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  - Sept. 23, 2015 -  

Supply Chain News: Trip Report - Logility Connections User Conference 2015

Company Continues Move Upstream While Maintaining Mid-Market Presence; Will We See Many Changes Under New President Allan Dow?

  by SCDigest Editorial Staff  

I am back from San Diego last week and the Logility 2015 Connections user conference in San Diego. Given the time to get out and back to the West coast my stay there was there was somewhat limited (about a day and a half), but it was time well spent, as planning software provider Logility continues to prosper. More on that in a moment.

As a quick side note, unlike most supply chain software companies Logility of late has been running its user conference every 18 months, rather than annually, as a result alternating back and forth between Spring and Fall events. That schedule may not work for every software company's needs, but I think it's actually a smart idea. In reality, for most software companies not that much changes in one year, and this approach cuts back on the time requirements for customers.

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Simply by improving the understanding of forecast inaccuracy at Intel, the parameters to the MEIO solution can be adjusted to improve the safety stock levels it recommends (by lowering the co-efficient of variance).



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This was the first user conference as president of Logility for Allan Dow, who after a long stint as VP of sales and marketing took over the top spot less than two months ago from Mike Edenfield, who remains CEO of Logility's parent company American Software. Dowd is smart and articulate and was among the most knowledgeable supply chain software sales executives out there in terms of what the solutions actually do.

Dow obviously has not had much chance to make any changes yet , and given Logility's recent success I wouldn't expect any dramatic shifts in tone or practice, though I think style-wise he is likely to be somewhat more aggressive than Edenfield in terms of Logility's approach to the market.

Logility has been performing well, and it is now about a $65 million company, averaging just over 10% annual revenue growth over the past decade. That will double a company's size about every six years.

That growth has led to a 22% increase in employees over the past 18 months or so, obviously a sign of some strength. R&D spend has consistently been about 18% of revenues, certainly at the upper end of where software companies usually come in on that metric. International continues to be a growth area for Logility, now more than 20% of revenues, impressive for what not that long ago was almost entirely a domestic company.

For a software company, Logility has long operated very conservatively. It has no debt, some $75 million in cash, and has funded acquisitions such as inventory optimization provider Optiant and in 2014 a company called MID Retail (retail merchandising and assortment planning) from its cash reserves rather than borrowing. As a result, it is well positioned to weather the inevitable next downturn.

Logility has I think been successfully walking a line between maintaining its historic position in the mid and upper mid-market to moving upstream in terms of large "tier 1" customers (e.g., Under Armour, Starbucks, Parker Hannifin, Timken, etc., plus another set of tier 1's (e.g., HP, P&G) that came from the Optiant acquisition). That move upstream has been supported by the 8.5 version of Logilitiy's Voyager Solutions suite, which significantly boosted the platform's scalability - needed for large companies generally and planning for retail and consumers goods companies at a store level, the current trend. Version 8.5 also provided a Cloud deployment option and a number of other functional enhancements.

On that front, Logility featured two new solutions at this year's conference: a new set of tools and analytics for managing the Integrated Business Planning (IBP) process, and Logility "Thumbprint," an umbrella term for adding widespread support for running Logility applications on mobile devices.

I got a quick look at some apps running under Thumbprint, and they looked cool enough. I guess my assumption is that all vendors are somewhere in this migration, so when evaluating software providers - if mobility is an important issue for you - you will have to work hard to get the details to determine just how far along each vendor really is and how well they have designed their mobile applications. There will be differences.

A manager from Parker Hannifin briefly came on stage with some favorable things to say about these Logility mobile applications and how they likely would make their account managers more responsive to customers and efficient in their time out in the field.

The IBP solution is really sort of an extension of a toolkit Logility had before for managing Sales & Operations Planning (S&OP), adding in new capabilities for integrating financials into the S&OP process, enhanced scenario analysis tools, new tools for risk assessment and more. I did not look at the product in any detail, but it certainly seems to support IBP end to end.

In terms of keynote presentations, Mike Uskert, a VP at Gartner, continued with some themes the research firm has been pushing since its own conference in May, notably that companies must be "bimodal" today to achieve success.

