Acquisition Success Thrives on Supply Chain Integration: Focus on It from the Start & Avoid Uncomfortable Phone Calls Later

It happens to me almost every week. I get a call from a firm (private equity or a company that makes and ships products) explaining that they did a deal a year ago and now it is not working out. Could we help?

Typically, these are "add-on" deals and someone has now realized that the supply chain is an important part of the deal. Their integrated supply chain is not working, and they want to know why this is so and how it can be fixed.

Of course, I am happy to help, but DARN, it would have been so much better for all involved to avoid this "one year later" call and get it done right the first time!!

It is my very strong belief that the supply chain is so important that it should be a key consideration, beginning with the due diligence and all the way through acquisition and integration of the supply chains. Unfortunately, what happens more often than not is that the M&A process is so time compressed and the initial aspects of integration are so hectic that the whole topic of supply chain is not even addressed.

Then the light blub finally goes on a year after the deal was completed someone says, "This supply chain is broken, we need help."

What normally occurs during this hectic year is that many decisions are made that may or may not be on the right supply chain path. Questions such as these are likely to arise:

Do we use Company A or Company B's order entry system?
Do we use Company A or Company B's S&OP process?
Do we use Company A or Company B's distribution operations?
Do we use Company A or Company B's sales team?
Do we use Company A or Company B's IT?

They are missing the point. The interesting thing here is that when Company A buys Company B, then the correct answer is often to not use what Company A has done or what Company B has done. The combined Company AB is a different organization from Company A or Company B, and it is quite possible that the new supply chain has different requirements from what either Company A or Company B had previously.

So, three big points to come away with here:

1. It is very important for the supply chain to be considered during due diligence and in formulating the strategy for the acquisition.
2. It is very important that an objective view of the supply chains of the two separate firms be understood, but even more important that the requirements of the combined supply chain be fully understood and addressed.
3. It is very important that decisions about supply chain integration be reached quickly and communicated widely soon after the acquisition is announced in order to accelerate the integrated supply chain.

For more reading on this topic, check out Tompkins' position paper on Integrating Supply Chains From Business Combinations.

Jim
Tompkins Associates