
Fleet Material
handling
Lab
equipment
Office
equipment
Procurement Treasury AccountingShared
Services
Because No One Owns It

6. No
Lease
Versus
Buy
Asset cost
IBR
WACC
Lease
term
Lease
NPV
Break
even
analysis
Net
cash
flows
Tax deduction
LEASE
VERSUS
BUY
ANALYSIS

7. Improper
Sourcing
of
Leases
Traditional
bundled
approach
Optimized
unbundled
approach
Asset
Lease
Asset Lease
Equipment
supplier
&
captive
finance
org
Equipment
supplier Most
competitive
lessor

8. Not
Tracked
Well
to
End
of
Term
Emails Spreadsheets File
Cabinets Post
It
Notes
Lease
term Evergreen
Decision
Return Buyout Renew

9. Net
Result
is
Spend
Leakage
(Cost
Savings)
1. Lack
of
spend
transparency
2. Lack
of
demand
management
3. Lack
of
aggregation
6. Often
has
been
optimized,
subject
7. to
data/organizational
constraints
9. Process
inefficiencies
10.
Accounting
and
compliance
issues
4. Inconsistent
application
5. Sub-­‐optimized
working
capital
7. Given
to
captives,
cot
competitively
sourced
8. MLAs
not
standardized;
terms
sub-­‐optimized
11.
EOT
overruns
12.
The
14-­‐year
lease!
Understand
Equipment
Spend
Standardize
Lease
Vs.
Buy
Equipment
Sourcing
Lease
Sourcing
Automate
and
Control
Processes
Manage
to
End
of
Term
Repeat
Process
(with
Data
and
Policies)

10. Analyze,
Aggregate,
Centralize
Spend
Case
Study
• Fortune
500
Manufacturer
• Expected
2200
Leases,
Found
7400
in
44
countries
• Consolidated,
integrated
in
LeaseAccelerator,
Oracle
and
Ariba
• Increased
size
of
material
handling
bids
into
one
large
event
saving
$700k
BEST PRACTICE #1
Many
independent
leases
for
material
handling
equipment
Aggregated
lease
for
material
handling
equipment

11. Unbundle
Equipment
Financing
&
Bid
Out
BEST PRACTICE #2
Competitive
Bidding
Process
Banks
Captives
Independents
Traditional
Bundled
Approach
Asset
Lease
Equipment
supplier
&
captive
finance
org
Optimized
Unbundled
Approach
Asset Lease
Equipment
supplier
Most
competitive
lessor

12. Savings
from
Equipment
Lease
Sourcing
Case
Study
• Eaton
Corporation
• $2.2
Million
savings
on
just
$12
million
in
spend
• Standardized
terms
and
conditions
• Willing
global
bidding
community
Competitive
Bidding More
Funding
Sources
Proposal Generation Financing
Rates
7 25%
80% 7%
Bids
from
different
financial
institutions
are
required
to
ensure
optimal
competition
Less
time
spent
cultivating
and
maintaining
relationships
for
capital
sourcing
from
using
ELM
Less
time
spent
preparing
financing
requests
and
evaluating
proposals
from
using
ELM
Reduction
in
the
average
cost
of
financing
equipment
using
ELM

13. End
of
Term
Management
Case
Study
• Same
Fortune
500
Manufacturer
• 7400
leases
pruned
to
3500
from
returns
and
buyouts
• Evergreen
payments
as
a
percentage
of
total
annual
payments
(excluding
termination
fees)
dropped
from
18%
to
8.5%
Most
Companies
Have
9-­‐12
Months
of
evergreen
(for
20%
of
their
equipment
leases)
36
Months
Original
Term
12
Months
Evergreen
Rent
End
of
Term
Options
11%
Savings
from
better
end
of
term
management
from
using
ELM
BEST PRACTICE #3

14. Seven
Step
Strategic
Sourcing
Process
(Applied
to
Equipment
Lease
Management)
1 2 3 4 5 6 7
Understand
Equipment
Spend
Standardize
Lease
Versus
Buy Analysis
Develop
And
Execute
Equipment
Sourcing
Conduct
Competitive
Exercise
With
Lessor
Market
Automate/control
Contract
And
Accounting
Costs
Manage
Portfolio
To
End
Of Term
Repeat
Process
• Data
Collection
and
Analysis
• Analyze
Leakage
and
Establish
Rio
• Align
Treasurer,
CPO.
Controller
• Build
Lease
Versus
Buy
Financial
Model
• Distribute
to
Organization
• Aggregate
Spend
• Typical
Cap,
Equipment
Strategy
• Execute
Supply
Market
Exercise
• Create
Lessor
Selection
Criteria
• Conduct
Lessor
Analysis
• Bid
Standard
Rfp/mla to
captive
cnd
independents
• Establish
Portfolio
Management
System
• Establish
Financial
Reporting
• Integrate
To
Erp/procurement
• Standardize:
Return
Buy,
Renew,
Refresh
Decision
• Stakeholder
Scorecards
• Escalation
For
Non-­‐
performance
• Begin
process
again,
but
with
data!!
• Review
ETO
needs
and
supply
markets
• Quick
Wins
Key
activitiesDeliverables
• Spend
Analysis/
Spend
Cube
• Category
Profiles
• Sourcing
Waves
• Lease
Versus
Buy
Model
• Standardized
Usage
across
organization
• Selected
vendor
&
Original
Equipment
purchase
price
• Selected
Lessor
• Standardized
Lease
Agreement
• Complete
Portfolio
Tracking
• Complete
Sox
Compliant
Accounting
Reports
• Automated
Transactions
• Improved
Eto
Results
And
Costs
• Supplier
And
Stakeholder
Scorecards
• New
wave plan

