JDA Software Group to Acquire i2 Technologies

Something that is bound to change the equations in the supply chain industry forever… Check the below news taken from Businesswire.
JDA® Software Group Inc. (NASDAQ:JDAS) and i2 Technologies, Inc. (NASDAQ:ITWO) today announced the signing of a definitive merger agreement for JDA Software to acquire i2 Technologies, Inc., a leading global provider of supply chain solutions, for an enterprise value of approximately $346 million in cash. The combination of the two companies creates a global leader in the supply chain planning and optimization market. On a pro-forma trailing 12-month basis, the combined company has annual revenues of $635 million, including nearly $300 million of annual maintenance and recurring subscription fees.
According to JDA Chief Executive Officer Hamish Brewer, the i2 acquisition completes the picture for JDA in the supply chain planning and optimization market.
‘By acquiring i2 we double our addressable market in manufacturing to include discrete manufacturing, complementing our current market leadership in process manufacturing and strengthening our retail and transportation management presence. A major player in the supply chain space for more than 20 years, i2’s world-class customers and employees are the perfect match for JDA. With the experience gained from the successful acquisition of Manugistics in 2006, the addition of i2 is comparatively an incremental and logical step for JDA,’ commented Brewer. ‘We are confident in our abilities to execute and deliver on projected synergies creating significant incremental shareholder value.’
‘In an industry that continues to consolidate, scale matters. In that regard, the combination of these two companies will create one of the world’s strongest, best-of-breed software solution providers focused on the global supply chain,’ commented Dr. Pallab Chatterjee, i2 Chief Executive Officer. ‘The combination of i2 and JDA increases the opportunity for expanded expertise, accelerated innovation and even greater value delivery through the joining of some of the best solutions and brightest minds in the industry.’
Snapshot of Combined Company
By combining JDA and i2, the resulting company will have significantly improved operating leverage and a strong financial position. The near-term cost synergies identified in operations, general, administrative and infrastructure resulting from this combination are expected to produce annual cost savings of approximately $20 million. As a result of the pending Merger, i2 is withdrawing its previously provided outlook for third quarter 2008.
‘In order to avoid equity dilution and maximize our shareholder value, JDA will finance the acquisition using debt. Credit Suisse and Wachovia will be financing the deal,’ commented Kristen Magnuson, JDA’s Executive Vice President and Chief Financial Officer. ‘Consistent with our strategy after the Manugistics acquisition, we will use our significantly expanded cash flow from operations to de-lever as quickly as possible.’
($ in Millions) JDAS
TTM ended
June 30, 2008 ITWO
TTM ended
June 30, 2008 Combined
Company
(Before Synergies)
Revenues:
Software $ 73.6 $ 47.1 $ 120.7
Maintenance 183.2 88.1 271.3
Product Revenues 256.8 135.2 392.0
Service Revenues 121.0 121.8 242.8
Total Revenues $ 377.8 $ 257.0 $ 634.8

Operating Income $ 44.6 $ 105.8 $ 150.4
Net Income $ 24.7 $ 96.0 $ 120.7
Adjusted EBITDA (1) $ 90.5 $ 45.8 $ 136.3

