Manhattan Associates, Inc.

Manhattan Associates, Inc.

2300 Windy Ridge Parkway
Atlanta, Georgia 30339
U.S.A.
Telephone: (770) 955-7070
Fax: (770) 955-0302
Web site: http://www.manhattanassociates.com

Public Company
Incorporated: 1990 as Manhattan Associates Software, L.L.C.
Employees: 1,117
Sales: $196.81 million (2003)
Stock Exchanges: NASDAQ
Ticker Symbol: MANH
NAIC: 511210 Software Publishers

Manhattan Associates, Inc. helps companies navigate their products through the supply chain, providing technology-based solutions to improve the efficiency of the distribution and transportation of goods. Manhattan's software, hardware, and services coordinate the flow of information among manufacturers, distributors, retailers, suppliers, transportation providers, and consumers. The company operates in eight markets, serving nearly 1,000 clients in the consumer goods, food, government, high-technology, industrial, life sciences, retail, and third-party logistics industries. Manhattan operates internationally through offices in the United Kingdom, The Netherlands, Germany, and Asia, generating nearly a fifth of total sales from its overseas business.

Origins

As the 1980s began, the U.S. textile industry faced a daunting challenge. Global competition had intensified, with many foreign manufacturers selling their apparel for prices that undercut the capabilities of most domestic producers. The U.S. manufacturers needed to find a way to beat back the ever encroaching presence of overseas competitors. They needed a solution that would enable them to compete effectively. The problem was widespread and it was growing worse, prompting the industry as a whole to take action. Midway through the decade, studies were begun that brought together experts from a number of different fields. The studies were part of an industrywide initiative focusing on the supply chain, the various steps a product took to get from a manufacturer to a customer. The national undertaking hoped to lower the cost of goods sold by increasing the efficiency of the supply chain. "Quick Response" was the result of the inquiry.

Quick Response relied on technology to give U.S. clothing manufacturers an advantage over foreign competition. Through the use of technology, the flow of information among manufacturers, distributors, and retailers was improved substantially, allowing retailers to inform manufacturers and distributors of what merchandise they needed more rapidly. Manufacturers and distributors, for their part, were able to restock retailers more efficiently. The reduction in idle inventory enabled textile product retailers to reduce the cost of goods sold, making the industrywide initiative a success.

Manhattan's four founders were involved in the studies that produced Quick Response. The founding group was led by Alan J. Dabbiere, the individual who would lead the company during its first decade of existence. Dabbiere participated in Quick Response pilot projects as part of his job at Kurt Salmon Associates, a management consulting firm he joined in 1986. Kurt Salmon, which specialized in consumer products manufacturing and retailing in its consultancy work, served as an instrumental contributor in developing the blueprint for Quick Response and its counterpart, Efficient Consumer Response, a system for improving efficiency in the food and grocery industry's supply chain. Dabbiere represented an integral component of Kurt Salmon's efforts. He was joined in founding Manhattan by three technology-oriented executives from Infosys Technologies Limited, an India-based software development company founded in 1981. When Infosys opened its first international office in the United States in 1987, Deepak Raghavan, Deepak M.J. Rao, and Ponnambalam Muthiah joined the company. In the years preceding the formation of Manhattan, Raghavan and Muthiah both worked as senior software engineers, specializing in the design and use of information systems for the apparel manufacturing industry. Rao, who performed the duties of an assistant project manager at Infosys, specialized in the design and use of information systems for the banking industry.

The four founders gathered in Manhattan Beach, California, as the new decade began. Their interest in enhancing supply-chain execution centered on one part of the complex process that carried a product from manufacturer to customer: the warehouse. They believed that distribution centers offered an ideal way to demonstrate what information technology solutions could deliver in efficiency to the supply chain. Manhattan Associates Software, L.L.C. was formed in 1990 to bring their idea to the marketplace. Dabbiere became the new company's president and chief executive officer, Raghavan its chief technology officer, Rao a vice-president, and Muthiah a vice-president.

PkMS Software Driving Growth in the 1990s

Manhattan was a new company in a new field, one in which the company would come to dominate. Its first software product aided customers in complying with the shipping-label specifications of retailers. Manhattan signed its first client in 1991, beginning a steady march that saw the company develop quickly. The centerpiece of the company's business was a warehouse management system, Manhattan's proprietary PkMS, which was developed not long after the company was founded. PkMS, a flexible, modular software system that controlled the efficient movement of goods through the supply chain, drove Manhattan's physical and financial growth throughout the 1990s. By using PkMS, a company could manage the checklist of tasks assigned to a distribution center. PkMS managed receiving stock, locating stock, picking stock, verifying orders, and packing and shipping product, orchestrating, in an efficient manner, the complex dance of packages moving in and out of a warehouse. The benefits to the customer were as numerous as the number of tasks that fell under the purview of PkMS. Inventory turnover increased, inventory accuracy improved, response time decreased, labor productivity increased, and customer service improved, yielding advances in efficiency that translated into reduced costs and increased profits for the customer.

