Supply Chain Management

Don´t get caught in the “1+1>2 trap”

mSE Solutions

Your math teacher in school would certainly have had serious concerns with this equation, and you might find that in today’s business world it hardly ever works either. At least not without a winning concept.

Mergers & Acquisitions can be a great tool to increase your market share, secure a better global presence or expand your company’s technology portfolio. As an enhancement of a healthy organic growth plan this is very often a way to get your company “on the map” on a larger scale. From local to global player, with the right strategic business concept and solid financing, this is definitely possible. But wait, is it that easy?

No, it is not. Acquiring a new company also means acquiring new cultures, new structures, new employees, new processes and, last but not least, new ERP systems. Achieving synergies is one of the main targets when bringing two organizations together, and is the basis for achieving results larger than those reached by simple addition of the original parts. In an ideal world, everything fits together and a merger runs as smoothly as a trip on a sailboat in calm weather. Unfortunately, that’s not how it works in the real world. You are suddenly faced with the challenge of combining completely different systems and supply chains that worked well separately in the past but no longer fit the bigger picture. Processes are understood and defined based on contrasting business cultures, and when company A says “left” company B takes that to mean ”right”.

Sure, there are always various strategic concepts possible for integrating a new company into your enterprise. Do you want to keep the old CI of your new subsidiary and run the business completely separately? Or do you want to overhaul the whole structure and form a new business unit under the umbrella of your flagship? Strategy follows market or customer behavior, there are no tried-and-true formulas for a single, correct solution, it all depends on customer demand and your own business targets.

A large portion of the targeted synergies when integrating two or more organizations comes from the supply chain. Redundancies in production, warehousing, fulfillment, procurement and administration offer potential for substantial savings. Duplication of work and operational obstacles need to be eliminated, and new system tools very often have to be engineered. Global structures and daily routines need to be realigned to fit the bigger picture. The real post-merger challenge you will face with most of the chosen strategies, and this generally proves to be the backbone of a successful operation, is the integration of all supply chain processes including ERP systems in use. It will make the difference between success and failure.

Preparations for a successful merger need to start long before the contracts are signed in order to prevent a disaster. Way too many companies suffer from the post-merger blues, a common sickness that stalls day-to-day operations, sucks financial assets into process patches, and might even distract from true business necessities.

Solid analysis of the existing situation and clear definition of future strategic business targets is the basis for sustainable success. Yes, 1+1 >2 is achievable, and you can prove your math teacher wrong. Don’t leave your in-house operational team alone with this monumental task. Get professional support that can stand by your side all the way from concept to implementation. If you would like more information, talk to us.