A Tale of a Few Good SCM Players - Part 2

Part 1 of this blog post series followed the progress of Manhattan Associates from its inception in 1990 throughout the mid-2000s. During this time, Manhattan Associates was the epitome of an immaculate supply chain management (SCM) software company in terms of market share, growth, profitability, and its products’ capabilities. Indeed, the company was the industry standard for the supply chain execution (SCE) space and the envy of competitors.

But lately, the two competitors that had long looked at Manhatan from behind, RedPrairie Corporation and JDA Software, have been posting much more upbeat news in terms of growth in contrast to Manhattan’s declining revenues. This post analyzes the possible reasons behind that occurrence.

To me, Manhattan and RedPrairie were always similar companies with similar offerings. I (and virtually every other analyst) always thought that Manhattan was the market leader by virtue of being much larger and simply a better-run organization.

It appears to me that RedPrairie and Manhattan are quite comparable in warehouse management system (WMS) and labor management systems (LMS) capabilities, and that any "edge" all depends on the client relationship. Namely, if the company already has a certain vendor’s WMS, it will likely go for that vendor's LMS, transportation management system (TMS), etc.

I believe that Manhattan might have some slight edge on the TMS side, and has been actually competing pretty well with JDA Transportation ManagementOracle Transportation Management (OTM, formerly G-Log), or i2 Transport Solution in this area. When a WMS is leading the deal with TMS as an add-on, Manhattan is very tough to beat.

The RedPrairie Factor

On the RedPrairie side, I think its warehousing management offering is generally just as great, and it excels on the order management side. I also liked the vendor’s vision around radio frequency identification (RFID) technology a few years back, though I still don’t know if any vendor could ever monetize it.

Compared to Manhattan’s capabilities mentioned in Part 1, RedPrairie also has a distributed order management (DOM) product that features distributed sourcing, available-to-promise (ATP), item substitution, and transportation cost comparisons. The vendor also has a Business Process Platform (BPP) offering that it launched with a pilot application at its RedShift 2008 conference and followed up with the full product in 2009. But my understanding is that at this time DOM and BPP are mostly marketing with no actual customers.

The platform integrates with both Java Platform, Enterprise Edition (J2EE) and Microsoft .NET Framework technologies, but I don’t know for sure whether it is built on one or the other (or on some mix of technologies). Thus, RedPrairie's BPP looks much less “fused” than Manhattan SCPP (Supply Chain Process Platform, mentioned in Part 1), but since all RedPrairie systems (SCE and retail store operations) are by now built on service-oriented architecture (SOA) principles, BPP works with them all.

Moreover, RedPrairie’s offering handles reverse logistics as part of its standard WMS, including repair, repackaging, redistribution, and disposal. The vendor just doesn’t market it as a separate capability or module.

Manhattan also handle returns in its base WMS, but Manhattan's reverse logistics management (RLM) product is not about returns in the warehouse. Instead it is about managing the entire process, starting with the point of return (i.e. Web site or kiosks for AT&T Wireless) and all the way back until final disposition.

Finally, all RedPrairie products are now available through the vendor’s on-demand hosted network. However, they are not yet all in a multi-tenant architecture. Generally speaking, I am impressed and happy for the entire SCE industry that these two vendors have managed to stay distinct and do fine on their own. I think both are still in a good place.

If one thinks about what the big enterprise resource planning (ERP) players are good at, my belief is that they prosper in structured, clean, self-contained environments. Basic ERP financial transactions are like that–they are structured, largely inside four walls, and fairly easy to automate once rules are in place.

In contrast, the heavy-duty SCE is an area that has been too "dirty" for SAP and Oracle to ever really dominate. This logistics space’s intricacies have given both best-of-breed and laser-focused SCE vendors a strong market to focus on. Indeed, the transportation and warehousing (or logistics in general) discipline is very different: it is chaotic and ever-changing, and people get their hands dirty working with it.

Logistics is the province of true gurus who understand the dynamic landscape of that world and does not fall neatly into the ERP bucket. Indeed, logistics costs are currently about 21.3 percent of China’s gross domestic product (GDP), compared to 8.6 percent in the US, according to a report entitled “State of Logistics in China,” by ARC Advisory Group.

I believe that retailing is as complex as logistics, which is why Oracle and SAP have needed to buy significant expertise to get into that market. The ERP guys were always terrible at supply chain and multi-tier collaboration because the nature of the problem is different.

Why Different Fortunes Now?

