Kinaxis announced this week that the RapidResponse technology suite provider has signed a definitive agreement to acquire Toronto-based Rubikloud Technologies Inc, described as a disruptive, emerging provider of AI solutions that automate supply chain prescriptive analytics and decision-making in the retail and consumer packaged goods (CPG) industries. Supply Chain Matters This Week in Supply Chain Technology

This announcement follows the acquisition of Prana Consulting in February which added to Kinaxis’s own professional services depth with the creation of a global services hub.

According to the announcement, Kinaxis will enhance RapidResponse’s demand planning capabilities with the Rubikloud technology, anticipating initial opportunities in the company’s rapidly growing CPG customer base and over time for other industries such as life sciences.

The acquisition also offers the company a springboard into the enterprise retail industry.

The stated terms of the Agreement indicate an acquisition price of U.S. $60 million (Canadian $81 million) in an all-cash transaction that is expected to close within 60 days. The transaction is subject to customary closing conditions.

Background

Toronto based Rubikloud, founded in 2013,  was a privately held company having reportedly raised upwards of $45 million over three rounds of funding, the latest being in 2018. The company reportedly has upwards of 80 employees, after a peak of 100 employees.

The company primarily partners with retailers and Consumer Product Goods (CPG) companies on their end-to-end digital transformation journey toward artificial intelligence enabled decision-making. Solution areas are product demand forecasting and trade promotion optimization within Beauty, Food and Beverage and Household CPG areas. The company primarily leverages a Microsoft AI technology stack.

According to the company’s website, the technology approach is centered on four states of maturity that introduce the benefits of AI, with the goal of fully automating specific, workload intense business decisions. They include advanced machine learning (ML) models to handle data complexity and sparsity to produce highly accurate forecasts at a Store-SKU level. Subsequent stages are in an agile approach to customization where tailored insights regarding promotion effectiveness, inventory availability, and missed opportunities are uncovered. A third stage intertwines ML with human intervention by evaluating potential promotions with forward-looking scenario modelling. The end state is described as a fully automated decision-making engine that builds a constraint-based promotional calendar.

According to Crunchbase, the intellectual property (IP)  of Rubikloud includes 8 registered patents primarily in the ‘Computing and Calculating‘ category

Commenting on the acquisition, Kinaxis CEO John Sicard indicated that this acquisition provides the opportunity to bring enhanced demand planning and advanced AI/ML to power the market. Further noted was moving Kinaxis more directly in the Retail industry sector of planning and response management.

Reporting on the acquisition, the Toronto based Global and Mail indicates that in addition to gaining an expected 10 percent increase in headcount, Kinaxis will gain 30 experienced technical specialists in AI and ML.

Further reported was that Rubikloud Co-Founder and CEO Kerry Liu will become an Executive Vice President for Strategic Innovation for Kinaxis.  Liu indicated to the publication that his company had to decide whether to raise significantly more funds to build a global salesforce, or partner with a company with a significant presence in sales and global partnerships. The two companies had previous partnered in specific engagements.

 

Supply Chain Matters Initial Perspectives

As our Supply Chain Matters readers may have noted in our ongoing commentaries related to the best of breed supply chain planning, analytics and response management, industry segment, a lot of existing players have announced augmented capabilities in artificial intelligence and machine learning, some by outright acquisition and others by internal development.

Recall Llamasoft’s acquisition of AI technology services provider Opex Analytics in October of last year, or increased AI/ML development initiatives by supply chain planning technology provider ToolsGroupJDA Software, after acquiring German based artificial intelligence and retail applications technology provider Blue Yonder in August of 2018, subsequently announcing in February a complete corporate rebranding under the Blue Yonder brand. This specific technology was targeted to fill gaps in actionable, autonomous intelligence, cognitive planning, replenishment optimization and advanced forecasting  capabilities targeted for retail supply chain and customer fulfillment process capability needs. We perceived the move as shoring up JDA’s capabilities in both AI and retail industry customer fulfillment support.

Kinaxis now joins in leveraging advanced AI/ML driven capabilities applied to supply chain management planning and broader business planning capabilities. In our Ferrari Consulting and Research Group published 2020 Predictions for Industry and Global Supply Chains published in January (Available for complimentary downloading in our Research Center) , we cited the area of AI/ML applied to supply chain management decision-making needs would garner the most attention and have the highest potential for businesses facing higher market uncertainties as to demand, supply and product volumes. Our belief was that AI enabled packaged applications stood the opportunity for higher momentum and interest.  The existing COVID-19 challenges have since added to such challenges and needs.

Thus, from this Analyst’s lens, this Kinaxis acquisition announcement is not surprising.

While some competitors may question the acquisition cost at roughly three times existing revenues, the availability of more in-depth operations research development and IP, coupled with the potential for added footholds in both Consumer Products and now, added Retail industry response capabilities is by our lens, going to intensify competition in the supply chain planning and response technology segment.

 

Bob Ferrari

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Disclosure: Kinaxis is a Named sponsor of this Supply Chain Matters blog as well as a client of the Ferrari Consulting and Research Group.