Mergers and acquisitions (M&A) in the retail space are big news at the moment but how do you ensure the tricky job of merging supply chains? Adrian Mangan, head of retail for P2 Consulting, provides some top tips
Hot on the heels of BooHoo’s announcement that it had bought up troubled department store chain Debenhams, was Asos’s victory in the bid for Topshop, Topman and Miss Selfridge - it will be interesting to see the changes these acquisitions will have on the high street. BooHoo also bought the online businesses of Oasis and Warehouse last year and M&S recently announced it was acquiring Jaeger.
Mike Ashley has also been busy in the last year or two, snapping up failing high street businesses left and right, in a bid to grow his empire. House of Fraser, Jack Wills and Game Digital have been amongst his purchases.
And the retail M&A frenzy probably won’t stop there. The Bank of England has predicted that the UK faces its ‘darkest hour’ in economic terms this year and that unemployment will peak at about 7-8% this summer. So we will probably see more retailers facing trouble and a subsequent uptick in M&A.
What should retailers - who might be eyeing an acquisition - bear in mind when it comes to bringing two supply chains together?
- Be prepared: don’t get caught unawares – supply chain teams need to be prepared, ready for any potential merger or acquisition situation. They need to have a blueprint, an action plan that they can mobilise when needed. This would include having a fully mapped supply chain, along with a supplier database that is updated in real-time, with information such as spend, origin, the products that are supplied and contractual information.
- Standardising measurement: if teams in the two businesses are assessing and measuring their supply chains differently, it will make the task of integrating them more challenging. Before the operational integration of the businesses, ensure that the company you are buying, implements the same measurement standards and KPIs in their supply chain operations – this will make comparisons and decision making much easier.
- Triage team: it is vital to create a crack team that will focus on post-deal implementation. They will be tasked with assessing vital information such as geographical reach, infrastructure and supply chain mapping, and should include representatives from across the business – the supply chain, finance, buying and merchandising, communications, HR etc. Supply chain team involvement means there is the right expertise when it comes to finding both efficiencies, but also opportunities to de-risk your future supply chain, for example, addressing any over reliance on a single supplier or country of origin. Understanding supply chain supplier risk relating to tier one, two or three suppliers will help the team with ‘what if?’ scenario planning and business continuity measures. A key focus would also be to identify any ‘skeletons in the closet,’ any supplier manufacturing issues, for example, that could have reputational consequences for the business – the communications team can then prepare to diffuse any problematic issues.
- Location, location, location: when two retailers come together, they might have different base locations for their supply chain, one in the UK and one in Lithuania, for example. The geographic variation will have an impact on different supply chain factors, such as the setting of lead times, the accuracy of demand forecasting and order fulfilment. These variations will determine how the future business is structured. This is now more relevant than ever given the current challenges retailers are facing post-Brexit - think M&S and Percy Pig-gate.
- Keeping the lights on: whilst this integration of two supply chains is happening, obviously, your company is still serving customers, who still want the products they purchased on-time in full – they couldn’t care less if you are having challenges with optimising your newly integrated supply chain. Keep focused on the fact that your customers are the most important stakeholders. If they are jaded with the service they get, they will go elsewhere – and there will be plenty of competitors waiting in the wings to snap them up.
Detangling and mapping supply chains and then trying to re-engineer a new one is one of the biggest headaches for retailers when it comes to M&A. But it’s an important one and it is vital to get it right. Essentially, it will help you to save money, stay competitive and not impede fulfilment, which will keep your customers happy. And that has to be the main goal.