Cash Flow from Operations $ 88.3 $ 31.7 $ 120.0

Employees 1,711 1,309 3,020
Customers 5,700+ 400+ 6,000+

(1) See attached reconciliation of Non-GAAP measures of Performance.
Terms of the Transaction
Under the terms of the merger agreement, each issued and outstanding share of i2’s common stock will be converted into the right to receive $14.86 per share in cash and each issued and outstanding share of i2’s Series B Convertible Preferred Stock will be converted into the right to receive $1,095.3679 per share in cash plus all accrued and unpaid dividends (the ‘Merger’). In addition, upon consummation of the Merger the vesting of each outstanding option and restricted stock award for common stock of i2 will accelerate in full and the holders of such equity awards will be entitled to receive $14.86 per share less the exercise price of such equity awards, if any.
The following table summarizes the estimated cash to be expended to acquire i2 excluding direct costs of the acquisition:
In millions
Cash paid to common equity holders $ 343
Cash paid to convertible preferred holders 118
Total equity payments 461
Cash paid to retire convertible debt 107
Total cash to equity holders and to retire debt 568
Less estimated assumed cash balances (222)
Enterprise value $ 346
Direct costs of the acquisition are currently estimated to be $45 million and include OID and debt issuance costs, investment banker fees, legal costs and change-in-control payments.
Consummation of the Merger, which is expected to close in fourth quarter 2008, is subject to several closing conditions, including the approval and adoption of the merger agreement by i2’s stockholders, the amendment of i2’s convertible note indenture, expiration or termination of the applicable Hart-Scott-Rodino waiting periods and regulatory and other customary conditions. It will also be necessary to complete JDA’s debt financing arrangements prior to completing the proposed Merger. There can be no assurance that the Merger will be consummated. If i2 or JDA terminates the transaction under certain circumstances, i2 will be required to pay JDA a non-refundable termination fee of $15 million or JDA will be required to pay i2 a non-refundable termination fee of $20 million.
Debt Financing Arrangements
Concurrent with the execution of the merger agreement, JDA received commitments from Credit Suisse and Credit Suisse Securities (USA) LLC, Wachovia Bank, National Association and Wachovia Capital Markets, LLC to provide up to $450 million of debt financing to complete the i2 acquisition, including $425 million in term loans and a $25 million revolving credit facility on customary terms and conditions.
JDA will use the debt financing, net of issuance costs, together with the companies’ combined cash balances at closing, to fund the cash obligations under the merger agreement and related transaction expenses, to repay i2’s convertible debt, to refinance JDA’s existing debt and revolving credit facilities and to provide cash for the combined companies’ ongoing working capital and general corporate needs.
Voting Agreements
JDA has entered into voting agreements with certain directors and executive officers of i2 and with a significant stockholder of i2, pursuant to which such signatories have agreed to vote in favor of the Merger agreement and against any other proposal or offer to acquire i2. The voting agreements apply to all shares of i2 common stock and Series B Convertible Preferred Stock held by the signatories at the record date for the relevant i2 stockholder meeting. The voting agreements restrict the transfer of shares by the signatories, except under certain limited conditions.
Consent and Conversion Agreements
