Name a supply chain management (SCM) software vendor that covers perhaps the most complete functional scope (from planning to execution), has been profitable for years, and has no debt on its books. Hint: Its global headquarters is in Atlanta (the city has a long history of supply chain thought leadership). No, it’s not Manhattan Associates, RedPrairie, Infor (now headquartered in New York), CDC Software, or Servigistics. (No peeking at the title of this article.)
It’s Logility. Indeed, not many even grizzled SCM market experts would immediately arrive at this answer—the public company has conservative marketing and is relatively small (approximately US$50 million in fiscal 2011 revenues). The Logility name is a blend of “logic” and “agility.” With over 40 years of the SCM expertise, the company has been a global provider of collaborative supply chain software solutions to over 1,250 customers in more than 75 countries.
The Logility Voyager Solutions suite helps small businesses and large corporations manage relationships with their raw materials suppliers, manufacturers, distributors, retailers, and customers. The comprehensive best-of-breed SCM product suite features performance management and monitoring capabilities in a unified Microsoft .NET Web-based framework that promotes supply chain visibility. The suite is designed for demand, inventory, and replenishment planning, sales and operations planning (S&OP), supply and inventory optimization, manufacturing planning and scheduling, transportation planning and management, and warehouse management.
Compatible with a variety of enterprise resource planning (ERP) systems, Logility Voyager modules address specific supply chain needs, such as reducing inventory, lowering the cost of logistics, and adjusting S&OP in response to inevitable market changes, new product introductions (NPIs), or production capacity constraints. The vendor currently provides 105 relevant supply chain key performance indicators (KPIs). Some of its modules are also based on in-memory (or memory resident) solvers (calculation engines).
There might be a couple of reasons why Logility’s market visibility is low and why the company is perceived as sitting at the lower end of the market. One reason is the company’s somewhat convoluted ownership structure; Logility is a majority-owned subsidiary of American Software. But as of 2004 Logility has its own autonomous subsidiary, Demand Management, which offers SCM software for small and midsize businesses under the Demand Solutions brand. These Web-based supply chain applications are used to manage the purchase, manufacture, distribution, and sale of goods. In fact, Logility Voyager Solutions and Demand Solutions have somewhat overlapping capabilities that target simple to complex supply chain networks. Demand Solutions customers include Fujitsu, Avery Dennison Corporation, Leviton, and Sara Lee.
In addition, Logility is relatively small compared with its competitors (i.e., JDA Software, SAP APO, Oracle, AspenTech, etc.), and it relies on Microsoft technologies. These factors lead people to believe that its customers are small and midsize companies. The reality is that Logility boasts numerous corporate customers with over US$30 billion in revenues, such as Hewlett-Packard, Nestle, Verizon Wireless, Sony, Proctor & Gamble, Microsoft, and Dow Chemical. In fact, many of its customers are companies with over $1 billion in revenues.
Logility may be smaller in revenue, but its functional footprint and depth of expertise is on par with or stronger than any of these competitors for the markets it serves. Furthermore, the readers of Consumer Goods Technology recently ranked Logility number one supply chain planning (SCP) customer experience in the magazine’s annual Readers’ Choice Survey.
S&OP as Growth Driver
Over the last three quarters of Logility’s 2012 fiscal year—Logility reported a whopping 38 percent total revenue growth, 88 percent new license growth, and 43 percent services growth. The company has also increased its headcount nearly 30 percent and is widely recognized for its aggressive investment in R&D. Somewhat surprisingly, Europe was cited as a vibrant market, although only those countries that are not severely burdened by the ongoing financial crisis (i.e., Germany and some of the Nordic countries). Logility is an established S&OP provider, with a sizeable install base, and S&OP continues to bring new customer wins.
Logility’s sweet-spot S&OP prospects are companies with global operations that require a network-wide view of supply, demand, inventory, and utilization. These companies want to align their strategic goals and priorities with tactical actions via an unbiased “single version of the truth.” They want to communicate and evaluate risks and opportunities, and they strive for consistency across operational divisions and commercial teams. Very often, new product introductions (NPIs) drive these corporations’ business. To that end, S&OP can improve success rates and minimize organizational impact if companies can plan according to each stage of a product’s life cycle. S&OP has been instrumental in these companies’ ability to sense market conditions and shape demand.
