A sale of supply chain software firm JDA Software Group Inc. to Honeywell International Inc.—or anyone else—appears to be off the table.
Private equity firm New Mountain Capital, JDA's parent, said today that it will partner with The Blackstone Group, the private equity and investment banking giant, to invest nearly $570 million in Scottsdale, Ariz.-based JDA, which provides software services to support supply chain planning, merchandising, and pricing, all critical areas that are needed to master omnichannel
fulfillment. Blackstone, which will invest the vast majority of the total, will receive a guaranteed 7.5 percent return, according to BG Strategic Advisors (BGSA), a Palm Beach, Fla.-based logistics mergers and acquisitions consultancy. New Mountain will use the funds to pay down about one-quarter of JDA's $2 billion debt load, which would reduce JDA's annual interest expense by $70 million, according to BGSA estimates.
The Blackstone investment signals that New Mountain believes JDA is a much more valuable property under its umbrella than it would be today as a saleable asset. Honeywell, the Morris Plains, N.J.-based conglomerate, was rumored earlier this month to be readying a $3 billion offer for JDA, which included assuming its debt. Honeywell has claimed a growing position in the warehouse and distribution category with the acquisitions of equipment maker Intermec Inc. and material handling automation provider
Intelligrated Systems Corp. Honeywell's rumored bid for JDA was about $1.1 billion more than New Mountain paid for the company in 2012.
Honeywell declined comment on the New Mountain-Blackstone announcement. In a conference call today with analysts, JDA Chairman and CEO Bal Dail also would not comment on the Honeywell rumors. "JDA has had a number of discussions with many different firms, and the Blackstone/New Mountain outcome in my book, from my perspective, is the best outcome," Dail said.
Benjamin Gordon, BGSA's founder and managing partner, said New Mountain could have sold JDA to several suitors, including Honeywell. Instead, New Mountain concluded that they would make more money if they doubled down, brought in Blackstone, paid down debt, and focused on growing the business.
Dwight Klappich, a vice president and supply chain specialist at the Stamford, Conn.-based consultancy Gartner Inc., said New Mountain might be doing Honeywell a favor by declining to sell. "The track record of industrial companies buying into the business application space has been atrocious," Klappich said. That's because most software used by industrial companies focuses on "operational technology," which is the domain of engineers, and not information technology, which is the purview of IT departments, Klappich said. "They are not the same, and success in one has no influence on success in the other," he said.
Despite that, industrial firms enamored by the growing importance of "software" in their business conclude that all software applications are the same and can be effectively executed in a uniform manner, he said.
Today's announcement should compel Honeywell to reconsider its strategic direction in the warehouse and DC space, Klappich said. For example, if all Honeywell wanted from JDA was warehouse management systems (WMS) capabilities, there are more than 30 WMS vendors available at a fraction of the cost, he said.
Klappich added that he wasn't sure what value Honeywell would derive from JDA's strengths in supply chain planning, merchandising, and pricing, areas where Honeywell has little involvement.
In a report issued this morning before the Blackstone investment was announced, London-based consultancy International Data Corp. (IDC), said Honeywell would be overpaying for an asset of questionable value. IDC acknowledged that Honeywell CEO Dave Cote has said that about half of the company's 23,000 engineers are currently working on software, but the consulting company
questioned whether those workers have the "software industry acumen to pull their objective off," or if Honeywell is "investing in the hope that JDA's current leadership can do it—something it hasn't been able to do as of late?"
IDC acknowledged that any industrial automation vendor would covet JDA's huge installed customer base. However, it wondered if Honeywell has "fully evaluated the financial value of JDA, a company that is struggling to keep its customers from jumping ship for a more innovative and future-proofed alternative."
IDC noted that JDA was recently downgraded by investment grading firm Moody's because of its high debt load.
John Santagate, an IDC analyst, said that although New Mountain and Blackstone's investment would help JDA balance its books, the news did not have any implications for the future of a potential Honeywell merger.
"One thing for sure is that JDA understands there's a debt issue, and they have to take care of it," Santagate said. "They have two options on the table now: one is a buyout by Honeywell and the other deal is a capital injection by New Mountain and Blackstone. Either way, at the end of the day, the deal is good for JDA."
Investment in next-generation products
JDA pledged to devote its new funds to improving its software products, both by enhancing existing, on-premise software solutions
and by investing in cloud-based products. Supply chain companies will need tools from both areas as they adapt to industry trends
such as the Internet of Things, big data, and analytics, JDA said.
"Clearly some retailers in North America are going through some pain points, as there have been announcements about store
closures and what have you because of the move to online," Dail said on the call. "But overall globally we see opportunities
in both manufacturing and retail as well the other sector we serve, which is third-party logistics."
"The bulk of our $100 million R&D budget is in current products, so we can now accelerate investment in next-generation products,"
Dail said. "We have a pipeline of things we want to build on that platform, around store logistics operations, manufacturing
planning, demand and replenishment, and a next-generation digital hub."
