In today’s world, it does not seem that a day goes by without a mega-merger being announced. Such industry consolidation triggers drastic distribution network redesigns. Whatever the origin of the project, the magnitude of the work to be accomplished is breathtaking. The effect is significant on operational processes, customer and supplier relations as well as previously recognized performance indicators of the logistics function.

Planning a consolidation-related project is key to its success and should be performed with a special care to details. In the upcoming article, we will outline the different steps that one should go through in such a consolidation project.

Understand and document the current situation

It is of outmost importance to understand the current operations. This is key to the project’s success. The process can be summarized under six distinct areas of analysis. First, one should understand and document the current distribution network and facilities used by all parties. Second, the product mix should be carefully reviewed as well as the order profile. Inventory management strategies should also be reviewed in relation to the storage and material handling equipment used. The third important factor to consider is to understand all the operating processes for all the business segments within the organizations. One should then understand and list processes, operational standards, working schedules, and qualification of the workforce employed in each location. Fourth, the analysis should focus on the equipment and systems used in all facilities. The consolidated organization should be able to take full advantage of all the world-class practices and technologies available in each location. The fifth aspect to consider is the documentation of the processes. In many consolidations, organizations that have taken the time to properly document their processes come out winners. Finally, one should devote time to understanding the distribution network and more specifically the transportation function of each organization. The extent of the distribution structure already in place is most often a reflection of the service level provided to customers. One should also not forget to acquire a good understanding of the various information systems in place and how they function to support the network.

Establishing design parameters

The consolidation project direction will only start to materialize during the establishment of design parameters. This phase, of outmost importance, will be one in which the long term strategic plan of the consolidated organization will be reflected. Such parameters will allow to adequately select the technologies that are best suited for the operation. Furthermore, sales growth projections, order patterns, product mix and service level should be applied toward development of future concepts.

Scenario development

Once the current operations are mastered and design parameters agreed on, the project team is then ready to proceed to concept development. Such concepts should reflect possible business growth scenarios, usage of various applicable technologies integrating different automation stages. Throughout the design, one should always remember that the key to success is to provide a suitable yet flexible solution in an ever-changing environment.

It is also a key at this stage to devote special time to educate the team members by providing them the opportunities to visit world-class facilities using the latest technologies. Brainstorming sessions should allow for evaluation of the widest variety of concepts as possible. Subsequent analysis should streamline the number of concepts to a few very promising ones.

Implementation Strategy

Planning can often be a fairly easy task, executing may turn out differently. In order to reduce the possible pitfalls, the project team should now devote energy to establishing a sound implementation plan of the final concept. It is extremely important that the individuals involved in implementing the concept be included during the planning process. As with many other types of projects, logistics projects are too often thought up in vacuums, which in turn leads to painful and mis-directed implementation

By their nature, consolidation projects often bring together opposing management strategies and processes. These philosophic and culture clashes are often hard to manage and can generate long-standing rifts in the organization. Many key people can feel left out. The project manager should be extremely mindful of such events as they can spill over to damage the client base and service levels.

Measuring the benefits

Project teams often overlook this step as they quickly fall into the day-to-day management of the operations. Carefully established milestones and performance indicators should allow them to adequately measure the value of the consolidation. Reporting of such indicators to the board of directors should not only allow you to acquire respect within your organization but it will also facilitate any further investments that may wish to be done in the upcoming years.

In today’s environment, chances are that your company could soon be involved in a merger. Although you may not know in which juncture it will take place, make sure you are at least ready when it does.i