Manugistics Indulges In The Open M&A Season
In May during the enVISION2002 annual user conference, Manugistics
Group, Inc. (NASDAQ: MANU), one of the leading global supply chain
management (SCM) software providers, announced it had acquired the assets
and business of privately-held ERP provider Western Data Systems
(WDS), www.westdata.com, with headquarters in Calabasas, CA, and with
over 20 years of presence in the Defense industry providing plant-level
transaction execution for manufacturing and Maintenance, Repair, and Overhaul
(MRO) operations. The acquisition has a potential to create one of the
largest Aerospace and Defense (A&D) installed client bases in the industry,
and to enhance a strong solution set for optimizing the complex Service
and Parts Management (S&PM) processes of these asset-intensive organizations.
WDS, with revenues last year of $28 million, is a prominent provider of
application software and services to A&D organizations, with more than
135 organizations and 33,000 concurrent users worldwide.
announcement came after the yearlong lull that followed the spate of mergers
and acquisitions in the first half of 2001 (see The
Mid-Market Is Consolidating, Lo And Behold). The lull, which was likely
partly attributable to reduced investors' optimism especially in the technology
sector amid slow economic environment, seems to have ended with another
slew of acquisitions (see SAP
Tries Another, Bifurcated Tack At A Small Guy, Microsoft
'The Great' Poised To Conquer Mid-Market, Once and Again, and CA
Unloads interBiz Collection Into SSA GT's Sanctuary).
this acquisition, Manugistics strives to strengthen its offering of S&PM
solutions that addresses the complex business operations inherent to asset
intensive industries. Clients will supposedly have increased capability
to plan, price, synchronize and execute with a comprehensive array of
functionality. The solution set should feature capabilities that range
from predictive system failure forecasting and parts optimization, to
finite capacity and labor resource scheduling, to MRO shop planning and
execution, and direct materials purchase management. Benefits of these
solutions might allow customers to optimize asset availability, ensure
an extended life for assets, and achieve inventory and physical capacity
clients include BAE Systems, Boeing, GKN Aerospace, Lockheed Martin,
Norshipco, Northrop Grumman, Sikorsky and Smiths Aerospace.
In addition, the U.S. Department of Defense (DoD) has implemented
WDS solutions at the U.S. Navy, the U.S. Marine Corps, and the
U.S. Air Force. On the other hand, Manugistics' A&D clients include
Kaman Aerospace, Rocketdyne Propulsion and Power, Mars Electronics
International, Department of State, as well as the Defense Logistics
Agency (DLA), the U.S. Air Force, and Naval Supply Systems Command
(NAVSUP). Numerous depot-level MRO sites within the DoD will consequently
rely on Manugistics' integrated planning and execution capabilities.
addition to a notable A&D client base, Manugistics is reportedly the only
leading supply chain technology provider to be listed on both the U.S.
General Services Administration's Federal Supply Schedule for Management,
Organizational and Business Improvement Services (GSA MOBIS) and the
GSA's Information Technology Schedule. The NATO Consultation,
Command and Control Agency (NC3A) have also awarded a Basic Order
Agreement (BOA) to Manugistics. The agreement gives NATO's 19 member
nations, 27 partner countries, and numerous governmental agencies direct
access to Manugistics' solutions.
following its strategy of investing in new, best-of-breed products and
solutions, Manugistics believes it has assembled a powerful solution suite
that now include WDS offerings such as:
for Original Equipment Manufacturers (OEMs) - This solution delivers
comprehensive project or contract-oriented capabilities to discrete
manufacturing clients with a need to maintain mandatory regulatory
compliance, control, and reporting.
for MRO - This is a comprehensive repair and overhaul operations
management and accounting system for commercial and military MRO facilities
is a Web-based, workflow-enabled solution.
Advantage - This e-procurement system, delivered by WDS' subsidiary
Advisian, is designed expressly for direct material acquisition that
makes up a great part of all procurement in complex manufacturing
industries. The solution is workflow-driven, and has sophisticated
tools for managing contractual and regulatory obligations that impact
complex manufacturing operations.
if one acquisition was not enough for within one month, on May 28, Manugistics
announced that it has acquired the business of privately-held Digital
Freight, a Lexington, KY-based provider of collaborative logistics
solutions that facilitate online, real-time bids for global transportation
contracts. Manugistics' Global Logistics Management Solution will
now consequently offer buyers and sellers of transportation services an
enhanced real-time, secure transactional environment designed to simplify
and accelerate the logistics sourcing process. By utilizing an online
marketplace to automate the time consuming task of requesting and processing
competitive bids for transportation contracts, shippers and carriers should
thereby reduce the resources required to manage their complex business
Digital Freight Marketplace solution has reportedly facilitated
over $1.9 billion in transactions across more than 1,800 carriers and
38 shippers. The collaborative architecture of the Digital Freight Marketplace
solution gives shippers and carriers major advantages over traditional
bid processes by providing a collaborative framework for dynamic pricing.
