Turning round a failing acquisition – case study

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Context

A UK-headquartered international Information and Communications Technology company had bought a PC business in the Nordics about a year earlier. The Nordic company took accountability for the global PC Development and Supply operations of the Group. Accountability for Sales and Marketing of the PC business was held in the UK headquarters with Sales Operations existing in all countries in which the Group operated.

Problems

Almost all of the Country Sales Operations were complaining about the Supply capability of the PC business, were reporting customer dissatisfaction, and were downgrading their financial forecasts for their Country Operations, placing blame on the PC business. This was having significant impact on the financial forecasts of the Group.

The Nordic management team had largely been left to their own devices and had concluded as a result that their performance was good. Most customer and Country Operations complaints were being directed to the UK headquarters and the Nordic team were largely unaware of a problem, or held the view that they were not to blame. The design of the programmes had to take into account the cultural and organisational sensitivities in play. The factory had been generally regarded as one of the best electronics manufacturing plants in the region.

A view was being expressed in the Group Headquarters that at least some of the Country Operations were dropping their financial forecasts for reasons other than the PC business, and were using it as a convenient scapegoat.

Solution

The PC business claimed it could make over a million different variants of PCs but did not know precisely how many. The Nordic factory was designed and configured as a volume-supply operation, but was producing small-quantity production runs. Analysis was undertaken to identify the higher volume variants and to phase out the very low variants from factory production. The marketing machine had already stimulated demand for these low-volume variants and orders had been and were being placed for them. A new marketing campaign was put in place to promote “best-sellers” – full-featured configurations on shorter lead-times with attractive pricing.

Systems were put in place to establish variable lead-times for different variants, with higher-volume variants on shorter lead-times. Systems were also put in place to capture Customer Requested Dates (CRD), Promised Delivery Dates (PDD) and Actual Delivery Dates (ADD). Analysis was undertaken to compare all of these dates with the established lead-times, and Supply Chain performance against lead-times and dates was established.

The analysis showed the Supply Chain performance was indeed poor, but so was the performance of Country Operations in forecasting requirements and in ordering the correct variants accurately. A significant percentage of orders were being changed after placement by the Country Operations, which they said was because the lead-time was too long for them to accurately agree the configuration of the PC with the customers – who had so many variants to choose from. Appropriate interventions were made where Country Operations were found to be wrongly blaming their deteriorating financial forecasts on the PC business.

5 in-country configuration and distribution centres were established, in conjunction with Third-Party Logistics providers, in strategic countries in Europe where most of the PC volume was delivered. These centres became the local point of contact for all Country Operations, and technical and sales support staff were located in each, working closely on the relationships with the Country Operations and assisting with local Sales and Marketing campaigns. The Nordic manufacturing facility began to produce “base units” only for the European market, shipping them to the configuration and distribution centres for inventory holding and final “just-in-time” configuration.

Results

  1. Supply Chain performance gradually improved, eventually achieving “best-in-class” supply chain performance
  2. The PC manufacturing facility was given the time and space necessary to work out the strategy in a market of increasing vendor consolidation and product cost reduction. The factory managed to cope with increased volumes over 20% and the Nordic team had the time to identify a strategic partner with additional capacity – sufficient to compete with the few consolidated players that would remain in the market.
  3. Product lead-times were reduced overall to a position competitive in the market for volume products, niche markets were still addressed with niche configurations.
  4. The new supply chain configuration enabled new markets to be entered into and serviced effectively.
  5. It is true that there was a significant reduction in the overall cost of the business, but this was driven more by falling technology prices than it was by supply chain re-engineering, and cost reduction was not the major objective of this programme.

Takeaways

  •  Managing the strategic imperative of securing a viable position in a market of vendor consolidation must co-exist with the tactical imperatives of selling and reliably delivering daily.
  • Ensure the programme design aims for stretching results, but be sensitive to the realities of the current situation, and pragmatically redesign as new information comes to light. Foster a strong sense of ownership and engagement by involving as many as possible of the stakeholders in the design of the programme, and any projects.
  • Challenge inappropriate behaviours sensitively once the facts have been established; do not accept or foster a “blame culture.”
  • Don’t over-commit or under-estimate the time to implement a major transformation, even when the pressure for a “quick solution” is forceful and seemingly unanimously demanded. Publicise successes loudly and often, offering appropriate recognition and reward.
  • Establish an organisation to manage the transformation, with clear “roles of change” and sufficient education, support and coaching. Make sure there is sufficient capability within the organisation to support the operational and the transformational activities concurrently.
  • Establish strong two-way communication channels and support them with high levels of relevant activity. Provide appropriate confidential “back channels”.

See also www.dancewiththeelephants.com