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i2
Technologies
Case
Study
By
Bruce
Egsieker
The chairman and founder of this company is
Sajiu Sidhu and the co-founder was Ken Sharma.
They started this company in 1988, in Irving Texas, and they have
emerged as one of the two leading providers of supply chain management software
companies in the world. In this company
there is no complacency. Its competitors
are Peoplesoft, SAP, ERP and Manigistics Group Inc. i2’s Rhythm Product Line is well known. Sidhu and Sharma were fortunate to obtain a contract at Timken
Steel even before developing their software product. Thus, they avoided the participation of a venture capital firm
that might exert pressures to show early cash flows. Timken really funded their product development during the first
years because they thought they understood the problem of production planning,
software, and demand and supply management software.
By 1996 i2 Technologies went public with a
stock offering. Their per share price
went form $20 per share to $40 dollars per share in just 1.5 years. The company was ranked 8th on
Business Week magazines 1997 list of 100 “hot growth companies”. Forbes magazine called them one of the most
dynamic companies in high technology today (1998). By the end of the year 1997 they had grown to $14.0 billion in
sales.
So what are their products?. They design and manufacture enterprise
resource planning software. This
optimizes supply chain decisions.
Products offered under i2’s Ryhthm umbrella were classified along two
dimensions: 1) the type of decision to be made (i.e. buy, make, move, store, or
sell), 2) the planning time horizon (the time horizon from decision to task
occurrence). Several Rhythm products
are offered: 1) demand planner (DP) uses a combination of historical demand
data, causal variables (like planned promotions) and strategic plans to generic
and consolidate demand forecasts from different departments, 2) Factory
Planner-operation efficiency, production, materials handling and capacity
planning software, 3) Supply Chain Planning- an off-shoot to develop, for an
entire supply chain a master plan that calculates quantity to purchase,
produce, store, and ship both intermediate and finished goods in order to meet
customer demand, 4) Distribution
Planner-(sold as a part of Supply Chain Planner) logistics for global supply
chains objectives, 5) Transportation Planner-to plan the transportation
resources needed to move materials and goods within supply chains, so as to
minimize costs while meeting deadline constraints.
During 1997, 1998, and 1999 i2 has purchased
companies to help them offer a broader range of products. Some of these companies were: Think Systems (demand management planning
software), Optimax (factory scheduling software), and Intertrans Logistics
Solutions (for transportation Solutions).
Operations research and computer science were the basis of i2’s
products. Advanced development and
consulting account for 50% of i2’s workforce.
Here is something of interest, 98% of their employees have Masters
Degrees and 32% have their PhD's. i2’s
business is that of converting academic research into commercial software. Demand Planner exploited research on product
forecasting methods done at various universities that were used to
determine product demand through the
use of time series methods “moving averages” and “exponential smoothing”. As many as 35 different time series models
are built into the tool to obtain measures of accuracy in product
forecasting.. Their demand planner
software is great as the manufacturing plant manager can view demand by product
while the sales manager might view demand by region or customer.
With DP (data processing), the sales
department’s forecast revision would be immediately visible to a factory in
Japan. Even better, the revised
forecasts could be fed into the factory’s planning systems (in realtime), and
production and inventory plans attend to reflect the revised forecast. The goal in aggregate planning was to
translate demand forecasts into a blueprint for planning a firm’s staffing and
production levels over a predetermined planning horizon. So you “drill down” capability through
orders, problem parts, bottlenecks, and staffing. What are the best solutions in a problem window when analyzing
demand and supply needs.
Heuristics are decision rules that are
designed to find “near optimal” solutions in minutes. Looking to “constant-anchored optimization”. You can run different “what if” scenario’s. What happens if a recession, what happens if
a major supplier goes on strike, what if a plant burns down, what if your tires
are defective (Firestone), these things effect everything in a supply
chain as to proper planning and
forecasting. So as you move through
the modules your using a business release methodology, with domain specific
knowledge. It gives you a real mapping
of demand, supply of material, production planning, shipping/distribution and
storage, and financing of the firms supply/demand chain. I2 provides electronic business processes
for optimization for your company.
Their future looks strong.
Some of their customers are: Dell Computer,
Compaq Computer, 3M Corporation, Copperweld, Healthtex, and Hermann Miller.