3M Wraps Up HighJump, While Retalix Shops OMI International Part One: Recent Events

Event Summary

The consolidation within the warehouse management systems (WMS) and supply chain execution (SCE) market, which has long been predicted by certain pundits who also explain the various reasons why it has never taken place, seems to have taken another route very recently. Namely, instead of a direct intra-market consolidation, some tormented public SCE/WMS vendors or smaller, but profitable, undercapitalized, and undervalued WMS/SCE vendors have found a shelter under wealthy, more visible parents with complementary products. The example of the first would be the recent acquisition of former EXE Technologies by SSA Global (see SSA GT To EXE-cute (Yet) Another Acquisition).

Two examples of the later would be the agreement by 3M, also known as Minnesota Mining and Manufacturing (NYSE:MMM) to acquire HighJump Software Inc., and the acquisition of OMI International, Inc. by Retalix Ltd. (NASDAQ: RTLX).

On January 5, 3M, a global, highly diversified technology conglomerate, announce that it has entered into a definitive agreement to acquire HighJump Software Inc. (www.highjumpsoftware.com), a privately-held provider of adaptable SCE software and solutions, that included its related trademarks and patents. Terms of the transaction were not disclosed, and the transaction, which was subject to customary regulatory approval and approval by HighJump Software's shareholders, was completed on January 31.

Although not occurring at a breakneck rate, demand for SCE solutions is still growing as customers across many markets face increasingly complex supply chains globally driven by customer and regulatory requirements. To that end, besides the highly functional WMS, HighJump provides a comprehensive suite of other SCE solutions. Like many other peer vendors, HighJump has lately revamped its strategy to attack the lucrative business-to-business (B2B) collaboration and visibility software market. Therefore, since its beginnings as a mere WMS vendor, HighJump has expanded its domain expertise into fulfillment collaboration, and consequently, it now offers an SCE suite of applications it calls Supply Chain Advantage. The suite includes integrated solutions for warehouse and yard management, transportation management, supply chain visibility and event management, trading partner collaboration, and data collection (for more details, see HighJump Grows in a Period of Low Growth Through Adaptable, Broad Function Products).

This is Part One of a three-part note.

Part Two will discuss the market impact.

Part Three will cover challenges and make user recommendations.


HighJump began life as Data Collection Systems Inc. (DCSI), a provider of bar-code data-collection systems to track labor costs and inventories in manufacturing plants and warehouses. The company was founded in 1983 to develop inexpensive systems to collect, view, edit, and process shop-floor and warehouse data for existing mainframe-based applications. Although data-collection systems remained an important offering, in 1997, under the leadership of CEO Chris Heim, DCSI began to more aggressively diversify and evolve into a full-fledged SCE vendor. DCSI complemented its first SCE product, a radio frequency (RF)-based warehouse management system (WMS) named Warehouse Advantage, with applications that facilitate many aspects of order fulfillment. Consequently, the approximately $36 million (USD) revenue nowadays is split into a healthy 40 percent for license fees, 50 percent for services and maintenance, and remaining 10 percent for data-collection hardware. In 2000, DCSI changed its name to HighJump.

The vendor's customers include manufacturers; distributors; retailers and third-party logistics (3PL) companies; and targets the operational needs of a wide range of organizations from midsize to large companies and divisions of the Fortune 1000, with more than 700 customers at this stage. Sample customers include Verizon, Honeywell, Sony, Georgia-Pacific, Toro, Fisher-Rosemount, PepsiCo, Starbucks Coffee Company, Circuit City, and NASA. Moreover, several new international customers have recently been added to HighJump's growing roster of worldwide customers. These companies span industries including retail; telecommunications; food and beverage, consumer packaged goods (CPG); and utilities. To support its international endeavors, HighJump has also extended its Supply Chain Advantage suite with multilingual applications to broaden the global deployability of the product line. In early 2002, HighJump closed a $10 million (USD) equity investment with Gemini Investors of Wellesley, Massachusettes and St. Paul Venture Capital of Bloomington, Minnesota (both located in the US) which have been its primary investors.

Most of its suite is based on the traditional bar-code technology familiar to ordinary shoppers and consumers, but the software can also use radio frequency identification (RFID) technology. While radio ID tag-enabled software is still just a small part of HighJump's revenues, more and more user companies and software vendors are adopting this technology (see SCE Leaders Partner To See Beyond Their Portfolios). Lately it has been on almost everyone's lips and seems to be heading towards mainstream and boardroom priorities, almost directly from scientific labs.

To that end, in November, HighJump announced that it has RFID-enabled its broad SCE offering, Supply Chain Advantage. With enhancements to existing solutions and several new applications, the vendor now claims to provide a broad and flexible collection of RFID-enabled solutions for warehouse management, visibility and tracking, shop floor data collection, and RFID compliance. This is made possible with HighJump's RFID Configurator, a Wizard-like application that should empower user companies to quickly configure specific processes to utilize RFID, bar codes or both, depending on their individual customer requirements, and at multiple points within the supply chain through the following HighJump solutions:

  • Warehouse Advantage: HighJump has extended its warehouse management solution to include RFID compliance as well as workflows that support RFID, so that all HighJump customers now have the option of selecting which activities they want to perform with RFID, bar codes or both.

