RedPrairie Makes a Smart Turn into SaaS WMS

My attendance of RedPrairie Corporations’ RedShift 2010 user conference (for the first time ever) confirmed what I have long sensed about the company’s corporate culture and its install base. That is, the previous blog series on a few supply chain management (SCM) players has, inter alia, expressed my opinions about RedPrairie (formerly McHugh Software), and I believed that these were mostly on target.

However, the recent conference provided a few more eye-opening findings and experiences that cannot transpire through occasional conference calls and brief analyst briefings. In his keynote speech, Michael Mayoras, RedPrairie’s CEO said that the privately held company had a compound annual growth rate (CAGR) of over 20 percent in last 5 years (to estimated ~US$260 million in revenues in 2009). 

The pragmatic and conservative company (there was nothing at the conference that struck me as slick, smarmy, or gimmicky) is not jumping on every latest technology bandwagon. Yet, it has been tacitly keeping itself abreast of the market trends while protecting its clients' investment. RedPrairie’s technical guiding principles have long been established to ensure the following: its applications’ longevity, usability, scalability, easy upgrades, and connectivity/interoperability (and all these tenets with the intent of facilitating ownership).

RedPrairie’s (Behind-the-scene) Platform Play

One revealing fact for me was that 2005 was a seminal year for RedPrairie in terms of its product’s architecture. Namely, in that year, its transportation management system (TMS) offering, which came from the 1996 acquisition of former Weseley Software, was finally rewritten and aligned with other RedPrairie E2e Suite modules. In the same year, RedPrairie added support for IBM’s DB2 database (to the previously supported Oracle and Microsoft SQL Server databases), while the Java Groovy language was adopted to code new business logic instead of C++ previously (and all that with backward compatibility). 

Microsoft is RedPrairie’s major technology partner on the user interface (UI) and user experience (UX) side. To that end, Microsoft provides RedPrairie’s Performance Management capabilities via Microsoft Office and SharePoint capabilities and metaphors, and via built-in SQL Server Reporting Services (SSRS).

Moreover, Microsoft enables RedPrairie’s Collaboration Portal, which is based on SharePoint and Office Communicator. Finally, Microsoft’s Windows Workflow Foundation (WF) is used in RedPrairie’s BPP (business process platform) and RedPrairie services are also exposed in Visual Studio (VS) before they can be composed and consumed in RedPrairie’s Composite Application Framework (CAF).

The End-to-end Supply Chain Play

In 2008, RedPrairie painstakingly achieved a common SCM platform with multiple database and operating system (OS) choices. The platform was able to protect its customers’ investments since 1996, while featuring a broad functional scope and depth in this day and age. Today RedPrairie’s E2e Suite covers the following three major SCM areas:

  1. Workforce – This promising and prosperous suite of products possesses the following capabilities for managing a workforce in warehouses and retail stores: workforce management (WFM), workforce planning & scheduling, workforce modeling, time & attendance (T&A), incentive calculation & payment, and retail execution management. RedPrairie hasn’t totally converged its supply chain (warehouse) labor management system (LMS) with the retail WFM yet. Right now the convergence is only in the realm of T&A. The vendor has integrated Retail WFM (former BlueCube) and Execution Management (former StorePerform), however. The latter product handles the task management portion of replenishment, but the inventory tracking, reorder points, and order submission is handled by the Retail Site Operations product.

  2. Inventory – The original (and still) bread-and-butter warehouse management (WM) product suite continues to sell in a mature (replacement) market. The standing-room-only session on the upcoming enhancements in the 2010.1 release of RedPrairie’s E2e WM very quickly had me lost with all its full-pallet and case picking, packing, task interleaving, labor management, and whatnot minutia, but I could certainly discern the power of the product, and appreciate why minor details will decide in each prospective WM selection between RedPrairie and Manhattan Associates (and perhaps Infor SCM, CDC Catalyst, and HighJump Software). On a higher level, many enhancements were along the lines of satisfying the needs of consumer packaged goods (CPG) manufacturers and distributors and along Web-based use of the product. Here is the press release where RedPrairie announced a touch screen packing operations feature in the 2010.1 release of its WM solution.

