Acquisitions can be a great catalyst to streamline supply chain processes and reduce overall costs. However, integrating an acquired business into existing operations is often underestimated, both in how long it can take to achieve synergised benefits and how much disruption to the existing business it’s likely to cause.
Here are some ways to balance the risks and deliver benefits faster when integrating an acquisition:
1. Understand existing activities in greater detail
Acquisitions are not something that a business undertakes lightly, and good financial due diligence is what underpins all successful deals. However, while you may have a high-level understanding of the cost per unit through the operation, there are many more variables at play.
The drivers of that cost by order channel, product category, time of year, and delivery offering also need to be fully understood. This complete understanding is best known as a cost-to-serve. It is a simple but powerful analysis tool that helps make sense of what it actually costs to serve customers, bringing with it valuable opportunities for benchmarking, improvements and cost reductions.
A detailed cost-to-serve will also allow the business to better balance risk, as well as understand the best ‘levers’ to pull to release capacity when required. Without understanding these sensitivities, it’s likely that envisaged savings are never fully realised.
2. Compatible ‘bolt-ons’ vs new ways of working.
Not every acquisition has to come with a supply chain consolidation. Sometimes the adage ‘if it ain’t broke don’t fix it’ does hold true. Nonetheless, it is impossible to make an informed decision as to the level of supply chain integration a new acquisition should warrant, without fully understanding all the moving parts.
The acquired business will have aspects that are not fully understood at first glance. Perhaps the sales profile has seasonal cycles that are different to your existing business. Maybe returns are the same rate, but the profile of returns is faster (or slower). There are any number of unknown factors that could impact the ability to meet, the now combined, needs of the customer.
The trick is to be as proactive as possible (via data modelling and analysis) while also be ready to react. Things will pop up and surprise the business as the integration goes on, so the ability to be flexible, adapt, and update your solution as new understandings emerge is vital to a successful integration.
3. Plan to maintain customer experience
With new product ranges, new suppliers, and new customers driving IT and process changes, your supply chain is going to feel unsteady before adjusting to its new normal. Therefore, it’s important that the business has a plan to maintain customer experience through turbulent patches.
Before you begin, define how the business is going to safely integrate the acquisition (to achieve the benefits as quickly as possible) without jeopardising customer experience. It may be that you need temporary additional headroom both across warehouse staff and the leadership team during this migration period to maintain performance of both businesses.
Supply chain simulation makes it possible to stress test any number of different scenarios, an exercise that can both confirm assumptions that allow action to be taken with more confidence, and flag potential risks before they happen.
4. Design flexible, sustainable supply chains
Although it can feel gruelling, getting your supply chain set up right first time will likely save you a lot of prolonged pain over the coming years.
Aligning with the forecasts and aspirations of your finance and commercial teams will help design a more sustainable supply chain that can grow with your business. Further, modelling and stress-testing your supply chain on these various forecasts and uncertainties can increase the longevity of the integrated supply chain, and even identify additional opportunities.
Ultimately, a smart, data informed, and iterative improvement focused approach to your supply chain will pay dividends long after acquisition has bedded into your existing operations.
If you’re really lucky, it may even prepare you for the next one.