The product’s intuitive, Web-based global view of the supply chain is easy to use. Logility’s S&OP product brings together data from demand, inventory, and supply planning applications, and has the ability to look at inventory as an integral part of the S&OP process. The product’s granularity allows users to drill down through S&OP views, from bigger picture (regions, product families, etc.) to customer level. Logility Voyager also provides visibility and management across the S&OP ecosystem, whereby companies can develop a forecast, visualize operational requirements, and align metrics in multiple units of measure (UOMs). Integration to financial management systems enables companies to initiate a profitable action sequence by conducting what-if budgeting and planning simulations in terms of profit margin and profit and loss (P&L) statements (except for working capital considerations).
The Optiant Acquisition: MEIO
Logility acquired Optiant in 2010 for a great price. The value that Optiant’s multi-echelon inventory optimization (MEIO) capabilities have added to Logility’s S&OP, Demand Planning , and Supply Planning modules is apparent: the combined capabilities have garnered a dozen new customers since the acquisition. Clearly Optiant, which previously might find a couple of new customers a year, if any, now has an effective vehicle for its capabilities.
The Optiant MEIO solution, renamed as Voyager Inventory Optimization, enables both strategic and tactical inventory optimization, whereby companies can right-size their inventory at all stages, from sourcing components and manufacturing assemblies, to finished goods. In a closed-loop process with the Logility Voyager Solutions suite, Voyager Inventory Optimization sets inventory targets by taking into account time, variability of both demand and supply, and desired customer service levels. With Optiant in the fold, Logility customers are now able to generate quantitative supply chain analyses and perform appropriate actions, that previously could be not be executed, to support the following functionality:
- Implement postponement
- Reallocate consignment inventories
- Reconcile inventory practices across geographies
- Make channel inventory more revenue-producing
- Perform what-if analysis for supplier and sourcing decisions
To illustrate the what-if capability, a company can run replenishing what-if scenarios to pick a better option between, say, delivering to China directly from the United States (US) versus sourcing in two legs (from US to Europe and then from Europe to China). The Voyager Supply Planning module can also perform “build versus buy” simulations and total landed costs calculations. Such strategic and scenario analyses enable companies to evaluate the impact and trade-offs of their value-chain strategies.
An intuitive and accessible dashboard that consists of over 120 pre-built KPIs (based on the Supply Chain Operations Reference [SCOR] model) and alerts is designed for ease of use. The automated exception-based target-setting process can be configured to the appropriate level of interaction, while businesses can define exception criteria and severity levels.
In addition to JDA and Oracle, ToolsGroup and SAP Enterprise Inventory Optimization (EIO) by SmartOps are the main competitors in this space.
Interview with a Logility Veteran
To dig deeper into some of the capabilities of Logility Voyager Solutions, we recently talked to Karin. Bursa, vice president of marketing at Logility, and someone who should be a familiar face to our readers (see our previous discussion on the state of affairs of the S&OP market). Ms. Bursa has 25 years of experience in the development, support, and marketing of software solutions to improve and automate enterprise-wide operations. You can follow her industry insights on the Voyager Logility blog.
TEC: What are your current install bases of S&OP and MEIO (former Optiant) customers?
KB: While we do not break out the number of customers per product, the majority of our 1,250 customers have turned to our solutions to fuel their S&OP initiatives for years. We hope to repeat this success with Voyager Inventory Optimization.
TEC: How has the MEIO capability improved the value prop of your other Voyager modules?
KB: MEIO expands the capability of the Logility Voyager Solutions suite to address multi-echelon inventory initiatives, a growing priority among many companies. While many inventory optimization solutions on the market focus only on finished goods, we bring in-depth assessment for finished goods as well as raw materials and work in process, critical elements in today’s global supply chains.
We offer Voyager Inventory Optimization as a standalone solution to complement their ERP or existing APS solutions or as part of our integrated Logility Voyager Solutions suite, which provides our customers with a choice of deployment options. The combination of MEIO with our best-in-class demand planning, supply planning, S&OP, etc. delivers a solution that is truly differentiated in the marketplace. A unique capability of Logility Voyager Solutions is its mature, built-in performance management architecture that delivers greater visibility and the ability to prioritize daily activities for planners across the organization. Logility is the only solution that brings this to the table, enabling companies to continually resolve issues in a proactive fashion and to model results and evaluate multiple manufacturing and distribution scenarios that incorporate cost, time, and resources. This is a big advantage for our customers.
One of our customers, Verizon Wireless, has relied on Voyager Solutions to synchronize its supply chain to drive out inventory across distribution points. The solution allows the company to link retail store replenishment to the procurement plan to reduce safety stock, lower inventory levels, and reduce obsolescence while maintaining superior service levels. Amid explosive growth in smartphones, Verizon Wireless, through the use of Logility Voyager Solutions, was able to achieve an average inventory improvement of 30 percent while maintaining over 98 percent service.
