long predicted consolidation within the warehouse management systems/ supply
chain execution (WMS/ SCE) market finally seems to be happening. However,
it has started by an unexpected route. Instead of a direct intra-market consolidation,
some public SCE/WMS vendors and smaller, even profitable but undercapitalized
and undervalued WMS/SCE vendors have found shelter under wealthy, more visible
parents with complementary products. The example of the first would be the recent
acquisition of former EXE Technologies by SSA Global
GT To EXE-cute (Yet) Another Acquisition). Examples of the latter are
the agreement by 3M to acquire HighJump Software;
the acquisition of OMI International by Retalix
Wraps Up HighJump, while Retalix Shops OMI International); and the
acquisitions of TRW by QAD and TDC
Solutions by Epicor.
best example of an intra-market merger is the early February announcement of
RedPrairie Corporation (www.redprairie.com
, formerly McHugh Software International). This upbeat provider
of broad SCE solutions announced the acquisition of LIS (www.lis-online.com),
its European counterpart and former competitor. The combined companies will
operate under the RedPrairie name with projected 2004 revenues of $130 million
(USD) and earnings before interest, taxes, depreciation, and amortization (EBITDA)
of $23 million (USD). The company will supposedly employ over 600 associates
from offices in the US, UK, mainland Europe, and China. RedPrairie solutions
are also offered by partners in eleven countries, including Latin America, Russia,
and South Africa.
to John Jazwiec, who will continue to lead the expanded RedPrairie as its company
leader, this acquisition should benefit both companies and their respective
customers, given their complementary products, geographies, and vertical segments.
This will enable them to leverage their combined service and research and development
expenditures to produce nearly end-to-end supply chain solutions. Martin Hiscox,
former CEO of LIS, will now report directly to Jazwiec as the Europe, Middle
East, and Africa (EMEA) leader. All RedPrairie locations, regardless of
geography, will soon sell, implement, and support the expanded product suite
of the joint entity, as well as offer new capabilities, such as international
trade logistics (ITL), mobile resource management and security applications,
currently under development, or acquisition.
is Part One of a three-part note.
Two will discuss the market impact.
Three will make user recommendations.
news comes at the heels of the January 30 announcement of RedPrairie's financial
results for 2003 that included record levels of license revenue and profitability.
License revenue was $14.8 million (USD), up 44 percent over 2002, while EBITDA
were $16.3 million (USD), up 20 percent over the prior year, and 22.4 percent
of sales. What was particularly noteworthy in the company's 2003 results was
its strong growth in license revenue fueled by a record thirty-four new customers,
representing 61 percent of total deals closed. RedPrairie reportedly achieved
that license revenue by closing fifty-six deals across all of its key vertical
markets, including consumer goods, retail, food and beverage, high-tech, pharmaceuticals,
and third party logistics (3PL). New customers also showed a good mix
of tier 1 and mid-market companies.
total revenue was $72.7 million (USD), which represented a slight drop compared
to 2002. With this somewhat stalled organic growth, RedPrairie had to consider
the acquisition route in order to remain one of the leaders in the SCE market,
in terms of total revenue. RedPrairie's transformation started several years
ago, when the company expanded beyond its WMS roots to include transportation
and labor management, with WMS today accounting for only about 25 percent of
revenue. This was accomplished through an integrated suite of DLx
(DigitaLogistix) solutions that provide the transportation,
labor productivity, and distribution management capabilities, enhanced with
action-oriented components for real time control and performance measurement.
of its suite is based on the traditional bar-code technology familiar to ordinary
shoppers and consumers, but the software can also use radio frequency identification
(RFID) technology. While radio ID tag-enabled software is still just a miniscule
part of its revenues, more and more user companies, and software vendors are
adopting this technology (see SCE
Leaders Partner To See Beyond Their Portfolios). This technology, which
has lately been on almost everyone's lips, and seems to be heading into the
mainstream and into boardroom , almost directly from scientific labs—it is heading,
of course, with a number of caveats due to the technology's current imperfection.
RFID Technology Pioneer
is one of the first SCE vendors doing something about RFID. In early in 2002,
it announced at its 5th annual Industry Summit the formation of a Center
of Excellence that it would explore the potential applications and
benefits of employing RFID technology within consumer goods supply chains. Joining
RedPrairie as founding members of the Center of Excellence were Intermec
Technologies Corp., Unilever, Georgia-Pacific,
Marconi InfoChain, and CHEP International.
