Another busy week, so let’s go straight to the supply chain and logistics news that caught my attention, headlined by a major acquisition in the transportation management systems (TMS) market:
- Kewill Announces Acquisition of LeanLogistics
- Apple & SAP Partner to Revolutionize Work on iPhone & iPad
- Amazon partners with Atlas Air Worldwide for cargo services (MarketWatch)
- Amazon expands European logistics role with continent-wide 3PL service (Lloyd’s Loading List)
- Target gets tough with vendors to speed up supply chain (Reuters)
- JDA Introduces Stratus — New Nimble, Out-of-the-box Cloud Offerings to Solve Complex Workforce Management, Transportation and Forecasting Needs
- Truck Orders Fall in April (WSJ – sub. req’d)
- Study: Biggest trucking firms outsource over 42% of their freight (FleetOwner)
- XPO Logistics Announces First Quarter 2016 Results
As I wrote last week, embracing disruption was one of the key themes of LeanLogistics’ user conference, but I don’t think any of us saw this disruption coming — that is, the company getting acquired by Kewill, which only 18 months ago had acquired IBM’s Sterling TMS solution, another pioneer in the software-as-a-service (SaaS) transportation management systems market.
According to a press release issued by Brambles (parent company of CHEP), the purchase price was $115 million, a nice premium over the $45 million Brambles paid for LeanLogistics in March 2008. When that deal was announced eight years ago, I was also surprised, but bullish on the opportunities ahead of them. Here’s what I said at the time:
LeanLogistics’ network provides the hidden value that makes the deal worthwhile for CHEP. It’s about the coming together of two rich information networks and the services they can power to bring value to shippers, consignees, and carriers by enabling more efficient, cross-company business processes. Combined with CHEP’s visibility to millions of equipment moves each day, LeanLogistics’ supply chain data becomes even more valuable — this supercharges what LeanLogistics was doing.
While both companies derived value from their eight year relationship, they didn’t quite reach the full potential of what they (and I) had envisioned. “Given the specialised nature of LeanLogistics’ business, as well as its size relative to the broader Brambles Group, we believe we have maximized the value we can contribute as its owner,” said Brambles CEO Tom Gorman in the press release. “We believe that in Kewill, and its controlling shareholder Francisco Partners, LeanLogistics has found the appropriate ownership under which to continue to develop and grow as an industry leader.”
Here’s what Kewill and LeanLogistics had to say about the deal:
“We see LeanTMS as a huge step forward for Kewill. New components, like LeanDex for freight rate indexing, have applicability across many of our 7,500 customers. And when you combine our two carrier networks, we will have by far the largest in North America,” said Jim Hoefflin, President & COO of Kewill. The MOVE platform provides additional components currently unavailable in LeanTMS. Chris Timmer, Chief Commercial Officer of LeanLogistics said, “We believe we can quickly integrate some key capabilities into LeanTMS such as yard management, deficit rating, shipment tracking and settlement for rail, to more comprehensively serve the needs of our customers. We also see the opportunity to accelerate our parcel functionality while being able to add entirely new customs and compliance capabilities.”
The deal is expected to close in mid-June, at which time I expect we’ll get more details from the combined company about its go-forward plans and strategy. My guess is that the LeanLogistics solution, enhanced with Kewill’s parcel and other capabilities, will become the main TMS platform moving forward, while the company continues to support customers currently using the Sterling TMS solution (with the goal/hope that they’ll transition over at some point in the future).
In short, the technology questions in these types of acquisitions generally get sorted out. The main questions I have at the moment are:
The leadership team: Over the past six months, Kewill has revamped its leadership team, including the appointment of a new CEO (Doug Braun, former CEO of IBS), new President and COO (Jim Hoefflin, former CEO of Empower Software Solutions), and new CFO and other leaders. Meanwhile, LeanLogistics brings a talented team of executives too, including Dan Dershem (President), Chris Timmer (Chief Commercial Officer), Chris Johnson (CTO), Tim Hinson (COO), and several other executives who have been with the company for many years. What roles will these executives have moving forward? Just as important is how the company organizes the rest of the team, including R&D, sales, marketing, customer service, and human resources. Simply put, how the company integrates and retains its talent is as important (if not more) to its future success than how it integrates its technology.
What will happen to Lean’s managed transportation services offering? This is an important component of Lean’s value proposition, but it takes Kewill and Francisco Partners out of a pure software model and into a logistics services business, which could complicate Kewill’s relationship with existing third-party logistics providers (3PLs). I’m a big proponent of managed services, and for several years I’ve talked about the merging of business models occurring in the logistics industry — that is, the coming together of technology, managed services, and consulting. Therefore, I believe keeping the managed services offering would be the right strategic move for Kewill, but running a logistics services operation is very different than selling software solutions, so going back to my question above about talent, this is an area where the existing Lean team will need to take a lead role.
Last month, I wrote about how the TMS market is becoming barbell-shaped, with some solutions becoming broader, more integrated, and feature-rich (multi-mode, multi-geography, complex optimization), while others are offering more limited capabilities, but with a stronger focus on ease of use, faster deployment, affordable and transparent pricing, and meeting the needs of the small and mid-sized business (SMB) market. This acquisition adds more weight to the broader, more integrated, and feature-rich end of the TMS barbell — and it may spark other deals in the months ahead.
If 2015 was the year of 3PL mega-deals, will 2016 be the year of TMS acquisitions?
Moving on to other news, Apple and SAP announced a partnership “to revolutionize the mobile work experience for enterprise customers of all sizes, combining powerful native apps for iPhone® and iPad® with the cutting-edge capabilities of the SAP HANA platform.” Here are some additional details from the press release:
This joint effort will also deliver a new iOS software development kit (SDK) and training academy so that developers, partners and customers can easily build native iOS apps tailored to their business needs.
As a part of the partnership, SAP will develop native iOS apps for critical business operations. These apps for iPhone and iPad will be built with Swift™, Apple’s modern, secure and interactive programming language, and will offer a familiar user experience with the SAP Fiori for iOS design language. Workers across industries will be empowered to access the critical enterprise data, processes and user experience they need to make decisions and take action right from their iPhone or iPad through apps designed to enable a field maintenance worker to order parts or schedule service, or a doctor to share the latest patient data with other healthcare professionals.
Meanwhile, JDA announced JDA Stratus, “a pre-packaged Software-as-a-Service (SaaS) cloud offering, is aimed at customers that want to leverage the full power and capabilities of JDA’s market-leading solutions through an economical, flexible and template-based deployment scope.” JDA Stratus is available in three pre-packaged offerings: JDA Stratus for Workforce Management (includes JDA Workforce Management and JDA Task Management modules), JDA Stratus for Transportation (includes JDA Transportation Management and JDA Transportation Planner modules), and JDA Stratus for Forecast and Replenishment (includes JDA Fulfillment and JDA Demand).
As JDA shared at its user conference this week, the company’s cloud business has grown to over $100 million in revenue, and it has more than 350 Cloud customers and more than two million users using its cloud solutions.
And with that, have a happy weekend!
Song of the Week: “Ophelia” by The Lumineers
Note: Kewill, LeanLogistics, and JDA Software are Talking Logistics sponsors.