Logistics.com Becomes The Newest Of Manhattan Associates Part 2: Strengths, Challenges, and User Recommendations




Strengths

On October 23, Logistics.com, Inc. (www.logistics.com), a provider of transportation procurement, planning and execution technology for shippers and carriers, announced that it has signed a letter of intent for the acquisition of its assets by Manhattan Associates, Inc. (NASDAQ: MANH, www.manh.com), a global leader in extended supply chain execution (SCE) solutions. Logistics.com's team members should bring breadth and depth of expertise in the transportation industry with, and the anticipated acquisition should extend Manhattan's SCE leadership with Logistics.com's transportation execution and procurement solutions for shippers as well as optimization technology for carriers.

Spending increasingly on R&D in an effort to develop enhanced products is one of the key tenets that have led to the continued success of Manhattan Associates. The vendor has so far focused most of its R&D on enhancing execution capabilities for specific industry requirements, on real-time collaboration of the extended supply chain, and on delivering more functionality from its suite of optimization products, which take the raw data from WMS and transform it into useful information.

However, although it had maintained that its PkMS application provided functionality for both transportation and warehouse management, Manhattan has generally been regarded strictly as a WMS vendor, whose market opportunity will not remain vast indefinitely despite the above well-attuned initiatives. Manhattan's product, PkMS, was originally developed as an order picking system for warehouses and distribution centers. Over time, Manhattan added functionality beyond the strict boundaries of order picking and warehouse management, such as outbound distribution, work order management, and freight management. Further, although Manhattan Associates acquired Intrepa in 2000 (see Manhattan's Footprint Grows With Intrepa Acquisition), the company had still lacked a strong TMS solution relative to the best-of-breed likes of RedPrairie and G-Log (see Who's Who? Sorting Out the e-Logistics Players).

Considering Manhattan's above-cited financial strength in a bargain software market nowadays, the timing, the price tag, and the rationale for the acquisition therefore seem right. Logistics.com was a wise choice, as its products bring more complete transportation planning capabilities to Manhattan PkMS and the broader footprint in SCE possessed by the combined entity should let Manhattan compete more effectively in the still fragmented WMS/TMS market.

Likewise Manhattan in WMS fulfillment and event management realm, Logistics.com has done a noteworthy feat of integrating transportation procurement with transportation planning/execution, thereby enabling more sophisticated collaborative business processes between trading partners (see Logistics.com Might Prove An Internet Success Story After All).

Logistics/distribution management remains high at executives' burning issues lists as bottlenecks are delaying shipments, transportation provider dynamics are ever changing, and costs appear to be escalating. To that end, Logistics.com remains one of a few companies nowadays offering technology to both shippers and carriers enabling them to buy, sell, manage and optimize transportation services. By being able to address the needs of all stakeholders across the board from shipper to transport provider, and with the marketplace/private trading exchange (PTX) tool in the middle, Logistics.com can connect trading partners at various levels. This is the likely reason why the Internet Capital Group (ICG) had initially endorsed Logistics.com's business model. The company also brings an impressive list of high-ticket customers and a seasoned team of people with transportation knowledge and experience. Logistics.com's client list is comprised of over 35 Fortune 500 companies, with over 120 customers in total, including Compaq Computer Corp., TJX Companies Inc., Staples Inc., The Gillette Company, Colgate-Palmolive Co., PPG Industries, Inc., Quaker Oats Co., Wal-Mart Stores Inc. and eight of the top 15 trucking companies in North America. With the acquisition, Manhattan should round out its SCE offering, while it also expects to bolster its top line with ~$10 million of estimated Logistics.com's revenue.

On the other hand, Logistics.com, whose prior owners/founders include Sabre and a MIT Professor Yossi Sheffi (see Logistics.com Solutions Target A Grand Scale), should now allay some customers' fears about its viability, as its financial condition and the commitment of the existing backer, ICG, have been dubious lately. Logistics.com offers 16 applications within three major software suites:

  1. OptiManage, an online shipper decision-support system for managing day-to-day transportation needs; it has been devised to automate and optimize processes and transactions between shippers and carriers, reducing transaction times and costs. It offers order consolidation, routing, scheduling, mode selection, optimal transportation service provider assignment, tendering, tracking and tracing.

  2. OptiBid, an e-procurement solution for shippers; it has been devised to assists shippers in identifying, securing, and monitoring optimal transportation provider for each movement worldwide and across multiple modes of transportation. Logistics.com uses proprietary algorithms to analyze shipping proposals based on e.g., service levels, benchmark transport rates, or cost fluctuations.

  3. OptiYield, an online supply chain execution (SCE) system for transportation service providers (carriers); it has been devised to automate and optimize the day-to-day decisions and strategic planning to improve efficiency, yield and profitability of truckload (TL), less-than-truckload (LTL), rail, air and sea transportation.

