17. Interview with Mr. Eddie Capel of Manhattan Associates
Introduction
This chapter consists of a series of questions and answers from an interview with a leading supply chain executive. The objective of this chapter is to provide a practitioner’s perspective on the subject of life cycle issues in supply chain management. Other related subjects are also discussed in the interview.
About the Interviewee
Mr. Eddie Capel is the Manhattan Associates Executive Vice President and Chief Operating Officer. He previously served as Executive Vice President of their global operations. Mr. Capel is responsible for worldwide strategic direction and quality execution across solution strategy, research and development, product management, professional services, and customer support. He also leads Manhattan’s EMEA and APAC regional operations. Mr. Capel brings more than 20 years of experience to overseeing supply chain organization strategy and operations. Prior to joining Manhattan Associates in 2000, he held various positions at Real Time Solutions (RTS), including Chief Operations Officer and Vice President of Operations, where he led teams that supported the supply chain strategies of companies such as Wal-Mart, Amazon.com, and J.C. Penney. He also served as Director of Operations, with Unarco Automation, an industrial automation/robotics systems integrator. Prior to joining Unarco, Mr. Capel worked as a Project Manager and System Designer for ABB Robotics in the United Kingdom.
“At Manhattan Associates, we provide sophisticated supply chain solutions to those who see providing exemplary service to their customers at a highly competitive cost a priority”
—Eddie Capel, 2012
About Manhattan Associates
Manhattan Associates, Inc. (www.manh.com/) is a best-in-class global solutions provider for supply chain leader-organizations intent on leveraging their supply chains. Their software solutions enable Fortune 500 and other organizations to create customer experiences consistent with their brand values; improve relationships with suppliers, customers, logistics providers, and other organizations in their supply chain ecosystems; leverage investments across supply chain functions; effectively manage costs; and meet dynamically changing market requirements. They are the only vendor exclusively focused on a platform-based approach to supply chain management. This enables organizations that view their supply chains strategically to execute more effectively and achieve competitive advantage. Platform thinking combines technology, principles, and practices to create Whole Chain Awareness—unified insight and execution across all organizational and market dimensions that yields more integrated, agile, and responsive supply chains.
Interview Questions and Answers
How would you characterize your organization’s support role in supply chain management?
Our firm supplies software solutions for supply chain experts. So we facilitate and support the movement, distribution, forecasting, and so forth of finished products through our client’s supply chains. We don’t provide broad software like material requirements planning (MRP) or enterprise resource planning (ERP) manufacturing software. We are 100% focused on the supply chain and getting their goods throughout their supply chain to whoever the consumer may be.
Does your software just provide the information on which a supply chain functions?
Our software provides more than just information. We actually help execute supply chain transactions. For example, suppose we dropped into a large distribution center (DC) for a very large firm with, say, $50 million in inventory, a million-square-feet DC, 500,000 products, and 600 people performing a number of primary distribution functions (for example, receiving, storage or put-away, inventory control, processing orders, shipping). What our software does is that it knows what products will be received, which will fit into the facility, where they will be located; and our software takes orders from customers and manages and directs the staff to efficiently utilize their time by telling them where to pick stock. In addition, supporting the outbound logistics functions, our software coordinates the right shipping carrier going from the right source to the right destination with the right service level. It also provides the right bar code shipping labels to go through the complex FedEx shipping centers, if they ship that way. So, our software manages the entire symphony of actions to optimize the firm’s supply chain operations. Now, imagine a firm like The Home Depot, which has 75 DCs. What our software will do is coordinate all these activities in the network of DCs for this firm. We management all of these transactions throughout the firm’s network in the most cost-efficient way. My point here is that we are about executing, operating, and running supply chains, not just providing information.
You offer a full range of products that support, among other things, the product life cycles that your supply chain customers have to deal with. Don’t some of those software products focus on the development phase or Introduction Stage of the product life cycle for your customers?
In our portfolio of software products, we provide companies with software that deals with nearly all phases of product life cycles in supply chain management. We provide companies first of all with forecasts of the demand for their goods. We look at anything from historical patterns to projected or predicted seasonal patterns to help firms know when and where their demand will be. That starts the process in supply chain. We are going to seed the forecast with the most similar products that we can find—so that new products will be picked up and be modeled with the same kind of attributes, whether they be product attributes or sales history attributes based on geolocation and any other demographics.
For the software products that you create to solve your client’s needs, are their features or add-ons that you modify your software products as your clients’ firms supply chain changes in size?
Yes, is the easy answer! Our products have to match the developing needs of our clients, and this goes beyond simply size issues. Whole strategies have to be modified as their environments change. For example, as diesel fuel prices change, the strategic use of logistics often has to change rapidly as well. If diesel fuel becomes cheaper than it normally is, there will be more transportation, resulting in less inventory and more frequent trips. This impacts inventory and logistics planning strategies, which in turn requires alteration of software applications. We seek to build in to our software applications some of the flexibility and agility needed to satisfy customers demands (that is, our customers and theirs) for our supply-chain-intensive firms.
Does your firm offer your customers the flexibility to adjust their needs as their products go through the Introduction, Growth, Maturity, and Decline Stages of a product life cycle?
