Last week I was briefed by Plex on its acquisition of DemandCaster, a provider of cloud based supply chain capability. We would not normally cover this kind of event but there are good reasons to do so in this case. Here are the top line reasons:
- This is Plex's first acquisition and so while one would normally expect significant risk, the two companies have been partners for over a year. Crucially the two companies share the same technology base so integration is straightforward. You can therefore characterize this as 'we liked it so we bought it' kind of deal.
- Plex and DemandCaster share 10 common customers. That means Plex has demonstrable experience in making supply chain work for its customer base and can confidently go forward into the existing customer base with a much needed option.
- For larger customers where Plex might struggle to get a foot in the door, DemandCaster provides an entreé for the departmental level buyer. That sets the stage for a 'land and expand' strategy that would otherwise prove difficult. Think of it as a Trojan Horse.
- For the longer term, Plex now has a strong incentive to overlay supply chain analytics to its existing analytics roadmap. That work is already in progress, the first fruits of which will surface at the end of this year.
We like this deal - a lot.
Meeting the SMB need
As we have said on many occasions in the past, manufacturing industry SMBs challenges reflect those of their larger brethren but they rarely have the technical or financial resource with which to implement solutions that meet their needs. This is where Plex slots in nicely, largely serving the medium sized 'Rust Belt' business with a solution that customers like and are often enthusiastic about.
Supply chain has always been something of a Cinderella technology where the problems of reaching the smallest suppliers has always represented a choke point. The long term promise of Plex/DemandCaster is that companies operating the supply chain capabilities will be able to reach BOTH suppliers and customers at almost zero cost. That comes about because technically, companies only need a browser with which to access information and financially, because Plex does not operate a per seat pricing model.
Functionally, DemandCaster is not the kind of full blown supply chain solution you'd expect to find from an SAP, Kinexis or Oracle. But it is covering the main components of constraint based demand planning, sales and operational planning, master production scheduling and inventory planning and optimization. In short, that's a solid base from which to develop more advanced capability in the future.
I asked Jim Shepherd, chief strategist and long time supply chain expert why DemandCaster represented a good addition to the company.
We wanted a solution that is easy to use because as you know, our products are on the shop floor, where things have to be obvious to the operator. DemandCaster fits that requirement really well. What's perhaps more interesting though is that in the case of a large automotive supplier, that was an SAP replacement. Having the SCM capability was a key to winning for their after market business where supply planning is critical.
I was concerned that even though Plex has experience of working alongside DemandCaster, there might be risk in making this first acquisition. Shepherd said this:
We hired an outside firm to do due diligence on the technology and as far as we know there’s no gotchas. Were on the same architecture, we’ve already got joint customers and we don’t have any baggage. I think that's about as good as it gets.
I asked Karl Ederle, vice president of product management about go to market:
DemandCaster uses a trial basis sales system. You can't do that with ERP but you can with supply chain and the fact it is easy to use should mean potential customers can get on board pretty quickly. But alongside, it has an easy and slick integration. They've done integrations with Infor, SAP, Oracle and Netsuite so we can get into those accounts as well.
I said at the top that we like this deal, in large part because it is ticking a lot of important boxes. Crucially, it overcomes the past difficulty in tying both customers and suppliers to important data that inform operations.
There's not much more to be said at this stage although I have requested that Plex put us in front of customers to discuss how DemandCaster is working. That will follow in due course.