Supply chain integration crucial to achieve M&A results

7 August 2020

Handling post-merger integration of sourcing and supply chains properly is crucial to realising operational synergies.

Mergers and acquisitions provided opportunities to create significant value through strategic sourcing, logistics consolidation, increased volumes in contracting and product rationalisation, said Robert Kugel, senior VP and research director, Ventana Research.

Speaking during a webinar of Best Practices on Mergers and the Supply Chain, Kugel said economic instability meant that sourcing and supply chain management would provide opportunities for profitable business combinations over the next several years.

He noted that even before the pandemic, companies were reconfiguring their sourcing and supply chains, rebalancing the trade offs between costs and resiliency.

However, Kugel said that mergers and acquisitions did not always achieve the hoped for results.

“One of the most common reasons is that the expected operational synergies weren’t realised because post merger integration of their sourcing and supply chains weren’t handled properly,” he said.

“Acquisition opportunities with significant supply chain related sources of value require technology based capabilities to extract that value.”

Managing post-merger supply chain integration is growing in importance due to the increasing chaotic and multi-polar nature of trade, requiring supply chains to rebalance efficiency and resilience, Kugel continued.

While post-merger integration of supply chains would always be difficult due to their inherent complexity, access to detailed data was key, with the right technology allowing fast adaptation to quickly changing circumstances.

“You can’t plan supply chain integration well with spreadsheets,” he said. 

“You need planning software that can scale to handle the details, that connects all the business operations and planning silos of both companies.”

He said the importance of having accurate, consistent and timely data was often under-appreciated, and companies spent most of their time on data preparation and error checking.

“You can’t maintain data integrity in spreadsheets,” he said. “Spreadsheets are a serious point of failure in any supply chain driven process, especially in post merger integration.”

“Companies that are quicker and smarter at using new tools have a competitive advantage over those that don’t,” he added.

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