As the debt laden Fortress Investment Group who purchased the resort’s operator Intrawest LLC struggles to repay $1.7bn loan, the Winter Olympic Games host resort faces uncertain future.
Intrawest has undergone widespread decentralisation – fragmenting their procurement leverage and embarked upon a resort garage sale.
Had the company invested in developing its procurement capabilities to take control of cost a comparatively modest saving of 6% could have delivered close to $30m in savings – enough to make a significant dent in its debt interest payments. By taking a more aggressive approach as many world class procurement organisations around the world have done during the downturn, achieving savings in excess of 12%, then maybe the garage sale could have been avoided.
Building capability in procurement not only serves to drive major savings and reinforce earnings capacity, it also reinforces the company’s financial position and generates cash flows which enable it to reduce interest bearing debt by:
- Improving operating margins
- Reducing front-loaded working capital, including inventory reductions
- Reducing fixed costs and improving cost competitiveness through integrated management of purchasing and operations
- Effective and efficient capital expenditure
Whilst the garage sale may enable the company to survive in some diminished form, it is hardly going to produce sustainable shareholder value, as its capacity to generate value from procurement has not changed. This I commented on nearly two years ago, but now it seams Intrawest is not “Aging Gracefully”.
Perhaps the shareholders should have their say.
Nuff said …