Concurrent with the execution of the merger agreement, i2 entered into a Consent and Conversion Agreement (’Conversion Agreement’) with Highbridge International LLC (’Highbridge’) as the holder of a majority or more of its outstanding 5% Senior Convertible Notes (’Notes’) due 2015. In return for i2’s agreement to pay Highbridge a payment of $86.9565 per $1,000 principal amount of Notes (’Consent Premium’), Highbridge has agreed as of the effective time of the Merger, to waive the application of and amend the indenture for the Notes to remove certain covenants and further to convert the Notes at, or within 30 trading days of, the effective time of the merger into cash as provided in the indenture, together with a make whole premium, as provided in the indenture as well as interest through the date of conversion. One-third of the Consent Premium due to Highbridge will be paid by i2 prior to August 13, 2008, with such amount being non-refundable, and the balance will be payable at the effective time of the Merger. Pursuant to the Conversion Agreement, Highbridge also agreed to convey its warrants to i2 as of the effective time of the Merger pursuant to the terms of the warrant agreement. The merger agreement obligates i2 to offer similar arrangements to all holders of the Notes to be effective as of the effective time of the Merger.
Consent Agreement with Thoma Cressey Bravo Funds
Concurrent with the execution of the Merger Agreement, we also entered into a Consent and Agreement (the ‘Consent Agreement’) with Thoma Cressey Bravo Funds, as the holders of our Series B Convertible Preferred Stock (the ‘Series B Stock’) to among other things, agree to the terms and conditions of a Certificate of Amendment to the Certificate of Designations for the Series B Stock to be filed and effective in connection with the closing of the Merger (the ‘Certificate of Amendment’). The Certificate of Amendment provides for the accrual of cash dividends payable to the holders of the Series B Stock at an annual rate of 12% compounding quarterly during any period after September 6, 2013 if we are unable to redeem the Series B Stock as a result of a prohibition under the debt financing arrangements (the ‘Dividend’). This accrued but unpaid Dividend is payable upon the redemption of the Series B Stock. This obligation to accrue the Dividend terminates on September 6, 2017 after which time we will be unconditionally obligated to redeem the Series B Stock upon the request of the holders of such stock.
Citi acted as exclusive financial advisor to JDA and DLA Piper US LLP acted as JDA’s legal counsel. J.P. Morgan Securities Inc. acted as exclusive financial advisor to i2 and Munsch Hardt Kopf & Harr, P.C. acted as i2’s legal counsel.
Investor Conference Call and Webcast Information for Today’s Announcements
JDA Software Group, Inc. will host an investor conference call and webcast today, August 11, 2008 at 11:00 a.m. Eastern time to discuss the pending acquisition of i2 Technologies. To hear the audio portion of the call and for investor question and answers at the end, dial (888) 434-3293 (United States/Canada) or (706) 634-5126 (International) and ask the operator for the ‘JDA Software Group to Acquire i2 Technologies Investor Conference Call.’ To view the webcast of the call, go to the following web page 10 minutes prior to the time of the conference call: https://www.livemeeting.com/cc/jda/join. using Meeting ID: 7DNQQG and Entry Code: 9W7673. The conference call recording will be available for replay two hours after the call’s completion. To access the recording, dial (800) 642-1687 (United States/Canada) or (706) 645-9291 (International) Conference ID 59781212. A replay of the webcast including audio will be posted on JDA’s website at http://www.jda.com/i2-acquisition.asp after 1:00 p.m. Eastern time on August 11, 2008.

