What’s the biggest problem in making a merger or acquisition succeed? Failure to address process issues, particularly in the supply chain.
That is the key finding of recent research by Accenture. The consulting firm surveyed 300 executives from
I think that may be a wrong-headed approach to growth, but let’s save that discussion for another time.
Mergers and acquisitions often run into problems, especially costly procurement and supply chain disruptions. The results, cited by close to half of the executives, include increased product-launch disruptions, a loss of talent, diminished product or service quality, problems with order-fill rates, stock outs, inventory build-ups and increases in supply disruptions.
And according to Accenture, the most frequently cited cause of these problems is “corporate management’s fixation on cost savings and paying too little attention to supply chain issues and prospective synergies.”
“Apparently, many execs are confident that supply chain issues can be handled later in the merger process, and they de-emphasize important service-oriented metrics such as quality, inventory turns and order-fill rates,” Pat Byrne, managing director, supply chain management practice, writes in Accenture’s corporate blog. “Their reward, in Accenture’s experience, is potentially compromised service and at-risk revenues – greater dangers than failing to capture every last quick-hot cost reduction.”
Byrne also says it is Accenture’s experience that the supply chain often accounts for 30 to 50 percent of the savings a merger ultimately generates. “It’s the last thing companies should postpone or overlook,” he adds.
In other words, it’s the process, stupid. What merging companies should be doing at the outset is developing extended value stream maps and creating a vision of their future state. Identify the waste and eliminate it; the cost savings will then take care of themselves.