August 18, SSA Global Technologies (SSA GT) (www.ssagt.com),
and EXE Technologies, Inc. (NASDAQ: EXEE) announced the signing
of a definitive agreement under which SSA GT will acquire the embattled global
supply chain execution (SCE) provider. Under the agreement, a subsidiary of
SSA GT will merge into EXE Technologies and all holders of EXE Technologies
outstanding common stock will receive $7.10 per share in cash, which represents
an 18 percent premium over EXE Technologies' closing market price on August
15, 2003. See Part One of this note for additional
information including EXE's history.
was formed in 1997 from the merger of Dallas Systems Corp.
and Neptune Systems Inc. and went public in August 2000 (see
Technologies Begins Life In The Public Eye). Dallas Sytems had built its
WMS product around the needs of automotive, retail, and wholesale distribution
companies, while Neptune brought expertise in third party logistics (3PL) firms
to the combination. Dallas Systems' EXceed product was offered
on the IBM mainframe and the UNIX platform while Neptune Systems'
solutions were supported on client/server UNIX and Microsoft Windows
platforms. As a result, the vendor still has three WMS product lines that are
being converged to a single J2EE set of inventory, labor, and task management
EXceed WMS for High-Volume Distribution Environments (a.k.a.,
EXceed 2000), which nowadays runs on the IBM AIX
and HP-UX OS platforms and on Oracle and
Informix database platforms;
EXceed WMS for Complex, Value-Add Distribution Environments
(a.k.a., EXceed 4000), which nowadays runs on the Windows
NT/2000, IBM/AIX, Sun Solaris,
and HP-UX OS platforms and on Microsoft SQL Server,
Oracle and IBM DB2 database platforms; and
EXceed WMS for Mainframe Environments (a.ka. EXceed
3000), which nowadays runs on OS/390 and AS/4000
Hence, at the completion of the merger, EXE instantly became one of the largest WMS vendors in the SCE market, as its broad range of supported platforms gave EXE the ability to provide WMS solutions for companies of virtually any size.
the merger, EXE has enhanced its product set, formerly EXceed eFS
(eFulfillment System) and now under the EXceed umbrella brand,
which is a multi-platform, multi-language software solution for complex, global
distribution, or high-volume fulfillment and warehouse management environments
including: retail, grocery and wholesale firms, manufacturing firms, 3PLs, and
outsourced e-commerce providers. The suite initially contained two extensions:
eFS Fulfill and eFS Collaborate. eFS Fulfill
(recently renamed into EXceed Fulfill) combined Exceed WMS
products with transportation management functions such as shipping and receiving
for multiple transport modes including air, ship, and rail. eFS Collaborate
initially provided suppliers and customers the web-based capability to share
information to support collaborative planning forecasting, and replenishment
is Part Two of a four-part note.
One detailed the event and the market impact.
Three will discuss the impact on SSA GT.
Four will present the challenges and make user recommendations.
EXE Software Portfolio
Nowadays, EXE's software portfolio is comprised of four complementary SCE product suites:
fulfillment software solution provides an enterprise with visibility of inventory
availability, enabling them to better serve the customer. EXceed Fulfill
manages the activity within and around the four walls of the distribution center.
In addition to best-of-breed WMS features that control and optimize the processes
within the four walls, EXceed extends visibility, inventory,
and operational control into trailer, container, and other extended storage
or processing functions; provides support for value-added services, postponement
manufacturing, or synchronized assembly operations. EXceed
enables holistic optimization of complex or automated outbound warehouse processes;
enables discrete asset and assignment monitoring, engineered labor standards
or reasonable expectancies, cost-based product slotting, layout planning, and
facility optimization. It enables vendors, suppliers, and customers to perform
on-line scheduling, appointment, and load management and supports cross-docking
to eliminate the holding of inventory and increase inventory turns by synchronizing
outbound demand and inbound processing.
Management—EXceed Adaptive Inventory Management (AIM)
EXceed AIM is an automated demand forecasting, planning, and
replenishment system for the demand chain that provides the tools needed to
implement the principles of smart buying from a buyer/merchandiser's perspective.
It automates repetitive, number intensive forecasting and replenishment activities
with the goal of reducing the amount of time buyers spend manually entering,
manipulating, and maintaining data so that they will have more time to analyze
how well the company is meeting customer demand. Features include a best-fit
forecasting engine with a repository of twenty-five forecasting algorithms and
automated order generation with a buyer/merchandiser workbench to aid in the
approval process. The latest product enhancements included a demand planning
module that lets users compare adjusted forecasts with system-generated forecasts,
view predicted inventory levels, and see future order forecasts. Other features
have been added to closely tie product inventory to real world constraints for
smoother supply chain execution, such as the ability to factor manufacturing
constraints into distribution replenishment and direct-ship merchandise into
vendor minimum requirements as well as allocate insufficient inventory to supply
chain needs based on business rules.
