Analyzing Manhattan Associates’ Supply Chain Platform Play - Part 1

My recent article on Manhattan Associates (NASDAQ: MANH) and RedPrairie Corporation stated that these two vendors continue to duke it out at almost every large-scale selection deal for a warehouse management system (WMS), distribution labor management system (LMS), and/or transportation management system (TMS) solution. But over the last few years they have also pursued somewhat different expansion routes from their traditional supply chain execution (SCE) realms, where they will likely face different competitors.

To that end, RedPrairie has been rounding out its solutions set for retail stores while trying to attract the lower-end of the WMS and TMS markets via on-demand applications. For its part, Manhattan has been rounding out a portfolio of supply chain management (SCM) software solutions dubbed Manhattan SCOPE, which stands for “Supply Chain Optimization, Planning through Execution.” Built on a common Supply Chain Process Platform (SCPP), the SCOPE suite combines the following sub-suites to enable overall supply chain optimization: Planning and Forecasting, Inventory Optimization, Order Lifecycle Management, Transportation Lifecycle Management, and Distribution Management.

The article then went a bit deeper into the guts of the SCPP technical underpinning. But SCPP is not a mere “geekware” toolset, since it also comes with its own applications and solutions. These solutions offer the broad supply chain insight and analytics that are critical to an executive’s ability to proactively manage the holistic supply chain. 

Nothing Without Holistic SCM Insight

To illustrate the business-related meaning of these applications, Supply Chain Intelligence (SCI) is a Web-based supply chain business intelligence (BI) product delivered through embedded IBM Cognos BI technology. SCI features powerful capabilities for analytics, dashboards, scorecards, reporting, ad hoc querying, charting/graphing, and business event management.

In addition, the product is dynamically integrated with Microsoft Office products and can be accessed via mobile devices. SCI is deployable to both internal users and trading partners, while its service oriented architecture (SOA) is flexible and configurable to meet individual customer needs.

The analytic SCI application has been thus far pre-integrated with the aforementioned Transportation Lifecycle Management and Distribution Management modules of SCOPE, with integrations to the remaining modules coming in the near future. Closed-loop analytics (the ability to go from SCI views back into an execution system to “take action” based on insight gained in SCI) and embedded analytics (providing access to relevant analyses and reports directly within transactional screens to help provide additional insight for decision-making) are envisioned as future developments.

These packs feature hundreds of pertinent key performance indicators (KPIs), analyses and reports, and ways to “slice and dice” the data (dimensions). In the case of transportation, examples of metrics would be the following: the number of shipments without delivery delay, the number of on-time shipments, and stop cost, whereas some examples of dimensions would be the following: origin facility, carrier, lane, and item class.

On the distribution management side, examples of pertinent metrics would be as follows: average number of purchase orders (PO’s) received per shipment, total number of multi-stock-keeping unit (SKU) inbound license plate numbers (LPNs) received, and total number of PO’s received. On the other hand, receiver, hour, SKU, and date would be examples of some relevant dimensions.

Enter Total Cost to Serve (TCS)

For its part, the Total Cost to Serve (TCS) composite application calculates the total cost per unit of an item to acquire it from a supplier and make it available for sale to a customer. The TCS calculation comes on top of the landed cost calculation, which takes into consideration all original manufacturing, shipping, and delivery costs the to the distribution center (DC). For its part, TCS includes both direct and indirect costs that can be reasonably allocated in receiving, carrying, picking & packing, and final shipping from the DC.

It is indeed quite problematic to capture actual costs per item for multiple reasons. For one, different quantities of different types of items may share a cost, which complicates what the right cost allocation to each widget in the shipment should be. Moreover, no single document (letter of credit [LC], PO, bill of lading [B/L], etc.) or transaction (inspection, picking, duties, etc.) can be associated with all types of costs, only to just some of them.

In addition, different routes to a destination result in different costs being accumulated not only for the same item at the same location but also to the same item at different locations. Needless to say, different types of costs have to be handled differently. Imprecise approximations have been the order du jour.

Manhattan customers can use more accurate TCS calculations to drive costs down in various ways. For one, they could change assortments by eliminating unprofitable products and promoting profitable products in a more informed manner. They can also raise prices on unprofitable products and price to match and/or undercut competition.

Choosing new suppliers and new countries for sourcing as well as new carriers and different modes of transportation can be other reasonable recommendations coming out of the TCS analysis. Last but not least, companies can select new goods flow-through strategies, e.g., cross-docking or direct store delivery (DSD) in order to reduce their total costs.

The TCS analytic application enables better sourcing, routing, and order fulfillment decisions based on all possible anticipated costs. It provides visibility into financial performance by product and location, thus forming a foundation for understanding true product profit margins and for optimization of the supply network as a whole.

The TCS module captures actual costs as they happen, and is pre-integrated with Manhattan SCOPE applications to automatically obtain cost information. In addition, TCS can obtain relevant costs from non-Manhattan sources. The product features multi-level apportionment rules to allocate cost (e.g., by organizational hierarchy, product hierarchy, timeframe, etc.).

