WAM Systems Offers Supply Chain Planning Packaged Solution For Chemicals

Vendor Genesis

WAM Systems develops and markets Internet-enabled Supply Chain Planning (SCP) solutions exclusively to the worldwide chemical industry. CEO Jack Weiss founded the company in 1987 as a developer of custom solutions to support complex planning and scheduling requirements of polymer manufacturers. Weiss and others observed that SCP applications prevalent at the time were designed for discrete manufacturing operations common in electronics, automotive and consumer packaged goods industries.

WAM was conceived to help companies address supply chain problems specific to areas of chemical processing such as reaction operations, liquid and gas transfer, evaporation, mixing, and extrusion. Since the company's inception revenue composition has steadily shifted toward licenses while revenues from custom services have waned. Today, WAM's livelihood relies predominantly on sales of its packaged solution suite, PICASO Advanced Planning System and implementation support services.

The PICASO suite for supply chain planning consists of a central supply chain simulator supported by modules for collaborative sales forecasting, production planning and scheduling, inventory targeting, cycle optimization, distribution planning, and raw material planning. Planning to partner with EAI vendors including webMethods and Extricity, WAM will offer a B2B messaging layer to PICASO that helps users engage in collaboration with trading partners.

Vendor Trajectory and Strategy

WAM Systems remains dedicated to solving the supply chain problems characterizing the chemical industries. Though its core market is polymers, WAM has identified new areas of growth in peripheral verticals. It plans to target primary expansion markets in paints, adhesives, and lubricants and then move on to organics (carbon-based chemicals), inorganics, gaseous products, and agricultural products. WAM sees huge potential in these markets and estimates that only four percent of chemical plants worldwide currently use SCP software. The company expects this percentage to grow to 48% by 2004 with total revenues from chemical plant SCP installations reaching $950 million the same year. These projections are based in part on a survey conducted by WAM of 638 chemical industry executives in which 70% reported planned SCP or e-business initiatives in year 2001.

WAM plans to nearly double its workforce within the next year to keep pace with its growth projections. Many of the new recruits will assume roles in sales and marketing as most of WAM's forty employees are engaged in consulting services and product development. Overall, penetration into international markets still remains low given WAM's small size and untapped domestic opportunities. However, WAM just signed a multi-million dollar deal with Pecom Engergia in Argentina for a complete eSCM solution. Additionally, many of WAM's customers are large multinationals that can provide access to international sites if properly leveraged.

Customers have played a major role in shaping the current PICASO suite through the years. WAM solutions have found homes within the technology infrastructures of many well-known leaders in the chemical industry, including BPAmoco, Chevron Phillips, Cyro, Equistar, ExxonMobil, Montell Polyolefins, SABIC, and Solvay. Some of these companies have been using PICASO since WAM was founded, a testament to its commitment to customer service.

ANALYSIS

Vendor Strengths

• Rich product functionality: PICASO is a broad, feature-rich, pre-configured product suite designed from custom applications developed in conjunction with leading chemical manufacturing companies over many years. This evolution gives it an edge over applications whose designs were based only on feedback from market researchers and focus groups. Usability is a key strength - especially in regard to tracking inventory availability, which PICASO enables through an intuitive graphical user interface.
  
  
• Out-of-the-box solution: Since chemical manufacturing presents unique challenges, most vendors have not bothered to package functionality as WAM has done, but design custom solutions one client at a time. Some, like Aspen Technology, offer software "toolsets" that are intended for large companies that still staff engineering departments capable of assuming the tasks of modeling and configuring software as needed. Downsizing has made fully complemented engineering divisions more the exception than the rule, however, and WAM is one of the few vendors that can offer a product with readymade functionality that does not require vast resources to construct and maintain.
  
  
• Top tier customers in the chemical process industries (CPI): WAM counts among its customers three of the top ten petroleum refiners, including number one ExxonMobil, plus many other well-known companies like Solvay and Equistar. Large, multinational companies provide WAM many opportunities for repeat business as they expand SCP to other sites and functional areas.

