Many companies in today’s world are driving organizational growth via the acquisition of businesses and competitors that operate within the same marketplace. This concept allows for rapid growth and an immediate uptick in current market share of the industry being serviced, as opposed to an often slower organically executed strategy. While many positives come as a result of the immediate growth realized from acquisitions, many hurdles also exist. One of those hurdles this blog will address is the process of successfully implementing acquired companies into your organization’s sourcing and contracted supplier programs.
Identifying Acquired Company’s Supplier Spend & Trends
As soon as the acquisition is closed, it is important to gain an immediate understanding of how spend has been flowing, and to what suppliers within the newly acquired group. Running an internal report showing high-level General Ledger spend broken down by categories should help easily identify the key suppliers being utilized. Once this spend is categorized and filtered by highest annual supplier, begin identifying any contracts tied back to these high spend suppliers. If you are unable to identify the most up-to-date contract internally, reach out to the supplier directly for this information.
Once the contracts are on hand, review them in-depth to identify any penalties or clauses related to early termination. Often times contracts have buy-out clauses within them related to early termination, which depending on the total spend identified may be in your best interest once the total cost of ownership is fully realized.
Also, if this acquired organization happens to use one of your contracted national providers, a simple amendment to your national agreement can be executed in a matter of days to immediately roll the acquired group’s locations into your program with minimal downtime and oversight required. Always be on the look-out for these quick wins when running through the supplier identification phase of an acquisition.
Once legacy contractual obligations have been sorted through, the next step is to ensure the newly acquired organization understands the proper purchasing programs that should be utilized. Depending on the size and complexity of your purchasing programs, the roadmap that often leads to success is through hosting program introductions and training sessions. These trainings often include the distribution of buying guides, a demonstration of online purchasing portals, and Q&A portions at the conclusion with each supplier’s national account manager to talk through any specific questions.
Monitoring Progress & Compliance
The compliance tracking portion of major implementations is a critical piece of the process that is often times understated by many organizations. Establishing effective processes to help monitor implementation and buy-in at the local level will enable your organization to easily pivot towards corrective action to ensure long-term success and buy-in. This crucial step will immediately help identify and eliminate bad habits at the local level as soon as possible.
This part of the process is where you can begin to lean on the effort and accountability of your contracted supplier’s national account manager. The account manager may even have personal incentives tied back to sales performance volumes with your organization, use this to your advantage and begin establishing a weekly or bi-weekly cadence early on to track the program’s progress and purchasing levels. Creating a document such as a “compliance tracker” that the account manager oversees will help monitor each location’s actual vs forecasted spend. During these meetings if any locations are trending in the wrong direction, a combined communication effort from your organization as well as the national account manager should help establish strong messaging to the local level regarding the importance of this program.
If these steps shared above are executed in a consistent manner throughout the acquisition process, the groundwork for a long-term successful purchasing program will be established.