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Lean Players Team Up to Form New Company

by Stephanie Neil, MA Editorial Staff

Posted on Thursday, April 19, 2007 5:25:00 PM       Sign Up to receive Daily News Alerts in your E-mail Inbox                               

Pelion Systems, a maker of lean software, and JCIT International, a demand-flow educational and consulting services company, announced this week that they will unite under the name DemandPoint. The combined company will provide consulting services and develop products geared toward the use of lean principles and technology in a demand-driven environment.

Specifically, DemandPoint will focus on demand-based order fulfillment among manufacturers looking to improve cash flow and working capital by streamlining the value chain and collapsing the order-to-cash cycle.

Pelion brings to the union software that addresses functions such as scheduling, value-mapping, and process optimization. JCIT boasts a patented algorithm that it uses to assess customers' facilities and implement demand-flow processes that improve the entire value chain, from operations to sales and marketing.

The merger comes at a time when many companies have turned to lean concepts in their manufacturing operations. "The challenge for these companies now is that they have great operational efficiency using tools, but many have yet to leverage that across the value chain," said Tony Gorski, JCIT's CEO, who will serve as president of DemandPoint. "All of the good operational work they are doing doesn't tie into the business model."

Officials said DemandPoint will guide its 3,500-plus customers toward a holistic approach to lean. This means understanding that if the value chain has improved to the point at which product lead time has been whittled down to two days from 20 days, the organization must act differently in response, Gorski told Managing Automation. In that scenario, for example, "I just brought my supply chain 48 hours from the customer," he said. "How I act in that environment is different from when I had six weeks' lead time." This change in mind-set is where JCIT's consulting skills come into play, according to Gorski.

Indeed, many manufacturers have implemented lean or a continuous improvement program "in little pockets," said Cindy Jutras, vice president of ERP research at Aberdeen Group, in an interview. That approach doesn't make a connection with the order-to-cash cycle, she said.

"There is some evolutionary perspective" in the merger, Jutras said. "Lean has to grow beyond just scheduling the plant. It has to affect the whole business, and to do that, you need to have a holistic view of lean in the context of business, as opposed to lean in the context of manufacturing, or a silo in manufacturing."

DemandPoint officials hope that an integrated vendor will be an appealing option to companies looking to create an integrated approach to lean. The two companies were destined to work together, as they come from the same DNA, Gorski noted. "Some people left our company to work for Pelion to build out its software," he said.

Not long ago, Gorski got a call from Kevin Fallon, Pelion's CEO, saying that he wanted to build out a consulting arm. The original discussions of a partnership segued into merger talks between the two private companies.

The combined business will operate out of the JCIT office in Denver, with the executive team largely untouched, as Gorski stays on as president and Fallon becomes CEO of DemandPoint. Terms of the deal were not disclosed.

Both Pelion and JCIT have industry partnerships that will be unaltered by the merger — Pelion with the Lean Learning Center and JCIT with major ERP vendors, including SAP and Oracle.

Officials said they expect the company's software to play a supporting role to its consulting services. "When you talk about fulfilling the perfect order, more often than not consulting will lead," Gorski said. "What changes are the business processes. The [software] tools will supplement that."