Last week, I attended Manhattan Associates’ Momentum 2012 conference. The theme of this year’s conference (its largest ever with more than 1,000 attendees) was “Platform Payoff”– a continuation of the “Platform Thinking” message the company introduced two years ago. Now that Manhattan (an ARC client) has about 200 customers live on its platform solutions, the company is highlighting the operational, technology, competitive, and financial payoffs customers can achieve by deploying a platform solution.
Eddie Capel, EVP and COO at Manhattan, gave examples of each payoff type via customer case studies in his keynote presentation, and Pete Sinisgalli, Manhattan’s President and CEO, pointed to the company’s record Q1 2012 financial results and continued investment in R&D ($256 million over the past five years) as validation points that its long-term strategy is paying off for them too.
But the highlight of the opening session for me was the keynote presentation by Brian Leinbach, SVP of Systems Development and Field Services at Macy’s, on the company’s omnichannel growth story. Leinbach summarized Macy’s omnichannel selling and technology vision with a simple phrase: “If we own it, she [the consumer] should be able to buy it.” It’s impossible for me to summarize everything Leinback presented, but here are my three big key takeaways from his talk:
The line between “stores” and “fulfillment centers” are disappearing. Macy’s is preparing about 300 of its stores to serve as fulfillment centers for online orders, following in the footsteps of Nordstrom and Toys R Us. Coincidentally, the Wall Street Journal published an article yesterday discussing Macy’s ominchannel fulfillment strategy and some of the benefits and challenges associated with it. My favorite quote from the article: “We’ve spent the last 153 years building warehouses,” said chief stores officer Peter Sachse in an interview. “We just called them stores.” Supply chain network design and balancing inventory, transportation, and labor costs just keeps getting more complex.
Item-level RFID is ready to fulfill its promise. Macy’s is using item-level RFID tags at a few stores today and Leinback calls the technology a “game changer” when it comes to inventory management — and based on a video he showed of a store associate waving a Motorola handheld reader through racks of clothing and other items, beeping away with each read, it seems like item-level RFID is finally at the cusp of broader adoption. A report published earlier this year by the VICS Item-Level RFID Initiative (VILRI) came to the same conclusion, suggesting that “2012 may be a watershed year for radio frequency identification (RFID) technology in the retail sector.”
Mobile and in-store devices are transforming the retail shopping experience for consumers and store associates. Simply put, tablets, in-store kiosks, touch displays, and other technology in stores and in the hands of consumers and store associates are blending the online and physical shopping experience.
In keeping with tradition, Manhattan didn’t make any groundbreaking announcements during the conference. Instead, the company repeatedly emphasized what it views as an important competitive differentiator: distributed order management (DOM) and its role in the platform, specifically the interplay between DOM and inventory optimization. Here are some of the key points Capel made in his keynote address and meeting with analysts:
- While other solutions approach DOM from a “taking the order” perspective, Manhattan approaches it from an “inventory, PO, and moving the product” perspective.
- DOM and inventory optimization are in constant tension with each other. To oversimplify, DOM “snatches” inventory from somewhere in the network, essentially “breaking” inventory optimization plans that have to be re-optimized again. DOM needs to know where inventory is located or going to be, while inventory optimization needs to know where inventory was taken from and why.
- Available-to-Promise (ATP) is giving way to Available-to-Commerce.
DOM is a bit outside my area of expertise, so I can’t comment on Manhattan’s solution relative to the competition. But as Macy’s omnichannel strategy makes perfectly clear, companies will have to find a profitable way to manage that tension between DOM and inventory optimization, while also taking into consideration transportation, labor, and other factors in the “total cost to serve” equation. Manhattan is just starting to work on this problem, so no payoff examples in this category yet, but the company believes it has an advantage over the competition by having DOM and inventory optimization (as well as WMS, TMS, and other solutions) on the same platform. Some customers might view this as an advantage, others might not (see, for example, “Differing Viewpoints on the Need for a Holistic TMS”). At the end of the day, I believe whatever approach delivers the biggest payoff the fastest will ultimately have the advantage.
(And if you’re not in a consumer-centric industry, most of this doesn’t matter anyway).
Cloud computing has been in the spotlight at most user conferences this year, with vendors making big announcements related to their cloud offerings and strategy, but Manhattan was virtually silent on this topic. Sinisgalli discussed it a bit during the press briefing, only after being questioned about it by an analyst. The short answer is that Manhattan’s current and prospective customers aren’t looking for cloud solutions at this time. Most of them are large enterprises (more than $500 million in annual revenues) that already own and manage their own IT infrastructure. But if you include hosting by a third party in your definition of cloud computing, then Manhattan has been doing this for years, with about 15-20 percent of its customers using IBM or another partner to host their IT infrastructure and applications. When it comes to cloud computing, Sinisgalli believes it’s better for Manhattan to be a “fast follower” than being on the bleeding edge, and he emphasized that when their clients are ready to move to the cloud, they’ll be ready too.
Fair enough, but I believe Sinisgalli or Capel should have made these points in their keynote address, if only to reiterate the company’s position and strategy on cloud computing to customers and the market. Manhattan needs to stay engaged in the cloud computing conversation, and perhaps steer it in directions that will benefit the company long term. Otherwise, it risks losing mindshare to the competition, which is never easy to recapture, especially if you’re positioning yourself as a fast follower.
The other hot topic in the software industry these days is social media, and Sinisgalli did discuss this trend in his keynote presentation (and I was pleasantly surprised that he included my “social media inflection point” slide in his deck). Manhattan is using social media tools internally to better understand how these tools can improve the way employees communicate and collaborate. The company is also starting to introduce social media capabilities into its solutions. For example, back in November 2011, Manhattan announced Manhattan Scope Social, “an engagement framework that enables companies to connect social networking capabilities and supply chain solutions” (for related commentary, see “Supply Chain Software, Social Media, and the Death of Email”).
Are companies (and employees) ready to use social media in the workplace, especially in supply chain and logistics functions? That was one of the questions I raised in a roundtable discussion I led on “The Role of Social Networking to Enhance Employee Collaboration.” The executives who participated in the session provided some great insights, but in the interest of time, I’ll share my takeaways in a future posting.
I walked away from the conference with a renewed appreciation for the complex challenges and opportunities supply chain executives face today, and the important role technology continues to play in supply chain management. As long as Manhattan Associates and its peers remain focused (and execute) on helping clients achieve bigger payoffs faster, whether its through a platform strategy or some other means, then I believe the future is bright for all supply chain software vendors because the opportunity pie is big enough for everyone to enjoy.
Correction: A previous version of this posting had incorrectly stated that Manhattan Associates had invested $256 million in R&D in 2011, $213 million in 2010, and $173 million in 2009. These figures were actually cumulative values. Manhattan has been investing an average of about $50 million per year in R&D over the past five years.