Next week, I’m especially looking forward to delivering the first of a two-part market education series of webinars for the Accenture Supply Chain Academy audience on the evolving hot topic of Supply Chain Control Towers (SCCT).
In the Part One- Foundations webinar next week I will cover the fundamental strategic changes occurring across global supply chains, along with their implications for decision-making. I’ll also provide our audience with a working definition of supply chain control tower capabilities, why these capabilities are so important, and delineate the design parameters, risks and benefits.
In December, Part Two of this education series will dive deeper into the people, process and technology capabilities to consider along with some guidelines for designing SCCT based initiatives within industry supply chains.
This series is exclusively available to licensed members of the Accenture Academy. The webinar content and registration can be viewed at this web link. Readers who are Accenture Academy Live members are encouraged to immediately register for this upcoming series, since registrations are building and the series kicks off Monday with an international based audience, followed on Tuesday with a European and U.S. based audience.
Supply Chain Matters readers can also review and access some of these SCCT concepts by clicking on supply chain control tower in our listing of Topics in the right-hand panel. Later in the week, I will also summarize some important takeaways from the Part One webinar for our broader readership.
On Tuesday, Supply Chain Matters commented that something was up at supply chain planning technology provider JDA Software, and that an announcement could come soon. On Thursday we issued a breaking news commentary indicating that privately held supply chain execution technology provider RedPrairie and JDA Software announced intent to merge into a combined supply chain planning and execution powerhouse with revenues extending beyond $1 billion. The market was taken by total surprise and perhaps many employees at both companies as well.
The open question is- what’s this all about? The reactions will be different and the views diverse, but one thing is certain, the dynamics of the supply chain technology market have changed.
In this commentary, Supply Chain Matters will provide our initial first impressions regarding this announcement after participating in a follow-on industry analyst briefing yesterday. Clearly, not all information behind this proposed merger is ready to be shared, at least publically, and that should be the caution.
Readers should keep in mind that the deal is still subject to a tender offer to JDA shareholders, which is anticipated in the December time period. If the tender offer does not yield a required majority, a JDA shareholder vote could extend the timeline to early 2013. According to the press announcement a cash tender offer of $45 per share, representing a 33 percent premium to JDA’s stock price on October 23, will be extended. The total value is estimated to be $1.9 billion. The considerable premium included in the offer was likely engineered to make the tender offer process more attractive.
JDA has a long history of acquisitions, the most notable being the original supply chain planning icons of Manugistics and i2 Technologies. At the time of the final i2 Technologies acquisition announcement from JDA, one of the other suitors was rumored to be RedPrarie itself. JDA is still in the process of integrating these two platforms, and CEO Hamlish assured us that the upcoming JDA 8.0 Release scheduled for Spring will have both platforms working together in a termed 100 percent cloud-based environment. Of late, JDA has been dogged by some regulatory inquiries regarding the disclosure of previous financial results. On Monday, JDA was scheduled to release its Q3-2012 Quarterly Results but postponed the release supposedly due to the Northeast storm. On the day of the merger announcement, JDA released its September ending results reporting declining software and subscription revenues and profits. Net Income in the first nine months declined 66 percent from a year earlier, and reflected $12.5 million of costs associated to the revenue recognition investigation and 2012 restatement.
RedPrairie itself was acquired in 2010 by New Mountain Capital, and has since completed a number of other acquisitions to include innovative cloud-based WMS provider SmartTurn, SofTechnics Shippers Commonwealth, Escalate, and Vortex Connect. RedPrairie’s existing technology capabilities support warehouse, distribution and retail fulfillment with vertical industry customer composition evenly divided among Industrial / 3PL and Distribution, and Retail Industry based clients.
The obvious fundamental question is why a privately held company, with approximately $300 million in revenues will absorb a publicly-held company with roughly $700 million in revenues. In our view, readers should context this proposed merger to be a private equity based financial engineering strategy where two companies are brought together under a private ownership structure to form a different mission and set of objectives. In a simplistic sense, it is a private equity based playbook transaction that allows enhancement of the best of both companies, a leveraging of cost control synergies and a re-positioning of mission, goals and objectives. Readers may also recall that i2 had previously been successful in a patent lawsuit concerning SAP, which adds IP assets as another consideration of this merger, not to mention the combined IP assets among both companies.