About i2 Technologies, Inc. (Pre Acquisition)

Throughout its 20-year history of innovation and value delivery, i2 has dedicated itself to building successful customer partnerships. As a full-service supply chain company, i2 is uniquely positioned to help its clients achieve world-class business results through a combination of consulting, technology, and managed services. i2 solutions are pervasive in a wide cross-section of industries; 21 of the AMR Research Top 25 Global Supply Chains belong to i2 customers. Learn more at www.i2.com.

About JDA Software Group, Inc. (Pre Acquisition)

JDA® Software Group, Inc. (NASDAQ:JDAS) is focused on helping companies realize real supply chain and revenue management results ‘ fast. JDA Software delivers integrated merchandising as well as supply chain and revenue management planning, execution, and optimization solutions for the consumer-driven supply chain and services industries. Through its industry leading solutions, leading manufacturers, distributors, retailers and services companies around the world are growing their businesses with greater predictability and more profitably. For more information on JDA Software, visit www.jda.com or contact us at info@jda.com or call +1.800.479.7382.

Safe Harbor’ Statement under the U.S. Private Securities Litigation Reform Act of 1995

This press release contains forward-looking statements that are made in reliance upon the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The forward-looking statements contained herein include statements about the consummation of the pending merger of JDA Software Group, Inc. (’JDA’) and i2 Technologies, Inc. (’i2′), future financial and operating results of the combined company and benefits of the pending merger. Factors that could cause actual results to differ materially from those described herein include: (a) JDA’s ability to leverage the i2 products to enable it to further expand its position in the supply chain market; (b) JDA’s ability to successfully integrate and market the i2 products; (c) JDA’s and i2’s ability to obtain regulatory approvals; and (d) JDA’s and i2’s assumptions regarding the future financial and operating results of the combined company if JDA and i2 successfully complete the merger. Additional information relating to the uncertainty affecting the businesses of JDA and i2 as well as certain risk associated with the pending merger between JDA and i2 are contained in the respective filings with the SEC, including the Proxy Statement referred to below. Neither JDA nor i2 is under any obligation to (and expressly disclaims any such obligation to) update or alter its forward-looking statements, whether as a result of new information, future events or otherwise.
In addition to the specific risks identified in the preceding paragraph, mergers involve a number of special risks, including diversion of management’s attention to the assimilation of the technology and personnel of acquired businesses, costs related to the merger, the integration of acquired products, technologies and employees into JDA’s business and product offerings, and the risk that the merger is not consummated. Achieving the anticipated benefits of the pending merger will depend, in part, upon whether the integration of the acquired products, technology, or employees is accomplished in an efficient and effective manner, and there can be no assurance that this will occur. The difficulties of such integration may be increased by the necessity of coordinating geographically disparate organizations, the complexity of the technologies being integrated, and the necessity of integrating personnel with disparate business backgrounds and combining different corporate cultures. The inability of management to successfully integrate the business of the two companies, and any related diversion of management’s attention, could have a material adverse effect on the combined company’s business, operating results and financial condition.
Caution Required by Certain SEC Rules
In connection with the proposed transaction, i2 has agreed to file with the Securities and Exchange Commission (the ‘SEC’) and mail to its stockholders a Proxy Statement soliciting approval for the proposed transaction. The Proxy Statement will contain important information about the proposed transaction and related matters. INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE PROXY STATEMENT AND OTHER DOCUMENTS FILED WITH THE SEC CAREFULLY IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION. The Proxy Statement will be mailed to the stockholders of i2. Investors and security holders may obtain free copies of this document (when it is available) and other documents filed with the SEC at the SEC’s web site at www.sec.gov. In addition, investors and security holders may obtain free copies of the documents filed with the SEC by going to i2’s Investor Relations page on its corporate website at www.i2.com/investor or by directing a request to i2 at One i2 Place, 11701 Luna Road, Dallas, Texas, 75234, Attention: Investor Relations (telephone: 469-357-1000).
i2, and its respective directors and executive officers, may be deemed to be participants in the solicitation of proxies from the stockholders of i2 in connection with the transaction described herein. Information regarding the special interests of i2’s directors and executive officers will be included in the Proxy Statement described above. Additional information regarding these directors and executive officers is also set forth in i2’s proxy statement for its 2008 Annual Meeting of Stockholders, which was filed with the SEC on April 28, 2008 and Annual Report on Form 10-K filed with the SEC on March 17, 2008. These documents are available free of charge at the SEC’s web site at www.sec.gov. i2’s filings are available free of charge on i2’s corporate website at www.i2.com/investor on its investor relations page or by telephone as listed below.
JDA may be deemed to have participated in the solicitation of proxies from the stockholders of i2 in favor of the proposed transaction described herein. Information regarding JDA’s directors and executive officers is set forth in JDA’s proxy statement for its 2008 Annual Meeting of Stockholders, which was filed with the SEC on April 11, 2008 and Annual Report on Form 10-K filed with the SEC on March 14, 2008. These documents are available free of charge at the SEC’s web site at www.sec.gov. JDA’s filings are available free of charge on JDA’s corporate website at www.jda.com on its investor relations page or by telephone as listed below.

NON-GAAP MEASURES OF PERFORMANCE
(in millions)

JDAS
(TTM Ended June 30, 2008) ITWO
(TTM Ended June 30, 2008 Combined
Company (Before Synergies)

Non-GAAP Operating Income and Adjusted EBITDA

Operating Income (GAAP BASIS) $ 44.6 $ 105.8 $ 150.4

Adjustments for non-GAAP measures of performance:
Add back amortization of software technology 6.0 6.0
Add back amortization of intangibles 20.1 .1 20.2
Add back restructuring charges and adjustments to acquisition-related reserves 3.5 4.0 7.5
Add back stock-based compensation 6.5 10.9 17.4
Less gain on intellectual property settlement, net (79.0) (79.0)

Adjusted non-GAAP Operating Income 80.7 41.8 122.5

Add back depreciation 9.8 4.0 13.8

Adjusted EBITDA (Earnings before interest, taxes, depreciation and amortization) $ 90.5 $ 45.8 $ 136.3

 

Manhattan Associates, SAP and IBM : What’s the connection?

