Supply Chain Blog

It’s Deja Vue all over again for FMCG Supply Chains

Posted by Dave Jordan on Tue, Aug 09, 2011

Do you remember the rash of take-overs, buy-outs and mergers just before last two rounds of EU accession? Locally owned CEE Companies that could not or would not meet the various requirement of EU accession were sold off to competitors and private equity that were more willing and able to invest in the future.

FMCG Mergers and AcquisitionsAs this current recession drags on and governments adopt more desperate and savage methods of balancing the national books many companies are once again feeling the strain. The market is once again ripe for some potentially lucrative low cost FMCG purchases.

Of course, when someone invests in a business there is usually a cost saving element broadcast due to synergies of those businesses.  How often do those synergistic costs saving numbers come to fruition? I am sure we would hear loudly about such successes if they were common. The problem is that they are not. Businesses are left in limbo by management failure to drive home re-engineering plans to completion. Yes, it is painful and it requires resources to be taken out of the day to day business but such re-engineering is vital to a sustainable future.

The company logos have been harmonised, the factory uniforms are all the same, the remuneration policies are in line and perhaps inevitably, the executive level company car policy has been harmonised upwards! When synergy programmes fail (or don’t even commence!) this leads to a succession of Supply Chains and specifically Route to Market Distribution networks that urgently require attention.  

There is an argument to put Logistic synergies last on the list of jobs to be done. This is fair enough as the last thing you want to disrupt after a merger is the customer/consumer interface. However, sooner or later you will have to tackle this side of the business or you will be left with inefficient and potentially competing Supply Chains. Examples exist in the market today where big name companies have failed to definitively harmonise their Route To Market networks and are floundering in a recessionary economy where every last sale counts.

In addition to such selling opportunity inefficiencies don’t forget the merger headline claims on cost savings. To achieve these in full you need to step back and evaluate the Supply Chains with prudent priority or else back-office savings will be used to prop up your creaking business. And when the next recession comes…….the hunter becomes the hunted!

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Tagss: FMCG, Route to Market, Mergers & Acquisitions, Dave Jordan, CEE, Distribution