Opportunities & Risks Associated with Standardization and Consolidation
By Bill Prenatt
Our way of living in America is changing faster and to a greater magnitude than at any time since the industrial revolution. The small mom and pop companies that once dominated almost all industries are being gobbled up. If they are good, they are acquired. If they are bad, they fail!
In every negative situation, some opportunities come to the forefront once in a lifetime. Our intention at Cohen is to be one of the companies that thrives in this disruptive chaos.
To understand what’s going on, it helps to look behind the scenes to see what drives consolidation/standardization. While every industry has its own set of circumstances, decisions to consolidate and/or standardize almost always have roots in MONEY. To reduce cost, eliminate waste and avoid duplication, STANDARDIZATION is the solution.
For example, in the foodservice distribution industry, outbound delivery expenses average about 4-6%. Tractors, trailers and drivers are expensive! Years ago in the foodservice industry, it was common to receive 15 deliveries a week from different suppliers. Over 15 years it evolved into two deliveries per week. And it was only two because fresh fish didn’t hold up in the new one-stop shop delivery system. Likely, the foodservice distribution industry has solved that problem by now.
Can you imagine the impact on the independent suppliers? Most of them either lost their business or t picked a specialty niche.
In a way, hospitals have become a niche market, caring for patients with support from niche markets e.g., cancer centers, dialysis centers, urgent care practices, etc. The entire Health Care Industry is under immense pressure from all sides, including the federal government, insurance companies, patients, and their families to reduce cost while improving quality.
As a result, consolidation has been rampant in the Health Care industry. In 2015 there were over 100 major mergers and acquisitions in the Health Care industry. In 2016 there were over 76 major mergers and acquisitions. A December 9th Price Waterhouse Coopers report called 2016 the year of ‘merger mania’.
Consolidation and standardization are not just buzz words. They are solutions!
This is why Cohen specializes in working with companies in industries that are consolidating, those who understand the advantages of using the same design, product and supplier for all their locations. Cohen has been helping companies standardize their millwork and custom cabinetry projects for over three decades. Our team understands the process to help a business maintain a consistent look and approach in multiple facilities, with multiple locations, across town or across the nation.
About the Author
Bill Prenatt consults exclusively with growth oriented family businesses. Bill spent much of his career in operations, sales and procurement with Marriott and Sara Lee prior to starting his own company Simply Successful in 2008. Bill has served Cohen for 7 + years in a consulting capacity.