Following on these results, Verizon Wireless now sees an opportunity for additional value through MEIO with Voyager Inventory Optimization. MEIO integrated with Verizon Wireless’ use of Voyager Demand, Inventory, and Replenishment Planning delivers the ability to drive additional savings and further improve the company’s ability to reduce working capital and maintain extraordinary service levels across its over 3,000 retail locations.
TEC: How has the MEIO capability improved the value prop of your S&OP module?
KB: MEIO expands the capability to model multiple scenarios that support the business plan and market conditions. Companies are able to better evaluate their manufacturing and distribution options. Remember, inventory is more than just finished goods. A truly effective S&OP process must take into account inventory throughout the network, not just the end result.
Celanese Corporation, a global technology leader in the production of specialty materials and chemical products, has realized the benefits of incorporating inventory optimization into the S&OP process. Key factors for Celanese’s success are the company’s ability to determine the right amount of inventory to keep on hand, to establish and measure inventory targets, and to dynamically readjust to changing market conditions.
Celanese has leveraged Voyager Inventory Optimization to efficiently map its inventory by product, so it can directly focus inventory positions based on individual customers or the specific form and function of inventory without the need to expedite products to meet aggressive service levels. Best practice processes are now set up for ongoing inventory optimization and are incorporated into the monthly S&OP target reviews. The monthly S&OP meetings formally review inventory targets and how they compare with approved targets; Voyager Inventory Optimization allows Celanese to drill down to identify why there may be a difference.
More strategically, Celanese is able to evaluate changes to its global footprint, such as new or consolidated production facilities or distribution centers in the S&OP meeting by modeling these changes and understanding right away the impact to working capital across the network. With Logility, Celanese initially reduced inventory by 20 percent and saw an additional reduction of 17 percent over the following three-year period.
TEC: We have an ongoing discussion on how much planning and optimization is needed (or not). In your view, since you have many SCM tools in your arsenal—from MEIO, sophisticated forecasting and demand management, and advanced planning and scheduling (APS), to in-memory solvers for rapid response management—in which industries and environments are sophisticated planning and optimization more appropriate than mere responsiveness?
KB: Our focus is on solving complex challenges inherent in distribution-intensive industries, including consumer goods, apparel, food and beverage, service parts, life sciences, wholesale distribution, chemical, and consumer electronics. The Voyager Solutions suite is uniquely focused for complex environments such as these, where the manufacture, storage, and distribution of goods represents a significant cost for the business. An accurate forecast and an optimized, service-oriented inventory plan are critical to their success and profitability. Through a better forecast we are able to support both their sourcing and production needs in support of their business goals.
TEC: Where are you in the demand sensing, multi- or omni-channel order management, and profitable delivery/distributed order management (DOM) game in retail?
KB: Logility Voyager Solutions is able to evaluate multiple demand signals as part of the demand plan and is able to recommend a model switch if the demand plan is not executing according to the initial prediction. For example, Voyager Solutions will take the demand sensing information, point-of-sale (POS), or syndicated data, and determine how the company is executing against the plan. If the variations from target exceed a certain threshold or pattern, the system will proactively recommend switching to another model.
From a demand perspective, Voyager Solutions forecasts demand across multiple customers, multiple channels, and multiple market segments to deliver as much granularity as a company requires. This also provides the ability to group and evaluate scenarios in several different areas, market conditions, levels of aggregation, and units of measure (volumetric and financial). From a profitable delivery perspective, our Voyager Supply Planning solution allows you to look at customer priority, customer profitability, and a least-cost scenario as part of all sourcing, manufacturing, and distribution plans. This includes incorporating storage, production, and transportation costs into the assessment.
TEC: What can you reveal now about the highlights of your upcoming user conference?
KB: Our first European customer conference took place March 7–8 in Amsterdam. Our growth in Europe these past few years has been exciting, and the event was energizing.
In the fall, we will hold our global customer conference, Logility Connections 2012, in New Orleans, September 12–14. Growth and interest in our global conference has led us to double the number of training sessions and increase the number of customer-led breakout sessions. Last year’s event set a record for attendance and we look to do the same this year in New Orleans. Topically, attendees have indicated that they are most interested in the following five key areas:
- Best-in-class demand planning
- Optimized supply planning
- Optimized transportation planning and management
How Much Supply Chain Optimization Do We Really Need? – Part 2. March 28, 2012.
SAP SCM—Stepping Out of Obscurity. February 28, 2012.
ToolsGroup—Going Back to Its SCP Roots. February 8, 2012.
Optiant Going to a (Much) Better Place: Logility – Part 3. May 11, 2010.