Manhattan Associates is an anomaly in the supply chain software industry – it made money in 2002. And while revenues at many of its rivals fell during the course of the year, Manhattan Associates was named the twenty-third fastest growing US company by Fortune Magazine.
The little-known company is no overnight success: Manhattan Associates is almost 13 years old. Nor is the company’s message revolutionary: that manufacturers and retailers can cut costs and streamline order fulfilment by using dedicated software tools to manage warehouse resources more efficiently. But as other areas have been computerised, and as economic pressures bite, it is now garnering widespread attention. Few manufacturers can afford to have finished products languishing in costly warehouse space.
Outdoor clothing company Timberland, for example, cut the number of warehouses it was operating from eight to two in the US and from five to one in Europe after it implemented Manhattan Associates’ PKMS warehouse management system (WMS).
Nor can organisations afford to send out delivery lorries half-full – which is why Manhattan Associates is expanding into transportation management systems (TMS), a move bolstered by its $20 million acquisition of a specialist in this area, Logistics.com, in December 2002.
Together, warehouse and transportation management tools – a software category termed supply chain execution (SCE) by research company AMR Research – represent a substantial opportunity for supply chain management software companies. Unlike the larger, but sluggish market for supply chain planning (SCP) tools, the SCE market continues to grow at robust double-digit rates. In 2001, for example, SCE tools achieved a 29% growth rate, while sales of SCP tools from companies such as i2 Technologies and Manugistics grew at just 9%. This gap widened in 2002, and will likely continue to do so in 2003.
“Companies are looking at their warehousing, transportation, orders, inventory and returns as one, global customer fulfilment system,” say AMR analysts.
SCE companies such as Manhattan – along with rivals such as EXE Technologies, Catalyst International, RedPrairie (formerly McHugh) and LIS – need to address demand for broader fulfilment systems, and Manhattan is leading that charge. Its purchase of Logistics.com, according to AMR’s Gerald McNerney, will give Manhattan Associates “a more complete SCE system that will require [its] competitors to reassess their strategies.”
Another key element in Manhattan Associates’ strategy, says the company’s CEO Richard Hadrill, is European expansion – but in this, he acknowledges, the company faces a number of challenges. First, the Atlanta, Georgia-based company must compete against a much stronger, European SCE supplier: UK-based LIS, which has 158 installed sites in the region. Manhattan’s software is installed at 60 sites in Europe – some of which are the international outposts of US customers. Second, the company must implement its software according to different regional markets: for example, in Europe, warehouses tend to be smaller and labour costs higher than in the US, says Hadrill.
Manhattan Associates is, nevertheless, well-placed to grow its business in Europe, on the strength of its mature products and able management team – not to mention its proven ability to win sales in a difficult environment.
AMR’s vote of confidence is clear: “You would be seriously challenged finding [a supply chain software company] that has bucked market conditions more effectively that Manhattan Associates.”