Merger Success and Supply Chain Integration

What are the major obstacles to a successful merger? Today I’ll have a look at the 2003 article by Langabeer and Seifert. The authors argue that supply chain integration plays a major role before, during and after the merger.

Why is the Supply Chain Key?

The authors start by making the case for the supply chain as one of the major drivers of financial performance in a company. After analyzing quantitative data from 400 mergers during a ten-year period, exploring relationships between mergers, finances, and supply chain performance, the authors conclude that

Finding 1: Supply chain effectiveness drives financial results.

Supply Chain Integration and Merger Success

Furthermore, their data shows that the faster the company is able to integrate the new infrastructure, processes, systems, and people into the supply chain organization, the faster it will stabilize and show better results.

Finding 2: Integration is essential to post-merger success

Using a case study of Unilever they find that the supply chain integration effort needs to focus on certain key activities. These include:

• Focus on the customer and on execution
• Identify the dominant supply chain leader and organization
• Conduct a final assessment of the processes, systems, network, people, and strategy
• Establish clear execution and performance targets
• Establish and continuously monitor an integration timeline

Supply Chain Participation in the Merger

The case data also shows that the early integration of supply chain management in the merger process can improve the outcome of the merger.

Finding 3: Supply chain participation in the merger process is essential

They pose a number of strategic questions which have to be answered beforehand:

• What is the overall strategy and operational characteristics for the merged supply chain?
• Is demand for the products of the two companies similar in pattern and volume?
• What is the available capacity in terms of manufacturing, transportation, and warehousing assets?
• How do the supply chain performance measures align?

Conclusion

In the paper I was missing a better description of the methods used to acquire findings mentioned. Of course the methodology is not always the most interesting part of a scientific paper, but leaving it out significantly diminishes the credibility, let alone the reproducibility of the results.

But the tenor of the paper is very convincing: Supply chain management should be included in all steps within the merger process to improve the success rate.