At the same time, JDA plans to continue its support for software applications hosted on-premise, he said.
"We're seeing increased automation in the warehouse, but if you're building a highly automated distribution center, you have to
have a warehouse management system that talks directly to the material handling equipment," Dail said. "That has to happen at a
very, very rapid pace, so they don't want the latency of having the warehouse management system sitting in the cloud. Even with
high network bandwidth, the latency is just too high for a highly automated distribution center."
Supply chain planning (SCP) leaders working on transformation efforts are focused on two major high-impact technology trends, including composite AI and supply chain data governance, according to a study from Gartner, Inc.
"SCP leaders are in the process of developing transformation roadmaps that will prioritize delivering on advanced decision intelligence and automated decision making," Eva Dawkins, Director Analyst in Gartner’s Supply Chain practice, said in a release. "Composite AI, which is the combined application of different AI techniques to improve learning efficiency, will drive the optimization and automation of many planning activities at scale, while supply chain data governance is the foundational key for digital transformation.”
Their pursuit of those roadmaps is often complicated by frequent disruptions and the rapid pace of technological innovation. But Gartner says those leaders can accelerate the realized value of technology investments by facilitating a shift from IT-led to business-led digital leadership, with SCP leaders taking ownership of multidisciplinary teams to advance business operations, channels and products.
“A sound data governance strategy supports advanced technologies, such as composite AI, while also facilitating collaboration throughout the supply chain technology ecosystem,” said Dawkins. “Without attention to data governance, SCP leaders will likely struggle to achieve their expected ROI on key technology investments.”
The U.S. manufacturing sector has become an engine of new job creation over the past four years, thanks to a combination of federal incentives and mega-trends like nearshoring and the clean energy boom, according to the industrial real estate firm Savills.
While those manufacturing announcements have softened slightly from their 2022 high point, they remain historically elevated. And the sector’s growth outlook remains strong, regardless of the results of the November U.S. presidential election, the company said in its September “Savills Manufacturing Report.”
From 2021 to 2024, over 995,000 new U.S. manufacturing jobs were announced, with two thirds in advanced sectors like electric vehicles (EVs) and batteries, semiconductors, clean energy, and biomanufacturing. After peaking at 350,000 news jobs in 2022, the growth pace has slowed, with 2024 expected to see just over half that number.
But the ingredients are in place to sustain the hot temperature of American manufacturing expansion in 2025 and beyond, the company said. According to Savills, that’s because the U.S. manufacturing revival is fueled by $910 billion in federal incentives—including the Inflation Reduction Act, CHIPS and Science Act, and Infrastructure Investment and Jobs Act—much of which has not yet been spent. Domestic production is also expected to be boosted by new tariffs, including a planned rise in semiconductor tariffs to 50% in 2025 and an increase in tariffs on Chinese EVs from 25% to 100%.
Certain geographical regions will see greater manufacturing growth than others, since just eight states account for 47% of new manufacturing jobs and over 6.3 billion square feet of industrial space, with 197 million more square feet under development. They are: Arizona, Georgia, Michigan, Ohio, North Carolina, South Carolina, Texas, and Tennessee.
Across the border, Mexico’s manufacturing sector has also seen “revolutionary” growth driven by nearshoring strategies targeting U.S. markets and offering lower-cost labor, with a workforce that is now even cheaper than in China. Over the past four years, that country has launched 27 new plants, each creating over 500 jobs. Unlike the U.S. focus on tech manufacturing, Mexico focuses on traditional sectors such as automative parts, appliances, and consumer goods.
Looking at the future, the U.S. manufacturing sector’s growth outlook remains strong, regardless of the results of November’s presidential election, Savills said. That’s because both candidates favor protectionist trade policies, and since significant change to federal incentives would require a single party to control both the legislative and executive branches. Rather than relying on changes in political leadership, future growth of U.S. manufacturing now hinges on finding affordable, reliable power amid increasing competition between manufacturing sites and data centers, Savills said.
The number of container ships waiting outside U.S. East and Gulf Coast ports has swelled from just three vessels on Sunday to 54 on Thursday as a dockworker strike has swiftly halted bustling container traffic at some of the nation’s business facilities, according to analysis by Everstream Analytics.
As of Thursday morning, the two ports with the biggest traffic jams are Savannah (15 ships) and New York (14), followed by single-digit numbers at Mobile, Charleston, Houston, Philadelphia, Norfolk, Baltimore, and Miami, Everstream said.
The impact of that clogged flow of goods will depend on how long the strike lasts, analysts with Moody’s said. The firm’s Moody’s Analytics division estimates the strike will cause a daily hit to the U.S. economy of at least $500 million in the coming days. But that impact will jump to $2 billion per day if the strike persists for several weeks.
