Investing in turmoil
You’re an investor, involved in the industry. Perhaps you’re part of a private equity fund. Or perhaps you’re evaluating the possible acquisition of a new entity for your company. These are times of exceptional uncertainty, and you’re wondering how your investment portfolio will evolve.
As economic and geopolitical conditions change from one week to the next, those investment decisions that commit you for the long term are tricky ones to make. We’re not talking about stock market trading here – selling your shares in a previously innovative brand that has now become toxic is an easy decision – speculating in cryptos is another story altogether. What we’re talking about is investing in a manufacturing company (some would say in the real economy) for several years, and making your investment grow.
Due diligence criteria
In assessing the suitability of this new investment, you lift the hood to assess the capabilities of the company you are considering acquiring shares in, in a process of due diligence.
You open the accounting books, which are full of lessons, but these are lessons about the past. You assess industrial assets – are they fit for purpose, have past investments been judicious, are production resources up to date? You assess the quality of the company’s teams and skills. You examine the business plan, which looks to the future, but will the assumptions on which it is based hold up, given the instability of the company’s environment?
You’re looking at the supply chain of your investment project. Will the current supplier and customer base ensure the continuity or growth potential of the business? Are there any identifiable risks that would pose resilience problems? What is the company’s performance in terms of service levels, stock turns, lead times and time-to-market?
If you think about it, what is the most important quality you can expect from the supply chain of your investment, in a fast-changing environment?
Investing in an adaptable supply chain
The main quality will undoubtedly be your acquisition’s ability to adapt to the changes to come over the next few years, which are largely unpredictable.
Teams, processes and management IT systems need to be assessed in the light of this ability to adapt
Here are some sample questions to guide you:
- Does the company follow a pull-flow logic, adapting continuously to the realities of demand, or does it rely on a push-flow logic based on forecasts?
- Do supply chain teams have the skills and training they need to meet the strategic and operational challenges of the future?
- Are planning cycles short, so that decisions can be made quickly?
- Does the company have planning and execution technology that ensures visibility and agility, or are IT systems based on a complex, monolithic ERP that everyone is working around in Excel? A frequent corollary to this question: is the company stuck in the middle of a seemingly endless system change?
If your assessment of these criteria is positive, that’s encouraging! The company you are considering investing in has the strengths to adapt to a tumultuous environment
Investing for a rapid, sustainable return
If your assessment is negative, it’s not critical – you’ve identified a quick turnaround opportunity to improve the operational performance of your investment, and ensure its long-term viability by strengthening its ability to adapt
The solution we recommend? Implement a structured end-to-end pull flow, S&OP, trained teams and processes equipped with Intuiflow technology, in 6 to 12 months. Our customers testify to the effectiveness of these rapid transformations
How about investing in a supply chain technology that’s quick to implement and delivers tangible results in terms of service and cash flow?