As mentioned earlier, the application calculates both total landed costs and costs-to-serve by item, location, PO, supplier, and route, and then aggregates costs up per item, location, and time hierarchies. Cost analytics can be viewed through the aforementioned SCI application and visualized geo-spatially through the Manhattan FieldVision supply chain visibility (SCV) module that is based on Microsoft Bing Maps. Future product directions include the capabilities to estimate costs and perform what-if analyses in order for the company to be able to invoke changes (e.g., change routes) in near real-time.

Manhattan’s Evolution Flashback

The realm of Distribution Management remains Manhattan’s bread winner (with estimated 60 percent to 70 percent of the company’s revenues). These “mother” applications are designed to effectively manage the key assets required to run complex distribution operations, and to move goods and information through a warehouse with precision and velocity. The suite addresses, among other needs, inbound visibility, receiving and shipping, labor management, and slotting optimization, and includes the following functions: Warehouse Management, Labor Management, Labor Forecasting and Scheduling, Slotting Optimization, Billing Management, Supplier Enablement, Hub Management, Radio Frequency Identification (RFID) solutions.

Transportation Lifecycle Management has also long been Manhattan’s forte after the 2000 acquisition of The suite optimizes all aspects of transporting product through supply chains by improving multiple product delivery dimensions, such as speed, accuracy, and cost. The suite covers the following areas: Transportation Procurement, Transportation Planning & Execution, Logistics Gateway, Fleet Management, Audit Payment and Claims, Appointment Scheduling, Yard Management, and Carrier Management. These two sets of applications are where Manhattan continues to fiercely compete with RedPrairie (as well as with HighJump, IBS, SAP, Oracle, Logility, etc.).

In addition to the Planning and Forecasting capabilities that were mentioned in my earlier article, the Manhattan SCOPE suite covers the realm of Inventory Optimization (IO). Both areas are in part the result of the mid-2000s acquisition of Evant. The idea behind IO is to enable enterprises to reduce overall network inventory, thus freeing up much needed working capital while improving sales and customer order fill rates. The IO analytical tools balance the financial trade-off between improving customer service levels and overall inventory investments.

Manhattan’s IO suite facilitates the following functions: Replenishment, Multi-Echelon (to manage distribution networks with more than one level of distribution center between the supplier and the end point), Vendor Managed Inventory (VMI), and Collaboration Gateway. The latter two solutions help companies formulate tighter, lasting relationships with key trading partners, such as replenishing products into customers’ locations or sharing supply chain KPI’s.

Due to a scheduling conflict I was not able to attend Manhattan’s Momentum 2010 user conference, but I was able to follow it remotely and vicariously through other analysts and bloggers’ reports. The conference’s tagline was expectedly “Platform Thinking” and here are incisive reports by Bill McBeth of ChainLink ResearchSteve Banker of ARC Advisory Group, and Shawn Beilfuss of Cross Border Journal.

Investing in the Future Finally Paying Off: No Guts, No Glory

Last few years have been tough on Manhattan Associates in terms of flat revenues (although that trend has recently changed for quite the better). RedPrairie was able to weather the economic storm much better due to its diversification (i.e., catering to manufacturers, distributors, and retailers in recession-proof industries such as food & beverage) and via appetizing acquisitions, as described in my 2009 series.

But Manhattan deserves admiration for its steadfast resilience and continued investment in product innovation (instead of a knee-jerk reaction to recoil and “cost-cut its way to prosperity”). Not only has the company’s application portfolio expanded far beyond its WMS/LMS/TMS heritage, but over the past several years the company has bravely spent more than US$200 million on research and development (R&D) to expand and migrate its SCOPE portfolio onto a unified, SOA-based platform.

In 2010, Manhattan added mobility capabilities to its platform via the FieldScout solution, which is part technology stack and part lightweight receiving and shipping application. Right now Manhattan FieldScout is aimed at the following two supply chain nodes: hubs/cross-docks and retail stores. For example, in a hub warehouse located at a port, a company might not need a full WMS with RF scanners, but rather just light functionality for receiving and shipping.

The only applications that are not yet fully on the SCPP platform are demand planning and inventory optimization. But the indications that I got at the very recent National Retail Federation (NRF) BIG Retail Show 2011 were that these solutions might also be platform-enabled by the Momentum 2011 conference in late May 2011, and the conference tag will be “Platform Thinking Activated.” We will have to stay tuned for that.

Following parts of this blog series will zoom into Manhattan’s distribution order management (DOM) capabilities, with a special focus on its multi-channel concepts and solutions deployment for retailers. A smart DOM system takes customer orders and decides which warehouse is best suited to fulfill them based on inventory on hand, inventory in transit, and delivery requirements. Your views, comments, and opinions on Manhattan Associates as well as concrete experiences with its products and services are as usual welcome in the meantime.
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