Everybody knows that IBM’s WebSphere and SAP’s NetWeaver are competing software solutions in the integration field. So which one is chosen by Manhattan Associates, an SCM best of breed vendor.
Literally both!
For its IPS(Integrated Planning Solutions) and ILS(Integrated Logistics Solutions), IBM’s WebSphere is the preferred choice.
For its WMS(Warehouse Management System) software, Manhattan Associates has got a “Powered by SAP NetWeaver® “ certification.

Let’s understand how both would help MA(Manhattan Associates) in expanding its business.
Being an IBM WebSphere partner, MA and IBM sales team are working together in almost all the markets.
Being a SAP certified vendor means MA WMS would instill more confidence in customers due to the seamless integration with the SAP business suite which many customers use.

 

Basics of Warehouse Layout : How to strategize ?

A warehouse is used to buffer inbound shipments and outbound customer orders. How much should be stored in a warehouse depends on the difference between the incoming shipment and the outgoing order.

How does one go about in designing a warehouse? The catch lies in understanding how picking and storage is going to happen in the warehouse. Both have opposite requirements and are the two most important deciding factors for a warehouse designer.

Remember, if you go for efficient storage, picking becomes complicated. If you go for efficient picking which normally means having a small number of fast moving or high-flying goods(as I like addressing them) in nearby locations, storage efficiency is reduced.

Let’s put it this way. The design of a warehouse would depend on which activity is going to dominate once the warehouse becomes functional.

If picking dominates, you need to have a compact picking area. You can go for some amount of automated picking.

If storage dominates, you need to have multi-levels and high bays .Picking can even be manual.

If both picking and storage are dominant activities, go for large DCs (Distribution Centres). You need to automate handling using MHEs(Material Handling Equipments) and also automate picking using either scanning devices or pick to light or voice picking.

If both picking and storage have low requirements, then a simple warehouse having pallets, shelves, racks with manual picking would suffice.

 

Warehouse Management concept: Choosing between voice picking and pick to light

Many of you have mailed me asking which is better : voice picking or pick to light . In a Warehouse, order picking can be done in a number of ways, namely paper based picking, scanning (through RF guns), pick-to-light and voice technology.

I stumbled upon a video which pretty much is biased towards voice picking but then as I have always repeated, don’t form opinions based on this video alone.

The real advantage of voice picking which people tend to overlook is that the warehouse floor staff which feels burnt-out doing the same monotonous job of order picking, now look forward to an exciting day in the warehouse because they get to work on something new and consequently job satisfaction increases. Because at the end of the day, its the people and not any technology and software that is driving the warehouse.

Some voice picking software applications are VoCollect’s Talkman®, Lucasware, Vulcan Voice™ by CTG, and Voxware .

Here’s the link to the video about voice picking vs pick to light.
http://www.yourtechtv.com/viewVideo.php?video_id=362&title=Voice_vs_Pick_to_Light

 

Is the debate on Best of Breed vs ERP or is it on Functionality vs. Integration?

