A conversation between Gibraltar Equipment Finance President Jeffry Pfeffer and PwC Partner Cort Jacoby on how middle market companies can approach today’s supply chain challenges. This is the first installment in a 3-part series on building supply chain resilience.
For the past 25 years, supply chains have gotten more complex, global, competitive, and extended. The pandemic hit and spending shifted into the purchase of all types of goods resulting in unprecedented and compounded stress on and disruption of supply chains. In 2023’s aftermath economy, lessons from the pandemic have emphasized more than ever the importance of supply chain resilience for middle market companies.
In the first installment of our Supply Chain Expert Insights Series, Jeffry Pfeffer sat down with Cort Jacoby, a Partner at PwC, to discuss the current economic climate, where equipment financing intersects, and how middle market companies can overcome challenges to optimize supply chain performance.
Jacoby has been consulting in supply chain for nearly 30 years with a focus on end-to-end supply chain transformations. His experience spans all elements of the supply chain including planning, sourcing, manufacturing, logistics, and product development that helps translate into reduced cost, improved inventory productivity, and improved speed to market. He has assisted companies ranging from Fortune 50 companies to medium sized companies owned by private equity.
Pfeffer kicked off the conversation by asking Jacoby about trends he’s seeing in the post-pandemic market, how middle market companies are adapting, and what actionable steps can be taken to address challenges. To start, Jacoby addressed how companies can adapt in the new normal to create a sustainable path to growth amidst an already stretched global supply chain.
There’s no industry immune from the supply chain challenges born out of the pandemic. Reeling from challenges of the eCommerce boom, clogged global supply lines, inflation, rising freight costs, increased capital expenditures and a labor shortage, companies are “leaving no stone unturned,” Jacoby said. “This starts with evaluating how they invest in people, processes, and technology, and determining where operational efficiencies exist.”
“Middle market companies are turning over every rock to find different places to drive incremental margins. They are seeing firsthand where cost increases and inflation are impacting their business,” Jacoby says. “As organizations look at different ways of doing business, they need to tackle multiple areas of the business to boost results.”
As for adapting in today’s fluctuating market, Pfeffer and Jacoby agree companies must rethink how they approach traditional business practices. Jacoby suggests middle market companies can get ahead of supply chain challenges with three core areas of focus:
- Address how to combat rapid cost escalation driven by inflation and limited buying power
- Secure access to talent and training to support a changing workforce
- Gain insights on investments that generate payback quickly for faster ROI
“The world has moved toward a ‘here and now’ mentality — and how quickly you can make an impact. So, you must determine what are going to be the things that are going to drive the highest impact and produce results relatively quickly,” Jacoby said. “Companies need end-to-end supply chain visibility. While you should be thorough in your evaluation, you can’t do it all at once so you must prioritize in execution.”
The two also discussed how digitization is creating new business models that company leaders must embrace. Knowing which digital capabilities to embrace first is another challenge middle market companies face. Having greater visibility into supply chain performance as facilitated by new technology allows businesses to have real-time trackable metrics for success.
“As we think of increased levels of digitization within an organization, that’s going to create change and new operating models. Organizations need to be able to be pulled along so they can continually re-train and re-equip employees with new capabilities,” Jacoby said. “Investments don’t start and end with the investment of a piece of equipment. It ends with the training and capability investments required to get better and better over time.”
As Pfeffer points out, there has been a drastic expansion and retraction of supply chains. Today, growth across many industries is challenging, which means companies must evaluate how to invest across their organization to prioritize where immediate impact and ROI exists.
“If you are looking at making a capital expenditure, either for capacity or efficiency, we can work to help you determine where that value exists on your investment horizon and what financing vehicle can best support your immediate and long-term growth,” Pfeffer said. “We target shorter cycles to drive faster return in today’s interest rate environment, however, there may be some longer-term investment horizons required for more significant transformation.”
Regardless of industry, for middle market companies, optimizing supply chain performance starts with achieving resilience, mitigating risks, and reducing operational disruptions — which goes far beyond the cost of capital. This is where middle market companies are increasingly turning toward equipment financing to support Capex plans.
“Equipment finance is front and center in the important problem solving in the deployment of capital to get equipment in place to make supply chains more real-time, more dynamic, more reliable. More specifically, digital investments in things like automation and robotics will help in driving cost and labor efficiency,” Pfeffer said. “Equipment financing providers and middle market companies who have the vision and the risk appetite to finance automation and robotics will be able to help the economy in that direction.”
Part 2 of our Supply Chain Expert Insights Series will explore Jacoby and Pfeffer’s top action plan recommendations for middle market companies looking to build resilience in their supply chain. Stay tuned for the next installment.
Read more about how equipment financing supports supply chain performance here.