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August 25, 2016 - Supply Chain Flagship Newsletter

This Week in SCDigest

bullet The Honeywell-JDA Merger that Almost Was bullet SC Digest On-Target e-Magazine
bullet Supply Chain Graphic & by the Numbers for the Week bullet Holste's Blog/Distribution Digest
bullet New Cartoon Caption Contest Begins bullet Trivia      bullet Feedback
bullet New Expert Insight Columns bullet New Videocast and On Demand Videocasts
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first thought


Supply Chain Graphic of the Week
Carrier Operating Performance by Mode for Q2 2016


Another US Manufacturing Industry Disappearing

Truckload Rates Still Headed Down
China Fortune Cookie Says More Robots
Ocean Container Volumes Continue to Slide


Innovation in 3PL Capabilities: Perspectives from Shippers and Providers

What Do Shippers Expect from 3PLs in Terms of Innovation? How Are 3PLs Responding?

We would appreciate you taking this brief survey, with separate paths for shippers and 3PLs. In the near future, we will send all respondents a copy of the survey results aggregated across all respondents. We know you will find it valuable.


Week of August 22, 2016 Contest

See The Full-Sized Cartoon and Send In Your Entry Today!

Holste's Blog: Calculating Inventory Levels Complicated By Shorter Product Life Cycles

Weekly On-Target Newsletter:
August 23, 2016 Edition

New Cartoon, Tracking Mote, Uber-Otto, Nike's Big Bet, Baseline Validation and more

The "-abilities" of Global Trade Management: The Impact of Playing it Safe and Variability
by Stephanie Miles
Senior Vice President of Commercial Services
Amber Road

Is It Time to Move Your Supply Chain Planning to the Cloud?
by Bill Harrison
Demand Solutions


Supply Chain Software Trends and Opportunities 2016 Benchmark Report

From the Search for Greater Agility to the Coming Era of Cloud Software, Where are Companies Headed?

Prefer to view the results instead? Watch the on-demand version of the Videocast summarizing the survey results:


The first “real-time” Warehouse Management System was deployed in what year?

Answer Found at the
Bottom of the Page

The Honeywell-JDA Merger that Almost Was

Ten days or so ago I was all geared up to write my weekly column on the ramifications from what looked at the time like a done deal in which industrial giant Honeywell was to acquire JDA Software, the largest "best of breed" supply chain software company.

Reuters and then the Wall Street Journal reported a couple of weeks ago that a deal was near done, in which Honeywell would pay $3 billion, or almost three times JDA's annual revenues, but with Honeywell also assuming JDA's $2 billion in debt. The deal was said to likely be announced on Monday Aug. 15.


Do I think Kiva will be part of Amazon a decade from now? I say almost certainly not, but it may work for Amazon for awhile.


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But alas, from a journalistic perspective only, Monday came and went and there was no deal. It was then announced that giant private equity firm Blackstone had jumped into the fray (how this works I am not sure) with an offer to provide financing to help retire some of that $2 billion in JDA debt by swapping debt for equity. The move will save JDA about $70 million in annual interest payments - quite a relief indeed - but I assume at the price of current JDA owner New Mountain Capital seeing its ownership stake diluted, and a new financial cook (Blackstone) also now in the JDA corporate kitchen.

And darn it, I had a lot to say if the Honeywell deal had gone through - all sorts of questions and advice.

I had other column ideas for this week, but thought in what does indeed feel now like the dog days of August I would lighten up a bit here and look at this deal that almost was, with some examples of other odd deals from years past that may provide some lessons.

In my mind, the Blackstone deal JDA ultimately accepted is clearly much better now for JDA employees and its customers than the Honeywell scenario. JDA will largely remain the same, the current team (led by CEO Bal Dail) I assume will stay in place, and the current direction in terms of market focus and product development should continue on, the latter perhaps even goosed a bit by the reduction in interest payments.

Had Honeywell acquired JDA, over time but maybe quickly, there would have been many changes that perhaps substantially affected employees and customers. But why did industrial giant Honeywell want to acquire JDA in the first place, when its major markets are in areas such as automotive, aerospace and defense?

That is the $3 billion question. Clearly, someone there has a supply chain vision. I doubt that it is well regarded CEO David Cote, but someone has obviously got his buy-in for the idea.

Honeywell has been in the supply chain technology space in a sense since 2007, when it acquired Hand Held Products, a maker of data collection equipment. It expanded that line when it acquired the parent company of wireless terminal maker LXE in 2011, and then continued with strategy with the 2013 acquisition of auto ID equipment provider Intermec, which was also the parent of Voice system company Vocollect.

