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To: Softechie who wrote (5126)	1/26/2003 11:55:30 AM
From: Softechie	Read Replies (1) \| Respond to of 29602

IN THE MONEY: Another Hurdle For Supply-Chain Software -------------------------------------------------------------------------------- 14:26 ET =DJ IN THE MONEY: Another Hurdle For Supply-Chain Software 24 Jan 14:26 By Steven D. Jones A Dow Jones Newswires Column VANCOUVER, Wash. (Dow Jones)--Revival in demand for supply-chain software has been stymied by a slump in manufacturing and may soon face another hurdle: write-offs. Analysts and consultants in the transportation and manufacturing industries report that several companies are retooling supply-chain initiatives launched during the booming '90s. Software to manage the flow of goods from suppliers to end-users was considered vital for keeping up with rapid growth and spawned an industry to provide supply-chain technology, or SCT. Now technology that cost millions is being trimmed or in some cases given the ax. The influence of write-offs on future sales is vague, say analysts. But it is certain that the write-offs compound the perception that supply-chain technology is Byzantine and costly, which the industry is striving to overcome. In his quarterly survey of shipping managers, Bear Stearns & Co. transportation analyst Ed Wolfe found that by the third quarter of last year, 44% of respondents had written down the value of their supply-chain technology in the prior 12 months. That's up from only 9% of those surveyed in the second quarter. "This does not speak favorably to the product suites and applications offered by many SCT companies" wrote Wolfe in a recent note to clients. "What many companies got into was too complex," says Tom Mast, of Lean Strategies Group, an Austin, Texas, manufacturing consultant to companies in the electronics, automotive and medical-device industries. Some Unsatisfied Customers Companies are guarded about discussing write-downs. The amounts often represent a portion of a suite of software that the company still relies on. And many companies have no desire to disclose the turmoil or the cost. Big supply-chain projects got a black eye in early 2001 after Nike Inc. (NKE) missed its earnings because of inventory buildup and late deliveries due in part to an ambitious $400 million supply-chain software overhaul. A year ago, truck leasing and logistics provider Ryder System Inc. (R) canceled a project to expand its Fleet Management Solutions unit and wrote down $27.2 million in supply-chain technology and software costs. In early 2002 retailer Nordstrom Inc. (JWN) took a charge of $15.5 million to write down its investment in supply-chain software to support its manufacturing division. The advent of just-in-time manufacturing techniques in the 1990s put a priority on supply chains. It was critical to manage the steps materials follow from procurement through manufacturing to the customer to ensure products arrived on time at every step. More than 100 software companies provide supply-chain software among a variety of offerings. About two dozen companies focus on software exclusively for planning, shipping and inventory management and as a group their shares have plunged about 70% in the past year compared with a 35% decline in the Dow Jones Software index and a 20% decline in the S&P 500. Spending Less, Demanding More But just-in-time management has turned to "just survive" for some businesses, and those still spending on software are buying less and demanding more. Wolfe's survey of shippers in the third quarter of 2002 found that one-third of software buyers in the period expected to achieve enough savings to pay for software license fees within 12 months. In the first quarter only 25% of respondents expected such a rapid return on investment. The impatience also is obvious in the number of write-downs, says Wolfe. With 44% of respondents writing down at least some of the value of supply-chain software investments, it's clear that the technology isn't generating the returns many expected. And Wolfe estimates the number of companies taking losses "could actually be much larger than our data reveal, as many shippers are probably more guarded about admitting to write-downs." The average write-down in the third quarter was $491,000, Wolfe says, which is down from $535,000 reported in the second quarter. "A lot of dollars were spent on technology that shouldn't have been spent," says Rebecca Wettemann, vice president of research at Nucleus Research, a three-year-old Massachusetts company that performs return-on-investment analysis for business. A recent study of 70 users of i2 Technologies Inc. (ITWO) software found that seven of the companies had discontinued using the supply-chain planning and management tools, says Wettemann. Nucleus didn't ask whether the companies had written off the costs. Janet Eden Harris, chief marketing officer for i2 Technologies, doubted the results and questioned whether the small number of companies sampled was valid. Broad surveys of more than 3,000 i2 customers show 75% satisfaction with the software, she says. And any customer with problems so serious that they considered dropping the application would receive priority service to solve the problem, she says. Eden Harris says she wasn't aware of companies writing down investments in i2 Technologies software. Eric Peters, senior vice president of strategy and marketing for Manhattan Associates Inc. (MANH), a maker of software to manage warehouse and distribution operations, says he hasn't heard of any customers writing down Manhattan software. "If you look at supply-chain planning where most of the write-offs are happening its very complicated stuff," he says. Manhattan focuses on supply-chain execution "where customers see a faster return on investment," he says. Quick return is key, says Harold Covert, chief financial officer of Extreme Networks Inc. (EXTR). In July, Extreme put into use more than $15 million in new supply-chain technology purchased from Siebel Systems Inc. (SEBL) and Oracle Corp. (ORCL). "It's been a big part of driving down our manufacturing costs," says Covert. The technology generated more than $2 million in savings in the fourth quarter, he says. "We're on track toward payback in about 15 months," Covert estimates. Stick to "plain vanilla" installations, limit the number of consultants and get supply-chain partners to buy into the solution before spending a dime, Covert advises. "You hear the horror stories," he says. To avoid them Covert advises: "Keep it simple." -By Steven D. Jones, Dow Jones Newswires; 360 253-5400; steve-d.jones@wsj.com (END) Dow Jones Newswires 01-24-03 1426ET