Descartes
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Arthur Mesher, CEO, The Descartes Systems Group Inc.
The Descartes Systems Group Inc.[1] (DSGX: Nasdaq; DSG: TSX) is a leading provider of inter-enterprise execution software for supply chain management. Founded in 1981, the company is based in Waterloo, Ontario and has over 300 employees in 14 offices in North America, Asia-Pacific region, Europe, the Middle East and Africa.
Descartes’ products target at distributive-sensitive companies where delivery is either a key or a defining part of their own product or service offering, or provides opportunities to them for cost efficiencies. The company’s on-demand, software-as-a-service (SaaS) logistics technology solutions, which consist of services and software, streamline the entire order-to-delivery process and enable customers across industries and modes to manage the movement of goods and related information. Descartes also provides various related services, including support and maintenance services, consulting, impleme ntation and training.
Descartes sells its products through direct sales force, distributors, and value-added resellers. Its customers include an estimated 1,600 ground carriers and more than 90 airlines, 30 ocean carriers, 900 freight forwarders and third-party providers of logistics services, and hundreds of manufacturers, retailers, distributors, private fleet owners and regulatory agencies.
In 2007, Descartes was granted the Omond Solandt Award of the Canadian Operational Research Society (CORS). It was also voted a Top 100 Logistics IT Company by Inbound Logistics. A year before, the company was recognized as the Best Canadian Company by Canadian Business Magazine during International Business Awards 2006. Contents
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Goals
In 1998, Descartes’ goal was to become the world’s leading provider of supply chain execution software to global Fortune 1000 companies in the consumer process and transportation industries. Later in 2000, the company refocused its vision, which was to become the global leader in networked e-fulfillment solutions by offering an integrated portfolio of applications and services that maximize their fulfillment operations, due to the shift to an e-commerce economy. Currently Descartes’ focus is on bringing together shippers, carriers, airlines, forwarders and truckers and encouraging them to work together to create standardized business processes and improve efficiencies. [edit] Business model
Descartes’ business model has been evolving since its founding. The company started as a developer of logistics software for delivery-sensitive companies and became a provider of broad, service-based solutions for the emerging e-fulfillment revolution in 2000. As the internet transforms business, Descartes has adjusted with a new strategy that emphasizes value-added services. Since 2006. Descartes has adopted a new software-as-a-service (SaaS) business model, in which the company offers customers the choice of using its solutions on an on-demand basis where they pay the company as they receive value from its services.
Modus operandi
The order-to-delivery process of a company often involves many sub-processes like order entry, pricing and promotions control, customer service, inventory management, fulfillment, vehicle loading, fleet routing, scheduling, delivery, account reconciliation and invoicing. These tasks are managed by many departments, all requiring the ability to see the actual order and modify it along the order-to-delivery process if necessary. Overlap between departments can—and does—occur; at any given point, customer service, finance, sales and distribution may be working on the same order.
At Descartes, the collection of functionality that models, executes and controls real-time events that are required to actually fulfill orders and deliver them to customers is called supply chain execution. The company develops supply chain execution software and provides related services to help customers reduce administrative costs, billing cycles, fleet size, contract carrier costs, and improve pick up and delivery reliability.
Descartes’ customers are divided into two groups: transportation and logistics services providers; and manufacturers, retailers, distributors and service providers. For transportation services providers, Descartes Global Logistics Network (GLN) offers services such as messaging, rate management, multimodal track and trace, shipment and fleet management, and customs filing & compliance. For manufacturers, retailers, distributors and retailers, the company offers the Descartes Delivery Management Suite which integrates design, planning, execution, performance management and messaging solutions, and connects companies to their trading partners, allowing them to share real-time information about orders, inventory and supply chain events. Currently, Descartes has more than 3,000 customers in over 60 countries worldwide, and 35,000 logistics messaging partnerships.
Characteristics
Descartes differentiates itself through its broad supply chain execution suite functionality, application of leading edge technologies, and its inter-enterprise focus on the supply chain. While most other supply chain software companies have developed their solutions from an enterprise perspective to manage operations 'within the four walls' of the company, Descartes designs solutions from an inter-enterprise perspective for companies that compete in a global arena with multiple trading partners. By approaching the supply chain from this perspective, the company could offer complete order-to-delivery solutions that companies can rely on to manage their current and emerging supply chain requirements.
Descartes also distinguishes itself from its competitors with its customer-focused software-as-a-service business model. Unlike ordinary software companies that require a large up-front investment, Descartes lets its customers use its solutions on an on-demand basis where they pay for the services as they receive value from it.
Challenges
Highly competitive and fast-paced supply chain software industry
The market for supply chain technology has been highly competitive and subject to rapid technological change. Further development of existing products and introduction to new services in a timely and cost effective manner are necessary for Descartes to keep pace with its competitors, who include supply chain application software vendors, general business application software vendors, enterprise resource planning vendors and value-added networks and business document exchanges. It is expected that competition will increase in the future.
Impact from customers’ business
Descartes’ business may be affected by the general cyclical and seasonal nature of particular modes of transportation and the freight market, as well as that of the industries these markets serve. Factors that may cause cyclical fluctuations include legal and regulatory requirements, amendments to international trade agreements, and weather-related events which impact shipping in particular regions. An increase in fuel prices and other transportation costs may also adversely affect the businesses of customers who would have fewer funds allocated to Descartes’ products/services.
Limited operating experience in regulatory compliance business
To support the company’s strategy of broadening the functionality of its products, Descartes has made three acquisitions in 2007: ViaSafe, Flagship and Cube Route. While the regulatory compliance business of ViaSafe could assist customers in making necessary import and export filings with applicable government and regulatory agencies, Descartes has limited historical operating experience in this business area and there may be unanticipated challenges in maintaining or growing this business
Changes in the value of the US dollar
The international revenues of Descartes have been denominated primarily in US dollars, while the majority of its international expenses, including the wages of its non-US employees and certain key supply agreements, have been dominated in currencies other than the US dollar. Since Descartes currently has no specific hedging program in place to address currency fluctuations, changes in the value of the US dollar as compared to other currencies have negatively affected the company’s operating performance. Recent fluctuations in the Canadian-US dollar exchange rate have incurred a significant portion of the company’s expenses, and no accurate prediction of future changes in Canadian-US dollar could be made.
Management and Board of Directors
Management Team:
Arthur Mesher, Chief Executive Officer
Stephanie Ratza, Chief Financial Officer
Chris Jones, Executive Vice President, Solutions & Services
Scott Pagan, Executive Vice President, Corporate Development & General Counsel
Edward J. Ryan, Executive Vice President, Global Field Operations
Board of Directors:
Arthur Mesher, Chief Executive Officer, The Descartes Systems Group Inc.
J. Ian Giffen, Chairman of the Board, Director of Corel Corporation, MKS and RuggedCom Inc.
David I. Beatson, Chief Executive Officer, GlobalWare Solutions
Michael Cardiff, Chief Executive Officer, Accelerents Inc.
Chris Hewat, Partner, Blake, Cassels & Graydon LLP
Olivier Sermet
Dr. Stephen Watt, Professor, Department of Computer Science, University of Western Ontario
External links
Descartes’ official website:http://www.descartes.com/
Descartes as International Stevie Award winner for Best Turnaround in 2006: http://thestevies.com/SmallBizNews/April2007fulltext.html#story_02
More about Arthur Mesher: http://www.sterlinghoffman.com/newsletter/articles/article265.html
