As Feds Supply Market, Manugistics Supplies Expertise

As Feds Supply Market, Manugistics Supplies Expertise

By Nick Wakeman, Staff Writer

Manugistics Group Inc. is counting on its newly secured spot on the General Services Administration schedule to give it a foothold in the potentially lucrative government market for supply chain management software.

The government faces the same challenge managing the movement of goods and materials as the private sector, and Manugistics wants to bring its broad commercial experience to bear in the government market, said Jeffrey Holmes, senior vice president of strategic solutions and alliances for Manugistics.

"Companies in the private sector have been utilizing the capabilities of supply chain management for years, and now the government is looking at those same capabilities," Holmes said.

"We [now] have the ability to go directly to the market with the GSA schedule, but ultimately our model will be to work with systems integrators," he added.

Rockville, Md.-based Manugistics develops software that is used to manage the movement of parts and materials through an organization and between an organization and its suppliers and customers ? that is, supply chain management.

The federal government is expected to spend $1 billion over the next 10 years on supply chain management and other enterprise resource planning applications, said Mark Romes, manager of the investment research program for AMR Research, a Boston-based market analysis firm.

To position itself for this booming business, Manugistics has won a spot on the GSA schedule and is working with several systems integrators to develop business in the government market, Holmes said.

While Holmes would not comment on any pending deals, analysts said the company on the verge of winning a large defense contract as a partner with a systems integrator.

"We are very active on some things and some announcements are forthcoming" was as far as Holmes would comment on possible contract wins.

Since Manugistics announced its push in the government market July 11, its stock has jumped from $45.82 July 10 to $61.75 July 17.

"The government is a huge opportunity," said Catherine Moore, an analyst with the financial services firm C.E. Unterberg Towbin of New York. And that kind of business could push Manugistics back into profitability, she said.

The company struggled during its fiscal 1999, which ended Feb. 28, 1999. Manugistics lost $96.1 million on revenue of $177.6 million. In April 1999, a new management team was brought in under Gregory Owens, president and chief executive.

The turnaround is now largely complete, analysts said.

For fiscal 2000, which ended Feb. 29, the company had $152.4 million in revenue and a loss of $9 million.

"I expect them to be profitable in this quarter," said Jim McNatt, an analyst with investment banking firm Legg Mason Wood Walker Inc. Baltimore. "We have the company rated a buy and we think they are doing extremely well."

The government will be a good market for Manugistics and the company seems to be positioned ahead of i2 Technologies Inc. of Dallas, its biggest competitor in the supply chain sector, he said.

Helping to drive the government market for supply chain management software is the Defense Department's desire to improve military readiness as well as save operational costs, McNatt said.

The federal government, particularly the military, was an early developer of sophisticated logistics operations, but that was during World War II, he said. "Now they are way behind, so this is potentially a huge customer," McNatt said.

Supply chain management is a critical part to gaining "total asset visibility" for the military, said Holmes, a retired Army lieutenant colonel. "You need to be able to see that your requirements are being fulfilled," he said. "If you don't understand logistics and purchasing, you are going to be in trouble down the road."

On both the military and civilian sides, there are agencies that want to create online markets with their suppliers, Holmes said.

"We have the software that enables these online communities to exist," he said.

"In the military especially, there are a vast number of inefficiencies," said analyst Romes. "If you have a huge inventory of spare parts and you don't manage it well, it is going to cost you more."

The military should be able to save billions of dollars by implementing better controls, he said.

The government is looking for commercial experience and commercially available solutions to address many of these issues, Holmes said. "They don't want to be writing custom code," he said.

Manugistics has provided supply chain management software to a wide variety of commercial companies, including as pharmaceutical giant Glaxo Wellcome, auto maker Mitsubishi, the Goodyear Tire Co. and Lucent Technologies.

Manugistics also has worked with major systems integrators in the private sector that maintain substantial government business. They include Andersen Consulting of Chicago, Computer Sciences Corp. of El Segundo, Calif., Electronic Data Systems Corp. of Plano, Texas, IBM Corp. of Armonk, N.Y., KPMG of New York and PricewaterhouseCoopers of New York.

"The government is looking at systems integrators with expertise in the private sector and seeing how that expertise can apply to the government," Holmes said, adding that the government market has the potential to be Manugistics biggest vertical sector.

"A lot of things are happening right in our sweet spot," he said.

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