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RedPrairie Corporation

RedPrairie Corporation

20700 Swenson Drive
Waukesha, Wisconsin 53186
U.S.A.

Telephone: (262) 317-2000
Toll Free: (877) 733-7724
Fax: (262) 317-2001
Web site: http://www.redprairie.com

Wholly Owned Subsidiary of Francisco Partners
Incorporated:
1975 as McHugh Freeman & Associates
Employees: 600
Sales: $72.7 billion (2004)
NAIC: 511210 Software Publishers

Based in Waukesha, Wisconsin, RedPrairie Corporation is a leading global supplier of software that companies use to manage virtually every aspect of their supply chains. According to RedPrairie, its DigitaLogistix software suite includes modules for transportation management, warehouse management, and labor productivity management, as well as logistics command and control, supply chain analytics, global visibility, and role-based collaboration via the World Wide Web. In addition, the company offers solutions for inventory optimization, supply chain security, mobile resource management, and international trade logistics, as well as applications for radio frequency identification (RFID). In addition to developing and marketing its own software, RedPrairie resells equipment from other vendors, including Intermec, Hewlett-Packard, Symbol Technologies, Psion Teklogix, and LXE. The company also provides a number of services, ranging from logistics operations analysis and implementation to training and support. RedPrairie's customer base spans a number of industry segments, from healthcare, pharmaceuticals, consumer goods, food-beverage. retail, industrial-wholesale, automotive and service parts, electronics, and third party logistics. In addition to its Wisconsin headquarters, RedPrairie has U.S. sales and service offices in Eden Prairie, Minnesota; Raleigh, North Carolina; and Charlotte, North Carolina. Internationally, the company has offices in the United Kingdom (York and Stokenchurch); Paris; Ninove, Belgium; and Oosterhout, Netherlands.

Formative Years: 197589

RedPrairie was founded in 1975 when Jim McHugh and Doug Freeman, who were both working in the information systems department of Miller Brewing Co., decided to form their own computer consulting and software development business. Operating under the name McHugh Freeman & Associates, the partners initially focused on providing traditional information technology (IT) consulting services. Freeman parted ways with the company in 1983, eventually moving to San Jose, California, to operate a software catalog distribution company.

By the mid-1980s, McHugh Freeman was working with companies like Compaq Computer and Quaker Oats to computerize their distribution centers. Specifically, the company's involvement in the automation of storage and retrieval systems (AS/RS) for distribution centers and warehouses gave it pioneer status in this particular niche.

According to the company, by this time "McHugh Freeman had used its accumulated expertise to create one of the first comprehensive packaged warehouse management systems (WMS). It combined over a decade of warehouse management consulting and software development into a packaged solution for rapid deployment in Tier One warehouses and distribution centers."

By the end of the 1980s, McHugh Freeman had developed enough of a reputation that three companies were interested in acquiring it. From its offices in Brookfield, Wisconsin, McHugh employed 34 people and generated sales of $3 million to $5 million in 1989. That year, McHugh Freeman was acquired by St. Louis-based Alvey Holdings Inc., a materials handling systems manufacturer, for an undisclosed amount.

Consolidation and Expansion: 19902001

McHugh Freeman's acquisition by Alvey, which eventually changed its name to Pinnacle Automation, provided much-needed capital for expansion during the early 1990s. In addition, it gave McHugh the resources to branch out into other areas of the supply chain industry.

By 1994, McHugh Freeman had relocated to nearby Waukesha, Wisconsin. That year, the company's sales were projected to reach $25 million to $30 million. Senior vice-president Ritch J. Durheim, who had joined McHugh Freeman in 1977, was named president and chief operating officer. Cofounder Jim McHugh remained chairman and CEO. McHugh Freeman employed 150 workers in 1994, up from roughly 85 the previous year. The majority of the company's workforce was comprised of computer programmers and software engineers.

Limited only by the availability of skilled workers, McHugh Freeman was growing at a rapid clip during the mid-1990s. In fact, the company was expanding so quickly that it needed more spacious facilities for its headquarters. Subsequently, by 1994 McHugh had hired Told Development to erect a four-story, 86,000-square-foot office building. By leasing more than half of the new structure, which it planned to occupy by the end of 1995, McHugh Freeman would expand its space by about 50 percent.

