cscmp 2014: planning through mergers & acquisitions
DESCRIPTION
Inking the deal is just the first step. Mergers and acquisitions require a melding of cultures between two organizations to rationalize physical manufacturing and distribution networks, integrate systems and reconcile differences in processes and metrics. Hear from executives at companies undertaking major mergers, acquisition and divestitures on how to make supply chain integration a success.TRANSCRIPT
Planning Through Mergers & Acquisitions
It’s a MAD World
MAD – Mergers, Acquisitions, Divestitures
ThroughJune 16,2014
It’s a MAD World
LinearProjectionat CurrentRate
$1,700
Managing Demand and Supply During and After a MAD Event
• How to plan through the turbulence?– Increased complexity – Network and supplier rationalization– System and process integration– Human and cultural aspects
• Challenges, approaches and lessons learned • Walk away with appreciation of the supply chain
complexities related to MAD activities• Successful strategies and best practices
Great Panelists
Craig McLaughlinGlobal Director Integrated Business Planning
Larry HartleySVP Supply Chain
Ron HordVP Supply Chain Planning& Contract Manufacturing
Case Study in Divestiture
Craig McLaughlinGlobal Director Integrated Business Planning
Larry HartleySVP Supply Chain
Ron HordVP Supply Chain Planning& Contract Manufacturing
Approx $52 billionGlobal portfolio
Approx $35 billionGlobal portfolio
Approx $17 billionNorth America portfolio
Divesture - Scope
We offer many of the world’s favorite brands
Fast facts
net revenues of $35 billion in 2013
global snacks powerhouse
products marketed in 165 countries
#1 in biscuits, chocolate, candy & powdered beverages
#2 in gum & coffee
over 100,000 employees
donated more than one billion servings of food since 1997
Divesture – Planning Challenges
Processes & Systems• Test, test, test the systems.• Manufacturing and warehouse de-coupling. • Transportation dis-synergies.• Customer order complexity.• Procurement scale impacts.• Transition Services.
People• Assign the most qualified operations resources on the
project.• Consider both capability and maximized talent
retention in building new teams.• Ensure people training is focused on for Day 1
capability needs.
Divesture – ApproachEstablish a formal dedicated team for each function
Functional Steering Team
Human Resources
Focus Areas
CommunicationOrg Design & Structure
RetentionMotivationRewardFacilities
Change Mgmt
Customer Service
Focus Areas
Policies/Work Processes
System splitCross-country
AlignmentSales Alignment
Customer communication / new
vendor set-up
Customer Finance
Focus Areas
SystemsWork ProcessesAP/AR by sector
Post auditCross-country
alignmentTSA
Product Supply
Focus Areas
System /Data SplitSAP
Demand/SupplyNetwork
ReplenishmentMaterials MgmtBU AlignmentSME needs
TSA
Logistics OpsWarehou
sing Wendy
Focus Areas
StrategySystemsCapital/Asset
Leases3PL vs ownedCross-country
alignmentTSA
Transportation Wendy
Focus Areas
Trans Planning impactsSystems
Work Processe
sProcurem
entVendor Mgmt
Route to MarketTSA
Global Steering Team
Divesture – ApproachMeasure progress weekly
Key Accomplishments this Week Key Upcoming Activities & Decisions
Key Issues/Concerns/Risks Key Milestone Status Update
Major Milestone (top ~5-10)Target
Compete Status
“4 Box Update”
Divesture – ApproachCheck dependencies often
Planning
Finance
Manufacturing & Logistics
Legal
Sales
Divesture – Lessons learned
• Keep optional change to a minimum and deploy change management early.
• Assign a full time project team with a strong leader.
• Create a clearly defined governance structure and report out approach.
• Review progress on a weekly basis.• Communicate weekly, in order to minimize
rumors.• Ensure transparency with other dependent
stakeholders.• Be crystal clear on priorities and get senior
approval.
Merger Case Study
Craig McLaughlinGlobal Director Integrated Business Planning
Larry HartleySVP Supply Chain
Ron HordVP Supply Chain Planning& Contract Manufacturing
Setting the Stage
Coming Together
Two of Everything!
