In our ongoing 'SAP mergers and acquisitions' blog post series I take the perspective of an executive-level team involved in an upstream SAP mergers and acquisitions event, for both the buying, and the selling, organisation. The posts identify the key mechanics in the IT transition workstream that could keep the executive team awake at night.
In the first blog post, I adopted the persona of the CXX team and described their needs. Then I looked at the maintenance/operations managers’ requirements.
Today, I am adopting the hat of the supply chain manager. I’ll be considering the critical success factors that will determine if the supply chain manager believes the IT transition workstream in the M&A project has been a success.
SAP mergers & acquisitions – supply chain manager’s perspective
Supply chain management in an upstream operator covers many functions. This includes contracts and procurement, inventory, and logistics. I’ll consider each function independently and focus on the typical hotspots that crop up in an ERP M&A event.
Contracts and procurement
As highlighted in previous blogs in the series, minimising disruption is critical. This plays out into the world of vendor contracts. Usually, that is pre-existing core business contracts pertaining to the legacy entity that will be novated into the new entity. There was a time when commercial sensitivities around pricing might have come into play. However, in a context where the buyer and the seller want to get the deal done quickly, such concerns have evaporated.
Procurement departments rarely have the reputation of interest in the wellbeing of their key vendors. Of course, that isn’t true. In an M&A event, contracts and procurement will ensure vendors are paid on time.
This becomes clear in the open item cutover during the transition, where open Purchase Orders are cut over into the ongoing entity. A robust, well-planned and well-communicated cutover strategy is a critical success factor for the transition project.
Upstream inventories come in different guises. This includes: spares, capital spares, packaging, containers, project stocks, consignment stock and more. The accurate and timely transfer of stock balances, location and disposition information relating to spares for critical equipment, capital spares, and high-value project stocks is especially crucial in the transition.
Operations rely on the availability of critical spares, whilst drilling and well ops will want to ensure that their stock holdings are available for planned projects and interventions.
As always, safety is paramount in upstream. Ensuring the appropriate storage and maintenance of the history and documentation related to Hazardous goods is critical
One aspect of inventory transition that should definitely be considered, but isn’t always, is stock movements history. The balancing act between carrying too much stock (upstream tends to carry a lot of dead stock) and incurring stock-outs is a fine line. Access to a full history of stock movements is an essential part of maintaining appropriate and effective stock replenishment parameters. Without access to this history, the inventory manager is operating with one eye shut when it comes to determining appropriate stocking parameters such as safety stocks, re-order points and delivery lead times.
Here I’ll focus on a couple of the themes mentioned earlier – open item cutover and history.
- Ensuring that open deliveries and open shipments at the transition are transferred appropriately is important. The outbound supply chain to remote assets must not be disrupted. If so, there are potential knock-on implications for production, operations, and safety.
- Retaining the movement history of duty suspended materials from import to export is vital for HMRC reporting. The fines associated with losing or not being able to demonstrate that traceability can be punitive. So, the history of stock movement is an important knowledge base to protect through the transition.
Key considerations for a supply chain manager during an SAP mergers and acquisitions transition
This blog has attempted to capture the key considerations for a Supply Chain Manager involved in an SAP mergers and acquisitions transition. Hopefully, you’ve picked up on the recurring themes of non-disruption and securing safe operations that are the foundation of a successful transition.
In my next blog, I’ll adopt the persona of an HR manager and tell you a bit more about what they are looking for in a successful SAP mergers and acquisitions transition. Follow Absoft on LinkedIn to keep up to date with our ongoing SAP mergers and acquisitions blog post series.