Elementum: A Disruptive Force is Coming to the Supply Chain Cloud… Maybe (Part 1)

Elementum formally announced its market launch today (although it ‘soft launched’ a few months ago in terms of its website).  It is an 18 month old supply chain start up that was funded and incubated at $24B contract manufacturer Flextronics, but has now taken on $44M in Series B funding from Lightspeed Venture Partners.  It is located in Mountain View, has over 50 people working for it, and has ‘released’ three of its mobile products called Transport, Exposure, and Perspective.  I only caveat the word ‘released’ because basically the only customer really using the product is Flextronics (also the dominant primary investor), but over a dozen of Flextronics’ roughly 1,000 customers have been kicking the tires on the products (more on this later), and at least two, Dyson and Enphase Energy, have signed on.  Spend Matters will report back on the progress being made as those implementations progress meaningfully.

Basically, the above products are mobile-based visibility products.  Transport offers visibility into existing shipments and offers predictive and rules-based alerts to notify managers of any potential delays.  Exposure is a supply chain risk management product that is most similar to Resilinc.  It monitors various external content sources and then based on an adverse event at a certain location, a perimeter is established, impact analyses run to determine affected locations, suppliers (and eventually suppliers’ suppliers), components, and products (with associated revenues/margins), and appropriate personnel notified and hounded until the problems are resolved.  Finally, Perspective offers a mobile dashboard with a variety of KPIs regarding supplier delivery performance, working capital, cycle time, and a few others.

Unfortunately, the products understandably are currently 'tightly coupled’ to the Flextronics supply chain, and until Elementum releases its “SDK” (solution/software development kit) for customers to hook up their own supply chain data (a somewhat non-trivial exercise), the dashboards will basically be tuned by Elementum to only display the Flextronics portion of the supply chain relevant to Flextronics customers who’d purchase these mobile applications.

The solutions have also been designed to run across multiple mobile platforms (Android, iOS, etc.), but will clearly require PC browser interfaces  for power users who want to work on larger data sets of tabular data and other UI features poorly suited to small touch devices.  The applications are almost toy-like in their simplicity, and not always in a good way, but, although the products may lack some functional depth in the short term, there is a hell of a lot of thoughtful design and impressive technology under the hood with regards to its massively scalable and secure platform built on an open and service oriented architecture.  Just read the product sheets on the website and the technical job postings out on the Web to get an idea of what I’m talking about.

Eventually, the products will transition from just cool smartphone/tablet based supply chain event management applications that Flextronics customers can show off on the golf course to more hardened response management and collaborative applications that any supply chain participant could use.  The CEO of Elementum, a confident former McKinsey consultant named Nader Mikhail, is looking to “build the next $10B cloud computing company." More accurately, Mike McNamara, the CEO of Flextronics, is looking for Nader to help him “pivot from a global manufacturer to a global supply chain solutions company. I expect great things in the coming years as he [Nader] revolutionizes the supply chain world through his leadership of Elementum."

In the ‘case study’ video on Elementum’s website, Mike holds up a smart phone and declares “On Elementum, I run my supply chain on this!”  He also touts the “Elementum layer on top of Flextronics scale” and says that “If your supply chain is not real-time, mobile, and connected, I don’t know how you'll run your supply chain in five years.”

Yes, I know, cue the major eye roll here. A lot of bravado for sure. But, it’s not necessarily a bad thing. The supply chain market (and even just the direct procurement aspect of it) does not have a strong cloud-based platform (not just an application suite) with depth, breadth, and technical.  There are players with different piece parts, but it is still very early days in the market, and there is clearly a need for strong leadership.

But, should a brick-and-mortar supply chain participant really want to get into the software business?  Is it core?  Isn’t the market littered with such failed forays?  What about the conflicts of interest and channel conflict with existing partners?  Does the company have the stomach for the long battle ahead?  These are important questions, and there is a back story to this tale that makes it relevant to all practitioners (and providers) in the market beyond this ‘new’ provider.

In Part 2 of this story, we will investigate the business strategy behind this move (i.e., innovation, diversification, synergy, orchestration, brand multiplier enhancement, etc.) and the lessons to be learned (or at least questions to be asked) by current and future players.  Stay tuned for the next installment!

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