Freshman Year
The Challenge
• Integrate two distinct organizations with similar products, service promises and customer profiles, but different approaches
• Complete while dealing with open headcount, dual leaders across the org, assortment changes and customer conversions
• Deliver promised synergies• Planning could only go so far
Scope and Timing
• Deliver $70-100M in run rate synergies by end of 2016
• Support customer conversions to legacy Office Depot systems
• Support move to common SKU base in three channels
• Design a flexible DC network that supports customers and lowers cost
Approach
• Use outside consultant• Ensure dedicated
consolidation planning resources
• Use data to inform decisions• Avoid getting bogged down in
decisions that can’t be made yet
• Key assumptions: Must capture synergies, timeline, service maintained
Lessons
• Get the org structure right first
• Commit to communicate• Expect and explain
change• Make decisions with
sense of urgency• Seek feedback from
multiple levels, field and HQ
People
• Create mix of people from both legacy organizations
• Reward top performers who lead with core values
• Communicate, even if you don’t have all the answers
• Get rid of “us versus them”
• Build a brand new culture
We are Office Depot, Inc.
Connecting the Lessons
• People take different paths to reach the same destination.
• Throughout life, you will meet new people and say goodbye to others.
• Embrace and adapt to the new people and experiences.
• Learn from those around you.• Choose who you surround yourself
with carefully.• The person/student/leader you were
before must change if you want to continue to succeed.
Acquisition Case Study
Craig McLaughlinGlobal Director Integrated Business Planning
Larry HartleySVP Supply Chain
Ron HordVP Supply Chain Planning& Contract Manufacturing
Our CompanyA Review of our Heritage, Values, Principles, and Growth
Company Heritage
• Founded in 1897 by Jerome M. Smucker
• Headquartered in Orrville, Ohio
• Leading North American brands
• Five generations of family management
• Commitment to quality and consumer trust
Our Purpose
“Helping to bring families
together to share
memorable meals and moments”
Basic Beliefs
The Company’s values and principles that guide both strategic decisions and our daily behavior
• Quality
• People
• Ethics
• Growth
• Independence
“The mutual respect for our fellow employees and
an atmosphere that makes people proud to work here.”
• “Thank you” for a job well done
• Listening with full attention
• Looking for the good in others
• Having a sense of humor
Core Competencies
Ability to Implement
Developing Strong Relationships
Building Emotional Bonds
Our Vision
We will own and market food brands that hold the #1 market position in their respective category
Transformation Through Acquisitions
2007
Calendar Years
2002
2004
2006
2008
2011
2012 2013
Transformational Growth
Net Sales in Billions
Coffee, peanut butter and fruit spreads
contributed 2/3 of the $5.9 billion
in FY13 net sales
Coffee
48%
Peanut Butter
13%Fruit
Spreads
6%
Baking Mixes& Frostings 6%
Shortening& Oils
6%
Canned Milk4%
Flour & Baking Ingredients
4%
Other
13%
Smucker FY13 Sales by Category
A Leading U.S. Shelf-Stable Food Manufacturer
Strength of Smucker
• Culture and continuity of management
• Clearly defined strategy
• Portfolio of leading brands
• Proven ability to execute
• History of long-term growth
• Strong cash generation and responsible deployment
Acquisition Types
• Larger in size• Game changing • New markets and new categories
• Increase category presence• Leverage existing infrastructure• Strengthens core competencies
• Smaller in size• New capabilities• Capitalize on Smucker resources
Transformational
Bolt On
Enabling
40
The Integration Process
• Vocabulary & Acronyms • Synergies versus run model improvements • Dual systems Supply Chain Planning
• Face to face communication…a lot of it!• Effective first, efficient second• Get the functional experts involved early
• On site JMS presence – Cultural Representative• Integration Team structure & Continuity• Even small integrations require full integration
Challenges
Overcoming the challenges
Lessons Learned
41
The People Side of AcquisitionsDeveloping Strong Relationships is a Core Competency• Face to face communication is primary method of
communication.
• Transparency with Communications is critical - Tell people what is happening when you know it.
• Key On boarding activities for all employees:• Learning from Each Other• Why we are who we are sessions• Leadership development – Resonant Leaders
• Integration cadence is tried and true.
Thank You!
Human Side of Change
Craig McLaughlinGlobal Director Integrated Business Planning
Larry HartleySVP Supply Chain
Ron HordVP Supply Chain Planning& Contract Manufacturing
Human Side of Change
Craig McLaughlinGlobal Director Integrated Business Planning
Larry HartleySVP Supply Chain
Ron HordVP Supply Chain Planning& Contract Manufacturing
How do you engage, inspire and motivate people during mergers, acquisitions and divestitures? Q:
Human Side of Change
Craig McLaughlinGlobal Director Integrated Business Planning
Larry HartleySVP Supply Chain
Ron HordVP Supply Chain Planning& Contract Manufacturing
How do you meld/create new cultures or deal with situations like co-CEO? Q:
Thank You!
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