Manugistics and IBM Form Supply Chain Collaboration

Manugistics Group Inc. (www.manugistics.com) and IBM Corp. (www.ibm.com)announced a supply chain collaboration solution for midsize companies. Thesolution, incorporating Manugistics software and IBM platform technology, isdesigned to help midsize companies improve product visibility and flow,maximize customer service, reduce costs, and increase sales. The two companieslaunched a global joint marketing campaign that focuses on midsize companies infood and agriculture, consumer packaged goods, distribution, consumerelectronics, and retail.

"Everybody's facing global competition," says Greg Owens,president and CEO of Manugistics. "Your competitors are global, and asthey produce efficiencies, if you don't do something, you're in survival mode.This creeps up on you." The joint solution, announced at Manugistics'recent user conference, helps midsize companies and their trading partnersleverage e-business collaboration tools once reserved for Fortune 500enterprises. Customers can expect a technological infrastructure that enablesmore intelligent collaboration around mission-critical business processes suchas demand planning and forecasting and customer fulfillment.

Analysts agree that this is an area businesses need to focus theire-commerce energy on over the next year. "E-fulfillment and globallogistics will be much more complicated than in the B2C [business-to-consumer]world. Collaboration is synonymous with e-business," says Adrian Gonzalez,senior analyst at ARC Advisory Group Inc. (www.arcadvisorygroup.com). "Companies need to move away fromthe old mindset of hoarding information. They have to manage across multipleorganizations. It's better to build fences, not walls."

Online supply chain management is still in its infancy for mostbusinesses, Owens says. Most companies "are just beginning to link withtheir suppliers," he notes. Ultimately, Owens hopes companies will followthe lead of one of Manugistics' more advanced customers, Canadian Tire, whichestablished relationships with its top suppliers to access information down tothe store and SKU level. This capability, however, takes some time to build, hecautions.

A representative of Amazon.com -- which also is partnering withManugistics to develop supply chain collaboration capabilities -- was on-handfor the IBM announcement. Large e-commerce sites will play a key role in thesmall to medium-sized business market, says Jeff Wilke, vice president andgeneral manager of operations at Amazon.com. "In the long run, businessescan tap into these services that hold inventory, and link through us, andprovide secure supply chain," he predicts. "We're talking abouthundreds of thousands of vendors out there."

The joint IBM-Manugistics supply chain collaboration solution featuresManugistics NetWorks, along with IBM Global Services consulting andimplementation services, IBM MQSeries message-queuing software, IBM RS/6000,and IBM Netfinity servers and customer support. Financing options are providedby IBM Global Financing. The solution also incorporates drag-and-dropconnections to help with quicker integration into existing systems.

One company that is seeing the benefits of supply chain integration isMitsubishi Motor Operations of America. Up until 1997, the company had a10-year history of losses in the US market, says Francis Oda, vice president ofsales operations at Mitsubishi Motor Operations of America. During this time,up to 45,000 units at any one time were piling up at shipping centers in NewJersey, incurring storage and insurance costs. The company was responding withexpensive price markdowns to clear the inventory. "We were doing the dealof the day to promote our inventory. Inventory costs, along with incentivecosts to dealers to push inventory, ran us about $100 million a year."

To get a handle on these costs, the company implemented a just-in-time,Web-based dealer ordering system that was accessible to its 520 dealers. Thesystem, which employed Manugistics supply chain software, helped clear theinventory. Combined with more focused marketing efforts, the order-to-deliverysystem helped increase sales 37 percent between 1997 and 1999. Sales were alsotrending upward by 42 percent this year, she adds.