Investors help risk management visibility software startup, incubated out of Flextronics, make splash.
There aren’t a whole lot of supply chain software providers that fly out the gate with celebrity investors attached and that’s what made the startup Elementum’s public unveiling in early April so noteworthy.
The company didn’t just enter the marketplace. It came armed with the news that five big-name investors plugged $60 million into the company’s fledgling coffers. Among the investors are Jerry Yang, a co-founder of Yahoo!, Aaron Levie, co-founder of Box, and Dave Duffield and Mike Frandsen, co-founders of Workday.
Within the software world, these are heavy hitters. So what attracted them to a startup aiming to shake up the world of supply chain risk and visibility?
Well, Elementum looks different from your average platform. It’s essentially a series of apps – one for transportation, one for supply chain risk management, one for fulfillment, and another that tracks key performance indicators. A fifth, one that aggregates information from the other four into a so-called “situation room,” is in development.
The design of the system is simplistic by design – its creators wanted to build an environment that feels familiar to users of smartphones and social media. They are intent on being disruptive, even down to the aesthetics of the system.
“We’re intentionally designing our apps in almost a consumer fashion,” said Rob Cheng, Elementum’s head of marketing. “We’re very much a mobile-first company in how we design our applications in terms of ease of use and the interface.”
As some background on the company, Elementum was incubated out of the global electronics manufacturer Flextronics, spinning off in February with $44 million in capital. The $60 million from the big-ticket investors came in April, a period in which Elementum generated what is known in the software world as “stealth.” That essentially means they made themselves known publicly.
The company’s first modules focus intently on visibility, leveraging all of Flextronics’ supply chain nodes, as well as those of a handful of other large original equipment manufacturers (OEMs) that have signed up, including two in high-tech, one in pharmaceuticals and some automakers. Among the customers Elementum can name outside of Flextronics are Dyson (known best for its vacuum cleaners) and the energy company Enphase.
The idea for Elementum sprang from a simple concept – companies assemble detailed demand graphs but don’t create nearly the same picture for supply, Cheng said.
Perhaps it’s because demand is largely out of companies’ control, and so is seen as more important to tackle.
“There’s no corresponding supply graph – no way to match the demand side of things,” he said. “There are cloud-based systems that are multi-tenant, but that data is still siloed.”
Some supply chain vendors would argue that point – indeed, many cloud-based offerings are built around the very concept of networks. But the point is still valid – monolithic companies using outdated architecture aren’t really in sync with the demands of today’s supply chains.
Cheng said the early goal is for the 80,000 or so nodes connected through the system (mostly from Flextronics) to create a viral effect, encouraging partners and partners’ partners to feed data to the apps.
“We’re not trying to create a mega-portal like with an ERP,” he said. “We’re not trying to replace ERP or supply chain management systems. We’re trying to give them the real-time data they need. Over time, strategically, it would make sense for us to be the system of record. But right now, I’d characterize it more as visibility. We’re a point of consolidation and visualization.”
Cheng said the starting point with prospective customers tends to be discussions with chief supply or procurement officers, and sometimes the chief operating officer.
“Often the gaps in a portfolio of solutions companies have around supply chain management are found in risk management,” he said. “There are very few established managers and systems.”
But is Elementum offering anything truly differentiated yet? Or are its splashy entrance and big-name investors obscuring the reality that other supply chain software vendors are already moving down this same path?
In early April, Clint Reiser, enterprise application analyst with ARC Advisory, wrote on the Logistics Viewpoints blog about Elementum.
“Many other companies offer similar solutions and have more well established networks,” he wrote. “Much of the value offered by these solutions is related to the size of the network and the ability to create demand-side increasing returns. This begs the question, what network (or networks) will win out, and is Elementum’s offering strong enough to overcome its late entry into this market?”
In a later email to American Shipper regarding his initial evaluation of Elementum, Reiser said “they’re looking at offering a differentiated solution focused on using supply chain event data for risk management purposes, but I also got the impression they’re underestimating how difficult it will be to obtain the data and sell it back to potential clients.”
Indeed, visibility tools are founded on data, or more precisely on eliminating gaps in data. So a network, no matter the bells and whistles, is only as strong as the data going into it.
Another complicating issue is that the field of supply chain visibility providers is crowded and getting more so. There are transportation management systems, ERP systems, and standalone visibility systems all offering their versions of visibility. Then there are the third party logistics services providers, some of which “white label” software systems and others which have developed their own visibility tools. And the reality is also that some shippers simply pull visibility information individually from their basket of carriers and service providers.
This is not to say Elementum doesn’t have a unique approach, although it’s a saturated and fragmented market.
The company appears to have ambition and capital, two things that go a long way in the software industry. And an understanding that in supply chain solutions, it’s often more about the “who” you have on board, rather than the “what” you have behind the scenes.
“It’s all about reaching critical mass,” Cheng said. “There are lots of exciting startups, but it’s really not about having enough technology.”
This article was published in the June 2014 issue of American Shipper.
