Who Will Win?

April 9, 2019
7:34 pm

Over the last month, venture capitalists evaluating the supply chain planning market called 3x/week. I know of five companies for sale. Sharks are in the water.
The calls follow a predictable pattern. The first is to identify the potential available market. I identify the size followed by a disclaimer, “The current market is smaller than the potential. Today, companies are waiting for the next evolution of planning software. The biggest competitor in the space is “do nothing.” Current solutions satisfy a few manufacturing/retail companies. Most wait for better solutions.” (My disappointment? No one wants to pull on this thread…. The venture capitalists do not want to innovate. Instead, their goal is to milk the value of current companies.)
The second question is “Who will win?” This answer is difficult. Of the current players, I believe that Kinaxis and OM Partners have the highest market potential. Oracle’s GLOG solution is the strongest transportation planning technology. Llamasoft is investing to move from strategic to capture the wider supply chain planning market. Each has a promising story. SAP is ceding its 45% market share to new players. Will this shift in power raise all boats equally? No.

Market Impacts

No market acts in isolation.
Market shifts take different forms: analytics, cloud and defining outside-in processes. Deep analytics includes companies like Lokad experimenting with deep learning and schema-on-read. Value-priced solutions using cloud-based software for demand, tactical supply planning, and finite scheduling sell for 30% of the cost of JDA or Logility. An example is Optimity. Project 44 is attempting to redefine the transportation market from the outside in. I find each exciting, but there is a question. Can they grow up to be major players? The answer is unknown.
I know. The market is a bit of head-scratcher. With the evolution of new technologies, I think that there will be many winners. We will see a redefinition of the market. I give thanks that the pace of change is quickening and promising technologies maturing. This is good news for the business leader trying to improve supply chain processes.
The current market, fragmented and industry-specific, is tough for Venture Capitalists to understand. They get lost in the nuance. Let’s face it. The supply chain technology market is heady and geeky stuff. While Venture Capitalists feel that they can help to accelerate value, this has not been the case in this market over the last decade.
The buyer is also ever-changing. Since 1991, in the US market, there were 2355 acquisitions. I estimate that this M&A activity decreased the available market for supply chain planning solutions by 40%.

Industry View

This week, I got an email from an attendee joining the network of networks discussion on refining B2B. I love the sentiment of his email:
“I feel blockchain is overhyped. Our Company’s focus is on Cloud Computing and Cognitive Computing. I feel that these technologies are mature and can solve many business challenges today.
In the discussion on the phone today, I heard about two types of companies. The first are companies like SAP, Elemica, etc. who have been around for 10+ years. Time will tell, but I feel that they are not agile enough to become the ‘Salesforce of planning and order management for supply chain’. We also discussed startups. Unfortunately, it will take many years before they are big enough to solve the industry challenges. I believe we need to look at companies ‘in between’ these companies. I don’t have names for you at this point as I have not yet figured it out. When I do, I will let you know.”
When I read this, I smiled. It is the essence of the issue. There is no in between. The venture capitalist seeks it. Manufacturing companies want it. Unfortunately, they do not exist. The answer? Visionaries will build the supply chain planning market. Compelling visionaries on “stumps” selling hope will drive change. Pretty marketing has little impact. Or venture capitalists well-intended efforts…

Moving Forward

The wider market is decision support. The goal is to improve organizational decision-making by unleashing the power of analytics. The supply chain planning market is narrow and used by only 3-5% of back office personnel. The new goal is decision support for the masses. The new solutions deliver answers better, faster and easier. Today’s solutions are expensive, long to deploy and hard to use. The greater the M&A activity, the worse the issue. (JDA, E2Open, Infor, and Logility grew through acquisitions.)
Supply chain leaders crave success. They are searching for new solutions. The good news is that new technologies are equal to the challenge even if the venture capitalists are not… I say bring on innovation.
I welcome your thoughts.
Here are some prior blogs on the topic. My thoughts change slightly, but the themes are consistent.
Navigating the Supply Chain Fault Line
Three Reasons SAP Is A Risk To Your Business
The Digital Drinking Game
Where Would We Be Without All the Bullshit?

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Supply Chain Shaman