The immediate cost of the strike can be seen in rising surcharges and rerouting delays, which can be absorbed by most enterprise-scale companies but hit small and medium-sized businesses particularly hard, a report from Container xChange says.
“The timing of this strike is especially challenging as we are in our traditional peak season. While many pulled forward shipments earlier this year to mitigate risks, stockpiled inventories will only cushion businesses for so long. If the strike continues for an extended period, we could see significant strain on container availability and shipping schedules,” Christian Roeloffs, cofounder and CEO of Container xChange, said in a release.
“For small and medium-sized container traders, this could result in skyrocketing logistics costs and delays, making it harder to secure containers. The longer the disruption lasts, the more difficult it will be for these businesses to keep pace with market demands,” Roeloffs said.
Jason Kra kicked off his presentation at the Council of Supply Chain Management Professionals (CSCMP) EDGE Conference on Tuesday morning with a question: “How do we use data in assessing what countries we should be investing in for future supply chain decisions?” As president of Li & Fung where he oversees the supply chain solutions company’s wholesale and distribution business in the U.S., Kra understands that many companies are looking for ways to assess risk in their supply chains and diversify their operations beyond China. To properly assess risk, however, you need quality data and a decision model, he said.
In January 2024, in addition to his full-time job, Kra joined American University’s Kogod School of Business as an adjunct professor of the school’s master’s program where he decided to find some answers to his above question about data.
For his research, he created the following situation: “How can data be used to assess the attractiveness of scalable apparel-producing countries for planning based on stability and predictability, and what factors should be considered in the decision-making process to de-risk country diversification decisions?”
Since diversification and resilience have been hot topics in the supply chain space since the U.S.’s 2017 trade war with China, Kra sought to find a way to apply a scientific method to assess supply chain risk. He specifically wanted to answer the following questions:
1.Which methodology is most appropriate to investigate when selecting a country to produce apparel in based on weighted criteria?
2.What criteria should be used to evaluate a production country’s suitability for scalable manufacturing as a future investment?
3.What are the weights (relative importance) of each criterion?
4.How can this methodology be utilized to assess the suitability of production countries for scalable apparel manufacturing and to create a country ranking?
5.Will the criteria and methodology apply to other industries?
After creating a list of criteria and weight rankings based on importance, Kra reached out to 70 senior managers with 20+ years of experience and C-suite executives to get their feedback. What he found was a big difference in criteria/weight rankings between the C-suite and senior managers.
“That huge gap is a good area for future research,” said Kra. “If you don’t have alignment between your C-suite and your senior managers who are doing a lot of the execution, you’re never going to achieve the goals you set as a company.”
With the research results, Kra created a decision model for country selection that can be applied to any industry and customized based on a company’s unique needs. That model includes discussing the data findings, creating a list of diversification countries, and finally, looking at future trends to factor in (like exponential technology, speed, types of supply chains and geopolitics, and sustainability).
After showcasing his research data to the EDGE audience, Kra ended his presentation by sharing some key takeaways from his research:
China diversification strategies alone are not enough. The world will continue to be volatile and disruptive. Country and region diversification is the only protection.
Managers need to balance trade-offs between what is optimal and what is acceptable regarding supply chain decisions. Decision-makers need to find the best country at the lowest price, with the most dependability.
There is a disconnect or misalignment between C-suite executives and senior managers who execute the strategy. So further education and alignment is critical.
Data-driven decision-making for your company/industry: This can be done for any industry—the data is customizable, and there are many “free” sources you can access to put together regional and country data. Utilizing data helps eliminate path dependency (for example, relying on a lean or just-in-time inventory) and keeps executives and managers aligned.
“Look at the business you envision in the future,” said Kra, “and make that your model for today.”
Turning around a failing warehouse operation demands a similar methodology to how emergency room doctors triage troubled patients at the hospital, a speaker said today in a session at the Council of Supply Chain Management Professionals (CSCMP)’s EDGE Conference in Nashville.
There are many reasons that a warehouse might start to miss its targets, such as a sudden volume increase or a new IT system implementation gone wrong, said Adri McCaskill, general manager for iPlan’s Warehouse Management business unit. But whatever the cause, the basic rescue strategy is the same: “Just like medicine, you do triage,” she said. “The most life-threatening problem we try to solve first. And only then, once we’ve stopped the bleeding, we can move on.”
In McCaskill’s comparison, just as a doctor might have to break some ribs through energetic CPR to get a patient’s heart beating again, a failing warehouse might need to recover by “breaking some ribs” in a business sense, such as making management changes or stock write-downs.
Once the business has made some stopgap solutions to “stop the bleeding,” it can proceed to a disciplined recovery, she said. And to reach their final goal, managers can use the classic tools of people, process, and technology to improve what she called the three most important key performance indicators (KPIs): on time in full (OTIF), inventory accuracy, and staff turnover.