One clear advantage of an effective investment recovery program is its cost-benefit. Organizations that recycle, redeploy, resell and reuse their surplus or obsolete materials and equipment return millions of dollars to their corporate treasury every year. Over the past few years, the terms ‘sustainability’ and “green business practices” have continued to be hot topics. As noted in other CAPS Research  studies, many companies are still struggling to understand what ‘green’ and ‘sustainability’ actually mean in terms of their supply management operations and objectives. Clearly, the business model continues to evolve as supply management executives drill into the costs and benefits of an environmentally sustainable supply chain. In the meantime, investment recovery professionals are recovering millions of dollars of value in unutilized or underutilized assets. Many survey respondents have reported that the cost-benefit dollars realized flow back to the business unit as revenue.

The results of a recent CAPS Research benchmarking study found the average cost-benefit of investment recovery programs to be $31.00 (US) for every dollar of investment recovery operating expense incurred. Here’s the bigger picture: sixty companies reported a total cost- benefit of $1.23 billion, which averaged $20.5 million per company. The median cost-benefit is $8.6 million, which indicates the average is being skewed by large investment recovery values reported by larger companies. If we remove the top and bottom two cost-benefit observations, the median value doesn’t change significantly, but the average benefit is $14.2 million instead of $20.5 million.

 
The real test continues to be the impact of total cost-benefit dollars against the investment required to
sustain an investment recovery program. None of the survey population reported a negative cost-benefit. Even when removing the top and bottom two values, the ratio of cost-benefit to expense is $27 realized for each dollar invested. Cost-benefit values are calculated as follows: the gross  revenue realized from sales plus the fair market value of surplus assets that have been redeployed within the organization and the value of other related cost avoidance. During the reporting period, the gross revenue from sales was approximately $798 million or 65 percent of the total cost-benefit value. The fair market value of redeployed assets was reported to be about $386 million or 31 percent of the cost-benefit value. The remainder was from other cost-avoidance measures.

Best-practices implementation.
Best practices start with strong and visible management support. The companies that reported having strong and visible management support in place were more likely to report higher cost-benefits as well as to have adopted other investment recovery processes considered to be best practices.
 
Opportunities for improvement.
Just as important as knowing which best practices lead to improved investment recovery operations is knowing which practices are still considered “best-practices opportunities.” Twothirds of the respondents reported that financial incentives to stimulate surplus disposition are still viewed as opportunities, and almost half reported that their companies should consider using their surplus and/or refurbished assets before buying new.
Organization Structure.
A large majority of survey participants (85 percent) said their investment recovery operations report directly to the supply management organization.
 
Technology.
Implementing and maintaining a viable technology capability to help dispose of surplus assets is key to implementing and maintaining an effective investment recovery program. More companies are
using e-auctions and other Internetbased tools more regularly and with greater success. These numbers are not a surprise given the complexities being faced in this era of environmental and
social awareness.
Investment Recovery professional profile.
A typical investment recovery specialist has a bachelor’s degree (62 percent), and about 40 percent have achieved professional certification. About 35 percent have less than five years of investment recovery experience, while 26 percent have more than 15 years’ experience. Approximately 90 percent
of the professionals employed by the companies in the survey sample are either exempt employees (70 percent) or nonexempt (19 percent); 11 percent are in-house contractors. The average annual salary of a Level 1 Investment Recovery Specialist is $103,645, which is an average increase of 13 percent over the average salary reported in the 2007 report.
 
To learn more about the CAPS Research benchmarking study on investment recovery operations,
members of the Association can visit the ‘Members Only’ section of the website and click on the
‘Benchmark Study Results link.’ To participate in the next update to the study and receive this year’s
study, please e-mail: metrics@capsresearch.org.