Christmas is around the corner – what Santa Claus can teach us about supply chain

You better watch out
You better not cry
You better not pout
I’m telling you why
Santa Claus is coming to town
Santa Claus is coming to town
Santa Claus is coming to town

Yup, the big guy dressed in red is getting ready to make his annual appearance. Bringing all the girls and boys, as well as some lucky moms and dads, presents and gifts for their Christmas trees. And all he expects in return is maybe some milk & cookies or even a carrot for his reindeer. But did we ever expect Santa Claus to provide us with some simple lessons that are applicable to our supply chains?

He has the global fulfillment thing down…

• He makes and list and checks it twice. Sage advice about how to handle all the data and information that extended supply chains produce and leverage on a weekly and daily basis. Many of the conversations I have had with supply chain practitioners and service providers comes back to getting a cleaner and more complete view of all the data that their supply chain produces on a weekly and daily basis. Look at what Santa is able to do – put all those wish lists in one aggregate list. He does check it twice to ensure consistency and correct for errors. Also good advice. Since we all know what garbage in gets us…companies like Avaya have worked with solution provider Kinaxis to create a more clear and single view of their distributor network and the data that is the connecting glue. One clean and unified view! Make sure to clear out that garbage before it gets into the system – or on Santa’s list.
• Gonna find out who’s naughty or nice. Yup Santa also looks at his data to segment his customers. Granted he has two simple categories. Our supply chains’ customers and suppliers are also segmented and they do not fall into simple “naughty” or “nice.” But maybe the simplicity of how Santa does his segmentation should drive our own. The key is identify what key variables matter to our businesses and supply chains. Determine which variables you need to identify and focus on to create the most effective segmentation. Santa might not explicitly state it, but his segmentation like our supply chains leverages a greater number of predictive analytics to drive better clarity. For example service providers such as Infosys work with a large office products manufacturer to better understand customer segments to establish service level engagements. Santa and our supply chains need to lean on tools and service providers that can help identify the variables to effectively and efficiently segment our target audience.
• He sees you when you’re sleeping …He knows when you’re awake. Maybe Santa has a secret deal with the NSA to eves drop on our calls…okay I joke…I think…but Santa makes sure he is aware of his consumers’ characteristics and where they are in the gift receiving pipeline. If we are awake he wouldn’t deliver our presents! Your supply chain needs to be sensitive to customers and where they are in the buying cycle. Think of how companies such as Steelwedge and Salesforce have worked together to help their customers better with the S&OP process by tying in the data coming from the Salesforce CRM to get a clearer view of where customers are with regards to the transactional pipeline. It is not simply about identifying our sleeping patterns, but understanding where we stand in terms of the buying cycle what our demand is and might be – are we in a position to have our gifts delivered by Santa?
• Santa’s a busy man he has no time to play…He’s got millions of stockings to fill on Christmas day. Wow, talk about solving the delivery to the home enigma. Santa and his reindeer are able to criss cross the global, in one night, and accurately deliver a vast number of packages, of different shapes and sizes, to millions of locations! Unbelievable. Santa is also ahead of the curve as he has been able to provide home delivery since day 1. Now I am not saying we can all find a Rudolfo with his nose so bright to guide our fulfillment and logistics departments, but there is something to say about how integrated Santa’s workshop is with his distribution center and his logistics. He cannot be expected to demonstrate this level of efficiency is he stocks the wrong goods, doesn’t properly load them to his sleigh and then takes poor routes to his delivery locations. Clearly the value for supply chains to integrate the warehousing and transportation is what Santa’s efficiencies demonstrate.  Vendors like Oracle with their integrated WMS/TMS and now yard management (that is like what Santa does with regards to managing the elves and ensuring their are efficient) or JDA with their TMS integrated with the WMS acquired in the RedPrairie merger, are prime examples of solutions that even Santa would appreciate to ensure seamless optimization between the workshop and the big red sleigh – ensure the inventory that he has to haul around the world on the night of December 24th is properly slotted and routed.

The one aspect Santa does not seem to have worry too much about, is with returns. He does not seem to have a good reverse logistics or after sales service department. But since he has gotten so much of the upfront part right he does have to worry about delivering the wrong items! Alas our supply chains do not have that luxury, and our supply chains do need to take into account reverse logistics, returns, maintenance and other after sales issues. But thanks to Santa Claus we have something to aspire to with regards to our supply chains.

Merry Christmas! Happy Holidays!

End of an era at JDA – Hamish Brewer leaves supply chain vendor

Today JDA announced the changing of the guard at the head of the company  with long time JDAer – Hamish Brewer moving on. Interim CEO Baljit (Bal) Dail will take over until a full time CEO is found.  From an outside perspective this is a surprising announcement. However, from a business stand point this makes sense.