  3. Transportation – Learning about this lesser-known product suite was eye-opening for me. Namely, RedPrairie does not come to mind as a leading TMS provider despite its offering having the following capabilities: transportation management, fleet management, parcel shipment, and a transportation visibility/collaboration portal. The product has reportedly grown 20 percent in last year (although with a budding base of about 50 companies), and it receives about one third of RedPrairie’s R&D investment (with 100 dedicated resources). Here is the press release on RedPrairie enhancing its TMS with appointment sharing for inbound less-than-truckload (LTL) shipments.

With this arsenal of products, the company is able to serve manufacturers, distributors, and retailers and cover the entire “from sourcing raw materials to retail shelf” realm (thus the end-to-end or E2e moniker). The upbeat RedPrairie (although it admits to flat revenues in the difficult 2009 year) currently has about 1,200 employees, direct offices on 20 countries (bolstered by resellers in other countries). The company also has a good geographic diversification, being much stronger in the Asia-Pacific (APAC) region than its competitors (it most recently entered the South African market).

Inevitable Competitive Comparisons

RedPrairie’s archrival Manhattan Associates had its Momentum 2010 user conference a week earlier, and I did not attend it this year (I went for the two previous years, though). Based on what I could glean from my attendances of these events in 2008 and 2009, and from the Internet chatter on this year’s event, Manhattan continues with a well-crafted marketing message about being a SCM platform provider and offering over 30 granular components for customers to select and assemble.

RedPrairie has a SCM platform and granular components too, but is not making lots of noise about it. Also, while having some business process management (BPM) and service composition capabilities (as mentioned earlier), RedPrairie is not yet in a full-fledged business rules engine-based multi-channel distributed order management (DOM) and reverse logistics play compared to Manhattan Associates, TAKE Supply Chain, and Sterling Commerce (just acquired by IBM).

Still, RedPrairie executives consistently claim that they are not losing sleep over Manhattan Associates, but rather over SAP (where the company has a number of joint customers and is constantly trying to be one step ahead as to avoid being replaced by SAP’s WMS or TMS offering). RedPrairie respectfully believes to have a different and better-attuned growth strategy compared to Manhattan Associates.

Namely, it caters to both pulling (sourcing) raw materials and pushing (delivering) semi-finished materials and finished goods for manufacturers, distributors, and retailers, whereas Manhattan is not yet in a “pull” and manufacturing play. Moreover, on the “push” play, Manhattan is not yet going all the way to the retail shelf and retail stores (by stopping short at retail distribution centers [DC’s]). On the other hand, RedPrairie is not into a data repository play, as it believes that this is an expert domain of high-and-mighty enterprise resource providers (ERP).

Recent Change of Owners’ Hands

RedPrairie was acquired in March by New Mountain Capital (NMC), a New York-based private equity firm, from its previous backers Francisco Partners. Prior to this move, the company was toying with the idea of going public, and was even in a so-called preparation “quiet mode” for a while (i.e., not talking to financial and industry analysts and media).

During the RedShift 2010 analyst/media lunch, Mayoras said that RedPrairie did not give up on going public, just postponed it. NMC invests in well-positioned companies, and the idea for RedPrairie is to double in size in five years, again. RedPrairie’s growth plan is based on the following five key tenets:

  1. Invest in its solutions

  2. Expand in the retail sector

  3. Pursue the software as a service (SaaS) leadership

  4. Targeted acquisitions

  5. Increase market share in SCM via geographic expansion.

RedPrairie’s CEO pointed out that he is not running a roll-up company (except for perhaps acquiring direct WMS competitors LIS and MARC Global, although not during his recent tenure), but will make provocative acquisitions. My gut-feel is that RedPrairie is in good hands with NMC based on Deltek’s experience under the same private equity (and RedPrairie is now a similar size to Deltek when NMC acquired it in 2005).

Expanding its Retail Focus

Given that RedPrairie has professed an interest in tackling the retail sector, one would expect it to acquire a few point solutions and fill its retail functional “white spaces”. Tactical retailer challenges are linking supply chain planning and execution, and achieving end-to-end supply chain visibility (from raw materials to retail shelf), which is in tune with RedPrairie’s functional footprint.