  • Compliance Advantage: This solution allows suppliers to relatively quickly and easily achieve RFID compliance as mandated by leading retailers such as Wal-Mart and government agencies such as the Department of Defense (DoD). It can also be adapted to meet evolving RFID standards and future mandates.

  • Tracking Advantage: This solution provides tracking for returnable containers and other high-value assets in closed-loop environments. In addition to providing hands-free recognition of inbound and outbound containers, this application aims to ensure total management and visibility of them throughout the supply chain.

  • Data Collection Advantage: This solution should enable manufacturers to track work in process (WIP) and finished goods with RFID technology, which is especially important to the manufacturers that track items in lots or by serial number.

With the introduction of RFID Configurator, HighJump claims to offer a unique and powerful approach to incorporating RFID into existing supply chain processes.It should allow customers to effectively position their operations to meet RFID mandates from their mighty customers, while preparing for additional RFID utilization and compliance requirements as they evolve. This approach fully supports the co-existence of bar codes and RFID that most industry experts predict will be necessary for many years. For example, because configuration capabilities are available at the trading partner level, truck loading for Wal-Mart could be configured to use RFID processing while bar codes are used for other retail customers. This can be accomplished on a stand-alone basis or by adopting integrated solutions that link the information flow from suppliers all the way to customers.

The RFID technology could potentially replace bar coding in the long term, if global technical standards develop. While the radio transmitter technology has been around for decades, the technology got a major endorsement this past fall when both the U.S. Department of Defense and retailing giants Wal-Mart and the Metro Group decided to make RFID tags a key part of their logistics. To that end, Wal-Mart has recently instructed its top one hundred suppliers that it wants RFID transmitters on all pallets and cases starting January 2005.

3M Industrial Services and Solutions

On its hand, in January 2003, 3M launched the 3M Integrated Packaging Tool, a web-based, data-enabled packaging information management system, which helps customers design and make packaging such as cartons. 3M touts this tool to be the first to integrate product information, package design and production systems to better manage compliance, time to market, product surety and packaging costs for customers in industries such as food and beverage, life sciences, chemical, and CPG. That software and newly acquired HighJump together will be part of a new division 3M created two years ago called Industrial Services and Solutions. 3M believes combining its strong brand, global presence and business process excellence with HighJump Software's SCE will help customers optimize their business processes across an even broader range of industries and geographies.

Further, 3M is not a newcomer in the goods-moving department, and it already uses HighJump's software in several divisions. Although it is considering integrating HighJump's software into its own supply chain system, the company maintains its main goal in buying HighJump to grow the business. While 3M currently does not have a product similar to HighJump's software, its researchers have for some time been experimenting with RFID tags. The conglomerate's lesser-known Library Services Division already sells librarians everything from Tattle-Tape magnetic security strip to book-tracking radio transmitters, and security checkouts with alarms. 3M's brands include icons such as Scotch, Post-it, Scotchgard, Thinsulate, Scotch-Brite, Filtrete, Dyneon, and O-Cel-O. Serving customers in more than 200 countries around the world, with its 70,000 people, the company has established expertise, technologies and global strength to lead in major markets including consumer and office; display and graphics; electronics and telecommunications; safety, security and protection services; health care; industrial; and transportation.

Retalix And OMI International

Coincidence or not, also on January 5, Retalix Ltd. a Dallas, Texas, USA-based provider of integrated enterprise-wide software solutions for the retail food industry worldwide, including supermarkets, convenience stores and restaurants, announced that it has acquired all of the outstanding shares of OMI International, Inc., a leading provider of SCE and WMS software for the US grocery sector. Retalix acquired OMI International, Inc. for $18.6 million (USD), of which $13.6 million (USD) was paid in cash and $5 million (USD) in 226,040 restricted shares of Retalix. For the twelve months ended December 31, 2003, OMI International had revenues of approximately $14 million (USD). Retalix funded the cash portion of the consideration from existing cash-on-hand, and the transaction was completed on January 2.

Founded in 1984 and also headquartered in Dallas, Texas, OMI International is a privately held company with affiliate partners in the UK, France, Spain and South Africa. Throughout North America, OMI's software systems are currently in use in fifty-eight of the top one hundred retail grocery organizations and in over 40 percent of the wholesale grocery business. OMI's applications integrate enterprise-wide purchasing and logistics management using advanced radio frequency, RFID, and voice-based solutions. Other solutions in the OMI product suite support store-level point of sales (POS) forecasting and yard management along with applications for invoice and payment reconciliation.

On its hand, Retalix offers a full suite of software applications that support a food retailer's essential retailing operations and enable retailers to increase their operating efficiencies. With installations in more than 25,000 stores and quick service restaurants across forty-four countries, the company markets its software solutions through direct sales, distributors, local dealers, and its various subsidiaries. Retalix was founded in 1982 as Point of Sale Limited and changed its name in November of 2000 to Retalix Ltd. Its growth strategy over the past several years has been to expand its enterprise and supply chain management (SCM) applications while maintaining close integration with its widely installed, in-store solutions. The planned integration of OMI's SCE solutions into its current application suite is touted as a perfect example of this strategy by the company's officials, which believe that this combination of technology and expertise will enable Retalix to offer an unequaled level of supply chain efficiency to retailers.

This concludes Part One of a three-part note.

Part Two will discuss the market impact.

Part Three will cover challenges and user recommendations.

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