The greatest risk to immediate and short term supply tends to be single sourced and long lead time items that have insufficient inventory to cover the replenishment cycle. These values may or may not be included in the planning systems or may not be current.
- Single Sourced Items – As with all items that are procured, you are competing with other customers for the limited capacity of the contract manufacturer. Single sourced items elevate that risk, which is why you should look for issues as soon as possible after close.
Unfortunately, these issues typically cannot be uncovered from an analysis of inventory. The best source may be the people who manage inventory and procurement. Be sure to include this in your interview process.
- Long Lead Time Items – You should be able to find most of the issues in this area from an analysis of inventory and procurement records, provided they are correct and complete. In addition, long lead time impacts not just procured components and finished items, but also raw materials used in the manufacture of procured and internally manufactured items. As with single source items, a more accurate source may be interviews with staff.
Downstream Customer Experience
As stated earlier, one of the primary responsibilities of the supply chain team post-M&A is to assure a reliable order-to-delivery-to-cash process that maintains or improves the customer experience.
Bottom line, you cannot allow the customer to feel your pain. That means you may have to uncover opportunities for failure and eliminate them. Customers do not care if the item you do not have in stock when they need it is an A, B or C item, nor do they care about your inventory policy for each.
In addition to obsolescence and registration issues already touched on, you need to thoroughly review order fulfillment and invoicing systems. The best source for this is often the associates who manage these systems and your customers. You should not make broad assumptions for alternate or substitute products. If you identify an unavoidable supply risk, it is important that you communicate to and include the customer in the solution.
Post-M&A, the primary responsibility of the supply chain team is the assurance of uninterrupted upstream and downstream product supply.
To avoid costly and lengthy disruption, companies need to include an assessment of people, inventory, upstream supply and downstream customer experience as soon as possible after the transaction closes. This will include a combination of analysis and one-on-one interviews. A best practice is to complete a timely analysis of current, transition and future or desired state of the supply chain, including people, before implementing changes.