Boosting manufacturing performance is one of the quickest ways to grow margins and release cash. Changing the structure and capabilities of your manufacturing supply chain via M&A offers significant value generation opportunities, but also requires a large upfront investment. Manufacturing typically contributes 30 to 50% of costs in a deal, so it’s important for both manufacturing and non-manufacturing companies to work to optimize manufacturing as early as possible.
Boost Productivity and Performance
Improving manufacturing performance increases gross margins and releases cash, offering far greater value than the short-term value generation of most transactions. Improvements must be sustainable, and rely on clear data—including real-time data.
Prioritize Business Continuity
The new entity must comply with all legal and regulatory requirements. Maintain consistent customer service by getting plant certification and other regulatory requirements in place as early as possible. Your transition plan should include transition service agreements and inventory building strategies to ensure supply chain continuity and minimize—or eliminate—customer service delays. Mergers can be disruptive; it’s your job to minimize disruption to your customers, and to ensure that the merger ultimately provides additional value.
Focus on Network Design Streamlining
Companies often cite plant rationalization as a key value driver. Companies can reduced fixed cost by an average of at least 25% thanks to network optimization. To define an optimal manufacturing network, companies must conduct a comprehensive review that focuses on proximity to suppliers and customers, then evaluates network options within the available constraints.
You must be willing to undertake a comprehensive review of your current operating practices, strategy, and critical expertise, as well as how they align with the deal’s goals.
Efficiently Manage Changes to Manufacturing Sites
Sometimes you need to close, integrate, or radically change manufacturing sites. Without a careful execution plan, doing so can disrupt operations and cause you to lose business. You can increase efficiency by moving products and equipment around before closing facilities. Executives need a keen understanding of product processes and capabilities, current and potential volumes, costs, labor, operational factors, and product mix. Identify the constraints within which you are working, then work early to develop a plan to minimize disruptions and reorganize plants in an orderly fashion.
Integrate Your Operating Model
Executives will need to reconfigure their operating models to become more integrated and collaborative. Operating considerations should begin at the corporate level, focusing on the degree of centralization, the extent of integration, and who fills which roles. There will be trade offs that may affect service and product quality. Be prepared to justify these trade offs, and ensure wherever possible you’re working to create more value and a better customer experience.
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