SCDigest editorial staff

At i2’s recent user conference, SCD interviewed Mike McGrath, CEO of the supply chain software company, and chief marketing officer John Cummings, to discuss a wide range of issues related to the i2 and its solutions.

i2 is aggressively pushing new technology it calls “next generation” supply chain solutions, based on what it calls an Agile Business Process Platform (ABPP).

SCD: What is next generation supply chain, from an end user perspective?

McGrath: It varies by customer, but basically gets down to the ability to combine planning and execution, whether it's for sales and operations planning, supply chain visibility, or many other areas.

It’s also taking a broader look at the supply chain, rather than a functional optimization of a single area.

Cummings: Historically, not enough of customer spending on SCM solutions went to true process innovation. Next generation supply chain is also about trying to change that. 

In the old days, there was a lot of custom code written to help solve supply chain problems. We’re in a sort of “back to the future” situation right now where there is a trend away from the generic solutions we saw in the recent past to ones that are more customized to a specific company’s opportunities.

If you look at the Plan-Do-Check Act model, we’ve always been able to deliver the “Plan-Do” part, but not necessarily been able to close the loop on that and get to “Check-Act”. Now we like to do what I call “managing while tuning” the supply chain, tuning all the parameters in the planning cycle to make sure you’re getting the right answers.

SCD: Can you summarize what next generation supply chain solutions are from your perspective?

Cummings: What struggled a little bit with what to name it, but it’s really an integrated planning and execution environment. We went from MRP to ERP, which is essentially an execution environment, then to APS [advance planning systems], which are planning tools. Now, we’re looking to combine those environments, and the agile business process platform for us is essentially the glue that enables you to do things like demand-driven strategies, combine lean and theory of constraints strategies at the same time, these kinds of things.

SCD: So what is really different about next generation solutions, or what you refer to as an agile business process platform?

Cummings: In the older generation, you tended to have very linear processes, sort of a sequential string of activities, and so you tend to have a tremendous amount of information latency. With next generation, that’s no longer the case. We can pull information from all the nodes of the supply chain simultaneously, process information in a synchronous fashion, and therefore execute very rapidly. You can get to a virtual zero-latency environment.

SCD: There is always some concern about the challenge of optimizing the “galactic supply chain,” that the problem is just too big. Is this boiling the ocean?

McGrath: We actually are trying to optimize the “galactic supply chain.” But in a different way, layer by layer, so that you are not necessarily trying to throw everything together in one giant optimizer. You can’t do that.

But on the other hand, the platform layer and the solution layer allow you to use more information in each optimization without boiling the ocean.

For example, let’s look at inventory optimization. You base your entire optimization on certain policies and parameters. You use those policies for different components or classes of components, but maybe just days after you do it, everything changes. Maybe manufacturing yields go down, demand spikes in a certain area, etc. If you don’t have that feedback loop, you are now driving optimization of your inventory and therefore your manufacturing and sourcing plans off of bad assumptions, because those assumptions were based on conditions that were true last week but are no longer true.

The world changes so fast. With closed loop, you are able to continually update those parameters based on accurate, updated data. You just can’t do that manually – it would take armies and armies of people. So this is a case where you aren’t optimizing in total, but you are enriching a portion of your supply chain with fresh information.

SCD:  Is part of this message about using Supply Chain as more of a competitive weapon here to grow the top line, or is it still mostly about cost?

McGrath: It’s both. Of course there is still a cost-reduction focus, but it’s also about building the top line. Things like “demand-shaping,” can impact revenue, and I gave an example today [at the i2 user conference] of the retailer that by ensuring they had the right products in the right stores at the time was able to increase per-store revenue by 50%.

SCD:  You’ve done a nice job stabilizing the overall financial side of things here, but can i2 ever get back to being a growth company?

McGrath: If we can maintain the lead in the next generation supply chain solutions, I think so. Otherwise, the traditional supply chain solutions market is a slow growth market.  But the new market I think can see a lot of growth, and that’s where our strategy is.

SCD:  Are customers thinking about next generation supply chain, or will you have to lead them?

McGrath: You can’t be an innovator and just simply respond to what the market wants right now. I want i2 to be highly innovative, to have new, differentiated solutions no one else has. Sometimes then customers want you to show them someone else who’s been doing it for the lastt four years; well you can’t be innovative and have that with next generation solutions.

SCD: What does i2 need to do over the next few years to succeed?

McGrath: We rally need to transition from the traditional products to the next generation. It’s a tricky transition from a business perspective, but the opportunity is enormous. The traditional optimization market is not that attractive, and we believe we are the leader in this next generation.

Our challenge is crossing that chasm, and making more and more customers aware of the opportunity.

Whenever you come up with a new product or technology, it takes awhile to take off.  Every new generation of solutions takes awhile for people to figure out what it is. That’s the challenge of being innovative is then making the market.