In addition to its software products, by the mid-1990s McHugh sold related gear, including radio frequency equipment, bar code applicators and readers, and special computer terminals that its customers mounted directly onto forklifts. Packaged together, the company's solutions typically cost clients, which included Miller Brewing Co., Procter & Gamble, Pepsi-Cola, BASF Corp., Nabisco, Digital Equipment Corp., Gallo Wine, and Spiegel, between $1 million and $3 million.

By August 1995, McHugh was marketing its DM Plus software suite for distribution centers and warehouses. Incorporating ORACLE database technology, the UNIX-based software ran on the HP/9000 platform and provided capabilities in a number of areas, including cycle counting and productivity reporting, value-added order processing, shipping, inventory management, cross docking, wave planning and release, yard management, scheduling, put-away, picking, receiving, replenishment, and location management.

McHugh's DM Plus product was RFID compatible, and also supported a graphical user interface. The latter feature was in keeping with a larger industry trend, as companies sought to offer more user-friendly, "point-and-click" applications, as well as more "off-the-shelf" software that companies could use and upgrade from without the costs associated with custom solutions.

In October 1995, McHugh Freeman opened a regional office in Atlanta, Georgia. The following January, the company acquired Weseley Software Development Corporation, which had created an advanced transportation management and optimization solution called TRACS.

By early 1997, DM Plus v.4.10 had been introduced. The new version ran on both the IBM RS/6000 and HP/9000 platforms and included new features, including parcel manifest interface management and small parcel, less-than-truckload shipment processing.

Heading into the late 1990s, a number of important developments happened at McHugh Freeman. The company's first name change came in August of 1997, following a restructuring that combined McHugh Freeman and Weseley Software into one firm named McHugh Software International Inc.

Following its name change, McHugh Software acquired Brookfield, Wisconsin-based Software Architects Inc. (SAI) in April of the following year. While McHugh historically had focused on larger clients with sales exceeding $1 billion, SAI had developed a WMS intended for companies with sales of $500 million to $1 billion, namely in the third-party logistics and technology sectors.

McHugh eventually blended aspects of SAI's software, which had a unique architecture, throughout its own product mix. According to the company, this allowed McHugh to provide logistics firms with "unmatched configurability and flexibility." This was an important move, because the industry was demanding software that was highly flexible and capable of managing multiple variables, such as different languages, specific SKU attributes such as color and size, and labels that met the standards of different countries.

According to the July 1998 issue of Export Today, the late 1990s were a volatile time for software firms, and customers were urged to think carefully before committing to a particular WMS. Nevertheless, the rewards of implementing the right system were significant. In addition to reducing inventory levels and improving tracking, one industry analyst cited productivity gains in the range of 15 to 30 percent.

Major developments continued as the decade's end approached. First came McHugh Software's acquisition of the Minneapolis-based industrial consultancy Gagnon & Associates. The May 1998 deal gave McHugh new capabilities in the productivity solutions arena. With the addition of Gagnon's labor management systems and services, McHugh claimed it was able to offer a comprehensive array of supply chain solutions.

In the August 1998 issue of Logistics, Pinnacle Automation president and CEO Stephen J. O'Neill remarked: "The addition of Gagnon's labor-management functionality to McHugh's product suite gives McHugh the unique ability to provide leading-edge logistics software combined with the industry's recognized leader in productivity solutions."

Company Perspectives:

The history of RedPrairie is a monument to the expertise, dedication, hard work, and experience needed to guarantee our clients' success in achieving total logistics excellence. Our sole focus has always been on providing the best functionality, technology and services for Supply Chain Execution. As a result, our clients have experienced 100% successful implementations and we count many of the best known names in business among our clients.

Several months later, O'Neill announced that Pinnacle was spinning off McHugh Software. In conjunction with GE Capital, the private equity firm Advent International purchased a minority equity stake in McHugh Software valued at an estimated $50 million. In the December 1998 issue of Transportation & Distribution, O'Neill said the spin-off would "provide the management and capital structure necessary for McHugh to realize its full potential, and allow Pinnacle to focus its resources and efforts on its systems business."

In early 1999, Cypress Associates' John Hill indicated that the market for automated material handling systems was worth $4.5 billion in 1998, with WMS systems accounting for approximately 60 percent of that total. Although McHugh's revenues dropped 21 percent between 1998 and 1999, the company remained focused on competition, devoting 24 percent of its 1999 revenues to research and development.