Network Management—Featuring EXceed SNx, a multi-agent
system developed in the new J2EE native web-based technology. The EXceed Network
Fulfillment solution acts as the higher-level system that sits on top of best-of-breed
applications and allows them to integrate and interact seamlessly. The solution
drives the end-to-end fulfillment processes in the supply chain, provides visibility
at different levels and displays a view of what is going on in the supply chain
through the use of a control center The EXceed Network Fulfillment system is
a closed loop solution that evaluates the information in the context of the
execution plan, determines the impact of the events to the plan, and calculates
an optimized reaction, which is disseminated to the underlying systems. These
reactions can be both automated responses or suggestions to an end user.
Intelligence—EXceed Analyze is a reporting and analytical
tool set that enables managers not only to measure and analyze their supply
chain but also directs them to detect and correct supply chain issues before
they become problems. Analyze makes information readily available
and easy-to-understand so that front-line decision-makers are empowered to take
action immediately at the point of greatest impact.
Portals provides suppliers and customers the ability to share information
to support collaborative activities. It opens up the internal supply chain to
trading partners by giving them real time access to the EXceed warehouse management
inventory data, shipment order information, and advanced shipment notice (ASN)
information. The software lets suppliers add, change, and delete orders and/or
ASN information, and comes in two flavors of Portals: Customer and Supplier.
While inventory checks are a feature of both, the Customer Portals allows the
customer to add, change or delete shipment orders, whereas Supplier
Portals allows all the same actions but for ASNs instead.
Sentinel provides customers the ability to track and trace their products
throughout their supply chain to ensure their brand is protected in the event
of a product recall or quality issue. It promises to help companies manage quality
in manufacturing and distribution networks, such as in food, beverage, pharmaceutical,
and other consumer packaged goods (CPG) companies. The software can be used
to trace products to the lot and individual item levels, which is necessary
to identify and isolate consumer products in the event of a recall.
Data EXchange is the platform that enables EXE customers to integrate
various systems with one another in addition to seamless integration with other
EXE applications using a large variety of formats (i.e. EDI, flat file, EDIFACT,
XML, shared database). The software sits behind a corporate firewall and converts
EDI, XML, or flat-file documents into WMS formats, and vice versa, so that users
of the WMS and their business partners can communicate without the need for
expensive EDI value-added networks, for example. The types of EDI and XML documents
that the system would actually be transmitting include shipment notifications,
shipment orders, purchase orders, and receipt notifications. When communicating
over the Internet with business partners, the software supports communications
protocols including HTTP and FTP. Data EXchange is Java 2 Enterprise Edition
(J2EE) compliant, and it also supports IBM MQSeries and Java
Message Service as ways to move data within or between enterprises.
Unified Platform Architecture is the underlying technology and standards
platform that enables EXE to deliver scalable, packaged "building block" solutions.
EXceed products are based on a J2EE technology stack ensuring open, secure,
scalable, highly-available, web-friendly applications that can be delivered
through a single roles-based portal or any networked device. Support for wireless,
voice, RFID, and other emerging technologies is provided through a flexible
shared services layer.
Thus, EXceed software also bridges the gap between SCP and SCE with products that guide and implement planning and replenishment activities or provide collaborative visibility, monitoring, control and execution, within a business and outside it. EXE has become much more than a WMS supplier and with its focus shifting from a static node perspective to a much broader supply chain network collaboration and adaptive supply chain.
is still arguably a premier solution provider for Microsoft technology in the
SCE industry, given it has implemented nearly 300 warehouse installations using
Microsoft technology, including Windows NT and SQL Server. EXE also has a worldwide
database reseller agreement with Oracle Corporation, in which
it offers a certified interface to Oracle's applications. Though it continues
to support mainframe and Unix installations among its several hundred customer
license base, EXE had for some time focused heavily on its Windows NT/2000 platforms
and has more concentrated its development resources on former Neptune's NT-based
WMS product, now EXceed 4000, which utilizes an open n-tier architecture, and
reputedly has allowed EXE to become the first SCE vendor to be fully certified
on Windows 2000.
Conversely, EXceed 2000 faces challenges of maintaining its highly modified code (the product requires the use of task and source code control applications to ensure performance and security) and lighter functionality, although the functionality is suitable for its targeted verticals—grocery retailers and auto parts suppliers. This will put SSA GT in a conundrum of deciding what to do with the product—while it caters to SSA GT's automotive industry of focus, its less attractive technological foundation is certainly a burden.
EXceed 3000 has gone largely un-marketed since the merger, although it has continued to sell to new customers and legacy accounts looking to move off of earlier versions of Dallas Systems DPPX offering. However SSA has a significant mainframe install base and will need to make a decision on continuing to market this product going forward.
Nevertheless, early on EXE was able to espouse a strong, comprehensive WMS functionality that would run on almost every common industry-accepted platform. EXE's product line has been the culmination of decades of development effort, employing feedback from customers and members of its Industry Advisory Board (IAB). Its multiple platform expertise has initially given it an edge over other vendors in providing integration services on client implementations. Other core strengths would include its considerable presence in the high-volume retail, 3PL, automotive, and high-tech verticals. A related edge for EXE would be products that are focused, relatively simple and easy to use, which tends to lower the total cost of ownership (TCO) for customers. EXE has long focused research and development (R&D) dollars on initiatives to offer a more packaged solution environment and has targeted a 1:1 ratio of licenses to services costs.