So now with Zebra Technologies, recent acquirer of the wireless terminal and scanner part of Motorola Solutions, Honeywell is one half of what is basically a duopoly in the North America market for RF and Voice gear.

Even more germane, in late June Honeywell agreed to acquire automated materials handling system provider Intelligrated for some $1.5 billion. Intelligrated - its origins would take a long time to explain - makes all kinds of materials handling systems, but most strongly of course for distribution centers, lately riding the wave of investments in DC automation to support ecommerce fulfillment.

So it seems likely the Honeywell idea was to marry some of JDA's solution set, notably its Warehouse Management and Labor Management solutions, perhaps even TMS and a few other pieces, to provide turnkey automated DC solutions - though Intelligrated actually came with its own WMS, after having acquired small player called Knighted systems in 2012.

What was the strategy beyond that seemingly obvious one? Not clear. Did Honeywell want to be in the challenging planning space (demand planning, supply planning DRP, factory scheduling, etc.) that really is the core of JDA - and far afield from DC automation?

Perhaps Honeywell saw this as a way to move from its mostly industrial customer base to the retail and consumer goods sectors where JDA today is mostly focused. Or did Honeywell see an opportunity (which I do believe exists) to develop supply chain planning solutions more specific for the needs of industrial type companies?

I do not know, and we may now never know. 

It appears most supply chain analysts were not enthralled with the almost merger. 

The folks at IDC wrote that "While JDA certainly brings an existing installed base of customers that any industrial automation vendor would covet [I myself am not so sure of this synergy], the price Honeywell is reportedly paying seems far too high, even considering acquisition synergies. Further, while Honeywell's chief executive David Cote says about half of the New Jersey-based company's 23,000 engineers are now working on software, do they have the software industry acumen to pull their objective off, or are they investing in the hope that JDA's current leadership can do it?"

Analyst Lora Cecere was also against the deal, but more from some weaknesses she sees in the JDA side of the merger, not from the Honeywell side. Gartner's Dwight Klappich was also negative, saying he thought the chances of ultimate success from the pairing were small.

Conversely, much of the commentary from the financial world was positive (e.g., sites such as SeekingAlpha). But when you read those commentaries, it is clear that many of the financial pundits really have no idea what JDA does, and maybe not even what Honeywell does. Many came up with non-existent synergies that simply made no sense, and several said this was just like industrial giant GE going after the Internet of Things/Industry 4.0 market.

No it was not.

Having said all that, it is long been my opinion that it is very challenging to say the least for non-software companies to enter the supply chain software market.

In 2004, for example, came the surprising news that giant 3M was buying WMS provider HighJump. I was doing consulting for HighJump at the time, and have some insight into what happened. I told then CEO Chris Heim that if he played his cards right he could make some nice money now and buy the company back on the cheap a few years down the road.

And that is exactly what could have happened, as 3M spit HighJump back out a few years later, for much less than they paid for it, though the talented Heim went in other directions. 

So same question: why did 3M want to be in the supply chain software business? My answer is that it was a small dollar investment in the grand 3M scheme of things, the company had created an emerging technology unit that housed these kinds of small tech businesses to see which would pay off, someone at 3M had the truly harebrained idea of finding synergies between HighJump and a home grown PLM solution for packaging graphics, and both companies were in the Minneapolis area, which made things in general a bit easier.

It didn't work though. Neither did the 2006 acquisition of supply chain software company Click Commerce by truly industrial conglomerate Illinois Tools Works. I forget what all solutions Click had at that point, but I believe an order management system, some ecommerce stuff, and the remains of once imporant WMS provider Optum, among other nuts and bolts.

I think that lasted maybe two years, as the truly awful strategy was then shut down and Click sold off.

In 2012, acquired robotic picking system provider Kiva Systems, for a very large price of $775 million. But this deal was different. Amazon didn't have in mind building the Kiva business - in fact the exact opposite. 

It turns out it acquired Kiva primarily so that it could have a complete lock on Kiva's manufacturing and deployment resources, which have been stretched to meet the roll-out demand across Amazon's vast fulfillment center network. Another motive was perhaps to keep the technology away from Amazon competitors for some period of time.

Do I think Kiva will be part of Amazon a decade from now? I say almost certainly not, but it may work for Amazon for awhile.

I wish I had time to talk about the even more perilous idea of trying to commercialize in-house developed supply chain software, but that will have to wait for another day.