However, today’s retail realities are as follows: the price priority, own brand (private labels) expansion, multi-channel maturity, and talent identification, attraction, and retention. What complicates and causes unfortunate retail stock-outs are the stock-keeping unit (SKU) proliferation, a rising number of promotional campaigns (with no ability to determine the actual profit or loss of executing campaigns), ever-more tailored assortments, and managing planograms (store shelf space designs).

RedPrairie is currently able to help with forecasting, replenishment, optimized scheduling and execution in the store, and labor planning and management (at the conference there was a demo of a persona-based UI for retail store managers, which was designed with the help of the Gomoll Research + Design agency, and is currently being piloted at Duane Reade). Yet, retail merchandizing, pricing and assortment optimization, and store space planning and optimizations are some apparent functional holes. Thus, it would not shock me to see RedPrairie acquire Galleria RTS for assortment and space optimizationIsland Pacific for merchandizing, or Quantum Retail Technology for its capabilities of assortment planning, allocation, and replenishment (bolstered by its insight of the cost of execution).

Tackling SaaS WMS

At its RedShift 2010 conference RedPrairie announced its very first acquisition under NMC’s ownership. It acquired SmartTurn, a provider of on-demand inventory control and warehouse management systems to small and medium enterprises (SME’s), for an undisclosed sum.

RedPrairie has meanwhile added SmartTurn’s multi-tenant SaaS WMS product to its E2e suite and renamed it RedPrairie On-Demand WMS. Over time, the product will be integrated with (or interfaced to) appropriate complementary RedPrairie’s offerings. SmartTurn CEO Jim Burleigh will continue to lead the On-Demand WMS group within the RedPrairie organization, which currently consists of about 20 people.

SmartTurn was founded in 2004 as a division of Navis LLC, a provider of logistics systems for marine container terminal management, yard management, and logistics asset management systems, and was spun off in 2007. SmartTurn designed its software, which is being used by more than 200 smaller facilities, to give small operations a low-cost way to gain real-time visibility into their logistics operations. The SaaS software provides capabilities for purchasing, picking, receiving and put-away, inventory control, order management, shipping, integration, and mobile computing.

Catering to the Little Guy

The on-demand WMS has proven attractive to supplier facilities, third-party logistics providers’ (3PL) facilities, temporary facilities, and in general, to any smaller (so-called forgotten) warehouses with less complex requirements. SmartTurn WMS is primarily good for full cases and pallet picking and packing (some each pick/pack), and it offers no labor management, slotting, and task interleaving capabilities. It is also only suitable for non-automated facilities, i.e., those without conveyers, automated storage and retrieval systems (AS/RS), and similar mechanized equipment. A high volume of transactions is not its strong suite either, given that the 1,500 shipping/receiving lines per day are touted as a benchmark.

Under SmartTurn’s pay-as-you-go (PAYG) model, customers pay a fixed monthly cost of US$1,200 per site/facility with unlimited users. There is also a one-time US$4,000 setup fee. Such appetizing functionality and price should help RedPrairie finally attract the lower end of the market. The E2e WM offering has been too complex and an overkill for SME's (as I could feel during the overwhelming RedShift WMS session).

For its part, SmartTurn expects to have more doors opened at larger companies that would have in the past questioned its credibility. The two merging WMS vendors have not competed but have crossed paths within larger customers that have small and medium facilities. These local facilities are in tune with the following retail trends: the rise of private labels, local sourcing, direct-store-delivery (DSD), and spare parts handling. The goal is to enable customers to share information with all nodes in the supply chain network, from the smallest warehouse to the largest DC.

Under RedPrairie’s umbrella, customers whose needs change will have the choice of growing with SmartTurn products or migrating to RedPrairie E2e WM,which offers more complexity and customization. For more information, see Bob Ferrari’s blog post on the acquisition.

In light of acquiring SmartTurn for WMS SaaS, I wonder whether RedPrairie is now eyeing LeanLogistics, One Network, or MercuryGate for SaaS TMS? In this case, customers could be offered the choice of utilizing private and public transportation networks.

We will have to wait and see how RedPrairie’s above-mentioned unveiled five-prong strategy will unfold. Your views, comments, and opinions are as usual welcome in the meantime.
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