Thus, most times the final competition comes down to RedPrairie and Manhattan on the largest accounts, and with the addition of HighJump for mid-tier accounts. SAP and Oracle are there sometimes when the customer has other SAP and Oracle solutions, but are rarely serious competitors unless the needs aren’t very complex. Infor SCM solutions, which currently contain former EXE Technologies, ShipLogix, Arzoon, Mercia, Provia, and other related applications, can be seen occasionally as well.

A logical question that comes to mind is why Manhattan did especially well in the 2001-2008 window, when the company grew while almost everyone, especially in the supply chain planning (SCP) arena, was hurting (think of former Manugistics and still-independent i2 Technologies). Why is the once invincible vendor having trouble selling now? Is it due to better competition in a tight market, or something else?

With Manhattan falling off (or at least losing pace) and RedPrairie rising, any outsider would simply guess that the latter is now a better-run company. Given that both vendors should be affected equally by market dynamics by virtue of their similar focuses, perhaps RedPrairie is just executing better than Manhattan as an organization? Does RedPrairie currently offer anything new or different from Manhattan?

RedPraire’s Acquisition Trail

Waukesha, Wisconsin (US)-based RedPrairie has had steady growth from 2002 – 2008, consistently giving competitors a run for their money. The growth also came from a number of acquisitions, with the major one being the former European WMS competitor LIS in 2004. RedPrairie continues to actively sell that product in some markets outside North America.

In 2006, the vendor acquired another WMS competitor, MARC Global. This product is no longer actively sold, but  RedPrairie continues to support all MARC Global customers. The vendor has offered some small enhancements to the legacy product as they have been requested, and will continue to support it as long as there are users. But the vendor has also offered a migration plan to its flagship E2e WM product and customers are slowly taking that route.

Moreover, RedPrairie saw an opening in the area that Manhattan still leaves out (surprisingly, since the vendor used to “own” the retail space): the connection between retail store operations and the upstream supply chain. To that end, 2006 was the year of RedPrairie’s acquisition spree, starting with BlueCube for retail workforce scheduling and store operations and StorePerform for workforce task management for retail stores. This store-level connection with the supply chain is getting a lot of traction in the retail supply chain and is starting to get noticed by retail suppliers as well.

Additionally, RedPrairie acquired Denmark-based Alta A/S for the build-to-order (BTO) and line-sequencing capabilities that automotive manufacturers require. These acquisitions have rounded out today’s RedPrairie’s E2e (end-to-end) product suite. The “end-to-end” mantra denotes the scope from manufacturing plants all the way to retail store shelves.

The Crux of the Matter

Therefore, I think the biggest difference between Manhattan and RedPrairie today is that Manhattan has always relied so heavily on the retail and wholesale distribution sectors, which have of course severely contracted in this recession. Manhattan does focus on pharmaceuticals, third-party logistics (3PL) providers, and carriers, but not much action is coming from these sectors nowadays either.

RedPrairie has always been a much broader cross-industry solution, as is JDA now with former Manugistics’ capabilities. RedPrairie and JDA's strengths in areas such as consumer packaged goods (CPG), food and beverage (F&B), groceries, and telecommunications--all sectors that are less impacted by the recession--have allowed them to continue to show strong results.

RedPrairie and JDA also have stronger international operations than Manhattan, with about 30 percent of revenue coming from overseas. This vertical and geographic diversification has also contributed to these two vendors’ stability during the current recession.

Conversely, where Manhattan used to "own" retail, RedPrairie's addition of store operations solutions and their integration into the broader RedPrairie E2e suite is now winning the vendor a seat at the retail executive's table. RedPrairie's retail results have been much stronger the past couple of years than they’d ever been previously--thus cutting into Manhattan's sweet spot. True, Manhattan folks will point out that they have lately had more wins over RedPrairie than the other way around in the retail sector, but the point here is that there had previously not been competition from RedPrairie in the retail sector at all.

Retailers are still spending on IT, but on a more limited basis (and more selectively) than in past years. RedPrairie’s retail business has been down as a percentage of the vendor’s total revenue for last 18 months or so, but the company is more diverse, industry- and geography-wise, than Manhattan. The vendor’s strength in F&B, CPG, and 3PL, as well as much stronger operations outside North America have helped growth for the year to reportedly achieve 16 percent overall.

Part 3 of this blog post series will analyze the current market dynamics in the retail sector, and try to explain the ongoing resurgence of JDA Software. In the meantime, your comments and feedback with regard to the opinions and assertions expressed thus far are welcome. What are your experiences with any vendor and its SCM solutions mentioned in the article?
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