The process of identifying the right price to charge an individual customer for a specific product in a particular region, can take many organisations as long as five or six days.
Bruce Richardson, director of research at analyst company AMR Research, relates the story of one such company he recently spoke to – a major global transportation company – whose sales force has to wade through “one million rates on file and 52 rule tariffs over 14,000 pages of text” to come up with a quote for prospective customers. “You never fully realize how complicated pricing
is until you hear executives describe these situations,” says Richardson.
Supply chain management software vendor Manugistics hopes to change all this however, by speeding up and improving the accuracy of pricing processes with its new Enterprise Profit Optimisation (EPO) product strategy.
EPO is the overarching term for a marketing initiative that spans a range of Manugistics’ existing products including its Supplier Relationship Management, Supply Chain Management, Pricing and Revenue Optimisation, and Services and Parts Management modules.
The aim of EPO is to combine data about a company’s supply chain with data about customers’ demand chains. The ultimate goal is to be able to judge a product’s optimal price by combining analysis of demand with analysis of the supplier’s ability to fulfil orders, and the cost to the supplier of that fulfilment.
The EPO strategy is intended to differentiate by Manugistics from the rest of the supply chain management software market, and in particular, from its chief rival i2. So far, the strategy has been received well by analysts. “Ultimately, Manugistics are offering the opportunity to connect customer relationship management and marketing with supplier relationship management and logistics planning,” explains AMR Research analyst, Simon Pollard.
However, EPO is currently more of a vision for Manugistics than an actual product set. The company can only offer a portion of EPO through its existing products, and Pollard believes it will be another three years before the EPO line-up is sufficiently mature to provide all that Manugistics claims for it.
Nor will the long-term EPO strategy do much to make up for the company’s current revenue shortfalls anytime soon – a more immediate concerns for the company and its shareholders. Manugistics’ revenues fell by 19% and 26% consecutively over the first and second quarters of 2002. CEO Greg Owens attempts to play down the effect of dwindling sales, saying: “We are in an operating environment, not a growth environment.”
In response to shrinking revenues, CEO Greg Owens restructured operations at the company in August 2002, re-organising the business into three regional groups – Americas, Europe and Asia Pacific – plus a group focused on the government, aerospace and defence sectors. The heads of each group have been given profit and loss responsibility, and Owens has eradicated the position of president, which has been vacant since June 2002 when previous president Richard Bergmann left on extended absence before resigning in August.
Overall, the changes should increase Owens’ direct control of the business, but also increase his responsibilities to shareholders and customers. He will now need to deliver on his claim that Manugistics will reach break even by the end of February 2003, when the company’s current financial year ends.
Moreover, Manugistics’ EPO message is likely to fly over the heads of all but the most cutting-edge of customers, according to Pollard, and to sell more software, Manugistics will need to raise the profile of older products, and in particular of its transportation and logistics management modules. If Manugistics is to ride out the spending downturn, it is vital that it aggressively targets those areas of supply chain management that analysts predict will grow rapidly in 2003.
But it is clear that Owens is not expecting much relief from that spending down turn soon: “You can’t really spur companies to buy – growth is dependent on the economy,” he says.