Manugistics Indulges In The Open M&A Season.
2: Market Impact, Challenges, and User Recommendations
Manugistics, remains one of the leading providers of supply chain
management (SCM) solutions, with the extra sophistication of its supplier
relationship management (SRM), profitable order management system (POMS),
and pricing and revenue optimization (PRO) innovations all under its EPO
mantra. Manugistics indeed offers a considerable portfolio of high level
value chain planning, scheduling, optimization and management systems,
and, as of recently, the factory level advanced planning and scheduling
(APS) systems too.
prior to its acquisition of the UK-based shop floor APS vendor STG
Holdings in 2000, manufacturing has not been Manugistics' forte, having
a history of building solutions for the distribution end of the supply
chain, the recent development of shop-floor applications bundled with
the pricing and revenue optimization applications, might enable the company
to provide a holistic approach to enterprise optimization throughout design,
source, buy, receive, make, move, store, price, promote, sell, and deliver
phases. These can take place in different environments, including paper-based,
electronic data interchange(EDI), web-based (XML), and/or real-time web-based
collaboration. Its solutions support, and are used by, both private and
public trading exchanges, particularly following its acquisition of SpaceWorks,
a sell-side e-commerce provider, in 2001, they also support all major
operating systems and databases.
suite has also long been constraints-aware - from supply chain planning
level at the top, down to the detailed scheduling of machines. For manufacturing
specifically, it offers a number of modules owing largely to its late
'90s acquisitions of Avyx and Promira, and the above-mentioned
STG. NetWorks Production Planning provides process optimization
with multi-site synchronization in a large-scale production environment,
based on a modeling language that enables detailed descriptions of complex
flows for simulation, optimization and control. NetWorks Production
Scheduling is aimed at rapidly scheduling complex, single-site production,
helping companies to improve customer service while minimizing inventory
through the identification and management of both capacity and material
constraints. Finally, NetWorks Sequencing optimizes shop floor
operations by generating detailed schedules that respect manufacturing
rules and production constraints, it is a good fit for complex assembly
line sequencing and multiple attribute-sensitive problems where user-defined
rules generate schedules.
back to WDS' acquisition, the arrangement seems to be mutually beneficial
at first look. The acquisition brings Manugistics a roster of high-profile
WDS' customers and brings along a deep domain expertise in defense contracting
and in other similar asset-intensive industries. Manugistics should hereby
also extend its offering from supply chain planning (SCP), pricing/profit
optimization and transportation into MRO management focused ERP functionality
(e.g., complex cost accounting and product configuration), which should
blend well with Manugistics' solid complex bill of material (BOM) collaboration
its SRM offering should be rounded up, as the Buying Advantage e-procurement
module should add unique defense contract capability to its supply chain
application for strategic sourcing and collaboration, along with a connection
to the Exostar aerospace industry marketplace. Having acquired
WDS' execution information at the OEMs and the repair depots should improve
the supply chain process as a whole.
Manugistics' S&PM module should complement the execution capability of
CompassENTERPRISE for MRO, and, in the long run, Manugistic should be
able to extend WDS' core competency into other asset-intensive areas like
automotive, aviation, communications, high-tech, transportation/fleet
management, rail and fixed plant facilities. Overall, the acquisition
bolsters Manugistics' traditionally weaker spot - manufacturing capabilities
as opposed to material management/distribution centric environments' stronghold
- and it entrenches it well within the A&D industry. Manugistics will
have likely been urged by its DoD clients to develop tighter integration
to customer and supplier back-office systems, and, in the process, it
will have found WDS's domain expertise handy at an reasonable price.
At the end of the day, it should enable Manugistics to fend off against
its direct competitors i2 Technologies, Synquest and AspenTech,
which have traditionally been stronger in manufacturing, as well as against
SAP, Oracle, J.D. Edwards and Baan, which
have long encroached into the SCM territory. However, Manugistcs' competition
will hereby extend to include a slew of other ERP players in the MRO market
such as Epicor Software, Mincom, Indus, Glovia,
Cincom Systems, MRO Software, Relevant Business Systems,
Avexus, Xelus, Lilly Software, Intentia, IFS,
should possibly be happier with the deal as it certainly bodes well for
its until recently uncertain future in consolidating and highly competitive
market. The company had been struggling to extend its functionality footprint,
to technologically prop up its product and to grow beyond its narrow (although
revered) A&D installed base with it limited resources. The lack of strong
financial management functionality and of some extended-ERP functionality
(e.g., project management and APS) had threatened WDS' relegation to a
niche specialist vendor facing acquisition by a direct competitor only
as to hijack its customer base and migrate it to another product. WDS'
users should therefore be pleased with Manugistics' acquisition, as it
is more likely to result with preservation of their investment into WDS'
product. Also, current OEM users of WDS may benefit from future improved
demand visibility into defense customer requirements and integrated service
and parts planning. On the other hand, Manugistics SCM customers in the
maintenance and asset-intensive environments may benefit from getting
more functionality from their original SCM rather than to pursue another
best-of-breed route. The similar analogy holds for Digital Freight' acquisition.
is Part Two of a two-part analysis of recent news from Manugistics. Part
One detailed the recent acquisition and began the Market Impact.
downside, as a rule, is the painstaking integration effort yet to be exerted.