Almost everyone has an opinion on the question of best of breed vs ERP. Alas, not many have the answers.
SAP and other big ERP players have this habit of browbeating the best of breed competition .SAP had once famously talked about the perils of buying best of breed .Well, the logic put by the ERP players is that integration is always an issue with best of breed software. But then, I am at a loss as to why the best of breed vendors have never hit back on their strong point of functionality. In terms of functionality, best of breed would win hands down.
So which is better, best of breed or ERP, which people have termed as best of suite. There are no clear winners and there are no clear answers. There is ample space for both for many more years. The criteria which normally hold the key are functionality, integration, implementation and technology. Price comes at the last which does suggest that this is an extremely profitable domain. Functionality and integration have the same priority on the wish-list of buyers.
But beware! Lots of buyers are opting for ERP and their decision is based on the presumption that they have the incumbent ERP installed and hence it’s the natural choice. Not necessarily a correct decision. The incumbent ERP may not have the requisite functionality ,required by the customers business, packed in it. If the customer just wants the industry standard process ,maybe a vague example could be inventory management module and normal functionality, they can very well opt for their current ERP. But if their functionality is rapidly changing, they need to look further and here the balance tilts in favour of best of breed.
Best of breed SCM software vendors are investing a lot in technology as well as adding more and more functionality to their base product. With most shifting to SOA(Service Oriented Architecture) , ERP vendors won’t have any grounds to complain about integration.
In SCM, business runs technology and not vice-versa. Its time for the ERPs to come up with their own best of breed versions.

 

When I2 was slam dunked by Nike

In 2001, I2’s share plunged by 22.4% as the markets reacted sharply when the reason given by Nike for its expected third- quarter earnings dip was flawed software from I2.The then CEO of Nike Philip Knight thundered in a conference call :” This is what we get for our $400 million?”
I understand that all SCM best-of-breed softwares are complex. But technology and support was never a problem for I2 though their software is pretty complex (as normally every other vendors SCM software is). The problem lies in how it is implemented. Nike had a complex problem of mapping and tracking every shoe-model manufactured by it. I2 enhanced its software for this feature and it took longer than expected. With issues cropping up during go-live and Nike’s earnings dipping, Nike squarely deflected the blame on I2.
What would have happened if Nike had chosen a big ERP player (though they had limited role in SCM during that period)? Would they have been able to put the blame on these big ERP players. The answer is always yes. The inspiration to write this article was because of the below piece of news I read at the start of this year.
Source: http://www.networkworld.com/news/2008/013008-ibm-american-lafrance-bankruptcy.html
IBM probably won’t be asking American LaFrance for product endorsements anytime soon.
American LaFrance, an emergency vehicle and equipment company in South Carolina, has faulted, at least in part, IBM’s software implementation for its recent bankruptcy in court documents filed at the US District Bankruptcy Court of Delaware this week.
According to the documents, American LaFrance began using unnamed ERP purchasing, inventory, production, payroll and finance services with the help of IBM and IBM software after the company was spun off from Freightliner in 2005.
However, the company said it began experiencing a “plethora of problems” with the components of its ERP software from its inception. Among the “serious deficiencies” that American LaFrance claimed had a “crippling impact” on its operations were “incorrect or incomplete” inventory data on the system; missing financial information that included inaccurate accounts payable, accounts receivable and general ledger balances; and the inability to transfer data from the Freightliner system onto the new system. As a result of these problems, the company says it was unable to reliably maintain its inventory, thus hindering the company’s ability to deliver vehicles and equipment to customers. This “had an immediate impact on [American LaFrance's] cash flow and created a liquidity crisis,” the company claimed.
Later in the documents, the company said it was “analyzing potential causes of action against IBM in connection with the problem-riddled transition to the ERP system.”
An IBM spokesman confirmed to The Register that American LaFrance had used its systems, but declined to elaborate, stating that the company was “reviewing the documents filed with the court and have no further comment to make at this time.” IBM bills its ERP system as “a comprehensive solution for managing business processes, including financials, human resources and operations and corporate services.

This leads us to the raging issue of best-of-breed vs ERP systems. Watch out for my next post.

