long predicted consolidation within the warehouse management systems
(WMS)/supply chain execution (SCE) market seems finally to be happening.
It has started however by an unexpected route, since instead of a direct intra-market
consolidation, some public SCE/WMS vendors or smaller, even profitable but undercapitalized
and undervalued WMS/SCE vendors have found shelter under wealthy, more visible
parents, ones with complementary products.
best example of an intra-market merger would be the early February announcement
by 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
(US) and earnings before interest, taxes, depreciation, and amortization
(EBITDA) of $23 million (US). 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.
Current RedPrairie and LIS customers, especially the companies that have to increasingly compete and operate on a global scale, should look at the acquisition as a positive move, which is promising increased support capabilities and functionality footprint, and allowing the combined company to cover a larger geographical area. Although this acquisition sounds like a very positive event, and RedPrairie appears to have strategic growth intentions, look for future proof in the actions it takes in the coming months. Additional acquisitions that provide strategic value and synergy should be welcomed, while significant cost-cutting and management turnover should be looked at cautiously.
with an outdated WMS who want the latest technology available and the next generation
of transportation and logistics software should place RedPrairie on a shortlist
of SCE vendors. RedPrairie delivers measurable results for customers in many
markets, including high tech and electronics, CPG, food and beverage, 3PL, retail
and wholesale, service parts, and make-to-order (MTO) manufacturing.
Additionally, LIS might contribute with its success in the furniture sector
on both sides of the Atlantic, as it will within the automotive and some specific
retail segments. The continued recent development of Dispatcher-WMS, which has
a leading market position in Europe, is encouraging. Release 8.4 shows a solid
vision behind the development roadmap, while future releases promise integration
with existent RedPrairie modules, such as labor management and radio frequency
identification (RFID) applications.
is Part Three of a three-part note.
One covered recent events.
Two discussed the market impact and challenges.
Proceed With Caution
prospective clients should bear in mind that some modules in some RedPrairie
suites have been integrated recently, such as labor management,
which had long only been available as a standalone product, and was only recently
fully integrated to the rest of DLx suite. Furthermore, existing customers of
merged vendors, particularly former Online Spacemaster, LIS Dispatcher, and
RedPrairie DLx/D customers should closely monitor any changes and ask for clear
product blueprints to determine whether they will continue to receive acceptable
support and service from their provider within new arrangements, since these
products overlap most. LIS customers should get written product roadmap and
migration strategies in their contracts for complementary products, while prospective
customers of either vendor should reevaluate which LIS or RedPrairie products
would be more appropriate now that several product lines are available to them
to choose from.
Those companies with existing ERP or SCM vendors in-house should evaluate RedPrairie in addition to their incumbent vendors due to its success in a co-existing situation where customers have found that RedPrairie often complements and improves upon the solutions offered by the existing vendors. The integration offered by ERP vendors should not be unjustifiably overweighed at the expense of functional breadth and depth and the vendor's domain expertise. Existing RedPrairie customers should evaluate the remaining portions of the combined product suites in search for additional value, such as 3PLs wishing to widen services beyond a mere carriage.
Users that need automation and visibility across multiple transportation modes, including sea and air, might want to consider marrying DLx with LIS or third-party software for managing international transport lanes. Though its suite is currently best suited for North American logistics, RedPrairie plans native support for all transportation modes in the not-too-distant future.
Potential and particularly existing LIS users should consider utilizing the analytic and value assessment capabilities of RedPrairie's new approach, at least to raise bar for other contesting vendors, in the case of brand new installations, major upgrades, and implementations of complementary products. Those opting for the approach, should proceed cautiously by
unambiguously how measurements will be done and how the gain-sharing will
Doing a pilot project proof of concept by having only a small part of the
contract scope subject to gain-sharing
Determining the maximum value of the payment to the vendor, in case of tremendous
benefits to you
On a more general note, while the potential of RFID technology is indisputable (i.e., contrary to bar-code, RFID requires no direct contact nor line-of-sight scanning, and it provides streams of data that can be differentiated and interpreted before being passed off to an enterprise application), much more is required in moving RFID from a lab to a live environment. RFID has a potential of a new technology inflection point and it can be a missing piece in the long-lasting puzzle of squeezing excess inventory out of supply chains, but only when (and if) it reaches a critical mass of adoption and maturity over the next several years.
a detailed discussion of RFID and RedPrairie as an RFID Technology Pioneer see
New Technology Set to Explode.