All participants then pledged to work together to define where, within the supply
chain process, RFID will have the greatest benefit and translate these benefits
into increased functionality within SCE applications.
a follow up, in mid-2003, RedPrairie further articulated its strategy for helping
customers implement and benefit from emerging RFID technology. As part of this
strategy, RedPrairie announced the availability of RFID Accelerator,
a new application that will supposedly enable companies running virtually any
distribution technology, including all versions of RedPrairie's DLx
Warehouse and other packaged or legacy systems, to become compliant
with the RFID information-sharing requirements of major retailers such as Wal-Mart
and Target. RedPrairie's RFID strategy addresses the three
issues companies are facing today as they plan for inevitable RFID adoption:
1) how to comply with the dominating retailer's 2005 requirements,
how to transition from current barcode environments, and
how to move to the ultimate scan-free environments that will be possible as
RFID technology matures.
a detailed discussion of RFID and RedPrairie as one of RFID technology pioneers
A New Technology Set To Explode.
What the LIS Acquisition Brought
October, LIS acquired Online Duty & Logistics, a specialist
provider of solutions for excise and customs warehousing. The company, based
in the northeastern English city of York, employed thirty-five people at the
time of the acquisition, and was the UK market leader in duty management systems,
with over one hundred companies using its applications to manage their bonding
and customs requirements. The acquisition has expanded LIS' customer base in
key areas such as retail, 3PL, and food and beverages, and has allowed both
companies to provide new and existing customers with a broader range of supply
chain applications. Growing demand for fully integrated, customs-enabled solutions
have convinced LIS of the value of acquiring both expertise and products in
this area. The solutions offered by each company were also complementary and
the Online's duty management solution, DutyMaster, has since
been integrated with Dispatcher-WMS from LIS. It offers users
benefits such as the convenience of dealing with a single vendor, while the
company's own WMS, SpaceMaster, has continued to be actively
promoted. Both solutions complemented LIS' offerings in yard management, activity
billing, and control of the extended supply chain, while DutyMaster can also
interface with a client's current WMS, financial, and sales order processing
recently and quickly after the acquisition, on March 19, RedPrairie launched
a new version of Dispatcher-WMS Version 8.4, which, besides
offering more features for management of advanced warehousing operations, has
also been integrated with a customs module, a labor management module and a
billing module. Version 8.4 can be used with a rich Microsoft Windows
user interface (UI), as well as a browser UI that increases visibility
and accessibility. The product is compatible with Borland's
application server and IBM's WebSphere.
now offers a completely integrated customs module, which concludes the incorporation
of Online Duty & Logistics' DutyMaster into the product suite. RedPrairie touts
the functional integration of the products is the starting point for rollout
to current and future global customers. Since customers have already ordered
this module, accreditation procedures in different countries will start soon.
ActivityBilling, which is fully web-enabled, allows companies
to attach a cost to all services delivered by the warehouse. Third party
logistics (3PL) and public warehousing providers can thus accurately track
activity for multiple clients within a single warehouse and manage complex,
invoicing contracts on a client-by-client basis.
Management is another module to enrich the Dispatcher-WMS product suite,
which allows the calculation of the estimated time that a task should take before
that task is started. The calculated times take into account the routes that
operators should follow, the time to access the locations, the nature of the
materials handled, and other operational parameters. The Labor Management module
allows objective comparison between the calculated time for tasks and the actual
time it took to carry out the task. Release 8.4 also marks the arrival of advanced
functionality for warehouse operations, since product substitution, container
replenishment and staging of pallets are just some of the added functionality.
Beam management allows for more efficient storage utilization, as the system
takes into account the widths of pallets and the available space on a beam.
Value added services are very important to some of RedPrairie's industries,
and Dispatcher-WMS now includes a system-directed tracking and tracing of value
Many of the above added functions are market-driven and should show the commitment of RedPrairie to the development of Dispatcher-WMS. Voice-driven operations are another demand from the market, and Dispatcher-WMS 8.4 integrates voice supported warehouse operations such as receiving, put-away, picking, container picking, stock checking, and others. RedPrairie has deliberately chosen not to use a middleware solution because of the real time nature of the system.
concludes Part One of a three-part note.
Two will discuss the market impact.
Three will make user recommendations.