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What on earth does that mean? In great summary, it says that companies have to structure themselves to both achieve continuous improvement (i.e., lower costs) while driving product and supply chain innovation at the same time. It's harder than it sounds, especially in getting the right org structure and metrics to do both well.

I also liked the observation that in many companies, top level strategies and metrics are clear, as are individual goals and metrics for specific roles in the organization. The issue is in the "murky middle" - the translation of the top level goals into performance metrics at the individual level. If this isn't well managed, like a balloon if costs are squeezed on one area, they often pop up in another, resulting in little or no total improvement.

I thoroughly enjoyed the second day keynote address by Sean Willems, Logility Chief Scientist after Logility acquired Optiant, the inventory optimization company he co-founded, a few years ago. An academic, Willems also recently took the post as the Haslem chair of supply analytics at the University of Tennessee just a short while ago.

His presentation on the "efficient frontier" - in essence, another term for supply chain tradeoff curves, but with some new wrinkles - was outstanding, and a 2015 presentation of the year candidate for sure (if for no other reason that it aligned very well with some thinking I have been doing lately). I covered this in detail in last week's First Thoughts column, which you will find here: Understanding the Supply Chain ''Efficient Frontier''

But I also really enjoyed his brief anecdote about what how some his students have recently responded after he asked them to wrote down a question they still have after a lecture on calculating optimized inventory levels.

Here were a few of those submitted questions:

"This is all just simple math. What is hard about this in the real world?"

"Why doesn't everyone do this since it's pretty simple, but effective?

"If inventory management is this simple, why do companies need consultants? Why don't they just hire smart people?"

"Can supply chain planners secretly use their own forecast instead of the one marketing gives them?"

We need more humor in supply chain, a notion I need to frequently remind myself. These all made me laugh.

John Ball, Sr. Director of Optimization (have to love that title) at the foods division of JR Simplot (think McDonald's French fries, but now more than that) gave a basic but solid review of how over the past few years the company has moved from operating much in silos with very dated technology to a much more integrated approach to supply chain running much more modern tools (from Logility, naturally enough).

Those tools have really provided a platform for the company to pursue new growth strategies (new lines of business, acquisitions) that it just could not have done very efficiently before. My question when I hear this specific type of presentation usually is this: How many more JR Simplots are there out there, operating in a way no longer really competitive in 2015, with dated technology that puts it at a competitive disadvantage? Business and technology leadership is needed desperately at these companies. There are many cases studies, such as the JR Simplot story, of the results of transforming supply chains.

From a breakout session perspective, I also really enjoyed a presentation by Toby Norwood and Brian Wieland, both operations research engineers at Intel - even though I only understood about half of it.

The company has been using the Optiant multi-echelon inventory optimization (MEIO) solution for more than a decade in one major product area, and achieved many benefits. The message here was that MEIO is not something that you install and then sit back and receive the benefits. Rather, it is a platform through which you can increase benefits over time by working to achieve continuous operational improvements.

In Intel's case, this case come from much work not to improve forecast accuracy (that is coming next) but believe it or not, just to really understand the true level of forecast inaccuracy. Simply by improving the understanding of forecast inaccuracy, the parameters to the MEIO solution can be adjusted to improve the safety stock levels it recommends (by lowering the co-efficient of variance).

It has done that using techniques such as "kernel smoothing" and more (hence the 50% of the presentation I didn't understand) to great effect, ultimately reducing inventories by 17% from the initial MEIO results. It has also increased the percentage of "no touch" inventory level recommendations coming out of MEIO (meaning there is no adjustment by planners) from around 65% early on to some 95% currently - indicating deep trust in the MEIO results today.

So all told a good day and half with Logility and its customers, and good effort again from Karin Bursa and her marketing team at Logility in pulling together a good event. (Alas I had to leave before the party aboard the USS Midway Wednesday evening).

Adding as always my two cents, Logility in general seems to be in a good spot. But I think the company itself needs to be a bit "bimodal," continuing the relatively conservative practices that have led to success (and importantly stability) while perhaps upping the excitement and thought leadership quotient a few notches, as it grows into a bigger company. Leveraging Willems even more is one avenue to do that.


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