So what could have been a market changing deal for now becomes just a financial transaction that matters little to us not playing at that level. We'll see if Honeywell does something else from here.

What are your thoughts on the almost Honeywell-JDA deal? Can regular companies ever make acquiring a supply chain software solution to go to market with ever work? Let us know your thoughts at the Feedback button below.

View Web/Printable Version of this Column

New September Videocast:

Reducing Order Picking Costs in the DC without Automation

New Solutions to Generate Significant Reductions in Order Picking Costs Whatever the Current Environment, With Little or No Disruption to Current Operations

In this outstanding Videocast, we will detail the wide portfolio of technologies that can be applied today to get your order picking costs headed back in the right direction. The broadcast will include real world cases studies.

Featuring  Dan Gilmore and Ron Kubera, Executive Vice President and Chief Marketing Officer at Lucas Systems

Tuesday, September 20, 2016

On Demand Videocast:

Supply Chain Software Trends and Opportunities 2016 Benchmark Report

Results from SCDigest's New Benchmark Study, Including a Special Focus on Cloud-Based Solutions

In this outstanding Videocast, we'll summarize important trends and developments on both the user and technology provider fronts, based in part on results from a new SCDigest survey on trends, opportunities, and practices in supply chain software.

Featuring  Dan GilmoreJohn Murphy, Senior Director, SCM Applications Product Marketing, Oracle and Jim Heatherington, Vice President, AVATA.

Now Available On Demand

On-Demand Videocast:

Supply Chain Design as a Continuous Business Process - The Whirlpool Story

From Project to Process: Here's How to Get It Done

In this outstanding Videocast, we'll explore the changes needed to make supply chain design a continuous process, emerging new best practices in supply chain design, and how consumer products leader Whirlpool has successfully embraced this 360-degree approach.

Featuring Dan Gilmore, Editor, SCDigest, and Toby Brzoznowski, Executive Vice President, LLamasoft and Brian Streu, Manager, Supply Chain Design, Whirlpool

Available On Demand


This week, just a few quick feedbacks from our first column last week on inventory performance 2016. That includes a question asking for more detail about calculating the inventory-to-sales ratio.

Feedback on Inventory Performance 2016


In your next column, can you clarify the calculation of the “Total Business Inventory/Sales Ratio”. I understand the DIO which is fairly intuitive.

I do wonder why the year-end inventory is used which is more capable of being gamed by someone incented to do so. Seems like an annual average would be more representative, especially for businesses which sell down their inventory over the Christmas peak season.

Eric Dagle
Senior Operations Planner
Dematic North America

Editor’s Note:

The inventory-to-sales compiled by the US Commerce Dept. is define as inventory levels being held by US companies in aggregate divided by one month’s worth of sales.

The Commerce Dept. collects this data from a series of surveys sent each month to manufacturers, retailers, and wholesalers.

So, for example, in May 2016, overall sales for the month across all businesses were $1.291 trillion. Inventories across those same companies were $1.810 trillion. So, $1.810 divided by $1.291 results in an inventory-to-sales ratio of 1.39.

I agree it would be better to use quarterly inventory data and take an average for the year, but the REL data we use as a base takes the year end snapshot, so we have to just run with that. I have looked at this before, and found that while the average inventories across quarters does tend to be a bit higher than the year end number, it is not meaningfully so.

Dan Gilmore


Good once again to see you looking beneath the headlines and trying to gain more meaningful information.

As to reasons for the increase in inventories it might just be due to companies deciding to stock more of what they really need, rather than run the risk of stockouts on popular lines, thus ensuring higher levels of service - using availability as a competitive weapon. Perhaps it is also due to an informal acknowledgment of the need for "slack" that I posed a few weeks ago.

If it is not on the shelf then it matters little how responsive your transport system is you cannot get it into the hands of the customer. It is also a reflection that it can take a huge amount of time to reduce redundant/slow-moving inventories and brand creep is still with us.

I look forward to reading about the answers from your side of the Atlantic.

David MacLeod
Learn Logistics Limited


Outstanding analysis as always from SCDigest. No one else out there, including the analysts, does what you do, and you do it week after week.

Great stuff - keep up the good work,

I agree that the rising US inventory levels have not been well covered or explained.


Thomas Detmann
Spokane, OR



Q: The first “real-time” Warehouse Management System was deployed in what year?

A: In 1975, at a JC Penney DC in Southern California, using RF terminals with the WMS software for the first time though there are competing claims.

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