During the recent protracted downturn, the older OptiBid and OptiYield products with notable market traction have provided some financial cushion for the company to develop a newer hosted TMS product, OptiManage. In addition to a well-rounded functional product offering, Logistics.com has also embarked on product technology related initiatives, which should play well with Manhattan's moves of Internet-enablement, Web Services, and improving PkMS' interconnectivity.

The company's Logistics Event Management Architecture (LEMA) is envisioned as underlying interconnectivity technology and standard that should enable all participants and their applications to communicate information and optimize performance. Tens of thousands of shippers, carriers, suppliers, 3PL providers and other vendors use hundreds of different software programs and methods of communication, but very few of those methods work together. To that end, LEMA could provide business rules driven event-processing integration of multi-vendor applications via a special form of extensible markup language (XML), called tXML (transportation XML), which the company has been trying to propagate. The standard allows shippers and carriers to leverage their investment in EDI, although in that case the companies miss out on a wealth of information that tXML comprises outside of traditional EDI-based fields.

The lack of standards has traditionally been one of the key barriers to the rapid adoption of e-logistics services, and through the introduction of LEMA, Logistics.com could be paving the way for more open, standards-based initiatives in the industry. The backbone of LEMA is its message bus, which reportedly integrates with over 70 distinct external business protocols such as EDI, HTTP, SOAP, XML/RPC and XML over the web. This standardization could reduce the cost and risk of intra- and inter-enterprise application integration (EAI) and should enable the free flow of information versus custom integration.

This is Part Two of a two-part analysis of the Logistics.com acquisition.

Part One presented details of the acquisition and discussed the Market Impact.

Challenges

The above ambitious strategy has nevertheless put a strain on Logistics.com's resources, and the relief in the shape of acquisition comes at a right time. Logistics.com, furthermore, needs to tie its execution modules into the plant/warehouse-level applications in order to give a customer a full solution. In many industries, the control of material extends further into the supply chain (owing for example to recalls, etc.). Therefore, tying these two products together should be beneficial, as Logistics.com cannot provide the execution without a backbone system that does its part of the business, while Manhattan cannot deliver the full fulfillment job without the transportation part.

However, despite a good fit at first glance, some product gaps still remain wide open. Logisitics.com's expertise is mainly within the North American full truckload realm, with a focus on long backhauls rather than on "milk runs" (over 90% of business). Moreover, the company's solution footprint needs improvements in terms of multi-national capabilities, International Trade Logistics (ITL) compliance, and contract management and payment processes. Manhattan will need to make acquisitions or partnerships to quickly provide a complete multimode transportation product that comples with global trading. Also, given that only some components (i.e., OptiManage Capacity Finder, OptiManage Core, OptiBid Lane, and OptiYield Profit Analyzer) have so far been released as LEMA and tXML compliant, there is a large outstanding product delivery work in progress.

Logistics.com has also an undeveloped indirect channel and there have been little success in the past of addressing it through partnerships with leading consulting companies. Manhattan, although able to help in this regard with its extensive service providers network, will also have to rationalize the respective product (e.g., CommercialWare, see Analysis of Manhattan Associates' New Partnership with CommercialWare) and service partnership arrangements, on top of assessing the strategic fit/gap of its newly gathered arsenal of products. Still, Manhattan should soon espouse a competitive WMS/TMS system, which, with its now enduringly strong sales execution, will make competitors scramble to reevaluate their countermoves.

User Recommendations

Combined respective customers should consider this event as a move toward a more viable position for their IT investment, given Manhattan's previous acquisitions' experiences, its stability, and sustained support for the ongoing development of its products, likely by deepening its ability to provide elements of adaptive supply chain. Users interested in the next generation of transportation and logistics software should keep an eye on Logistics.com future within Manhattan. The company has built its team from well-versed people with decades of domain experience in transportation service and execution. Medium and large companies with large shipping needs in the retail, consumer-packaged goods (CPG), high-tech equipment, and automotive industries should be especially attracted to its approaches. Enterprises seeking a transportation solution on a subscription basis for multi-mode, primarily but not exclusively North America based transport, should evaluate Logistics.com.

Prospective customers in Manhattan's core industry verticals, retail, apparel, and consumer goods manufacturing, should look favorably on the acquisition in the long term. There will be a few rough spots on the path until then, though. Although Logistics.com's products are complementary to those of Manhattan, the integration work ahead will involve some areas of overlap in light of former Intrepa product, which will have to be handled carefully. Users should not expect a unified suite of applications to be available before second half of 2003, and should challenge the company to commit to more certain product development and migration strategy roadmap. Consequently, until the merger is consummated, users evaluating the above individual products should keep themselves informed, and consider generally available (GA) functionality only.

Users should ask the following questions when evaluating the Manhattan-Logistics.com combined offering:

  • Are there any price advantages offered to existing clients who elect to purchase/migrate to the future integrated products?

  • What technology will be used to integrate the applications?

  • Will (and when) the applications share a common server platform and user interface?

Existing users of Logistics.com's products that have been delivered in partnerships with other vendors (e.g., J.D. Edwards, Agilisys) should urgently clarify their support status and the long-term product development and migration strategy with the new management.

 
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