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  First Thoughts

    Dan Gilmore


    Supply Chain Digest

June 16, 2017

Trip Report: LLamasoft User Conference 2017

Is Modeling the On-Ramp to Many Other Supply Chain Solutions?

One of the great strategic blunders in technology history was Microsoft's failure to perceive that search would become the on-ramp to the Internet, leading to the ascension of Google and Microsoft's decidedly second tier status in the search arena and resulting challenges from Google on many other fronts.

Why do I make this observation after just returning from a couple of days at the LLamasoft user's conference in Detroit this week (not far from the company's Ann Arbor headquarters)? I will come back to that in a moment.

If you are not familiar with LLamasoft, the company has been around for almost 20 years, and now dominates to an amazing degree the supply chain software category that was once usually categorized as supply chain network planning/optimization.

Gilmore Says....

At the conference, CEO Don Hicks said LLamasoft will be receiving an investment of hundreds of millions of dollars from another big time private equity firm, TPG Growth.

What do you say?

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LLamasoft's ultimate genius - it took the company a while to get here - was to recast that network planning/optimization category as "network design" - and more importantly that "design" was itself a separate discipline that stood alongside supply chain planning and supply chain execution - and provided rich opportunities for operational improvements and savings across virtually every supply chain process.

LLamasoft's tremendous success in this positioning really has to be viewed as one of the greatest marketing/branding strategies of all time in the supply chain software space, second only to what i2 was able to accomplish in creating an environment in which it was perceived by many companies that they were at a competitive disadvantage if they weren't jumping on the i2 bandwagon in the late 1990s and early 2000s - though like Icarus of mythology, i2 flew too close to the sun and fell dramatically into the sea.

I do not expect that fate to happen to LLamasoft. As I have written before, through a combination of the "design as a discipline" message, really focusing on advancing its design software while competitors moved more slowly, and a better-than-most focus on customer success, LLamasoft has simply blown away the competition.

What it couldn't crush nearly completely in the market LLamasoft simply achieved by acquiring weakened competitors, first the LogicTools solutions from IBM in 2015, and then a more Euro-focused provider called Barloworld Software in 2016.

The 2017 user conference again demonstrated LLamasoft's success. Attendance continues to grow, with close to 700 in the Motor City this week, and scanning the badges as you walked the halls of the Marriott Renaissance Center would show a who's who of Fortune 500 and indeed global 2000 companies.

As further evidence of LLamasoft's strength, in 2015 the company received $50 million from an arm of Goldman Sachs that valued the company at some $250 million - huge number for a company that I believe then had less in revenues than the $50 million Goldman Sachs plunked down. That only happens if the growth rate is very rapid.

At the conference, CEO Don Hicks said LLamasoft will be receiving an investment of hundreds of millions of dollars from another big time private equity firm, TPG Growth. To repeat, Hicks said "hundreds of millions" - that is simply staggering. It means LLamasoft will have to someday be worth multiples of that for the investment to pay off for TPG.

Now, back to my Microsoft-Google reference. What is now becoming increasingly clear - and I doubt even LLamasoft itself early on let alone any other software provider or pundit, including me realized this - is that once you have modeled substantial elements of a company's supply chain, you are in a tremendous position of strength.

That modeling - which then leverages a variety of optimization and analytic techniques to solve problems from the traditional "where we do we put our distribution centers?" to what products are made in which factories and on what lines, to complex capacity planning questions and much more - is what LLamasoft does.

With that position with a customer, a couple of things happen. First, LLamasoft becomes highly strategic within the company's supply chain. Second, having modeled all or most of a customer's supply chain - understanding if you will how the company's supply chain works in tremendous detail - LLamasoft has the opportunity to branch into other areas of supply chain from that position of strength.

My point is that just maybe supply chain modeling, as is now practiced by LLamasoft as has never been approached before, is an here-to-now unperceived on-ramp to lots of additional supply chain planning and execution solutions, the way most didn't see search as the on-ramp to the internet.

This is far from guaranteed at this stage, but it is an intriguing question - and LLamasoft is now certainly heading down this path. The trend for several years has been for LLamasoft customers to use its tool sets for making decisions in shorter and shorter time frames - not just long term network decisions made every few years or even annually, but tactical and even operational planning for decisions made monthly, weekly and even daily. For example one customer, USU Silica, gave a case study at the show of how it built a daily available-to-promise and order allocation tool using LLamasoft.

