Posted on June 21, 2025

How Optimizing Operations Early Unlocks Higher Valuations and Faster Returns for PE Firms

In today's highly competitive private equity (PE) landscape, maximizing the valuation of portfolio companies is critical. Supply chain operations, when strategically optimized, present powerful levers for improving EBITDA, unlocking working capital, enhancing resilience, and driving long-term value creation. These improvements not only boost financial performance but also enhance exit readiness.

Typical Supply Chain Challenges in PE Portfolio Companies

PE-backed companies often face common operational issues such as:

• Excess inventory and working capital inefficiencies
• Disjointed supplier and distribution networks
• Reactive planning and forecasting
• High logistics and handling costs
• Limited visibility across the value chain

These challenges not only limit profitability but can delay growth initiatives, stall product launches, and erode valuation at exit.

Why Supply Chain Should Be a Priority from Day One

Addressing supply chain issues from the start of ownership allows PE firms to capture early wins, de-risk future operations, and build a stronger valuation story. Research indicates that businesses proactively optimizing supply chains see EBITDA improvements exceeding 15%, while also enhancing agility and reducing capital tied up in inventory.

Strategic Levers for Supply Chain Optimization to Boost Valuation

1. Inventory Optimization
By applying ABC/XYZ analysis, demand segmentation, and advanced planning models, companies can:

• Reduce excess stock and free up working capital
• Lower storage space needs and handling costs
• Minimize inter-warehouse stock movements
• Improve product availability and reduce obsolescence

2. Sales & Operations Planning (S&OP)
An effective S&OP process ensures cross-functional alignment between commercial, supply chain, and finance, which:

• Guarantees more accurate demand forecasts and supports revenue predictability
• Reduces safety stock requirements and overall inventory levels
• Lowers warehouse footprint and improves space utilization
• Minimizes waste, expired products, and fire-fighting costs

3. Network Design and Optimization
Strategically reconfiguring the supply chain network—including warehouse, DC, and supplier locations—can:

• Reduce transportation distance and associated carbon footprint
• Improve product availability at the point of demand
• Lower lead times and enable faster response to market shifts
• Minimize total landed cost and enhance service levels

4. Supplier Strategy & Contract Management
Reviewing supplier performance, terms, and proximity to manufacturing or distribution hubs can:

• Unlock cost savings through renegotiation and consolidation
• Improve OTIF (on-time-in-full) and reduce production delays
• Enhance resilience through dual sourcing strategies

5. Operational Efficiency & Waste Reduction
Implementing lean practices and production scheduling improvements can:

• Increase line efficiency and reduce downtime
• Lower labor and overhead costs
• Minimize rework, scrap, and material losses

6. Technology & Data Enablement
Leveraging supply chain analytics, scenario planning tools, and real-time dashboards enables:

• Faster decision-making and risk mitigation
• Better alignment across stakeholders
• Increased visibility and proactive issue resolution

How PE Firms Can Drive Supply Chain Excellence

To maximize impact, PE firms should:

1. Conduct Operational Due Diligence with a Supply Chain Lens
2. Launch Rapid Diagnostics Post-Acquisition to Uncover Quick Wins
3. Deploy Specialized Experts to Lead Execution of High-Impact Initiatives
4. Embed KPI Tracking and Governance to Ensure Accountability and Progress

Conclusion: Supply Chain as a Pillar of Portfolio Value Creation

A smart supply chain strategy does far more than cut costs—it builds the operational muscle that enables agility, scalability, and sustainable growth. For PE firms, integrating supply chain optimization across inventory, planning, network design, and technology is a proven path to accelerate exit readiness and increase return on investment.

If you're looking to assess your portfolio's supply chain maturity or uncover untapped value creation opportunities, get in touch to explore a tailored diagnostic.