As McHugh prepared to compete within this promising market during the 2000s, it named Joseph Broderick as its president and CEO. With 20 years of industry experience, including the installation of some 550 supply chain systems, Broderick came to McHugh Software from Manugistics. He was tapped to provide leadership in the areas of professional services, engineering, marketing, and sales.

McHugh Software kicked off the 21st century with several product-related developments. In May 2000, the company entered into an agreement with Boulder, Colorado-based SyVox, a developer of speech recognition technology, which added interactive voice capabilities to McHugh's systems.

The Logistics Suite was introduced three months later, providing new customers with logistics software modules that were between 80 and 90 percent pre-built for a wide span of business sectors, ranging from consumer products and e-commerce to those dealing in packaged chemicals, electronics, and spare parts.

By this time, McHugh had developed the nickname "McHuge" by some industry players, according to Frontline Solutions Europe. The nickname stemmed from what McHugh executive vice-president of sales and marketing Steve Tonissen called the company's "anything for a buck" policy, whereby it would commit to just about any firm that wanted to buy its software, even if the customer's business was not the best fit for the product.

Under the watch of new CEO Joseph Broderick, Tonissen replaced 80 percent of McHugh's sales force, and the company began to do a better job of focusing. The two men decided the company would concentrate on consumer packaged goods companies in the food and beverage sector, high-tech and electronics firms, dot-com companies, third-party logistics firms, and those dealing in parts. The company backed away from other industry sectors, including clothing retail, to the point of cutting ties with a few large customers and effectively foregoing millions of dollars in business. McHugh reported a net loss in 2001, on revenues of approximately $70 million.

In January 2002, John G. Jazwiec was named as McHugh Software's CEO. About three months later, McHugh established an RFID Center of Excellence in conjunction with other companies (Marconi InfoChain, Georgia-Pacific, Chep International, Intermec Technologies Corp., and Unilever) that supported the use of radio frequency identification. RFID involves the use of small radio tags that are able to communicate with a networked device known as a reader. These tags, which may contain a variety of data, can be affixed to or embedded within pallets, cartons, merchandise, or parts that companies and retailers need to track.

In the April 15, 2002 issue of Food Logistics, Unilever supply chain futurist Simon Ellis said: "Potentially, RFID chips and readers can smooth Collaborative Planning, Forecasting and Replenishment, as well as execution level functionality within the DC [distribution center], possibly even to the point of eliminating mundane tasks such as issuing purchase orders or advance ship notices. For retailers, this pilot is the first step toward addressing their biggest problemthe last 50 feet, getting product to the shelf."

New Business Model in 2002

After only a few months at the helm, Jazwiec led McHugh through the most significant change process in its history. On May 22, 2002, McHugh Software radically altered its business model by implementing a shared risk-reward program that guaranteed results for its customers. As the company explained, this involved "totally aligning its corporate culture, processes and products to deliver superior, measurable logistics results." One of the main reasons for this shift was to convince companies that had made logistics systems investments during the previous decade that doing so again would be cost-effective.

Along with a new business model that focused on gain sharing, the company also adopted the name RedPrairie Corporation to differentiate itself from other industry players and redefine its image. As Traffic World explained in its May 27, 2002 issue, many within the industry still thought of McHugh as a WMS vendor, when in fact less than 25 percent of the company's revenues were generated by WMS systems.

Key Dates:

1975:
Jim McHugh and Doug Freeman form McHugh Freeman & Associates.
1983:
Freeman leaves the company; midway through the 1980s, McHugh Freeman develops one of the first warehouse management systems.
1989:
McHugh Freeman is acquired by St. Louis-based Alvey Holdings Inc., which later becomes Pinnacle Automation.
1996:
McHugh Freeman acquires Weseley Software.
1997:
McHugh Freeman and Weseley Software are combined into one firm named McHugh Software International Inc.
2001:
McHugh reports a net loss on revenues of approximately $70 million.
2002:
McHugh Software adopts the name RedPrairie Corporation.
2003:
RedPrairie opens an Asia/Pacific headquarters in Shanghai, China.
2005:
Francisco Partners acquires RedPrairie.

On the creative side, Ken Hanson, executive creative director of McHugh's ad agency, Milwaukee-based Hanson Dodge, elaborated on the words that made up the new name. In the June 3, 2002 issue of Adweek Midwest Edition, he explained that the color red was "a striking image" that was "almost nonexistent in technology. Hanson further explained that the prairie concept denoted a peaceful place in an industry that was anything but peaceful.