Manhattan's solutions resolved some of the most pressing problems challenging U.S. textile manufacturers, distributors, and retailers. The idea that began in Manhattan Beach flowered into a growing financial enterprise. By 1993, Manhattan had developed into a $3.3 million company. The following year, when it signed its 50th customer to license PkMS, the company nearly doubled its sales, generating $6.5 million in revenue. In 1995, a year that marked the arrival of the company's 25th employee, Manhattan relocated from the beach that gave it its name and settled in Atlanta, Georgia. Sales during the year leaped upward again, reaching $11.2 million. After a modest gain to $14.4 million in 1996, Manhattan recorded a remarkable surge in financial growth in 1997, more than doubling its sales to $32.4 million. By this point, the Dabbiere-led venture was contemplating its debut on Wall Street.

By the end of 1997, Manhattan had made its mark in the warehouse management system sector of supply-chain execution. The company added 56 new clients during the year, giving it a customer base of more than 250 companies. These customers, who reflected Manhattan's diversification beyond the apparel industry, included members of the consumer products and the foodservice and grocery industries. Calvin Klein, Dean Foods, Mikasa, SEIKO Corporation of America, and Patagonia were PkMS licensees, each finding rewards in using Manhattan's software system to manage their distribution centers. The company's payroll swelled, particularly in 1997, when the number of Manhattan employees shot up from 88 to more than 200. In October 1997, Dabbiere made room for the robust growth of the company by announcing that Manhattan was relocating its headquarters to another facility in Atlanta that was more than three times the size of the company's existing headquarters. To Dabbiere and his colleagues, the strident growth of the company suggested more than a move to larger quarters. The time had come for Manhattan's end as a limited liability company and its debut as a publicly traded company.

Initial Public Offering of Stock in 1998

Dabbiere and his team prepared for Manhattan's initial public offering (IPO) of stock, desiring to take advantage of the company's strong position. Manhattan's PkMS was the only warehouse management system designed exclusively for manufacturers and distributors who shipped to retail and grocery. After acquiring Performance Analysis Corporation, whose software helped determine the optimal storage location for inventory within a distribution center, Manhattan filed for an IPO in the spring of 1998. Manhattan Associates, Inc. was formed to acquire the assets of Manhattan Associates Software, L.L.C., leading to the sale of 3.5 million shares of stock on the NASDAQ at $15 per share.

Dabbiere quickly made advances after Manhattan's IPO. In July 1998, the company announced the formation of a subsidiary in the United Kingdom, an office near Heathrow Airport in Stockley Park. By this point, the company already enjoyed a European customer base, serving Revlon, Warnaco, Ocular Sciences, and Venator Group's European Footlocker. The subsidiary was formed to provide better support to Manhattan's existing clients and to cultivate additional European customers. The year of Manhattan's public debut also saw it become the first company to guarantee ongoing compliance with the stringent and specific guidelines demanded by the leading 100 retailers in the United States. Dabbiere also tapped into one of the strengths of his former employer in 1998, agreeing in September to acquire DCMS, the Distribution Center Management Systems software product developed by Kurt Salmon. By the end of the year, Manhattan boasted more than 350 customers operating in more than 750 sites worldwide.

Company Perspectives:

Large or small, global or local, established or newcomer . . . if you're in business today, you're under pressure to be efficient, cost-effective and competitively astute. The old days of going out to the warehouse, picking products off the shelves and shipping customers a month's worth of inventory are gone. Today, advanced capabilities, automated operations, accelerated responsiveness and a rapid return on investment differentiate those who succeed from those who do not.

As Manhattan concluded its first decade of business, the company was demonstrating surging growth. Fruit of the Loom became the 100th customer to install PkMS in 1999, representing a 56 percent increase from the previous year in the number of new clients secured. To help manage this growth, which saw sales increase to $85.2 million for the year, Dabbiere looked for outside help, announcing the appointment of Richard M. Haddrill as president and chief executive officer in October 1999. Dabbiere took the title of chairman, leaving the day-to-day management of the company to Haddrill, who had spent the previous three years serving as president and chief executive officer of Powerhouse Technologies, Inc., a $250 million diversified gaming technology company.