EXE also has global reach, with about half of all installations in the US, and the other half equitably divided between Asia and Europe. This is advantageous given that many customers are going global and need a software vendor that can work with their divisions around the world. Also, the supply chain often starts in Asia, because most companies are moving their manufacturing operations overseas, so any SCE vendor must be able to do business starting in Asia and follow the supply chain all the way back to the US. No other WMS/SCE vendor enjoys a customer base so evenly distributed over the globe, and in fact, EXE's area of fastest revenue growth during 1990s was Asia with a compound annual growth rate of over 80 percent from 1997 to 2000. The European market has also provided a steady performance for the vendor even during recent years of economic decline.
Still, despite its promising genesis and despite the fact that geographic diversification should have better insulated EXE against local economic downturns, the vendor has failed to grow its business significantly in the several years following the merger. Total revenue more than tripled from 1997 to 1998 but sagged significantly from 1998 to 1999, in which the company grew by just 6 percent to $96.8 million, when it was still the SCE leader in terms of revenues. As a cost-cutting measure during the Y2K-induced lull in its customers' buying activity, EXE restructured its operations in August 1999 and reduced its total headcount by 18 percent. During 2000 the company's stock peaked at more than $125 per share, the company was dependent on sales to a then new breed of Internet companies, such as on-line groceries, that disappeared with the dot-com bust. The quite belated focus on brick-and-click players has never born fruit for the company. For a long time, the company's revenues continued to decline and an array of losing quarters spiraled, all resulting with customers' reticence to deal with a beleaguered vendor, despite an attractive product line for the still buoyant SCE market.
make things worse, the company's multiple restructuring steps since 1999, which
might have yielded short-term cost savings, never helped the vendor turn around.
Quite the contrary, reducing the number of R&D resources and the exodus of other
professional staffers has ultimately brought about a loss in technological leadership.
This plus inexperienced pre-sales employees that had to be trained over time
in a complex expert matter, and a declining level of customer support, contributed
to all but stalled sales in the fastidious US market. EXE enlisted the aid of
outsourced development and implementation services through Hindustan
Computers Limited and Span Systems Corporation but
these were an insufficient substitute for dwindling in-house resources.
capital through an IPO in 2000 to make acquisitions (at that stage, like its
likely new parent SSA GT nowadays, EXE believed the best way to grow market
share was through acquisitions, since it felt that it was easier to acquire
a complementary software vendor and assimilate than to develop functionality
in-house) also had poor timing, and has not helped much. Still, EXE bought AllPoints
Systems in 2001, in a stock deal worth approximately $30 million. The
acquisition was to add key functionality to the EXceed product line, especially
in the area of one-to-one, business-to-consumer (B2C) fulfillment and to give
EXE a broader reach into its primary verticals, including retail and electronics.
Although for similar reasons, Manhattan Associates successfully
acquired Intrepa in a similar deal in 2000, EXE's acquisition
of AllPoints meanwhile failed, and the product was written-down and discontinued
from a new sale product offering in 2002.
has tried its luck in partnering nonetheless, both with independent software
vendors (ISVs) with complementary functionality, and system integrators (see
EXE Latest Vendor to Join IBM Supply Chain Club and EXE
and i2 Advance Relationship), but the traction from these had only limited
success in reinvigorating the unfortunate vendor. Actually, EXE has recently
shown a limited and slow-moving recovery through cost-cutting measures and much
smaller losses, but the negative sentiment has still been hovering above it.
the above reasons, once the SCE/WMS leader, EXE has long lost the leadership
to the now seemingly unstoppable Manhattan Associates (see Logistics.com
Becomes The Newest Of Manhattan Associates), while a slew of upbeat players
like HighJump (see HighJump
Grows in a Period of Low Growth Through Adaptable, Broad Function Products),
RedPrairie (see RedPrairie
- New Name For A Brave New Value Proposition Paradigm), G-Log,
HK Systems, Provia (see Provia
Proves Its Way To Success) and Yantra (see Yantra
Leader in Distributed Order Management, But Wait There's More), have eclipsed
EXE's mind share, if not exceeded its total revenues and market share.
as the demand for more integrated collaborative SCE suites abounds and industry
consolidation increases, all the above vendors offering standalone, complexity-handling
SCE applications face increased competition from ERP and SCE suite vendors for
middle-to-less-complicated environments, such as Irista, Swisslog,
Optum, SAP, Oracle, J.D.
Edwards, Lilly Software, SYSPRO,
and Adonix, to name some. While the WMS market is expected
to continue to grow modestly but faster than many other enterprise applications,
it appears the customer order fulfillment process management as an add-on solution
to WMS will experience much higher growth. Look for many of the above vendors
to continue bolstering that functionality, through increased product development
budgets, alliances, and acquisitions, the onset of which began very recently
Leaders Partner To See Beyond Their Portfolios).
concludes Part Two of a four-part note.
One detailed the event and the market impact.
Three will discuss the impact on SSA GT.
Four will present the challenges and make user recommendations.