Company: $10M residential and commercial solid waste service provider.
Problems: Under utilization of current assets. Not understanding the utilization rates. Retired assets still an expense. High capital cost of vehicles.
- Owners failed to know what the utilization rates should be for each piece of equipment and then determine how to maximize those rates. Also the owner needed to look at retired assets and remove them from being maintained and/or used.
What was done:
- New vehicles for this firm cost $175K.
- Each vehicle needed to be operated 52 hours a week to generate the revenue needed to maximize return on investment.
- Routes were restructured to put the amount of work necessary to maximize equipment and labor.
- Also retired assets were sold off to increase cash but also to make sure that employees did not maintain or use retired assets because they were there.
- Reduced routes by 2 routes decreasing needed capital by $350K, reducing needed cash, improving driver productivity and selling two old pieces of equipment for cash.
Value Driver: By significantly reducing capital expenditures, generating cash from equipment sales, and improving driver productivity, the company value was increased each year.