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  First Thoughts

    Dan Gilmore


    Supply Chain Digest

Sept. 8, 2016

Three Supply Chain Software Vendors on the Move

LLamasoft, E2open, and Softeon have Some Mojo Going


This week, I want to focus on three supply chain software firms that seem to me to be "on the move." I have no strict criteria here, and there may well be others deserving of equal billing if they make their case, but I am close enough to these three that I am very confident of putting them in the "on the move" category.

Let's start with LLamasoft, which really has been a most amazing story over the past seven years or so, though it was founded all the way back in 1998 by Don Hicks and Toby Brzoznowski, both University of Michigan grads (Brzoznowski was on the baseball team and played with several future major leaguers).

Early on, LLamasoft was positioned as a supply chain simulation software firm - a sort of cousin to traditional supply chain network design that involves "playing out," if you will, how a supply chain would operate over some period of time. That exercise might show that even though a given network design might be optimal from a cost and overall service standpoint, at certain times there might be unacceptable service issues that leads a company to tweak the design.

Gilmore Says....

Softeon has also released a solution its calls Plan2Fulfill. It exists in a sort of "white space" in supply chain software that I will call "execution planning."

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But LLamasoft soon moved to a more of a full supply chain network design approach, and did a couple of things others in the space couldn't achieve. Almost single handily, LLamasoft has made mainstreamed the idea that network design is not an occasional exercise about where to locate facilities but an on-going process that can answer a continual series of new and existing questions relative to how the network should operate. Many others, such as the good folks over at Insight, had been making the same argument for years, but simply without as much force or market effectiveness.

Supply chain network design is a distinct discipline, LLamasoft argued, on a par with - perhaps even more important than - traditional planning and execution.

Add to that a focus on product development that simply advanced the tool much faster than was happening at the competition. Then, as always is the case with success, came some lucky breaks. ILOG acquires a top competitor to LLamasoft in David Simchi-Levi's LogicTools, only to have ILOG be acquired by IBM, where the LogicTools product gets lost in the enormity of IBM's business.

LLamasoft kept building, adding inventory optimization, a cool tool for getting data into the models (always the bane of network design), and Cloud and mobile solutions. It then starts to get into tactical planning solutions, coming at it as I have written before from the top down, building models that solve traditional supply chain planning problems after the bigger picture design work. Very smart.

Oh, and then LLamasoft buys up much of the remaining competition, first acquiring the LogicTools solution from IBM, and then the network design and other supply chain planning software from a company called Barloworld (UK based).

It's all working. The company's annual user conference is like a who's who of the Fortune 1000. A 2015 investment from Wall Street giant Goldman Sachs of $50 million valued the company at an incredible $250 million. LLamasoft has grown revenue 60% annually three or four years in a row.
The move into traditional planning will not be without its challenges, but LLamasoft no question is a company on the move.

Next up, E2open - which had a near death experience a couple of years ago and came out strongly on the other side.

The company has its roots in the EDI space, where years back a predecessor firm achieved connectivity to a large number of OEMs and suppliers, largely but not exclusively in the high tech arena.

Flash forward a few years, and E2open builds a unique, multi-level visibility and collaboration solution that allows the OEMs, such as Dell, to really see their supply chains across tiers operating in real time. It would take more space to well describe this than I have here, but if an OEM say has an opportunity for 10,00 new units, it can see if it has the supply commitments needed to make the customer order promise, and then see if those commitments are achieved on-time during execution.

To greatly over simplify, E2open thus provides is a multi-level supply chain dashboard and decison-support tool for discrete manufacturers.

Sounds good, yes? Just one problem: the company, which went public, was spending like drunken sailors for awhile (thankfully, SCDigest got some of it) and simply was not paying much attention to the bottom line, which bled red ink for many quarters.

In 2015, the company was taken private, and my friend Michael Farlekas was named CEO. Farlekas is a smart guy, but I think he would agree the first steps weren't rocket science. In a company that relies almost exclusively on subscription revenues, meaning the top line can be pretty well estimated for a given year, the solution is just to get expenses nicely back down under the revenue number (see Descartes Systems/Art Mesher around 2004).

Farlekas has done that quickly, giving him the leeway to pursue acquisitions. In the past few months, E2open has acquired "demand sensing" vendor Terra Technology, and then Orchestro, which provides a "demand signal repository" across retailers. Both solutions target consumer goods companies.

These two acquisitions go very well together, with the Orchestro solution now providing the POS data - the key potential bottleneck - to the Terra solution.

Yes, at one level this is far afield from E2open's visibility platform. But can that real-time supply chain view provide benefits to CPG companies as well? That is the bet, and E2open is now in strong financial position to pursue the opportunity, growing revenues from about $75 million when Farlekas showed up to over $100 million now, 15% of that organic growth. It is solidly profitable.

More acquisitions are likely coming.

Finally, a company called Softeon is simply one of the most interesting software vendors in the supply chain space. The company was started a good number of years ago by president Gana Govind, who offered a major consumer goods company a deal: He would build the Warehouse Management System they needed for price X, but would do it for lower price Y if he could keep the code and start a WMS company. That's just what happened.

Softeon's approach from the start has been focused on the product and customer results - for many years frankly at the expense of sales and marketing. But despite that, along the way Softeon has gathered up customers like InBev/Anheuser Busch, Sears, Sony, Time Warner, Ceva Logistics, DB Schenker, Duluth Trading Co., Lenova, Casey's convenience stores and many others.

What is unique is that Softeon has built a very broad and deep suite truly from a single data model from the ground up, all based on a granular Service Oriented Architecture that provides Softeon and its customers great flexibility in tailoring workflows or what functionality is needed for a given deployment. It has all been web native from the start, and Softeon has been a leader in Cloud-based deployments. The products in the broad suite just work very well together - and have a number of differentiated capabilities. Its approach to materials handling and ERP integration is very strong.

Softeon has also branched well beyond just WMS. It has a very interesting Distributed Order Management (DOM) system that has some functionality I am not sure anyone else does, such as optimizing the inbound flow of goods to the best node in addition to making optimal fulfillment decisions.

Softeon is also very capable in what I would call "delivery intensive" companies, largely meaning those their own fleets. Softeon has a number of successes at customers running its combined WMS and route accounting or DSD solutions (beverage companies, convenience stores).

It has also released a solution its calls Plan2Fulfill, which occupies a sort of "white space" in supply chain software that I will call "execution planning." P2F takes forecasts, inventory levels, desired service levels, transport costs and more to optimize inventory placement and replenishment across the network in the short term. I do not believe there is any other tool quite like it.

Softeon is the smallest of the three vendors overviewed here, but it has been growing nicely over the past few years, and definitely moving upstream in terms of customer base, with a number of major customer wins. The track record of deployment success is very high - not easy to achieve in the notoriously challenging WMS space. Definitely worth a hard look for WMS, DOM, delivery-focused businesses and increasingly even supply chain planning.

Three vendors on the move. I may do a few more down the road a bit.

Any thoughts on these supply chain software vendors on the move? Is this kind of analysis useful to you? Let us know your thoughts at the Feedback section below.

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