Supply chain synergy and supply chain transformation can be a significant source of post-M&A deal value and a critical enabler of long-term corporate growth and market competitiveness. In this blog post we explain how you can unlock this value and mitigate potential risks.
Often economic downturns and recoveries provide a window for ‘mergers and acquisitions’ (M&A). History of previous crises tells us that winners don’t pause M&A during downturns, rather they take advantage of opportunities to reshape their industries. But at the same time, supply chains are now more integrated and interdependent than ever before. For example, recent events like the incident in the Suez canal, Russia’s war against Ukraine, and the Covid-19 pandemic have had an impact on global supply chains.
In this situation, supply chain transformation is a major driver to deliver M&A value: enabling sustainable growth, achieving cost and operational synergies, preserving capital expenditures, and improving cash flows. It impacts almost every corporate function as well as internal and external stakeholders.
A merger or acquisition transaction presents not only opportunities, but also challenges for supply chain professionals who are tasked to quickly navigate inherent post-merge complexities to fully deliver synergies and achieve the anticipated deal value. For executives the primary task lies in integrating the best of both legacy organizations while keeping business running full steam ahead.
As first step after an M&A transaction, supply chain leaders need to reposition operations for long-term growth and optimization. You need to deploy a strong supply chain governance structure, and strategic and tactical decision-making across the merged supply chain. To support the newly-merged entity it is critical that you include business inputs from the core supply chain functions and each of the merged business entities and geographies in order to launch a transformation.
Continued focus on harmonization initiatives, such as sales and operations planning (S&OP) unification, distribution network optimization, or centralized inventory management can unlock significant synergy value. Availability of data plays a crucial role in this harmonization process, but the right data is usually not readily available from the multiple ERP systems across legacy organizations and legal entities. This is a big hurdle to overcome. You need specific data management and planning analytics capabilities, which are often not of the highest priority, given multiple challenges of the post-M&A period. To still make the progress needed, this can also be outsourced to specialized companies. EyeOn is specialized in guiding companies through complex supply chain transformations across all organizational and functional layers. Our Planning Services team for example, can enable harmonized planning processes across your whole organization. With our unique Honeycomb data science platform, you can work across geographical and organizational boundaries and connect multiple ERP, APS, and other legacy data sources into a single data environment.
A large global producer of packaging struggled to optimize its inventory levels in a post-acquisition period. The challenges included local suboptimization of inventories across production, distribution, and sales organizations. On top of that different regions were unable to communicate effectively due to differences in ERP and data architectures, and different strategic approaches towards inventory management. EyeOn assisted in merging multiple data sources and using unique analytical models to run global multi-echelon parameter settings as a service for inventory management. This multi-echelon inventory optimization (MEIO) helped to achieve significant inventory synergy benefits and the service model sustained a centrally-driven process across multiple merged geographical and legal entities.
Optimizing supply chains after a merger can be a multi-year effort. There is significantly more upside in driving fast transformational changes versus incremental ones. Despite the high stakes, an M&A transaction provides executives with a powerful platform to quickly transform two disparate supply chains into an integrated operation to create a competitive advantage in the marketplace.
Business continuity during such a large-scale transformation can become a significant challenge, which potentially includes the transfer of some business units to new policies, practices, processes, and ERP or APS solutions. Those new ways of working and systems can be used by the acquiring company or considered to be the best across the new organization, but in both cases the potential disruption can have a significant impact on multiple business functions and processes. Our team, with its proven Planning Services methodologies, industry experience, and leading tools and enablers, can help you unlock your short-term and long-term deal value, while ensuring business continuity and operational success from day one.
After multiple acquisitions of smaller players and of individual production facilities across the world, a chemical company started a major transformation of their supply chain planning, having a 3+ year transformation roadmap in place. The company postponed investing in specialized planning software. This meant they were fully dependent on unreliable and outdated legacy systems with a very low degree of automation, which were not able to handle the growing portfolio. Outsourcing statistical forecasting to EyeOn Planning Services secured a robust basis for a temporary planning process during the transformation, while at the same time enabling the customer to build their own planning team capabilities through close collaboration with the Planning Services experts.