Vendor Challenges

• Creating brand awareness: By far the greatest challenge for WAM lies in creating brand awareness. Without recognition in the corporate buying community, WAM has a substantial disadvantage among other SCP vendors in being asked to participate in software selections. WAM has clearly acknowledged its shortcoming and has recruited top industry professionals like John Kaiser, Executive Vice President Sales and Marketing, to spearhead efforts to make its presence known.
  
  
• Reliance on niche market: WAM Systems has been well served by its commitment to the polymer manufacturing industry since its founding. However, unless its efforts to expand into peripheral chemical industry segments are successful, the company risks being permanently relegated to a limited niche.
  
  
• Maintaining funding levels required for growth: As a privately held company, WAM Systems sustains its operations solely with funding from revenues and venture capital. To date, these sources have proven sufficient for its needs; however, the downturn in the technology sector may complicate future efforts to obtain private placement and it is unlikely that current revenues can support WAM's plans for growth over the next several years.

Vendor Predictions

• Vertical Expansion: WAM believes expansion into new chemical industry verticals is a critical step in establishing new areas of growth. While revenue from its primary market, polymers, will continue to grow at a moderate rate; its sales and marketing efforts directed toward expansion verticals (adhesives, paints, and lubricants) should result in these areas contributing 10% to overall revenue composition by the end of 2001. (60% probability)
  
  
• Going Public: Given the strong investor skepticism toward the IPO market, it is doubtful that WAM Systems will attempt a public offering until late 2001. Although WAM has many attributes that would appeal to investors, such as a history of venture funding support and a list of top tier clients, its narrow market niche and brand obscurity make a near-term IPO unadvisable. (70% probability)
  
  
• e-Business: The PICASO B2B messaging capabilities represent an important advance for WAM and strong selling point for customers eager to join the e-business revolution. However, more capabilities could be added to further enhance its ability to support one-to-many and many-to-many collaboration and integration to net marketplaces for buying and selling chemicals. We expect WAM to partner with an e-commerce platform provider to extend its functionality within the next twelve months. (70% probability)

Vendor Recommendations

• The ability of PICASO to represent and track vast numbers of product SKUs (stock keeping units) makes it an ideal solution for polymer and specialty chemicals companies. It would be even more useful if packaged with a laboratory information system (LIS). LIS applications and PICASO use much of the same data, such as product specifications, product and raw material assays, and customer order information. Combining PICASO with an LIS would be a strong selling point for customers who want both supply chain management and laboratory data management and would otherwise need to go to two vendors.
  
  
• WAM Systems should continue its plans to build its market presence, crafting its message for executive levels (CIO, CEO, COO) of mid to top tier chemical manufacturers. An emphasis on the B2B fulfillment aspects is paramount for getting a foot in the door so that a case may be made for the rest of the PICASO suite.
  
  
• WAM Systems may want to consider building APIs to facilitate the integration of PICASO to DCS (Distributed Control Systems) and SCADA (Supervisory Control and Data Acquisition) systems. This strategy may give it leverage against the 900-lb gorilla of the chemicals SCP software space, Aspen Technology, for which integration to these plant-level systems is a strong selling point.

User Recommendations

• For polymer manufacturers of any size, PICASO is virtually the only solution on the market that, although not quite "shrink-wrapped," contains a rich set of built-in features that can be implemented with no customization.
  
  
• Small and mid market companies in the broader chemical manufacturing industries such as specialty chemicals and petrochemicals that do not support a staff of operations research engineers should give WAM a prominent position on its list of vendors.
  
  
• Large multinational petroleum refiners and chemical manufacturers that want maximum control and flexibility over their solutions should probably look beyond WAM to more toolset-oriented applications, most notably Aspen Technology's eSupply Chain Suite.
  
  
• Companies that may be put off by WAM's relatively small size and undisclosed financial condition should be reassured by its successful, established customers and thirteen-year operating history.