New Funding, Merger for Tradec

Material cost management specialist raises $11 million, joins with provider of supply chain decision management solutions

San Jose, CA  June 24, 2002  Material cost management solutions provider Tradec today announced that it had raised $11 million in its third round of funding and that it would be merging with PowerMarket, a provider of supply chain decision management solutions.

Tradec tapped three new venture capital firms in its latest round, with Norwest Venture Partners, Kleiner Perkins Caufield & Byers and RRE Ventures joining existing investors, Novus Ventures, Portage Venture Partners and others participated in the new round.

The solution provider said it has raised more than $16 million in financing since its inception.

Tim Minahan, vice president of supply chain research for Aberdeen Group, offered an upbeat assessment of the provider's funding announcement. "Attaining such funding from top-tier equity firms in this overly cautious economic environment validates the strength of Tradec's existing solution set and customer base and reaffirms the company's total cost management vision," Minahan said.

The solution provider said it is going to use the new funding to expand its cost management product development efforts and expand sales and marketing operations.

Tradec also announced today that it has reached an agreement to join forces with PowerMarket, a provider of supply chain decision management solutions for analyzing, measuring and managing direct spend in collaborative supply chains. PowerMarket's supplier performance management application is designed to give companies the ability to measure and manage the total cost of ownership of direct materials across their base of suppliers.

The merged company will combine the product offerings and supply chain domain expertise from each organization, retain the Tradec company name and maintain operations at Tradec headquarters in San Jose, Calif. Edwin Winder, chairman, president, and CEO of Tradec, will retain these titles in the combined company.

Addressing the merger, Minahan commented, "The merger with PowerMarket complements and extends the Tradec platform to further empower manufacturers with the critical information, analytics and functionality they need to continually reduce and control material costs."

PowerMarket, a startup company, was piloting its solution with several clients but had not yet licensed its technology to any customers, according to Winder. Although the two companies did not share any customers, PowerMarket's had targeted its pilot at the high tech manufacturing sector, where Tradec also has traditionally played. Winder added, however, that PowerMarket's technology is applicable to any complex manufacturing environment, and that Tradec should be able to apply it to its other target sectors, which include the communications equipment and computer/peripherals markets. Tradec is also looking to expand into the medical equipment, aerospace, automotive and industrial markets.

Winder said in an interview that the merger represented both a tactical extension of Tradec's capabilities and a strategic move for the company. "I don't believe in today's market that you can do things totally from a strategic standpoint," he explained. "You have to be very tactical and deliver something that's practical in very short timeframe with very strong and very high payback. We can't ask people to wait two or three years for a strategic vision to come together before they see value."

At the same time, the solution will help Tradec expand beyond its traditional focus of material cost management, according to Winder. The CEO said that Tradec's customers have been asking for cost-control capabilities that encompass such non-material areas as the cost of noncompliance by suppliers, the cost of poor quality, landed cost and transformation costs, that is, areas that are nonmaterial but that affect final product cost.

Asked whether the current focus on cost management in lean times is likely to continue as the economy improves, Winder offered: "I hope so. These are defining times. A lot of people have known that they need to do something [to control costs] but have had constraints put on them in terms of capital spending and can't do it. So our traction has come from thought-leaders that know they need to spend some money in order to affect some costs. As things move forward, I think more people will make that decision and have some of the constraints off of them to do some capital spending so they can position themselves for the next downturn, know where they are cost-wise and not be caught short as many of them were.