Sure! We do not have a product life cycle (PLC) software application per se, as it is usually used for product design. But in terms of execution, we certainly offer our customers software applications that permit them to deal with all phases of their PLCs.
How do you help your supply chain customers manage products that are in the Growth Stage of their product life cycle?
Building a system to deal with growth is not hard to do, but here is the problem. A system can work well for 360 days a year, but on the other days, like Black Friday, Cyber Monday, Mother’s day, Valentine’s day, and some other one-day special yearly events, we need a system that can handle ten times the volume of business than the other 360 days of the year. But here is the challenge: Our customers don’t want to pay for a system that can handle ten times the need for the other 360 days. There are number of different approaches that we can use to deal with this kind of service-level demand for those five extreme growth days of the year. Of course, it depends on the type of business. There are simple solutions like provisioning flexible hardware where additional servers and staff would be available on those five busy days to keep systems from slowing down during high demand. That is the easy part of dealing with growth spurts. A different demand situation that could be in any phase of the product life cycle is where a customer shifts the service level from, say, delivering goods in three or four days to an overnight delivery service level. This would take an entirely new execution service process because you are receiving goods, staging goods, and calling transportation carriers to achieve the new service level.
Growth in demand can also cause inventory problems, as well, since demand outstrips supply. This leads to issues of how you should prioritize customers and which customers you decide you will satisfy. Often times, the decision is made based on profit margin.
All the factors previously mentioned are relevant and important to helping our customers deal with the Growth Stages of their products. Sudden growth is something that is fairly predictable. We know the days of the year when growth will occur and we can fairly well predict the amount of demand but there are other situations, like natural disasters that cause disruptions in supply chains that are not always predictable and cause a variety of supply chain challenges (for example, inventory outages, wasted labor effort, lost sales). Without agile and flexible software, a firm will not be able to respond in a timely manner to deal with those unexpected types of situations. Our software is design to provide that type of agility and flexibility.
How do you help your supply chain customers manage products that are in the Maturity or Decline Stages of their product life cycle?
In these stages, a firm tries to minimize the inventory they have to avoid carrying costs and minimize transportation costs. Firms are looking for much more economic ways to transport goods to customers. Reducing the costs generally means longer lead times to customers. Using our software, employees can dial in the number of days they are willing to allow for delivery to a customer (for example, one day, two days, three days, or more), and the software will optimize their choice of shipping methods and carriers to reduce the costs of shipping. The longer the lead time, the more opportunities exist to reduce the transportation costs.
As your software products age because of new innovations and technologies, even your product goes through a product life cycle. How do you deal with these changes within the context of supply chain management changes?
Yes, this happens, but to deal with it we are spending millions of dollars every year in research and development. We do this to either build new products or continue to innovate products in a certain form. Twenty-five years ago it was common for DCs to be screwed onto manufacturing factories for supply chain purposes. Today, things have changed, and there are very few DCs/factory combinations, so this evolution process has changed and our software systems have changed, as well, to match these industry changes. These changes have required us to spend tens of millions of dollars to upgrade and enhance our software applications. In this regard, our software applications go through the same kind of product life cycle stages that our customers experience with their products. It is the nature of our firm to have to stay ahead of the changes in supply chain management, so our software will be more than current, but ahead of the needs of our customers. The software solutions we are building this year are designed to solve what we perceive to be the supply chain problems of next year and the year after.
Let me give you an example of one issue of how supply chains are changing and how our organization tries to help to deal with it. The workforce in the United States is graying. There are about 500,000 DC workers in the United States, and they are all getting older. We are exploring what that means to the needs of the firms that have DCs. Related and even more acute is the graying of truck drivers for supply chain truck-oriented firms. The market for drivers today has changed, and not as many younger drivers are entering that career. As a result, the cost of truck drivers is going up. This shortage is causing a whole number of other challenges in supply chain management. We don’t have a magic wand to solve this problem completely, but we can help solve some of these issues. By using software that optimizes transportation, such as minimizing miles and improve driver utilization, you need fewer truck drivers, which in turn helps to reduce their costs and other human resource problems. To develop software to deal with this kind of issue, we are looking at age patterns, demographic patterns, commodity prices, and fuel prices and making some of our bets on product development investments around those real macro issues.
Are there any additional points you might like to add about supply chain management?
At every turn, supply chain management is becoming more complicated. The macro-economic downturn that started in 2009 has heightened the need for minimizing the capital investment in, among other things, inventory. Trying to drive down inventory within a supply chain makes the need for optimization much greater than it ever was before. During a downturn in the economy, orders tended to become smaller, requiring us all to be more responsive to customers’ needs. Smaller orders tend to translate into an increased frequency of orders. On top of that, we are facing an ever-expanding number of new products entering the market. So, a combination of focusing on inventory, a higher level of customer support, orders becoming smaller, and millions of products being introduced into the market has made supply chain management more complicated every day. This becomes even more complicated when adding in the globalization aspects from a sourcing perspective and the consumer markets. Of course, we love complication because the more complicated the supply chain world is, the more demand for sophisticated software solutions such as ours.