Making those expected synergies work rests squarely on supply chain managers

Pick up the business section of any newspaper and there's sure to be coverage of yet another merger and acquisition (M&A). Unfortunately, it seems there are just as many reports of deals that haven't achieved their full potential, says Jay Welsh, partner in the supply chain practice of New York-based consultancy Accenture.

The ability to deliver on the promise of a deal's synergies often depends on the supply chain performance of the companies involved. And since leveraging supply chain synergies can account for somewhere between 30 percent and 50 percent of M&A savings, there can be a lot at stake.

Supply chain functions are the engine behind maintaining customer satisfaction and getting new products to market, so a lot can go wrong for customers during the integration of two companies.

“Manufacturers' performance after a merger or acquisition is getting better, but there's always room for significant improvement,” maintains Welsh.

Accenture research indicates failure to involve supply chain managers early in a merger integration process prohibits maximum results. Supply chain and non-supply chain managers alike agree that limited involvement of the supply chain organization prior to close of the deal was the main obstacle.

“The limited degree of supply chain involvement in pre-deal planning really was a surprise, and I believe it's an error,” says Welsh. “Nearly half of the supply chain managers surveyed weren't involved until the close of the deal. Companies often come to realize too late that this can be a costly mistake.”

From a supply chain perspective, adds Welsh, the trick is in determining the correct stage in the process to begin planning supply chain integration.

“Supply chain managers often have expectations thrust on them that they scramble to meet,” says Welsh. “Consequently, they think that if everything doesn't fall apart during integration, it was a success. In reality, these companies may have missed a significant opportunity to jump-start savings because they considered supply chain planning too late in the process.”

Conversely, says Welsh, if executives begin planning supply chain integration too soon, they risk doing all the work for nothing if the deal falls through. The bottom line is, it's important to have supply chain and non-supply chain managers working together more closely. Manufacturers are not quite there yet.

“Companies going through a merger shouldn't just mash the two together and plan to iron it all out later,” Welsh says. “It pays to bring supply chain managers into the process early, and mitigate risk around the right plan and strategy.”