Once the M&A deal is completed, the real work of making the company successful begins. It is the time the supply chain manager can embrace the opportunities to create long-term value through the integration and optimization of two supply chains.
— By Lena Haram

One of the common reasons for an unsuccessful merger and acquisition (M&A) is failing to successfully integrate two supply chains in a way that optimizes value generation. Effective integration and optimization of the supply chain are critical steps in ensuring the value of the M&A is achieved for long-term success. Achieving the ultimate synergies of an optimized supply chain means realizing cost savings and developing a streamlined and more effective supply chain operation as a minimum, and leveraging innovation opportunities and increased supply chain diversity to maximize value.

Integration actually begins during the M&A deal-making process when a transition plan is developed and continues during implementation after the deal is closed. After integration ensures business processes are not disrupted, supply chain optimization begins.

Integrating the new supply chain into the existing operations is critical and requires preserving strategic vendors and minimizing the risks of disruption to customers. Achieving full synergy and realizing the maximum value of the new supply chain go beyond integration to finding cost reduction, implementing performance improvements, expanding supplier diversity, and ensuring strategy alignment meets organizational needs.

Setting the Stage for Supply Chain Optimization
After an M&A is completed, supply chain leaders are faced with the challenge of creating an aligned, cost–efficient and productive supply chain. The supply chain synergies are a significant component of every M&A deal because of their importance to competence and success.

There are numerous value–generating opportunities in supply chains. They include strategic sourcing, carrier consolidation, demand–and–supply planning, inventory and working capital management, cost optimization, and manufacturing network optimization, to name a few. However, there are other opportunities to create value like increasing supplier diversity, which can lead to new business-supplier and supplier-supplier partnerships.

The first step is integrating the acquired supply chain assets into the existing one. The ability to later optimize the combined supply chain as efficiently and effectively as desired depends on getting the integration right first.

The integration process includes assessing the talent pool now available and making changes in job responsibilities and people. It is common for some of the cost reductions to come from streamlining the talent pool to eliminate job redundancies. The buying organization's procurement function must consider factors like existing currents, lease commitments, and other agreements.

The integration process also includes assessing and leveraging technologies. Chances are the two companies are using different technologies for sourcing, supplier relationship management, diverse supplier tracking, supplier communication, inventory management, demand management, and so on.

It is also necessary to standardize the sourcing and procurement functions in terms of operational practices, internal communication between functions, and accountability measures.

Improving the Supply Chain to Increase Value Generation
A successful integration process sets the stage for optimizing the newly combined supply chain to achieve synergies and move ahead into optimization. It is important to preserve strategic vendors to prevent disruptions in the ability to deliver goods and services to customers.

Competitors are always ready to step in and fill gaps. Optimization is the process for improving performance once the supply chains are integrated. At this stage, procurement professionals consider higher–level factors like establishing priorities for future performance, risk identification and minimization, developing performance metrics, cost reviews, eliminating redundancies, assessing distribution networks, and utilizing new technologies to improve supply chain performance and to generate analytics that improve decision-making. At this stage, procurement is working closely with decision-makers across the newly merged organization to find opportunities for improvement.

Each M&A deal will lead to unique challenges and opportunities, and supply chain strategies are critical to success. New customer bases are part of the deal, meaning the buying company must expand its supply chain.

For example, Qualcomm acquired NXP in 2016, and the acquisition broadened its automotive customer base and significantly increased the need for coordination with customers and suppliers. Qualcomm's procurement process was changed to integrate more closely with automotive supply chains to ensure timely delivery of chips to the factory.

Supply chain managers may find they need to devise supply chains with shorter lead times, improved quality, increased customization or more flexibility to meet fluctuating or unexpected demand. Some organizations consolidate fulfillment centers to improve logistics, inventory management, and customer service.

Developing New Supplier Relationships
When the dust settles, so to speak, after supply chain integration, supply chain managers can do a complete analysis to determine ways to increase the ROI of supply chain processes. This is an opportunity to discover and develop new supplier relationships that can increase flexibility, bring innovation, or create significant savings.

Leveraging new supplier connections can also assist with accelerating supply chain diversity as new needs open up opportunities for diverse suppliers or when the merging supply chain has already achieved a high level of diversity.

Even in the latter case, optimization includes evaluating diverse suppliers to determine how to best help them build capacity and scale for long-term growth of a larger company. The goal is to focus on positioning supply chain processes for optimization that focuses on organizational growth, increased complexity, and the needs of functional leaders.

Knowing When Not to Stop
One of the risks is the organization stopping at supply chain integration. Integration is more of a transactional process that deals with the practical considerations of merging two supply chains to minimize disruptions.

Optimization is about transforming the supply chain network and procurement processes to improve performance over the long-term. Optimization is strategic in nature. One suggestion is to begin by adopting the best of functions in both supply chains and move forward from there.

The M&A is a complex business event, but supply chain managers should never lose sight of the fact it creates enormous opportunities to generate high value through strategic efforts.