Manugistics must still figure out how and whether to integrate the WDS'
applications that have been developed on a hodgepodge of technologies.
To be fair, while the concept of an integrated supply chain execution
(SCE) and supply chain planning (SCP) system is attractive, the defense
market has also in the past shown a willingness to buy independent modules
for MRO and spare parts planning. As for Digital Freight's integration,
it will likely consists of flat file imports/exports for some time to
will furthermore have been Manugistics' seventh acquisition in last few
years and its priorities might not coincide with WDS' and/or Digital Freight's
customers' wishes; not to mention that Manugistics' resources are not
infinite, given its poor recent financial performance. The company is
still deep into developing and delivering on its middleware-neutral integration
server strategy. Also, some enterprises still struggle to grasp Manugistics'
EPO message that might seem too far-fetched (or even unneeded at this
stage), and one is to watch how this concept will be married with WDS's
OEM and MRO functional expertise.
Manugistics' acquisition of Talus has produced far more than mere price
management as enterprises can use intelligent statistical modeling tools
to discern how price affects sales within seemingly identical product
lines and/or demographic groups by collecting and analyzing sales into
given market segments, it might not fly with defense contractors, for
whom the price is not always the most decisive factor (i.e., time is often
of more essence). Although Manugistics caters for many different pricing
strategies within its PRO module (e.g., promotional, target, precision,
and revenue management pricing) the value of such data is enormous typically
for CPG and retail companies. Moreover, while the benefits of EPO might
be obvious at a higher-level supply chain planning, the necessary data
and process requirements can significantly complicate SCM implementations
and deter a prospect, who might find it not worth the trouble.
the Digital Freight's acquisition might indicate that Manugistics has
not forgotten that supply chain planning and execution have been its roots
and that much of the market is still grappling with these intricacies.
Pricing and revenue optimization, Manugistics' mindshare capturing watchword,
is seemingly also more plausible to be married with logistics e-procurement.
The acquisition enhances Manugistics' transportation management capabilities,
which might keep it abreast of the likes of Logistics.com, i2,
Descartes, and G-Log, provided new functionality will be
delivered so that it can be digested by Manugistics' target customers.
Although the above acquisitions hold a promise for Logistics to cover
many bases of ever-increasing SCM functionality footprint and thereby
keep its competition scrambling to match its value proposition, the company
needs to continue delivering on the basic SCM business processes that
have once promoted it into a market leader.
Experience teaches us to be wary of the outcome of mergers' and acquisitions'
as the market has witnessed both success and disaster stories. While we
believe that the above mergers might be synergistic in the long run, some
growing pains, integration issues, and discontinuation of redundant products
are always to be expected. Consequently, until Manugistics clearly articulates
the strategy to integrate WDS and Digital Freight and the mergers are
consummated, users evaluating the above individual products should exercise
moderate caution, keep themselves informed, and consider generally available
(GA) functionality only.
considering WDS for a new implementation should question Manugistics'
commitment to invest in the acquired applications. If you are waiting
for unified technology stack, do obtain Manugistics' commitment to the
timeframe, whereas, in the short term, it is very likely that you might
be offered a joint development partner agreement for WDS' functions outside
it's A&D stronghold.
WDS' and/or Digital Freight's users should urgently clarify their support
status and the long-term product development and migration strategy with
the new management. Customers adopting the first integrated product should
anticipate significant changes in later versions of the product after
first users' experiences and product refinement requirements. Given the
slew of recent acquisitions, users should proceed warily as these are
still new territories for Manugistics. Current WDS' users should also
query the development partnership with Adexa to deliver AgilePlan
and Theory of Constraints (TOCs) modules as it overlaps with Manugistics'
above-mentioned products. Likewise, Manugistics' users of other transportation
management systems (TMS) might want to evaluate Digital Freight if the
current TMS product does not offer bid optimization and transportation
procurement functionality, bearing in mind that the product integration
is a work-in-progress and that more comprehensive intermodal transport
procurement (e.g., air, marine, and rail transport in addition to trucks)
is slated only for some time next year.
for Manugistics per se, it targets primarily the large corporations with
revenues exceeding $500 million and with strong collaboration and distribution
requirements mostly in transportation and logistics, automotive and automotive
supply, communications and high tech, chemical and energy, pharmaceuticals,
consumer packaged goods (CPG), apparel, footwear and textiles, and food
and agriculture industries. For more detailed recommendations, see The
New Manugistics Faces A New Millennium.