Mike Ashley, CEO of Sports Direct, is emerging as a bit of a ‘save the high street’ hero, on an acquisitive strategy to buy up failing retail brands. House of Fraser, Jack Wills and Game Digital have been amongst his purchases.

And it isn’t just Mike Ashley. Other companies taking advantage of the slump in retail to scoop up competitors include online retailer BooHoo, which bought the online businesses of Oasis and Warehouse, for £5.25 million, after the high street brands went into administration.

As the economy stalls and more retailers face trouble, we might continue to see an uptick in M&A activity. But for these acquisitions to be a success, there are some challenges that need to be overcome. One of the most important is the amalgamation of two or more supply chains. Driving revenue and protecting margins is the main aim of an acquisition after all, so a successful re-engineering of the supply chain is a must. Here are some key points that retailers eying an acquisition need to consider:

  • Be ready: the supply chain team should always be aware of any potential M&A activity, whether their firm is the acquirer or the takeover target. Having a fully mapped supply chain is vital, along with a bang up to date supplier database, with information such as spend, origin, products supplied and contractual information.
  • Triage team: this will be a crack team working on post-deal implementation. They’ll be tasked with assessing vital information such as geographical reach, infrastructure and supply chain mapping and will include representatives from across the business – supply chain, finance, merchandising, HR etc. Supply chain team involvement means there is the right expertise when it comes to finding both efficiencies, but also opportunities to de-risk your future supply chain – e.g. address over-reliance on a single supplier, country or territory.
  • Standardised measurement: if teams in the two businesses are assessing and measuring their supply chains differently, it will make the task of integrating it more challenging. Ensure there are standard KPIs and way of measuring. When it comes to re-engineering the supply chain, that level of standardisation is crucial.

Preparing for ‘What if?’ scenarios

  • Location, location, location: when two retailers come together, they might have different base locations for their supply chain, one in the UK and one in South Africa, for example. This geographic variation will impact a variety of supply chain factors, such as the setting of lead times, the accuracy of demand forecasting and order fulfilments. These variations will determine how the future business is structured. Further, understanding supply chain supplier risk relating to Tier 1, Tier 2 etc. suppliers will also help plan for ‘What if?’ scenario planning, and business continuity measures.
  • Not dropping the ball: whilst all of this is going on, it’s vital that business as usual (BAU) is attended to. Customers still want the products they purchased when they are supposed to – they don’t care about any challenges you might be having with optimising the newly integrated supply chain. Remember that your customers are the most important element in all of this – if you alienate them due to any problems with your supply chain, there’ll be plenty of your competitors waiting in the wings to snap them up.

Detangling supply chains and re-engineering new ones is one of the biggest headaches for retailers when it comes to M&A activity. But it’s an important one and vital to get right. Essentially, it will help you save money, stay competitive and not impede fulfilment, which will keep your customers happy. And that has to be the main goal.

At Valcon, helping our clients to respond to and solve these challenges is what makes us tick. If your business is encountering similar challenges and you’d like to speak to us about how we can help, please get in touch at [email protected]