BUYOUT LEASE

• The business maintained a large portfolio of Material Handling Equipment (MHE) and Fleet lease/rental assets. A financial efficiency assessment demonstrated non-optimized cost structure with the rental model. Leadership aimed to reduce cost exposure while ensuring that essential assets remained available to support operations
• Procurement partnered closely with business leadership to conduct a comprehensive evaluation of the full MHE and Fleet portfolio, identifying essential versus non‑essential assets.
  • Proposed targeted buyouts only for high‑value assets that were strategically important to retain.
  • To increase leverage, launched a competitive RFP, introducing market pressure on the incumbent lessor.
  • Initiated negotiations to return non‑critical equipment.
• This competition drove a 17% reduction in the original buyout offer and secured pricing 29% below market value, delivering significant financial benefit to the enterprise.

• The lessor’s initial buyout offer significantly exceeded fair market value. Additionally, the portfolio contained a mix of critical and non‑critical assets, making it difficult to justify such a large capital outlay without a detailed assessment. Market conditions and existing lease terms further limited flexibility, placing the business at a strategic disadvantage

• How do we establish a competitive cost structure when the supplier holds leverage through legacy contractual terms—and renegotiate a buyout that reflects true market value—while preserving a strong relationship with a supplier partner that supports a significant portion of PEP’s broader business?

This can be considered Productivity since there are metrics that fit the YOY algorithm requirements: 

• Established base rate: monthly leased rate
• Current year rate: depreciation rate
• Current year volume: purchased volume

**  YOY Productivity = ( LY Monthly Lease Rate – CY Depreciation Rate ) * Purchased Vol 

• Following the GP Productivity Framework, there is only a 1-year benefit