Manhattan Associates sees uptick in supply-chain business

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.

Pete Sinisgalli

Pete Sinisgalli

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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shadow7071

September 7th, 2010
11:14 am

Like the sexy “Dot Com” era I predict the sexy “Supply Chain” era is about to change. For about the past decade business has been enamored with the “Global Supply” chain model (in all honesty I used to give presentations on North Ave. about the virtues of globalization) but this love affair is about to change. First, business is learning about the cost of shipping raw materials, work-in-process and finished goods around the world. (I just completed a study for a business where we discovered that a significant contributor to their costs was transportation) Second, business is beginning to understand both the total cost and the total risk (e.g., Mexico) of far flung global operations. And third, the U.S. market is going to demand locally produced goods. These changes will significantly impact the way that we view supply chain operations and management today.

Jefe

September 7th, 2010
11:31 am

So, shadow7071 do you view this as a good thing, localization? Maybe this will bring jobs back to America and we can go back to where labor is a big cost but at least it is local. I think companies forgot that even if goods were produced in Asia, South America, etc., very few of those workers could afford to buy their products.

We see what is happening in China now. Where highly educated Chinese workers do not want to work in factories for low wages. They want to be engineers, project managers, etc. Labor costs there are set to take off over the next few years.

shadow7071

September 7th, 2010
11:44 am

Jefe – I see localization as a good thing. It will be good for the economy and business.

Henry Unger

September 7th, 2010
12:27 pm

Good discussion, guys. It would be nice to see some local jobs coming back as part of a new wave of best practices.

shadow7071

September 7th, 2010
1:50 pm

Thanks Henry – Yes, it would be nice to see some solid, long-term jobs coming back to Ga. and the U.S. Localization is a new, emerging business model that can benefit business and the local economies in which they do business. In fact, we refer to this localization model as – Sustainable Manufacturing – meaning that it’s a business model for sustaining the business (i.e., costs, margins, profitability, marketplace execution) and sustaining the local economy (i.e., jobs, suppliers, community stakeholders).

whimsywoo

September 7th, 2010
2:07 pm

Shadow:

“Localisaton” as you describe it sounds more like “distributed manufacturing” or at least, “distributed assembly”. We see this huge trend in direct to consumer already…it is only logical that a cost-based model will begin to dominate in wholesale. Agree about the health of local economies under this model.

shadow7071

September 7th, 2010
2:21 pm

Whimsywoo:

From our perspective localization or “Sustainable Manufacturing” is a hybrid of “distributed manufacturing” models. Maybe it’s the natural progression. But yes, it’s cost-based model for the business. More than that it’s a marketplace execution model, a product commercialization model, a “sustainable supply chain” model, a business responsibility model and a local economy model, just name a few characteristic.

machen

September 8th, 2010
1:57 am

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