In the industry analyst briefing, current JDA CEO Hamish Brewer and existing RedPrairie CEO Michael Mayoras did not share many details, indicating that this deal happened quite fast and there has been no opportunity as yet for either management team to dive into the specifics of a combined company. There was however, lots of enthusiasm. What else could one expect at this point!
CEO Brewer views RedPrairie as a natural fit for JDA, and both CEO’s dwelled on the potential to bring combined supply chain planning and execution support capabilities to existing retail, consumer goods and industrial manufacturing clients. There was considerable emphasis on the opportunity to provide the market broader support for Omni-Channel commerce and supply chain fulfillment processes, which for this author, reinforced that there will be targeted vertical industry objectives included in the strategy of the combined companies. This author probed on the basis of a further manifestation of a combined planning and execution cloud-based B2B platform but both CEO’s indicated that there has not been time as yet to consider such objectives. Both CEO’s acknowledged that there would be obvious overlaps in the transportation management and planning segment which will have to be addressed for customers.
Turning the lens toward New Mountain Capital, they are a New York based private equity firm holding a rather interesting portfolio of companies that include healthcare, services, software and supply chain service needs. We probed their web site for common themes among portfolio companies and one theme appeared common- a strategy of investing in companies that offer outsourced or market disruptive services. Companies such as SymphonyIRI Group providing consumer and retailer point-of-sales data, Intermarine that provides asset-light logistics, Inmar Inc. that provides reverse logistics services and others point to this basis of investment strategy theme. That may provide a clue as to the motivations for creating a merged JDA/RedPrairie capability.
One thing is certain, this announcement will change the dynamics of the supply chain management best-of-breed landscape in the months to come, regardless of the outcome of this merger. Expect more partnering and/or consolidation among pools of vendors. If the end-play turns out to be cloud based software coupled with end-to-end outsourced services, than the market should expect further dynamics to occur in the B2B outsourced services segment.
Another important consideration is that process objectives among supply chain planning and execution processes are somewhat different, along with the organizational cultures, and that will be very important for the proposed merged entities to realize in their integration and go-to-market strategies. Just ask Manhattan Associates who attempted a similar feat. A lot has changed among both sides of supply chain management. Clearly the need for fusing both processes is compelling, but the implications are far-reaching and much more centered on advanced decision-support, business intelligence and supply chain control like capabilities and organizational skill requirements. When JDA initially acquired i2, it failed to recognize the unique, broad-based planning and analytical capabilities that was within the i2 offerings. The first declared strategy was to facilitate a CD based go-to-market strategy, ignoring the reality that many i2 customers customized their planning processes to enable industry differentiation. JDA quickly changed that perspective when customer realities were discovered.
The merger of JDA and RedPrairie is therefore not a cakewalk and will require bold vision, strong leadership, a firm hand, and certainly end customer input.
In the meantime, we continue with the advice that existing customers from both companies should be patient and await the full picture to evolve.
As I pen this posting it is incredible to believe that November is already upon us. Where did the year go? It seems like such a blur.
The month of November is the kick-off of our sales cycle for 2013 named sponsors for this blog. Loyal readers please bear with us as we take care of business.
Supply Chain Matters is able to share and publish the quality content that we provide through the support of our sponsors. For our sponsors we provide highly experienced product strategy, social media centered marketing and market research services that are individually tailored for sponsors and their brands.
We therefore remind providers of supply chain related technology and services that limited opportunities for being a named sponsor of the Supply Chain Matters blog in 2013 are now open for both the Lead and Sustaining Sponsorship levels. Blogs have come to be very influential sources of opinion, market knowledge and thought leadership, with this site being cited as among the top ten blogs commenting on global supply chain business process and information technology developments.