It is a complicated story I don't have room to fully detail it here, but combined with the customer trend towards using Supply Chain Guru (LLamasoft's flag ship design tool) the company also inherited a suite of traditional supply chain planning applications (demand planning, supply planning, etc.) in the Barloworld deal.

While ultimately moving away from simply building out those planning solutions, that deal forced LLamasoft to think more specifically about if and how to pursue the all more general market.

In what was a bit of a circuitous though not overly long path, we got the answer this week at the conference with the introduction of LLamasoft's "planning by design" solution, which will be delivered in Cloud form under the portal (private Clouds also supported).

LLamasoft repeatedly emphasized that "planning by design" was not meant to replace existing supply chain planning solutions - a partially dubious if understandable claim, as I will explain below.

So what is it then? In great simplicity, it is a tool for creating logic and workflows that leverage LLamsoft's great library of supply chain models and analytics to solve problems not being addressed by existing planning systems - the white spaces that are leading a growing number of companies to invest in data scientists and other smart people - in a reversal of a decade-long trend - to create advanced analytics for decision-support in areas that existing systems do not well address.

On top of that ability to call and sequence analytics in highly flexible ways LLamasoft has created a neat tool for easily developing simple, clean user interfaces, with the goal being to expand the use of modeling and analytics from normally a small group of really smart people to more of the supply chain masses and even beyond to more general business users - which of course will also expand LLamasoft's revenue stream.

It is understandable that LLamasoft would position the solution as it has, because if it was marketed as a potential replacement of existing planning systems that would create all kinds of resistance from users and caretakers of the existing software. But smart tools to fill in the blanks, from a company that runs the critical model of your supply chain? That will generate far less objections. But as LLamasoft gains a foothold with really smart analytics and optimizations - versus the heuristics that underlie most traditional planning systems - with an innovative new age tool for building the "apps" - well, it may indeed be seen as offering replacement possibilities - though of course traditional planning vendors are hardly sitting still and are all on their own analytics journeys.

I wish I had more space. In addition to planning by design, LLamasoft featured a new tool that I believe for the first time is truly designed to provide complete visibility across the end-to-end supply chain - as I rather presciently predicted in 2012. That tool, named "ESP," leverages Llamasoft's successful Data Guru Integration tool, and if I have it right can interact with models built in the core product to automatically create the visibility structure, then pump in the data. More soon, but very impressive.

It also announced a product called Demand Guru that tackles another white space - understanding and decomposing demand over time, with a focus on advanced analytics for forecasting and to incorporate so-called causal factors (e,g., the weather, competitive reactions) in a more sophisticated fashion, as well as considering macro data such such as GDP forecasts and much more. The goal of course is to provide better and more nuanced forecasts for making strategic supply chain solutions. Very good.

I may do a part 2 on this to summarize interesting keynote and breakout presentations. It was something of a "Heat Wave" in Motown this week. 

What is your reaction to Gilmore's LLamasoft conference trip report? Is modeling a key path in to other areas of the supply chain? Let us know your thoughts at the Feedback button below.

Your Comments/Feedback

Jonathan Smith

Manager, Logistics Engineering, Expeditors
Posted on: Jun, 16 2017

Dan, thank you for an excellent summary of the conference and insightful perspective on where LLamasoft seems to be headed. The conference was vibrant, with many valuable networking opportunities. NOTE: The new product mentioned at the end is called "Demand Guru"; it does indeed seem intriguing. (Data Guru was released 3-4 years ago.)

Jeff Metersky

VP, Solution Strategy, LLamasoft
Posted on: Jun, 19 2017
Glad you enjoyed yourself last week and had an opportunity to see first hand all the new solution offerings. One clarification, the demand modeling solution is Demand Guru. Data Guru is a part of the solution.

Supply Chain Consultant

Supply Chain Optimization, Holisol Supply Chain Solutions
Posted on: Jul, 29 2017
Nice blog. LLamasoft is doing a good job in optimizing the supply chain of their clients with its latest initiative, Demand Guru, which uses analytics to predict demand into the future while considering external influencers such as weather and economic factors.



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