Sunday, March 29, 2009

It’s Time to Monitor Your FM/CRE Supply Chain

Most FM’s/CRE’s are dependent upon a wide range of service and material providers. If you have checked on the financial health of your key providers recently you may have gotten a few surprises. The S&P 500 shareholder value index is down 56% (as of early March) but many providers have suffered deeper losses, some to the point they are on failure watch lists. Here are a few real examples.

Office supply company -98%

Custodial equipment and supply company -96%

Provider of outsourced FM services -78%

Electric utility company -60%

Provider of outsourced food services -44%

Each of the providers listed above is a national top tier company in their market segment and each has suffered substantial loss of shareholder value. Those losses may result in any number of impacts to customers, including staffing changes, decreases in quality and attempts to maximize billings.

In addition, take a very close look at your Real Estate relationships. Many REIT’s and building owners are in distress due to reduced property values, high vacancy rates and lease defaults. If you are a Landlord through ownership, management, or sub-leases then a monthly watch on tenant’s health is a prudent step. One simple way to do this is by dashboarding shareholder value as a percentage as was done with the companies listed above. Another method is tracking share price, debt/equity ratios, etc. Whichever metric you decide upon make certain the context is both valid (choose the right measure) and equitable (sensible across segment boundaries).

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