Moving forward, Jazwiec explained that while McHugh was known as a software company, RedPrairie's identity would be very different. In the quest to save customers money, he noted the possible acquisition of other firms involved with logistics functions such as automation and material handling.

The company's name was not the only thing to be changed. The title of chief executive officer was changed to that of "results leader," executive vice-presidents became "results leaders" in their respective areas, and employees became "customer advocates." Services and software products were referred to as the "RedPrairie Approach." Beyond new titles, employee performance was linked with customer performance.

Because customers were not required to make sizable up-front investments under the new model, RedPrairie was able to concentrate on more mid-sized and small firms. In the past, it had focused mainly on larger corporations. According to the aforementioned Traffic World article, RedPrairie's gain-sharing approach typically required companies to share 25 percent of their first-year savings. However, firms that chose to invest more up front could gain-share less.

In addition to its corporate transformation, it also was in May 2002 that McHugh released a new version of its LENS information portal, a product that allowed logistics providers to process transactions via the World Wide Web. LENS 3.0 gave McHugh customers roles-based collaborative processing capabilities, as well as the ability to track shipments in real time from order through delivery. It also gave logistics firms greater agility and allowed them to minimize inventory levels.

In December 2003, RedPrairie opened Asia/Pacific headquarters in Shanghai, China. This was quickly followed by a major deal that expanded the company's size and international reach: the February 2004 acquisition of High Wycombe, United Kingdom-based LIS, a top SCE provider. LIS was integrated into RedPrairie's Europe, Middle East, and Africa (EMEA) division, which was placed under former LIS CEO Martin Hiscox. According to the company, the deal bolstered its status as player in local European markets, with offices that could offer multi-lingual sales and support.

According to the Milwaukee Journal Sentinel, in addition to extending RedPrairie's international reach, the LIS deal also increased the company's size by about 250 employees, bringing the total workforce to approximately 600 employees. Although RedPrairie already was the industry's second-place WMS vendor, the acquisition brought the company closer to industry leader Manhattan Associates in this area. Combined revenues of both firms were expected to total $130 million in 2004.

In 2005, Francisco Partners, a Menlo Park, California-based private equity firm focused on the technology sector, acquired RedPrairie from private investors that included Vestar Equity Partners and Advent International. In the April 19, 2005 issue of Traffic World, Jazwiec commented: "This acquisition will expand our opportunities to better leverage RedPrairie's leadership position for accelerated growth, both organically and through further acquisitions."

Principal Competitors

HighJump Software, Inc.; Manhattan Associates Incorporated; Provia International Inc.

Further Reading

Fauber, John, "The Warehouse Goes High-Tech," Milwaukee Journal, June 29, 1994.

"Firm Names Durheim President," Milwaukee Sentinel, May 9, 1994.

"Francisco Partners Acquires RedPrairie," Traffic World, April 19, 2005.

Gertzen, Jason, "Waukesha, Wis.-Based RedPrairie to Acquire Foothold in Europe," Milwaukee Journal Sentinel, February 12, 2004.

Hickey, Kathleen, "McHugh Now RedPrairie," Traffic World, May 27, 2002.

"In Brief ...," Automatic I.D. News, September 1999.

Jensen, Trevor, "Simply Red," Adweek Midwest Edition, June 3, 2002.

"McHugh Buys Consulting Firm," Logistics, August 1998.

"McHugh Buys Software Architects," Logistics, March 1998.

"McHugh Changes Name, Market Approach; Rider Joins Team," Warehousing Management, June 2002.

"McHugh Freeman Accepts Offer," Milwaukee Journal, May 1, 1989.

"McHugh Software Adds Event Management," Industrial Distribution, May 2002.

"McHugh Software on the Move," Transportation & Distribution, December 1998.

"Name Change," Material Handling Engineering, October 1997.

"RFID Center of Excellence Formed," Food Logistics, April 15, 2002.

Slee, Kendall, "SKUing Relationships," Export Today, July 1998.

"Suite Success," Works Management, August 2000.

"The Top Five," Frontline Solutions Europe, October 2000.

"Two More Industry Deals Announced," Logistics Management & Distribution Report, May 2000.

"UNIX-Based, Integrated System Does It All for Distribution Centers," Automatic I.D. News, August 1995.

"WMS CEOs: 'Turn Data Flow into Cash Flow,' " Supply Chain Flow, April 1999.

Paul R. Greenland

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