Gregory J. Owens joined Manugistics as chief executive in April, replacing company founder William Gibson. The former head of supply-chain management for Andersen Consulting recently sat down with a group of Washington Post editors and reporters to discuss his new position, the problems Manugistics has encountered and his vision for the future. Here is an edited transcript of that conversation.
What does Manugistics need to change?
There are several areas. First of all, Manugistics has excellent products and always has, and the market hasn't known about them as well as it should have. So the marketing area was one that I thought didn't do as well as it should.
The second part is the sales organization. You've got to explain the software. Some of the software in here, with the intense algorithms, is rather complex. So you don't go in and explain how it works, you go in and explain the value proposition that the software produces. We needed to build a much more aggressive sales force to be able to describe to our customer base . . . what the benefits are.
The third thing is the supply chain has been ever-evolving, and if you go back to where it used to be more around distribution, transportation, inventory management, and then we got the term logistics and then it evolved to supply chain. What the market's looking for are solutions. So [clients] are saying, "Come in and install this piece of software," they're saying, "How do you solve this problem for me?"
And then, lastly, this is a company that had a very entrepreneurial spirit but had not really brought in the executive management team that had the background of running much larger organizations.
You've hired more salespeople?
Hired a number of different people, outside of sales as well.
And have you cut back in other areas?
No, I've not cut back. [Former managers] did, they cut back prior to me coming on board. I am very much on a growth strategy, so I'm not interested in cutting back, I'm interested in growing the top-line revenue that allows us to add more people.
About Internet-based supply-chain management -- are you also proposing an Internet-based strategy?
We've developed our e-chain solutions. I don't know if you've seen those, but they are really state-of-the-art solutions in the marketplace. The Internet enables you to bring information in very quickly so the demand feeds are instantaneous. You get them from companies as quickly as they get them.
The best way to explain it: Supply chains of the past were about moving physical product around. Supply chains of the future are about moving information around that allows you to react. You don't move the product around as much and can build to order.
Are your clients catching on to the importance of supply-chain management?
What we're starting to see is that the people have figured out that supply chain is the competitive differentiator. In the past it was one of those nice-to-haves. Now [for example] Dell's selling a process. It's not that their computer's any better than Compaq's or has got more horsepower or is configured differently. They're selling this efficient process and being able to lower the price and still make money on it.
What we're seeing in the electronics and high-tech industry, [we're] beginning to see in the parts areas. And automotive -- I suspect we've had our first look at a dealer ordering system at Mitsubishi [a Manugistics client].
For parts or for cars?
How does that work?
What they are doing is getting the demand signals from the customers at the dealer. That gives [the company] a chance to manufacture the car that the people want, as opposed to putting cars out on the lot that tie up a tremendous amount of inventory.
And how long would you wait if a client said he wanted a blue Mirage with these features?
The goal is to be able to do this in a 12-day period.
Why do you need the dealer at all?
I think the dealers become the central point for services later on. And also from a transportation standpoint you'll see them as the take-delivery point, so the cars will be transported from the manufacturing plant, consolidated up there, dropped off at the dealership and that's where you'll actually take delivery.
One question in this supply-chain process is, who's left holding the bag? The car dealer doesn't want to hold the inventory, so the car dealer wants something like just-in-time delivery to the ultimate buyer. The carmaker doesn't want to hold the inventory for all the same reasons, so the carmaker is getting engines just as they're needed to make the Mirage that's going to immediately go to the dealer. The steel supplier doesn't want to hold more steel inventories. . . . What do you do with real life in the economy when there are demand surges? The one thing we know is that demand for things isn't continuous; it spikes, it falls. Where is that finally absorbed in this tighter, short-linkage chain that you're helping to build?
It's not exactly absorbed in the chain. What you look at, supply-chain management is different from just-in-time. What this is trying to do is to get the information from true demand out to the supplier at the same time that it's coming to the manufacturer. That allows them to respond much more quickly. Our software helps to do any type of advance planning that helps you forecast what those demand spikes will look like so that you're able to plan for your production capacity.
