The Path to Integrating Product Distribution of an Acquired Business
One of the most important integration milestones following the close of an acquisition is the integration of the acquired business’ products into the sales and distribution processes of the new parent entity.
Distribution integration and availability of products across existing sales channels is often a key element of the deal thesis, and a significant revenue driver.
The path to Distribution Go-Live requires a closely coordinated effort involving many (if not all) of the business workstreams involved in the integration. IT plays a critical role underpinning the efforts of the business team in ensuring business process integration is successful, enabling supporting systems, and facilitating data migration.
4 Key Phases for a Successful Distribution Go-Live:
Post-Diligence Assessment and Planning
Depending on the legal parameters guiding interactions with the acquired entity, begin integration assessment and planning as soon as practically possible. While some information may not be shareable prior to the deal close, it may still be possible to begin understanding the acquired entity’s business processes and learning about their systems prior to close. Any work that can be performed pre-close will shorten the post-close timeline to Distribution Go-Live.
During the assessment phase, build on work that began during due diligence. On the IT side, be on the lookout for a few key considerations to inform the planning (and ultimately the integration) process.
Business Process Alignment: Comprehensive assessments of all sales and distribution business processes and their underlying IT systems will need to be performed by the business functional and IT teams responsible for the integration. The most urgent ‘watchouts’ to uncover are current business processes that do not align with or map clearly into the processes of the new parent entity. These will require the most collaboration and work during the integration. While it is preferable to migrate the acquired entity into the new parent’s existing processes, there may be special considerations or other reasons this is not possible. For example, the acquired entity may include a new business line with different legal or regulatory considerations that are not present in the parent. While the business process assessment should be owned by the business functional teams, it’s important for the IT team to have advance visibility of situations where business processes may drive new system requirements that need to be delivered prior to Distribution Go-Live.
System Customizations and Modifications: Acquired entities will often have a less sophisticated legacy ERP system than the new parent. Because these entities may be smaller or growing businesses, they may also have had less discipline than the larger parent entity with respect to customizing and modifying their systems. As a result, there may be processes that legacy employees consider ‘standard’ and a regular part of their jobs, which in fact, are streamlined through special system customizations. Identify any customizations that are not covered by existing functionality in the parent ERP system. Determine if these customizations were built due to insufficient functionality in the legacy ERP system (and thus may not be required given the capabilities of the parent’s ERP) or if they truly require a new system solution to meet a business requirement not currently supported in the parent ERP. Depending on scope, developing new system solutions in the parent ERP system can be time-consuming – the sooner this work can be started, the shorter the path to Distribution Go-Live.
Data Migration Challenges: We share the philosophy of most of our clients that data in the system is owned by the business functions who are responsible for managing it ongoingly. While there are exceptions, most commonly, IT’s role during the acquisition integration is facilitating the extraction, transformation, mapping, and loading of data on behalf of and in close coordination with business counterparts. Here again, there is an advantage to starting early. It is unusual to have an ERP data source that is the same as the destination (i.e., SAP to SAP). Even in these situations, there are often differences in how the two entities have chosen to implement solutions in the same ERP system. More often, the acquired entity will have a smaller ERP system, and the data will not align between the source and the destination (i.e., NetSuite to SAP). Some key data sets like Customers and Products/Materials need to be migrated early in the integration process to support other items dependent on them. Accelerating this learning and integration of key data sets is critical to expediting the overall integration timeline.
During planning, the information gleaned from the assessment informs the overall integration plan. Work on some tasks may be well underway while the integration plan is still in the process of being finalized. Quickly identifying the ‘long poles in the tent’ and streaming work in parallel wherever possible will lead to the shortest integration timelines.
Deploy Business Capabilities and System Solutions
Once all the workstreams involved in the integration have aligned on a plan to achieve Distribution Go-Live, the race is on, and the work begins.
During this phase, all system build, test, and deployment activities must be completed. Some tasks may need to be completed earlier in this phase to enable critical business activities for which they are prerequisites. For example, product/material master data may be dependent on new system configuration settings as a prerequisite to being loaded.
As the business team prepares to begin distributing the new suite of products, it is important to define when these products will first be introduced to the supply chain. It is often the case that inventory will be built up over a period leading up to Distribution Go-Live. All system build activities required to enable the inventory buildup, as well as any master data involved, will typically need to be tested and deployed before the inventory can be received. Prerequisite activities are prioritized accordingly during this phase.
Some of the key activities involving IT during this phase include:
Building the future state product and financial flows
Deployment of system configurations and new solutions
Early conversion of critical master data sets (on which other tasks are dependent)
Re-branding and product labeling
Enabling inventory build-up in the supply chain
Migration of complaints data
Final Preparations and Cutover
Any tasks or activities that cannot be completed during earlier phases will take place during a cutover window leading up to Go-Live. Minimizing the volume of tasks performed during cutover reduces risk and shortens the cutover window. It is always advantageous to complete as many tasks as possible prior to cutover, provided the early completion of those tasks does not create excessive additional work or rework later in the process.
Some tasks, for example, transactional data conversions, are often a moving target. In those cases, it will be necessary to determine a workable window for the business to pause transaction activity, perform conversions, and resume activity once complete. Most often, this takes place over the course of a cutover weekend.
Appointing an experienced cutover lead to own the cutover plan and manage the cutover is critical. Cutovers should be rehearsed in advance to confirm prerequisites, processes, ownership, and timing. (Planning for and managing cutovers is a science of its own, which warrants a separate blog post…)
Tasks to be performed during the cutover window will typically include:
Deployment of remaining system changes
Final master data conversions (including delta loads of previously loaded data sets)
Transactional data conversions (e.g., inventory conversions, sales order backlog, open customer returns)
Granting production system access and updating user authorizations
Making the final “Go/No-go” decision to go live
Go-Live and Hypercare
Following a successful cutover and go-live, it’s critical to have a solid communication and support plan in place. Depending on the level of risk the team has assessed, different support strategies can be developed.
While every integration is different, there are several important areas where detailed plans should be made prior to going live:
Identify key support resources, backups, and expected availability
Define communication strategies & support channels
Identify key business decision-makers & escalation paths
Set daily standups and/or other recurring meetings
Issue tracking and management
Status reporting to project sponsors and stakeholders
Working these details out in advance will avoid pain caused by doing things “on the fly” post go-live.
Every integration will have its own unique challenges and its own set of nuances and requirements. The nature of the business being acquired will lead to many variations in how the work of the integration is completed.
I hope this post provides a high-level overview of what to expect during the integration of an acquired business’ sales and distribution processes. The Avanti Group has worked with clients in a range of different businesses and has successfully helped those clients define their own unique integration plans and complete the work of the integrations. We would love to hear from you and discuss how we may be able to help with your integration.