Since the acquisition/merger with Red Prairie in April 2013, the dynamics for JDA has changed. What has been a strategy of acquiring new revenue streams – see Manugistics and i2 acquisition – could not be sustainable. At some point JDA will need to compete with organic development of its own and revenue if it hopes to challenge the likes of SAP and Oracle. It looks as if the board determined that Hamish was not the right person for this new challenge. Mr Brewer does deserve a lot of credit for being able to cobble together a family of supply chain vendors and not only keep the ship afloat but also continue to drive JDA forward.

Whether it is Mr Dail or a new CEO, they will face some challenges:

• How will JDA continue to drive and grow revenue. JDA has the classic problem of a large business, the good is they have a large portfolio of products the negative they have a large portfolio of products. In such verticals as automotive they are facing challenges from the likes of Kinaxis. In the S&OP space the likes of SteelWedge offer a viable option. Of course they always have the threat from SAP and Oracle.
• Speaking of product portfolios…JDA, like many legacy vendors, straddles the world of on premise and cloud offerings. While I think there remains room for both, I think the value that comes from being more “cloud heavy” will start to out weigh on premise. For example companies such as One Network or E2open have leaned heavily on the cloud and in doing so are able to bring added benefits of creating turn key networks. Users who need to integrate large networks of suppliers, customers and partners via their solutions into their supply chain network will lean more and more towards cloud heavy offerings.

The new CEO for JDA will face some interesting challenges. However, the company still has a number of arrows in their quiver. It will be interesting to see how the company moves forward. And what type of background the next CEO has will go a long way in determining where JDA finds itself in 5 years.

 

Disclosure: I worked at i2 Technologies for 5 years. I left i2 Technologies prior to being purchased by JDA in 2010.

 

Red Prairie “acquires” JDA, a $1.9billion gamble that is a company too far.

The supply chain and software worlds were thrown into a tizzy this past week with the announcement that Red Prairie and their primary investor, New Mountain Capital, would be paying a 33% premium to acquire publicly traded JDA software – click here for press release. This new entity will have a combined revenue of a $1billion, of course we all know that in the world of M&A, 1+1 does not necessarily equal 2 but sometimes more 1/2…This merger was kept under tight wraps. From what I understand no one, outside of a handful of individuals, knew about the deal until it was announced publicly. A testament to both companies running a tight ship. So what does this mean?

JDA has always been known as an acquirer of companies, most notably former supply chain darlings – Manugistics and i2. JDA’s modus operandi seemed to be – acquire tarnished brand, that has a good client base and technology. Apply JDA’s operational excellence and maximize margin on that revenue stream. Run that until the revenue stream slows down due to lack of innovation, and repeat. This is different in this situation. Granted Red Prairie is technically “acquiring” JDA. But the buzz on the street is really JDA is being taken private to merge with Red Prairie and be the dominate partner. This makes sense since the owners of Red Prairie have constantly sought a viable exit strategy for the software company. So under the protection of being private, JDA/Red Prairie will work to becoming the dominate supply chain vendor. But three things that need to be addressed

1. Being private does not necessarily cure JDA’s problems. With Hamish Brewer running this new entity, there is much hope that being taken off the Wall Street carousel, will allow for a hard focus on SaaS and other necessary changes to the business to compete in the changing market. The question remains, is this in JDA’s DNA? They have not really proven to be an innovative company. They have always been an operational excellent business, but not a company that is going to take chances with innovation and R&D. With a spot light coming from an investor that just sunk a large chunk of money, the pressure might be greater than when it was a publicly traded company.
2. Product overlap. Primarily what will the new business do with their TMS solutions? By my count there might be 3 versions – JDA’s, the old i2 and now Red Prairie’s version. Gartner and other analysts always ranked the i2 solution as one of the best, on the same level as Oracle’s GLog offering. This is not a trivial problem to deal with. There are other solution overlaps as well as matching R&D direction. In prior mergers it used to be clear that JDA was coming in as the dominate player. Not in this situation.
3. Too big to succeed? Has this merger been one company too far? When JDA acquired i2, there was some noise that i2 and Red Prairie had explored merging instead (would have been a very powerful combination). An i2 – Red Prairie merger would have been a very powerful entity. The problem is that JDA is not i2, they are bigger! They have many more pieces that they have pulled together over the years. Adding a large piece like Red Prairie at this stage might have been too big a chunk to digest. A company too far.

This merger has much potential for both success and failure. Fundamentally both companies come to the table with pieces the other has been lacking. But I am just not sure that the cultures and the products will mesh in the near term. Going private is good, but I am not sure it will diminish the pressure on Hamish and his leadership team to get the new company on the right track.

JDA will no longer have the pressure to constantly grow revenue stream – through acquisition – but now they will need to get things in place for their investor to get a return on their $1.9billion investment.