You described the Mitsubishi scenario that will potentially change how customers order cars. Can you give us some other examples of the ways consumers are affected by your software?
We're a society that rewards speed -- fast food or Internet or whatever it is. This allows companies to produce that level of customer service at a lower price. Now, when you go on the Internet and order a book from Amazon.com, you really don't care whether it's coming from Amazon or not. All you want is this particular book. And by the way, if I can get it at a lower price than I can at a retail bookstore [all the better].
Mitsubishi doesn't want to end up with so much extra inventory that they're continually having to lower their margins. They don't want to try to sell cars that don't have options on them that people want. [If they don't have to do that], then they end up [being] able to bring their prices down, which makes them more competitive, and still hit the type of margin targets that they need to as well.
So from a consumer standpoint, the more efficiency you can drive through the supply chain, the better it is to be able to bring prices down. That's what Wal-Mart did. Wal-Mart had a very simple strategy: to be the low-cost provider on an overall basis. They put in the most efficient supply chain in retailing to be able to do that.
Can you give us an example of a company where your software solved a problem for them?
I think you'd be surprised at some of the Fortune 500 companies, at some of the levels and inefficiencies that are still at some of them.
Your introductory monologue sounded a lot like what analysts have said about your company, that you've got great products but less-than-great sales. In a turnaround attempt, did the previous management cut too many people? And how do you turn around this, a company that has good products and hasn't been able to sell them?
[The cuts] were very calculated. I'm sure we had a number of people who left the organization that we didn't want to leave, but obviously if you're making cuts, you don't get rid of your very best performers.
So we've got the capability within the organization that we need to continue to grow. That's on the cut side.
Now how do you move this forward? It is about people. You've got to have the people that have the right vision, that have the ability to work as a team and to execute as a team and deliver into the marketplace. Those are the types of executives that I'm bringing into the company right now that are going to help us propel this into a much larger organization.
If supply-chain management can solve a company's problems, why is Manugistics in any trouble at all?
You've got to educate the marketplace on what the products do. First of all, let me clarify one point. Manugistics is not in any trouble. We are a very healthy company.
You're not as healthy as you were three years ago.
If you go back three years, our cash on hand is significantly larger than it was then, but last year Manugistics had a hard time. I've been on board for one quarter now and we had a profitable quarter. We built cash up by $2.4 million. We've increased market capitalization over $200 million over the last eight weeks, so we are certainly on a better momentum trail. It's a great product line, some outstanding people, and we're developing the solutions and bringing in the executive management team. But there were some issues that [previous managers] caused themselves. It wasn't a demand issue.
You've been running around talking to analysts for the past few weeks. What have you been telling them?
What I'm telling them right now is I've got three main levers that I'm pulling. One is market share. Two is investment in innovative products and three is profitability. We are a for-profit company, so I must make sure that we continue on the profit trail, but right now what I reported back to them is that for us to gain market share, particularly in a growing economy, we're going to need to make some investments in those markets so that we have state-of-the-art products.
So I will keep the three in balance, but right now I want to increase our market share and our product sweep significantly, so that's where I'm focusing more of my attention. I promised that when I announce Q2 earnings, then I will lay out an annual projection for where we go. Now that gives me about three months from right now, and given that I've only been on board eight weeks they were all willing to accept that. But that gives me the rest of the summer to get my entire management team on board, and it also gives me two quarters. It gives me full visibility into quarter three, because we have those deals in that we're working on at that point. And it gives me partial visibility into quarter four, and I said at that point I'll lay out to you where I think we're going in terms of earnings, where we should be at and what we need to be in terms of numbers and building and where I think we can go for the next several years as well.
A Look at ...
Businesses: Sells software systems that allow companies to operate more efficiently so that they can reduce inventories, create better relations with suppliers, improve customer service and lower overall operating costs.
Chief executive, president: Gregory J. Owens
Ticker symbol: MANU on the Nasdaq Stock Market
Local employees: 375
Web address: www.manugistics.com
Source: Company reports, Bloomberg News