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Our
week was highlighted by two meetings which were of particular interest - thus
my desire to share. Common among both operations with whom we met was the
recent acquisition of a competitor.
Akin
to the comedy sitcom of the 1960’s - The Brady Bunch - where two families were
melded into one - both companies now find themselves with the task of managing
the excess or inefficient capacity.
As
you know, if you’ve watched reruns - Marsha, Greg, Bobby, Cindy, Peter, Jan,
Mike, Carol, and Alice ultimately co-habituate peacefully - although five
seasons and 117 episodes were consumed telling “the story of a man named
Brady.” A similar saga occurs when two businesses are joined at the hip.
In
the first case, growth had occurred organically - with great products marketed
to a number of customers who saw the value and bought more. With an increase in
sales and the need for more space - each operator looked to proximate buildings
to house the explosive up-tick in orders. Each enterprise functioned - albeit a
bit clunkily.
Flash
forward. Packaged were two groups that essentially served the same buyers but
from different operating facilities. The “marriage” created a behemoth of
inefficiency - with receiving, manufacturing, storage, shipping, sales,
marketing, accounting, and management essentially quintuplicated.
Now
considered is a consolidation into one facility - essentially moving the Bradys
into a house in Studio City. Carefully vetted in the weeks ahead will be the
disruption of production, moving costs, future needs, available buildings,
disposing of the existing lease obligations, and return on investment. Should
be fun!
Our
second group achieved its size through acquisition. Consumed was any competitor
in its path. Awesome. But the wake is similar to the Brady union - you’ve two
sets of kids - pairs of whom are the same age. In commercial real estate
parlance - the business has duplicated its distribution footprint serving the
same geography. Complicating the equation - a trend in logistics - higher
ceilings and larger truck courts. Allowed is the occupation of fewer square
feet - stacked higher with product and accessed by longer trucks containing
more inventory.
Ultimately, a distributor can occupy fewer square feet and
store the same amount of stuff. We now must figure out where the employees
live, proximity of the centers to their customers, and the right sizes for the
mirrored buildings. Just a simple puzzle to solve!
Stay
tuned in the week’s ahead for an update on our progress.
Allen C. Buchanan,
SIOR is a principal with Lee & Associates Commercial Real Estate Services. He can
be reached at 714.564.7104 or abuchanan@lee-associates.com his website is allencbuchanan.com