 

I2 Tech to get $83.3 million SAP settlement

SAP is going to pay I2 Tech $83.3 million to settle a two-year old patent-infringement lawsuit. I2 had accused SAP of infringing on seven of I2’s software patents.
By paying up all of it in cash,SAP has been able to get the patents cross-licensed. Now each party will receive license to certain patents. Read the below Associated Press article in businessweek for details.
I2 Technologies Inc. said it will receive a cash payment of $83.3 million under terms of a patent litigation settlement with German business software maker SAP AG.
I2 makes software that helps companies coordinate deliveries from suppliers with their production schedule, and manage inventory.
The companies have agree to cross license certain patents, and dismiss all existing legal action with prejudice.
Further terms weren’t disclosed.
I2 expects to receive the cash payment in the third quarter. The company also said that since the settlement will boost financial performance, second-quarter results are no longer expected to be flat with the first quarter.
Shares rose 37 cents, or nearly 3 percent, to $13.09 in afternoon trading on an overall down day for the markets.
Source: http://investing.businessweek.com/research/stocks/news/article.asp?docKey=600-200806260839APDIGITLFINANCE__i2_Technologies_SAP_S-6AJ23A7BOO94R6D9VMCTEHU7DQ&timestamp=06/26/2008%208:39%20AM%20ET&headline=I2%20Tech%20to%20get%20%2483.3%20million%20SAP%20settlement&docSource=AP%20Digital&provider=ACQUIREMEDIA&realtedsyms=|US%3BITWO|US%3BSAP&symbol=SAPG.DE

“I2 makes software that helps companies coordinate deliveries from suppliers with their production schedule, and manage inventory.” Reading this line from the AP article makes me wonder how I2 has been relegated to the role of an inventory management solutions provider. Wasn’t it delivering a suite of products in almost all functional areas of Supply Chain? Maybe , its time to discuss why I2,which was one of the leaders in the best-of-breed SCM software providers, declined. This would lead to the wider debate of best-of-breed vs ERP.

 

Supply Chain Management: How to introduce the subject to the uninitiated?

The oft-consulted Wikipedia gives the definition of Supply Chain Management as “Supply chain management (SCM) is the process of planning, implementing and controlling the operations of the supply chain as efficiently as possible. Supply Chain Management spans all movement and storage of raw materials, work-in-process inventory, and finished goods from point-of-origin to point-of-consumption.”

What do you do when a fresh intern asks you what is supply chain and supply chain management? Well, I go about like this.

Three things make a Supply Chain, namely Customers, Producers and Suppliers. One can extend the Supply Chain to include the customers’ customers and the suppliers’ suppliers. Supply Chain Management is an approach to manage the troika of PPF which stands for Purchasing, Production and Fulfillment, in order.
Purchasing- I/P from supplier
Production- Converting I/P to finished product(O/P)
Fulfillment- Delivering O/P to customer.

Major decisions that are taken before setting up a Supply Chain in place can again be summed up in a triad as where to, how to and from which.
a)Where to locate the DC(Distribution Centre)
b)How to transport goods among the DCs
c)From which places to procure the goods.

 

Things you need to take into account when buying supply chain management software

a)Understand what functions are required by your business before you buy any SCM product. How the product integrates with the other IT systems in place now or in future in your business should play a major role in determining the buy. Let’s straightaway start with a generic example. If you are planning to buy a Merchandising Software from one software vendor and already have a different Warehouse Management Software, make sure that the merchandise software can be integrated with the Warehouse Management Sofware. Another decision making criteria is whether the SCM software you are going to buy can integrate with the ERP system in place.

b)Most often than not, best-of-breed SCM software providers keep adding newer functionality to their base products by constantly taking the best custom features asked by the customers. These may suit your business needs which keep on changing and while fine-tuning your supply chain, you may need a new functionality which is already there in the software but has been switched-off at the time of delivery because it wasn’t asked for.

c)Keep in mind that an SCM product which suits a big player like WalMart may not suit everyone else.Just because WalMart has bought a certain product from an SCM software provider doesn’t mean that the product would be suitable for your business. Walmart is able to invest huge amounts of money in getting the product customized to suit its business. The customized product may more often than not nowhere resemble the base product sold by the SCM software provider. So never go by reputations. Your SCM problem could be unique and if you have luck on your side, a niche player could very well solve your business needs.