As a sponsor of Supply Chain Matters, your company will be recognized for its products and services and as a supporter of quality thought leadership. Our sponsorships include services in spring boarding your brand recognition, enlisting social media and search engine optimized product marketing strategies, and raising educational awareness to innovative technologies and services. An investment as a Supply Chain Matters sponsor extends way beyond a single event or campaign, offering a continuous daily impression across a global, highly targeted supply chain audience. Existing sponsors have incurred web based impressions exceeding one million views annually. The web domain of Supply Chain Matters itself averages over 30,000 reader visits per month.
What sets our sponsorship opportunities apart from other web properties is the unique personal and tailored services we can provide for your brand, with a highly affordable and competitive investment. Supply Chain Matters has supplanted high profile industry analyst firms in providing independent, insightful and straightforward commentary on important global supply chain business process and information technology developments and needs.
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Bob Ferrari, Founder and Executive Editor
Last week, South Korea based Samsung, the giant of consumer electronics vertical integration and diversified manufacturing, reported impressive earnings and profits for its September ending quarter. The company almost doubled net profits to nearly $5.8 billion while recording a 26 percent increase in revenues. Samsung attributed the bulk of these positive results to the increasing sales momentum of its Galaxy smartphone and other mobile communications products, which collectively contributed more than half of revenues and profits. Impressive results were also fueled by strong demand for Samsung’s OELD LCD display panels embedded in other smartphones, tablets and television products. Samsung reported that its Display Panel segment outperformed the Semiconductor Business in terms of year-on-year revenue growth, a strong testimonial to the fact that a value-chain component supplier to other OEM’s can produce money and profits.
Operating profit nearly doubled to $7.4 billion, which is noteworthy, given its ongoing competitive battle with rival smartphone and tablet producer Apple.
On the not so positive end, Samsung’s Semiconductor segment posted an 8 percent year-on-year decline in overall revenues while its PC DRAM memory chips business also declined due to increased competition and consequent excess market supply.
Investors, however, had a far different reaction, reducing shares by 2 percent directly after the announcement on fears of a potential saturated market in developed economies and heightened competition for penetrating developing and emerging markets. Continued signs of a declining global economy have also concerned investors, even when it comes to hot selling products such as smartphones and tablets.
An article posted on the Seattle Post Intelligencer web site cites research firm IDC’s latest account of smartphone market volumes. According to IDC, while Apple sold 26.9 million smartphones in its latest quarter, Samsung sold 56.3, over double the volume. Many media outlets are enamored with the coverage of the quarterly smartphone sales of Apple, and often lose the perspective that Samsung has even more impressive performance. Keep in mind that Samsung insured that its latest Galaxy product introduction came before Apple’s iPhone 5 market unveiling announcement.
In the fourth quarter, Samsung expects the smartphone market to continue its current growth momentum with increased demand, especially in emerging markets. Samsung plans to further cement its leadership by leveraging the GALAXY S III and by ramping up sales of GALAXY Note II, its newest product.
Supply Chain Matters has itself often commented on the scale and performance of Apple’s global chain, but we respect that of Samsung as well, particularly when readers consider that Samsung also provides much of its own component supply, including the latest high-end OLED LCD display panels and processor chips that are featured on Galaxy phones. We have also shared commentaries related to the supply chain fallout of the ongoing competitive battle between Samsung and Apple. Many industry watchers, as well as we, are of the belief that, in the end, both companies will not damage their long-term component supply agreements because there is too much at stake for both companies. Samsung is the prime supplier for ARM microprocessor chips that power iPhones and iPads, along with DRAM chips. Samsung also serves as a back-up LCD display supplier.
In a previous commentary we described the analogy of two extraordinary supply chains represented by the shiny apple vs. the complex orange. While Apple tends to draw lots of media attention, complex Samsung does not garner all the attention of the shiny apple, but the reality is that its supply chain is bigger and can serve multiple purposes.
This ongoing competitive battle not only provides great theatre, but important learning related to implementing agile, effective and responsive supply chain capabilities.