Resilience has been the business buzzword of recent years – and no more so than in the world of supply chain and logistics. Weathering storms from the pandemic to the cost-of-living crisis, businesses have been operating within a volatile global market, becoming increasingly agile to constantly evolving circumstances. Disrupted transport routes, delayed deliveries, and surpluses – or deficits - in order volumes are just some of the sizable consequences that can result from external circumstances and go on to impact the end customer in turn.
Those businesses looking to improve resilience to factors beyond their control may look to consolidation for futureproofing. In fact, merger and acquisition (M&A) activity is projected to pick up but those businesses that choose to take the leap will expect such a move to generate benefits at scale – and avoid introducing further risk at all costs.
M&A can be a catalyst for growth, from harnessing efficiencies to expanding into new markets, but those looking to embark on the journey should proceed with a level of caution. Pre-deal decision-making should be careful and considered, keeping resilience and risk mitigation front of mind. A detailed pre-M&A supply chain and logistics review, which covers factors from procurement through manufacturing to warehousing and supply, is critical to commerciality, as these operations span from end-to-end and have the potential to make or break a business’ bottom line.
Streamlining and cost-cutting
Prospective acquirers will likely be looking to drive the business forward and maximise the benefits of taking it over. Third-party costs rack up, so it’s worth reviewing existing suppliers and transport and logistics providers – many of which may have been in place for an extended period without review. Better deals or more streamlined solutions could be available from procurement of materials through warehousing and transport. And ensuring the warehousing network is strategically located can help to reduce transport miles – which cost time and money in turn.
Mergers can be a little more complex, as bringing together two entire business operations adds a further layer of decision-making about which operations to take forward or disregard - all while minimising internal conflict and managing the transition smoothly. However, comparing outgoings can be a useful way to identify opportunities to cut costs. And while sadly, mergers can potentially involve redundancies, reducing labour costs can also boost profitability.
Spotting opportunities and scaling up
Beyond spending less, M&A also offers the opportunity to do more and create economies of scale. Are the business’ current products actually selling? If so, what is popular, and where? Understanding who is purchasing products enables businesses to optimise their warehousing and distribution networks in the right geographies. By holding the right number of products in the right places, businesses can avoid inflated stock positions and wasting valuable warehouse space.
Meanwhile, a merger can mean embracing the best of both worlds. Bringing together two business operations enables each to learn from the other, potentially improving product quality and even posing the opportunity to diversify product lines.
However, it’s important that everyone is bought into the journey and can accommodate the big ambitions of the new business entity. Employees, suppliers, processes, and systems can all influence post-merger success, so they must have the capabilities and services to accommodate potentially rapid, exponential growth without compromising quality.
Navigating the unknown
However, the post-M&A transition needs careful management to ensure the vision then becomes a reality.
Unexpected circumstances often crop up post-M&A - even following the most diligent pre-deal review. Forging new supplier relationships – and protecting old ones – takes time and consideration, while the human impact of restructuring is often emotionally driven and requires sensitive change management. And for those still in post, integrating workstreams, embracing new responsibilities, and adopting new IT systems, for example, are all new challenges to overcome.
As we’ve learned in recent years, the environmental, socioeconomic, and political environment is constantly shifting, but a strong supply chain and logistics strategy should consider a range of prospective scenarios and be flexible to change. While undertaking M&A is a significant business move, taking the time to consider supply chain and logistics opportunities can create a more commercially profitable business entity that stands the test of time.
Phil Reuben, executive director at global supply chain and logistics consultancy, SCALA