Under Haddrill's leadership, Manhattan celebrated its tenth anniversary and plotted its course for the new decade ahead. Late in the company's anniversary year, it acquired a Mishawaka, Indiana-based company named Intrepa L.L.C., a developer of transportation and distribution applications with more than 100 employees and seven offices in the United States. Intrepa served more than 250 customers in the healthcare, automotive, publishing, and industrial wholesale industries, counting Nissan, Dupont Merck, Gerber Products, and Novartis as some of its better-known clientele. The $30 million transaction was expected to add between $14 million and $18 million to Manhattan's revenue volume, giving the company more than 750 customers in 11 markets. "Intrepa LLC's current technology, broad solution footprint, deep domain expertise, and an impressive client list were key drivers behind our decision to acquire Intrepa," Haddrill remarked in a December 2000 interview with Manufacturing Systems.

The early years of the decade marked a serious decline in technology spending, making for a bleak start to the 21st century for many software companies. Manhattan was insulated somewhat from the downturn because of its focus on warehousing. In tight economic times, companies could not afford to have their warehouses in disarray. "Warehouse software is a less discretionary purchase than other areas of technology," an analyst explained in a December 3, 2001 interview with Investor's Business Daily. "Customers tend to invest in such software when they have some kind of significant problem. It's not just a matter of getting to the next level of performance." Manhattan's advantageous position as a warehouse specialist in the broader supply-chain software field helped the company record impressive growth while others suffered from the downturn. The company expanded into Germany and France in 2001, ending the year with more than $138 million in revenue. Manhattan's focus on warehousing shielded it from the worst of a recessive economy, but the company's niche in the supply-chain software field also was threatening to become a detriment. The dynamics of the supply-chain execution industry were changing. Manhattan, the "king of warehouse management," according to the January 17, 2003 issue of Investor's Business Daily, needed to widen the scope of its kingdom.

A More Comprehensive Manhattan Emerging in 2002

Competition within the supply-chain execution industry was taking on a new dimension. Companies larger than Manhattan, competitors such as Manugistics Group Inc., I2 Technologies Inc., and SAP AG, were encroaching on Manhattan's warehouse niche. Each of the three companies offered a wider range of business software than Manhattan, offering their customers a more comprehensive solution to problems along the supply chain. Haddrill needed to extend Manhattan's reach, and in November 2002 he announced a deal that expanded the services the company could provide to its customers. Manhattan agreed to acquire Logistics.com, Inc., a Burlington, Massachusetts-based logistics planning and execution firm. Logistics.com developed software to help trucking and rail companies handle routing and planning, offering three products: OptiManage, a comprehensive transportation management solution for shippers; OptiBid, a procurement solution for shippers; and OptiYield, a decision support and optimization solution for carriers. The acquisition of Logistics.com moved Manhattan out of the warehouse, giving the company the capability to address problems in both distribution and transportation.

As Manhattan reshaped itself from a warehouse management software provider to a broader supply-chain execution provider, changes in leadership set the stage for the company's future. In May 2003, Dabbiere announced he was leaving the company to devote more time to his family. Less than a year later, Haddrill announced he was leaving as well, which led to the appointment of Peter F. Sinisgalli as chief executive officer in July 2004. Under Sinisgalli's stewardship, Manhattan was expected to continue expanding its involvement along the supply chain, as the company endeavored to be not only the king of the warehouse but a dominant player in the supply-chain execution industry as well.

Principal Subsidiaries

Manhattan Associates Software, L.L.C.; Manhattan Associates, Ltd.; Manhattan Associates Europe, B.V.; Manhattan Associates, Pty Ltd.; Manhattan Associates (India) Development Centre Private Limited.

Principal Competitors

Retek, Inc.; Manugistics Group, Inc.; i2 Technologies, Inc.; SAP AG; RedPrairie Corporation; Catalyst International, Inc.

Key Dates:

1990:

Manhattan Associates Software, L.L.C. is formed in Manhattan Beach, California.

1995:

The company relocates to Atlanta, Georgia.

1998:

The company completes its initial public offering of stock, becoming Manhattan Associates, Inc. in the process.

2000:

Manhattan acquires Intrepa, L.L.C.

2002:

Manhattan acquires Logistics.com, Inc.

Further Reading

Armbruster, William, "Dabbiere Steps Down As Chairman of Manhattan Associates," Journal of Commerce Online, May 22, 2003, p. 15.

Grugal, Robin M., "Manhattan Associates Inc.," Investor's Business Daily, December 3, 2001, p. A10.

Hickey, Kathleen, "Sinisgalli to Manhattan Associates," Traffic World, March 8, 2004, p. 19.

Michel, Roberto, "Manhattan Associates Acquires Intrepa," Manufacturing Systems, December 2000, p. 15.

"Warehouse Software Gets Bigger Inventory of Major Competitors," Investor's Business Daily, January 17, 2003, p. A5.

—Jeffrey L. Covell