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SIG dispatch: Leasing Spend — The Hidden Double Digit (millions) Category Savings Opportunity! (Part 1)

10/17/2019 By

At SIG’s Global Executive Summit this week in California, two sessions, a mainstage panel and a breakout session, focused on the opportunity for lease sourcing. Two LeaseAccelerator execs — Steve Keifer, VP of Marketing, and Ingemar Lanevi, VP of Global Lease Sourcing Solutions — ran the sessions.

Steve did one of the best jobs I’ve seen at not “selling,” per SIG’s requirements — far better than many of the consultants I’ve seen over the years at SIG events (and certainly many steps up on the vendors, some of whom toe the line).

In Part 1 of a quick two-part series, I’ll share some of my notes on the leasing opportunity for procurement to pursue based on Steve and Ingemar’s lecture. Spend Matters will explore LeaseAccelerator, a technology provider, in greater detail in a PRO Vendor Snapshot in the months to come.

At SIG, the somewhat sparsely attended breakout talk (relative to a “capacity” session on agile sourcing at the same time, as well as two others) was a crash course in the opportunity for leasing savings. A textbook 101 introduction to the opportunity. EVERY procurement leader and category manager who has the opportunity to address lease spend should listen to this presentation (and of course finance teams that have oversight over leasing spend as well).

Here are some of my notes from the talk and from the slides that Steve shared with me:

  • Leasing spend is a huge opportunity for many companies — the average S&P listed firm has $1.13 billion in lease liabilities, which represent 10% of balance sheet debt.
  • The first “wave” of recent leasing efforts focused on incremental regulatory/reporting accounting changes based on IFRS requirements. Publicly held firms now have to show all lease spend on their balance sheets. Private firms will have to do so eventually.
  • Companies lease a variety of categories of spend — so leasing category management is really an overlay on existing category management strategies. These categories include fleet/trucks, railcars/shipping containers, forklifts and other material handling equipment, manufacturing equipment, IT and data center gear, photocopiers/office equipment and laboratory test equipment.
  • Sourcing savings opportunities (on the finance piece alone) can represent 10% of more savings on the total leased amount.
  • Compliance opportunities can run into the double digit savings (hard dollar savings) — more on this in case studies to come. Unplanned overpayments on a lease can be as high as 75% of the actual cost of the lease term (after paying through the initial period, which represents as much as 85% of the original equipment lease cost).

In short: You’re sitting on found sourcing and category management money here. So target it!

Up next: I’ll share greater detail on where lease savings can come from as well as LeaseAccelerator’s case study/benchmark savings data.