Commentary -- Merging for Gains

Commentary -- Merging for Gains

Mega-mergers across any industry, such as the recent deal between Procter & Gamble and Gillette, boggle the mind in scope along with the potential for cost savings and process improvement.  

Merging companies need to lay a solid foundation for operational excellence through which all benefits will flow and attention to the logistics operations is central to that effort. One recent case showed how a diligent, sharply focused approach across all aspects of merging companies can bring the kinds of results that help such mergers reach their strategic objectives.

When one of the world's largest food producers merged recently with another global food producer, the new entity was faced with integrating more than 10 separate companies with roughly 30 manufacturing plants and a host of IT systems.

The logistical challenges came in all shapes and sizes.

Issue by issue, task by task, the team committed itself to simplifying the customer's experience, which varied in satisfaction ratings from company to company. 

The new unified company vowed to do better by improving the systems and processes that support all phases of the business.

To promote acceptance of the broad and sweeping changes, leadership needed to quickly show decreased costs through consolidation.

To keep that in focus, the team set up seven basic goals: integrate without disrupting operations; consolidate orders, shipments and invoices; show a unified face to the customer; maintain order and inventory visibility; track and monitor sales and margins by product/brand/customer; create a consistent costing methodology for margin comparison; and provide timely, seamless responses to customers and vendors.

To make the newly merged company successful, it needed better visibility into the order and delivery processes across each organization. 

Under the old systems, customer orders were shipped and tracked using a hodge-podge of systems and processes. As a result, many entities were running trucks that were not optimized to provide the best customer service at the least cost. 

Complicating the situation, the integration teams labored while additional mergers, acquisitions and divestitures were in play. Flexibility and a focus on evolving business objectives were the keys to success.

At the start, for example, plans were drawn up to blend the various entities and plants, but the timeline lacked an exact implementation sequence. The team met its objectives, however, even though the priorities of the new organization evolved throughout.

Although complex by any standards, integrating companies over roughly a nine-month time frame can be accomplished with a straightforward approach. 

The processes identified for assessment in this project included order to cash, warehouse and transportation, production, purchase to pay, financials, human resources, benefits and payroll processes and systems. Integration teams focused on project planning, system and process design, documentation of business process procedures and coordination of conversion and interface activities. A lean core team mobilized a large contingent of players within each organization of the merging companies. 

To complete the integration, the teams spent time at each company to learn about all areas of the businesses, documenting their findings and communicating their results. The process teams then evaluated individual process areas, identified interfaces and conversions, documented business procedures and created integration plans.

Finally, the teams integrated the companies by developing interfaces, converting data, training users, organizing and monitoring activities and transitioning the integrated company to new processes.

The merged food provider achieved significant benefits from the successful integration of its new division and created increased efficiencies through the reduction of disparate systems, elimination of duplicate processes and transition to standardized organization processes.  Overall, there were substantial benefits in transportation and distribution.

For example, by processing more orders on a single, integrated system, the distribution team has better visibility to the number and types of orders they are managing. That visibility allows them to optimize the use of the warehouse and transportation network. 

Other benefits in the logistics area included: improved fleet planning; consolidated IT departments; eliminated duplicate warehouses; consolidated carriers; improved inventory turns; optimized truck loads with fewer deadhead runs; and more timely tendering of loads to their carrier partners.

In other affected areas, the new order-to-cash system eliminated duplicate personnel and activities while increasing service levels.

In addition, the purchase-to-pay process allows the company to centralize procurement to improve vendor management, provide improved visibility into their annual spend and eliminate redundant positions in the plant locations. The client also has improved visibility into its financials through a single financial reporting system.

These benefits did not come easily, but resulted from a dedication to people, processes and technology focused on the final goal. 

With more than a dozen disparate systems consolidated into one the company is poised to gain maximum value from its recent acquisition.