Competitive Leverage: Building an M&A-Ready Supply Chain for an Uncertain World

Merger and acquisition (M&A) activity is intensifying as companies seek to adapt their supply chains to major, global-market forces. Companies need to adapt to rapidly changing technologies and the blurring of traditional market channels, resulting in new, digitally-driven business models. Simultaneously, companies must adjust to contend with turbulent geopolitical forces and growing uncertainty about cross-border trade and tax policy, which have a direct impact on their businesses.

Amazon’s recent purchase of Whole Foods is a great example of a company turning to M&A to extend the strategic capabilities of their supply chain. The acquisition helped the online retailer build out its perishable-food supply chain at a time when the digital economy is transforming how people buy food, such as with online grocery shopping and home-delivered, meal-ingredient services. More importantly, Amazon’s supply chain can leverage Whole Food’s network of stores for “last mile delivery or pickup.” With 6% of American households within one mile of a Whole Foods store, the acquisition competitively bolsters Amazon’s strategic omni-channel capabilities. Going forward, companies will be looking to M&A events to fill the gaps in their supply chain capabilities, which address the needs of emerging business requirements.

The supply chain has always been at the heart of M&A events. Historically, the focus has been on increasing brand share, shedding redundant assets and fueling growth. Now, the focus is on improving innovation and operating model reimagination so companies can change the game to swiftly respond to digital and geopolitical market changes.

The new M&A-ready supply chain

Emerging responsibilities are drastically reshaping supply chain leaders’ roles from achieving operational and delivery excellence to becoming ecosystem orchestrators and business model innovators. Creating building-block, supply chain models – where units can be quickly added, shed and/or reconfigured for competitive advantage – is a key ability that will be crucial for leaders of cutting-edge supply chain organizations.

New analytics, such as supply chain network modeling with flexible cloud deployment and increased computing performance, are enabling supply chain leaders to model the financial and operational opportunities before and after the M&A event. This helps to realize the monetary and agility benefits in a shorter period of time.

Guidance for forward-thinking supply chain leaders

Make bold moves: M&A events present opportunities to make leapfrog changes. Rather than managing the slow and expensive trek of integrating systems and harmonizing processes, for instance, supply chain leaders may find that a nimbler service provider is a better choice. By combining network design and modeling with the growing number of third-party supply chain services firms, companies can quickly integrate the merged operations while simultaneously building an adaptive supply network that leverages market change as a competitive opportunity.

A leading technology company provides a prime example. The company was spun off from its previous corporate parent in recent years. The spinoff outsourced key logistics and distribution functions, such as packaging and fulfillment, to agile service providers instead of building a new downstream supply chain. This allowed the company to take advantage of leading supply chain capabilities and created greater flexibility to deliver its products to consumers in new ways, such as by embedding them in partners’ products and through co-packing. In short, it allows the company to focus on its core business and strengths while increasing its agility.

Be data driven:  What if a proposed 15% corporate tax rate really does become reality in the U.S.? What if NAFTA is restructured and more EU countries go the way of Brexit? What will companies’ supply chains and cost structures look like in these new worlds?

These are the kinds of questions that supply chain leaders can answer by using big data to design and simulate future supply chain operating models. They then can adapt their businesses to the model that is most profitable across a range of potential future scenarios. Additionally, companies can use advanced analytics at the SKU level and drive decisions in the micro-segmented markets where business is being won today. Analytics maturity, especially predictive and prescriptive analytics, dramatically improves operating performance while increasing competitive response to market dynamics. Companies that are investing in the Internet of Things for data collection, artificial intelligence, and machine learning are driving, rather than responding to, market change.

Build the Digital Core:  Data is the oil of the supply chain. Using digital technologies to refine the data helps to create new insights and innovation. Transforming to digital requires companies to develop an enterprise information architecture to securely and effectively build and manage an M&A and future-ready supply chain.

This “digital core” requires three key elements. First, a data infrastructure to collect, house, transport and disseminate data. Second, robust master data models that harmonize data, providing consistent, quality data management. And finally, advanced analytics to interpret data and help make decisions in a common way across the business.

Time for a new playbook?

Companies that want to create future-ready supply chains need to revisit their M&A supply chain playbook and ask: Is it designed to help me competitively leverage the new digital future? Or is it still focused only on rapid integration and cost reduction?

M&A is no longer about getting supply chains integrated and running as they were. It is an integral part of a company’s strategy in the new market ecosystem – a new way to leverage the company’s vision to be agile in an uncertain world.

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