As more firms in the United States and abroad look to expand their reach and boost the bottom line, sometimes the latest IT wizardry and/or product innovations just don't cut the mustard. This is one reason why mergers and acquisitions (M&A) are becoming more commonplace. Similar brands, products and companies come together to create a "bigger is better" mentality in an effort to compete more aggressively in today's global marketplace. In theory, the idea is not a bad one. New research from global consulting firm Accenture, however, indicates that more often than not, a critical supply chain step is overlooked during M&A activity.

Approximately 30 percent to 50 percent of the savings generated in a merger or acquisition can come from supply chain synergies, according to the Accenture report, as recently highlighted by Modern Materials Handling. It stands to reason, then, that one of the first areas looked at during M&A activity should be the supply chain. But this simply is not the case, according to Accenture:

Supply chain executives are involved in early planning in only about half of M&A deals. By waiting until after a deal closes to identify a strategy for merging supply chain operations, companies are missing an opportunity to jumpstart their savings, says Accenture partner Jay Welsh.

Not only that, a second recent report from the same firm observed that 67 percent of respondents think their companies' recent M&A activities were the cause of increased product-launch disruptions, and 62 percent reported that mergers resulted in a loss of talent from their supply chain organizations.

If procurement and supply chain disruptions are so extremely common in the aftermath of a corporate merger, how can it be fixed?

Welsh says "the obvious solution" to this problem is to include supply chain executives in boardroom discussions earlier in the deal cycle. If regulations prevent companies from sharing supply chain data before their merger closes, the companies can hire a third party to begin the planning for them, he says.

Welsh also says early supply chain planning is critical when combining companies from different countries, as executives often underestimate how long it will take to iron out differences in regulations, culture and language.

Recent Line 56 editorial also discusses the importance of synching up disparate supply chains in the heat of a merger or acquisition. Here's an interesting excerpt:

The speed at which a newly merged team can drive toward a more efficient supply base depends on how quickly it identifies the overlaps, and the vulnerabilities. This is also critical to execute on the economies of scale.

Line 56 also underscores the fact that manufacturers need to understand who they are doing business with, as disruptions can occur from multiple sources. Tier-2 and tier-3 suppliers, transportation carriers and service providers, for instance, are just as likely as strategic suppliers to wreak havoc overnight, according to Line 56. Here is one tip to combat such issues:

When the possible risk and severity of disruptions are known, they can be charted. For example, a company may find it needs to focus most closely on 6 percent of suppliers, because that population is delivering 25 percent of active parts and accounting for 45 percent of spend. This information supports a systematic framework for analyzing and mitigating risk.

So the million-dollar question is whether or not "charting" and other types of analytics are enough to stem supply chain issues during M&A. It's an interesting question to pose to the textile industry. According to a New Delhi Financial Express article, it's a global industry on the verge of some serious global consolidation, thanks to "the quota regime phase-out and liberlisation [sic.] of fiscal restrictions in the current financial year."

According to Financial Express, as many as 12 textile majors, including Alok Industries, House of Pearl Fashions, Malwa Industries, Gujarat Heavy Chemicals and Raymond, went into global acquisitions, helping textiles heavyweights diversify into newer domain.

Sounds like a great, big supply chain mess is brewing. Who will survive? And what will be left of them?

See: Supply Chain Management: The Secret Key to Post-merger Integration?