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Funding supply chain forecasting

Oct 31, 2022
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Illustration: Gabriella Turrisi/Axios

Investors poured $1.5 billion into enterprise supply chain management deals in Q2, according to PitchBook.

Why it matters: The ability to forecast demand and balance the right inventory levels is a top-of-mind concern for retailers, and companies that can connect various parts of their supply chain are necessary in today’s world, e2open CEO Michael Farlekas tells Axios.

Context: Consumer product goods companies and retailers have contended with supply chain disruptions from COVID-related lockdowns, congested ports, and a war in Ukraine for nearly three years now.

  • They’ve come to ask themselves: “How do I become more agile? And what is my ability to change based on things I can't control?” Farlekas says.

What’s happening: E2open, an Austin, Texas-based supply chain software company with a broad set of applications, helps retailers and CPGs with demand sensing, a near-future forecasting method, and with inventory management and planning.

  • It is important to be agile, Farlekas says, because it can help retailers get ahead of cost curves and enable them to fulfill demand better than competitors.
  • “Many of our customers actually said that 'we sold more than our competitors because we had a greater availability of products than our competitors,'” he says, adding it keeps them from getting “behind the eight ball.”

How it works: Data from retailers' partners, suppliers and manufacturers need to be in real time in order to give them a better understanding of where everything is and the state of their manufacturing, distribution and selling, Farlekas says.

  • E2open receives data from the retailers themselves about what was sold, the inventory positions at their stores, and what’s in their warehouses.
  • The software company can then predict what’s going to happen and what’s going to be sold at their stores over the next week to several weeks out.
  • “By collecting and predicting demand at the item store level and aggregating that up, that means you could be much more forward-thinking about what you're going to sell in the future,” Farlekas says.
  • The same can be done for planning inventory as well, where its software can help them understand how many products to make and even what geographic areas are best to make it.

What’s next: Companies are faced with having to make quick pivots to their supply chain, he says.

  • He's seeing companies starting to set up more diverse infrastructures to account for these rapid changes and employ more software that can tell them what to change in the future.
  • E2open is willing to be acquisitive in core capabilities as well, especially to add more intelligence and automation to the applications it already has, he says.
  • "We're much less likely to buy a new technology and much more likely to buy a proven technology," Farlekas adds.
  • The publicly traded company's revenue more than doubled to $160.7 million in the quarter that ended Aug. 31.
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