Merge And Purge Still The Story in Supply Chain

“A significant portion of the value of a merger and acquisition deal must be unlocked through reconciliation of product lines and high-level redesign of a consolidated supply chain,” says Jeff Karrenbauer, president of Insight. Citing difficulties of the Daimler-Chrysler deal, Karrenbauer points out the failure to integrate supply chains to take advantage of synergy was a major contributor.

Companies pursuing mergers and acquisitions typically point to revenue growth and cost reduction as target benefits of the combination. Part of the ability to achieve those goals rests with the strategy to divest of various components of the merged operations to remain focused on core capabilities.

A comprehensive global supply chain design that supports the most competitive delivery service levels extracts the most from worldwide operations, regional, and product flexibility to capitalize on changing markets, delivers low cost for profitability and pricing leverage, and continuous improvement.

Relationships with suppliers are changing along with the nature of those suppliers. Large firms have spun off vertical sub-assembly manufacturing as part of “verticalization,” says Karrenbauer. These second-tier, mega-suppliers continue to grow in size, influencing the success of logistics to the end manufacturer and taking an increasing role in managing lower-tier suppliers—sometimes concentrating supply risk.

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