While mergers and acquisitions (M&A) provide excellent opportunities to grow a business, they also come with their own challenges. The need to integrate disparate IT systems is probably the biggest issue in merger deals, as Professor Sydney Finkelstein once pointed out in the Wall Street Journal. He’s right, but much of the trouble comes from the mistaken belief that the ERP systems need to be standardized and integrated first.
I have a better plan.
I do understand why senior management tends to insist on streamlining the ERP systems first. After all, it’s their window on how their businesses are run. It seems pretty convenient to have all this information available in one globally integrated system covering every operation in the newly formed group, no doubt about it. But how important is that on a deeper level?
Several of our global OMP customers run a mix of ERP systems as a result of multiple M&As. These could be different versions or implementations of standard ERP systems from SAP, Oracle or Microsoft, obsolete legacy systems or highly customized systems of all kinds. While many of these companies would want to move to a single central ERP, they quickly discover that it would be a costly and long-running project.
What’s more, those who make the effort ultimately find out that running every operation on the same ERP platform doesn’t miraculously have them acting as one company. Indeed, the ERP system doesn’t streamline critical operational processes and KPIs. And it doesn’t say anything at all about how to reserve production capacities for internal and external demand, the stock levels needed to guarantee fast supply while keeping costs down, or indeed the level of service to be achieved in the company’s key markets.
These critical processes and KPIs are the domain of advanced planning, not ERP. Companies investing in standardizing their operational planning system and processes as their first move are more successful in aligning the various operations. By building a digital twin of their entire supply chain, they get full end-to-end visibility on what’s happening here and now in all their operations. As a result, they’re quicker to spot synergy opportunities. And that’s what M&As are all about, isn’t it?
Aligning the ERP systems is of secondary importance and could come later, particularly because the most advanced planning solutions give the user a set of well-defined, standard interfaces that can be tuned to any local ERP implementation. If aligning ERP systems gets the silver medal, standardizing your supply chain planning goes for gold.
25 years at OMP leading supply chain implementations in the mill products industry mean that Jan is the go-to guy on program roll-out, worldwide. His special focus is now on helping companies achieve their sustainability aims through smarter planning.