Never waste a good recession.
Even though that lesson has been drilled into CEOs time and again, many aggressively cut R&D and key projects during tough times, just like they do with operating expenses.
But when important capital investments are put on the back burner, companies risk future growth in what can be a penny-wise, pound-foolish move.
Still, many did just that during the height of this recession — if one bellwether firm’s experience is indicative. Some had no choice, given the credit crunch.
“Companies didn’t know where they would get cash, so they postponed investment,” said Pete Sinisgalli, president and CEO of Manhattan Associates.
The Atlanta-based company (founded in Manhattan Beach, Calif., where its name comes from) is one of the top firms in the logistics business, selling supply-chain software to retailers, manufacturers and distributors.
While it sounds complicated, logistics software helps companies get the right product to the right place at the right time. It’s more efficient, for example, to have trucks carrying goods to and from locations than traveling empty on the return trip.
“We’re constantly inventing new math and science to help companies operate more efficiently,” said Sinisgalli, who has headed Manhattan Associates for the past six years.
In normal times, the company saw its revenue climb quarter after quarter — mostly by double digits. But beginning in mid-2008, Sinisgalli said, revenue started going backward. Last year, revenue fell to $247 million, from $337 million the year before. Profit fell to $22 million, from $34 million.
Through layoffs and attrition, Sinisgalli presided over a workforce that dropped to about 1,800 from 2,200.
“It was a very painful process, losing very smart, caring people,” he said.
Now, however, Sinisgalli, 54, said business is turning around as Manhattan Associates markets new software.
Instead of focusing on just one part of a company’s supply chain, such as inventory control, Manhattan Associates is now selling software that ties together the different stages. The software can maximize efficiency throughout the entire process, from planning to inventory control to distribution.
That’s in contrast to individual software packages that can produce the optimum result in one area, but neglect to factor in others. Without stitching the software together, a company could arrive at the right inventory solution, but it might be tying up too much capital.
With business on the upswing and revenue headed back to the $300 million neighborhood this year, Manhattan Associates has hired about 50 people. There are another 100 openings for software engineers — are you paying attention, Georgia Tech grads?
Because Georgia Tech and companies like Manhattan Associates, UPS and Home Depot are heavily involved with logistics, business recruiters have been marketing this area as a supply-chain center.
“One of the reasons we’ve relocated here [in 1996] is that Atlanta is a hub for transportation and logistics, and home of Georgia Tech,” Sinisgalli said. “Clearly, IT is going to be a growth area for many years to come.”
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