It's not uncommon for midmarket companies to grow by acquisition. It's also not uncommon for the procurement organization at a midmarket company to be presented with some major integration challenges as a result of such acquisitions. But at laser technology developer Newport Corp., the benefits of a 2004 acquisition that doubled the company size are clearly hitting home in the emerging procurement organization.

With the acquisition of Spectra-Physics in 2004, Irvine, Calif.-based Newport doubled its head count and revenue. But things changed when Newport doubled its size in 2004. Bob Darrah, director of strategic materials, tells Purchasing there was clearly a list of challenges and benefits that came with the acquisition.

“The biggest challenge we faced in the procurement organization was the consolidation of suppliers across the various organizations in the company,” Darrah says. “There are a lot of common suppliers in our various vendor bases and ERP systems. Rationalizing those and getting the organizations 'acquainted' with each other so we can leverage our synergies and spend have been our areas of focus since the acquisition.”

Historically, Newport had been very decentralized and its procurement operations were spread across various locations and business units, typically reporting up to the operations director or general manager of the local site. Some sites only have two or three procurement people while its Irvine site has 45 procurement and materials staffers with various responsibilities.

Newport's decentralized structure makes a company-wide project like supplier consolidation difficult. But the newly acquired Spectra-Physics came with a Global Sourcing team of six strategic sourcing specialists who were given the two-pronged task of identifying new global supply sources as well as rationalizing and consolidating the company's existing supply base and commodity list. Much of that rationalization has focused on evaluating suppliers for their engineering capability and other value-adds.

“We like to engage suppliers that can support us with some detailed engineering support or creating documentation for us, as well as providing their perspective and expertise in helping us accomplish our goals,” Darrah says. “Since the acquisition we've been seeing 3-4% overall cost reduction which is good for us.”

On the process integration front, Newport's Irvine site had been implementing Kanban and Lean initiatives prior to the acquisition.

“As we look at what initiatives to expand across the company, we know that not every site needs every tool,” Darrah says. “Sometimes that can be like taking a drink of water from a fire hydrant.”

“We need to both let our buyer/planners access their counterparts at other facilities as well as at the organizational structure level,” Darrah says. Specifically, getting Newport's buyers used to having a Global Sourcing Team representative consult on some decisions took some work, but it's gradually been accepted, mostly because of the benefits it brings.

The technology integration has been a separate, but equally daunting challenge post-acquisition. Spectra-Physics had been using various ERP systems at 10 different sites. Newport decided to standardize all of its sites onto an SAP platform and began implementing in February. Its current objective is to rollout in October at Irvine and another site and a new site every quarter.