Digital Freight's clients include industry leaders like Crown Cork
& Seal, Frito-Lay, Honeywell International, Safeway Inc.,
has in the past offered one of the industry's broadest suites of Web-based
logistics management solutions, although through partnerships. Customers
like Bandag, Inc., Brown & Williamson, ChemLogix - a GATX affiliate,
CMB LogiFlow, Deere & Co., Elemica, Ewals Cargo Care, Hershey Foods, Kohl's
Corporation, Kraft Foods, NAVTRANS, Staples, Inc., Subaru of America,
The Great Atlantic and Pacific Tea Company (A&P), The Limited, Inc., The
TJX Companies, RadioShack Corporation, Toys "R" Us, Inc., Tronicus
and Winn-Dixie have all turned to Manugistics for solutions to
address their logistics challenges.
is Part One of a two-part analysis of news from Manugistics. Part Two
will continue the Market Impact and make User Recommendations.
renewed frenzy of enterprise applications software company mergers and/or
acquisitions appears to be more than a sheer consolidation that is normal
to almost every industry. The cash-depleted smaller vendors that have
admirably survived both the Y2K conundrum, dotcom's en mass demise, and
protracted economic slowdown crunches still have to keep themselves abreast
of the growing demands on the underlying collaborative product architecture
and functionality breadth, with customers remaining vendor viability cautious.
While customers increasingly demand that these applications collaborate
better with one another and also with external, third-party and legacy
applications, the enhanced functionalities of these technologies and an
abundance of interfacing software should make this feasible.
although the advent of Web services based interconnectivity and collaboration
between disparate applications is promising despite being nascent, customers
will still increasingly look for one strategic vendor to fulfill the vast
majority of their business application needs, particularly in the lower
end of the market. This market segment has traditionally been more amenable
to buy from their incumbent ERP vendor rather than to engage in yet another
exercise of qualifying and assimilating another vendor's offering. It
is not any more a question whether any ERP vendor provides some SCM, e-procurement,
portal, or CRM functionality, but rather how much functionality and with
what level of integration (see Integration
is the Name of the Game in Software Systems).
that end, in the ERP market, the major vendors focused on the high-end
of the market have virtually evolved into providers of comprehensive e-Business
suites. While that has long not been the news for SAP, Oracle,
and PeopleSoft, many Tier 2 vendors like J.D. Edwards, Baan,
IFS, Intentia, MAPICS, QAD, and others, have
recently significantly expanded their traditional ERP suites, either internally
or via acquisition, or both. All these moves reflect the morphing of the
enterprise applications landscape as all vendors scramble to outrival
competition or, more often, survive and position themselves well for the
next phase of e-Business that features a market cognizance of the need
for a seamless link between demand and supply along the entire supply
a further degree of integration and convergence is to take place between
ERP, SCM and CRM applications in 2002 and beyond, with SCM and CRM moving
towards the transactional aspects that have until lately been the stronghold
of ERP. In fact, the recent acquisitions may confirm the theory (still
considered by some pundits as heretic) that ERP systems will remain a
foundation of broad applications portfolio spanning activities across
the entire value and/or supply chain. Likewise ERP vendors being grilled
about their extended-ERP capabilities, their SCM and CRM counterparts
are conversely barraged with questions about their back-office capabilities
or, at least, about their ability to provide a seamless integration (or
close) to these systems.
did not exactly depart from Siebel Systems' or i2 Technologies'
route of providing integration (see Siebel
Rallies Its Integration Alliance Troops), since, in its latest Manugistics
7 product release it features a Web-based portal framework/layer that
works as an user interface (UI) that resides over underlying disparate
ERP and legacy systems and also as a workflow engine for moving forms,
documents, and files throughout an organization, providing visibility
into pertinent data. The product also supports the now all-too-familiar
mantra of Web service standards - SOAP and XML - for accessing and aggregating
data from multiple data sources. Nevertheless, Manugistics has with this
acquisition also pursued an additional option of acquiring some ERP capabilities,
with a sharp vertical focus to boot.
the Level of Collaboration
Furthermore, as ERP, SCM and CRM applications individually improve to
collaborate better, other technology components might also come into play
to enhance the level of collaboration. In addition to e-procurement (including
transportation services procurement) and private trade exchanges (PTXs),
one of these could be the pricing and revenue optimization technology,
which extracts data from ERP, SCM and CRM applications to, e.g., determine
the best prices to quote and the best promotions to apply in every particular
case. To that end, Manugistics has possibly been a torchbearer in marketing
the concept of using advanced mathematical algorithms to optimize supply
chain processes that would extend beyond traditional manufacturing and
distribution cost-based operational optimization into pricing and revenue
optimization - providing thereby the opportunity to enhance margins to
the entire enterprise by addressing both the supply and the demand side
of the business simultaneously.
original idea, introduced over a decade ago, was that mathematical models
could help companies find the most cost-effective methods of fulfilling
orders and increasing their profit margins. Today, Manugistics promulgates
applying mathematical algorithms directly to the profit side of the equation
well above low-level transaction processing. That is the logic behind
the Enterprise Profit Optimization (EPO) strategy that Manugistics
started formulating shortly after acquiring Atlanta-based Talus Solutions.
In that deal, which took place at the end of 2000, Manugistics obtained
a software program that can determine the optimal price to charge for
specific products based on current market conditions (see Manugistics
Lays Groundwork For Talus Integration). The system picks the brain
from the airline and/or hospitality industry's practice of adjusting ticket
or room prices based on how quickly/slowly those spaces are filling up
at any given time.
a company that sees demand for a particular product surging can use Manugistics'
optimization package to simulate how changing the price affects that demand.
If, for example, an optimization model indicates that raising the price
does not affect demand, the company should perhaps make plans to produce
or acquire more of the product. If, on the other hand, the model shows
higher prices suppressing demand, that could be an indication that the
product is likely already priced to produce maximum profits and it may
not be a good idea to increase production levels. Manugistics has therefore
been striving to offer profitable-to-promise (PTP) concept, which will
allow companies to determine their profit spread before committing to
delivering an order to a specific customer.
concludes Part One of a two-part analysis of recent news from Manugistics.
Part Two will continue the Market Impact, including the Challenges presented,
and make User Recommendations.