15. How
Much
Will
You
Save?
Competitive
Sourcing
End of Term
Management
$100M
Lease Portfolio
$500M
Lease Portfolio
$7M
Per Year
$35M
Per Year
$10M
Per Year
$50M
Per Year

16. Typical
Equipment
Leasing
Cycle
Lease
End
Lease
Start
Decision
to
Lease
12 24 36 48 60
Original
Cost
Spread
Out
Over
48
Months

17. Challenges
with
Introducing
Competition
Bidding
Takes
30-­90 Days
Lease versus
Buy Analysis
Recruit
Lessors to Bid
Generate
Leasing RFP
Proposal
Analysis & Ranking
Notify Winners
and Losers
Negotiate Terms
& Conditions
Start End
Year
One
Year
Two
Year
Three
Year
Four
Year
Five
Lease Sourcing

18. Time
Savings
with
Equipment
Lease
SW
Typical Competitive
Bidding Process
(30-­90 Days)
Automated Competitive
Bidding Process
(5-­10 Days)

19. Plug
In
to
the
Global
Lessor
Network
500 Banks, Vendor
Captives and
Independent Lessors

20. Material
Handling
Equipment
global
the
lessor network
In
order
to
take
advantage
of
economies
of
scale,
and
to
remove
the
inefficiencies
of
multiple
“one-­‐off”
RFP
events
for
this
consistent
flow
of
equipment,
this
industrial
manufacturer
consolidated
24
months
of
multi-­‐vendor
Material
Handling
leasing
volume
into
a
single,
large
successful
competitive
event.
By
aggregating
transactions
into
a
lease
line,
this
lessee
was
able
to
attract
more
lessors
and
drive
down
capital
costs.
Stakeholders
have
the
flexibility
to
take
down
transactions
over
the
term
whenever
they
want.
Amount
Financed: $8,345,000
Term/Structure:
48
Month
Operating
Lease
Proposals
Received: 11
Max Average Award Min Savings %
Saved
Annual
Payments,
Initial
Term $
2,078,340
$
1,923,573
$
1,790,913
$
1,764,380
$
132,660
6.9%
Total
Payments,
Initial
Term $
8,313,374
$
7,694,292
$
7,163,652
$
7,057,520
$
530,640
6.9%
Present
Value,
Initial
Term 94.1% 87.4% 81.0% 79.8%
©
LeaseAccelerator
Inc.
2015.
All
rights
Reserved.
Not
for
Distribution.

21. Dell
Supercomputer
global
the
lessor network
A
Fortune
200
IT
organization
needed
a
leasing
solution
quickly,
given
a
demanding
implementation
timetable
and
impending
return
date
on
existing
equipment.
Using
Lease
Accelerator
and
The
GLN,
they
went
to
market
quickly
and
obtained
aggressive
rates
on
an
accelerated
timetable,
which
has
resulted
in
a
savings
of
over
$87,000
over
the
lease
term
compared
to
the
incumbent
lessor.
Amount
Financed: $2,380,081
Term/Structure:36
Month
Operating
Lease
Proposals: 10
Max Average Award Min Savings %
Saved
Annual
Payments,
Initial
Term $
814,092
$
765,898
$
711,168
$
711,168
$
54,730
7.1%
Total
Payments,
Initial
Term $
2,442,276
$
2,297,694
$
2,133,504
$
2,133,504
$
164,190
7.1%
Present
Value,
Initial
Term 100.8% 94.7% 88.0% 88.0%
Incumbent’s
PV
=
91.4%
©
LeaseAccelerator
Inc.
2015.
All
rights
Reserved.
Not
for
Distribution.

22. Telephony System
global
the
lessor network
Secured
financing
for
an
Avaya
Telecom
system
with
a
new
lessor
from
the
Global
Lessor
Network.
The
competitive
financing
process
delivered
an
IRR
not-­‐to
exceed
3.36%
for
the
likely
end-­‐of-­‐term
purchase
scenario,
substantially
less
than
the
incremental
borrowing
rate
for
the
entity.
Amount
Financed: $1,988,237
Term/Structure:
60
Month
Operating
Lease
with
FMV
Buyout
Caps
Proposals
Received: 18
Max Average Award Min Savings %
Saved
Annual
Payments,
Initial
Term $
452,124
$
399,396
$
358,332
$
358,332
$
41,064
10.2%
Total
Payments,
Initial
Term $
2,260,620
$
1,996,980
$
1,791,660
$
1,791,660
$
205,320
10.2%
Present
Value,
Initial
Term 96.3% 85.2% 76.4% 76.4%
IRR,
Initial
Term
+
FMV
Buyout
Cap 11.8% 7.7% 3.4% 3.4%
©
LeaseAccelerator
Inc.
2015.
All
rights
Reserved.
Not
for
Distribution.

23. Next
Steps
-­‐ Get
an
Executive
Briefing
• How to separate
equipment from
financing
• How to aggregate,
analyze and
consolidate spend
• How to
standardize lease
versus buy
analysis
• How to minimize
end of term
leakage