CEOs of i2 and Manugistics Share Supply Chain Visions at CLM – It’s All About Execution?
In a follow up to last week’s CLM review, we wanted to share the perspectives of the CEOs of i2 and Manugistics, who shared the stage with some other pundits in a CLM session on the “Future of Optimization.” As these two companies really defined supply chain management in the late 1990s and are still considered the market leaders, we thought it would be good to share their interesting perspectives.

First, it was just great to see both CEOs (Greg Owens of Manugistics and Sanjiv Sidhu of i2) presenting at the conference and visibly active (both were seen walking the show quite a bit). In these challenging times for all software vendors, even those at the top can’t afford to pass on good forums for getting the message out and meeting with potential prospects.

Also, let’s note the similarities in the observations each CEO made. Both Mr. Owens and Mr. Sidhu took a few jabs at ERP vendors, arguing that while necessary to provide a solid transactional foundation, they couldn’t really optimize complex supply chains or provide competitive advantage. In a follow up discussion with Mr. Owens, he predicted a reversal of the “recession-driven” bias towards integrated ERP supply chain solutions versus best-of-breed, as corporations over the past couple of years focused on “hunkering down” (my quote) and new investment in technology withered.

More importantly, for what have traditionally been considered Advanced Planning System (APS) software providers, both executives spent quite a bit of time focusing on the need for improved execution, and tighter linkage of planning and execution.

We’ll start in the order they presented at CLM, which was with i2’s Sidhu going first. i2 promoted its vision for “Closed Loop Supply Chain Management,” and a corresponding activity model, which is structured as “Monitor – Decide – Act.” Sidhu argued that to drive continuous improvement, and to deal with supply chain variability, these three activities must be closely integrated, and the “velocity” of decision-making greatly increased (that is, the cycle between monitoring, acting, and evaluating the results of that decision, and then deciding again, must be greatly accelerated.) This can only happen if planning is fed a steady, near real-time stream of execution data, with the ability to effectively process and report on actual results versus plan.

To support this model, i2 plans on providing “Synchronized Data Management” services, to enable companies to use common data definitions in i2 solutions regardless of the underlying transactional data structures, and something it calls “Synchronized Analytics,” which means performance metrics that try to get everyone on the same page, improving the understanding of supply chain trade-offs. The model also implies a level of collaborative optimization, so that parts of the supply chain take a master optimized plan, and then perform individual optimizations to deliver best results within the master plan constraints.

Sidhu also stated that with improved packaging of the applications, and new tools for integration with ERP and other systems, implementation times (and one assumes therefore costs) for planning software is down 50% or more in the past 1-2 years.

Manugistics’ Owens outlined four principles he saw as key to supply chain excellence over the next few years, which would drive Manugistics’ product development:

(1) Optimizing ERP: Taking better advantage of the wealth of ERP transactional data to make better decisions using high performance decision-support tools, and enabling companies to ultimately get more value not only out of their supply chains but also their ERP investments.

(2) Linking Planning and Execution: A point already discussed above, but one that inherently recognizes the need for planning systems to understanding what actually happens when the plan hits reality. Importantly, this does not necessarily mean Manugistics has to own the execution system; it is continuing to develop tools to make this integration easier and to better leverage the data.

(3) Collaboration with Trading Partners: The theme here is that the recession, combined with companies recognizing that they needed to better understand new process models, slowed down the collaboration train that appeared to be leaving the station in 2000. Owens’ message is that if collaboration is alive and well, then the move to things like build-to-order manufacturing and a renewed focus on CPFR will drive increased collaboration with suppliers and customers.

(4) Revenue and Demand Optimization: This is perhaps the most interesting, as this whole area is in the very early stages of market understanding and acceptance. The theory is that companies can more intelligently set prices (think of the airlines’ “yield-based” pricing mechanisms) to maximize total profit, and can understand the impact of pricing on their back-end supply chains (as pricing impacts demand and also total supply chain costs).

In summary, it seemed clear that both i2 and Manugistics are refocused are delivering results, and/or clearly recognizing that planning alone can only take you so far without the link to execution. The reality is that the line between planning and execution for many companies is already starting to blur, and will continue to do so over the next 5-10 years. One very interesting question will be who owns “event management” – supply chain planning vendors, supply chain execution vendors, or the ERP?

Are i2 and Manugistics back on the right track? Is there something missing from these competing visions for the future (recognizing the summary nature of the comments)? Is execution the key to realizing the benefits of planning systems?

Give us your thoughts.

The Link Between IT and Productivity
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Does investment in IT deliver results? A recent study by MIT says “Yes.” It researched over 1000 large companies and found a positive correlation between the level of a company’s IT investment and overall productivity versus industry average. But the correlation was modest, and there were substantial differences in results between companies.

This is just the latest in an on-going debate about whether IT investment level demonstrably leads to ROI and improved efficiency that has been really raging since the e-commerce bubble burst and companies started to look more closely at IT investments. Of course, anecdotal evidence and experience shows many examples of companies that have profited nicely from IT investments, and also many that have failed to produce adequate returns. But on average, do companies with greater IT spend achieve better results than those in the bottom half?

This research says they do, but emphasizes that real gains are made by companies that combine IT investment with a variety of business processes they call “digital organization.” This includes decentralized decision-making, improved incentive systems, different hiring practices, and better training.

Interesting research and opinions, but the debate is hardly settled. What do you think? Is there a clear correlation between IT investment and productivity gains?

On “Déjà Vu” for EPC versus previous industry initiatives:

“QR (Quick Response), CRP (Continuous Replenishment of Product, a key objective of the ECR initiative), VMI (Vendor Managed Inventory) and CPFR (Collaborative Planning, Forecasting & Replenishment) are all business processes that work. In fact, QR, CRP and VMI are virtually identical processes. As a member of the ECR Best Practices Committee and an early practitioner of CRP in the grocery channel, I know from experience that these processes can dramatically reduce inventory AND reduce stockouts AND reduce distribution costs AND reduce administrative costs. What these processes cannot do is change corporate culture, strategic thinking models, trading partner relationships and fear of change. I doubt that RFID can either....”

Dave Sandoval
President
B.U.S. Systems, Inc

On EPCglobal:

“The yearly fees announced at the EPC Symposium were nothing short of astronomical and border on extortion. If EPC ever does get it off the ground it will be a travesty for small businesses over the world , as only the very rich will be able to afford to trade. After waiting patiently for something of substance to come out of MIT besides fantasies about soda cans talking to refrigerators, the amount of real content that was delivered at the EPC symposium was extremely disappointing...

Responsible persons considering in investing in this technology should insist on data and case studies that are indecently verifiable and published in responsible journals. Sadly, the executive panel that addressed attendees in the "reasons to believe" seminar track chose to decline to shed much light on real cost/benefits of initial pilots - citing confidentiality. One should be very cautious about believing those who have, by their own admission, already invested heavily in an area, are asking you to do the same, but who say they will only show you the real prospectus after you have done so.”

S. Morris
Printronix