Industry Overview #4
Supply Chain Management and Logistics Software
This is a high-level analysis where we explore an industry and its peers from a 30,000-foot view, helping you get acquainted with the sector and offering one or two interesting ideas.
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In this version, we will explore the Supply Chain Management (SCM) and Logistics Software industry. The role of SCM/logistics software in modern business is mission-critical as it provides real-time visibility into complex global supply networks and helps companies optimize operations for efficiency and cost savings.
As supply chains become more global and interconnected, robust software solutions are essential for maintaining agility and resilience. In recent years, high-profile disruptions (from pandemic-related shutdowns to geopolitical events) have thrust supply chain operations into the spotlight, prompting companies to accelerate digital transformation and invest in advanced SCM platforms to keep their businesses running smoothly.
According to Gartner, the SCM market is broken down into Supply Chain Planning (processes related to demand forecasting, supplier relationships, manufacturing planning), Sourcing and Procurement (processes related to purchasing: i.e. managing vendor terms for trade & payments), Supply Chain Execution (processes related to delivery and distribution: i.e. purchase orders, inventory management, delivering goods to customers).
Source: Gartner
The industry includes a broad range of players, ranging from large-scale suite providers to niche providers specializing in specific verticals. Therefore, the below peers do not necessarily compete head-to-head. In our analysis, we will cover public companies in the industry but we will exclude the largest players like SAP, Oracle, Blue Yonder (under Panasonic) which offer SCM solutions as part of their broad suite of services.
1. Key Players
WiseTech Global (Ticker - WTC): An Australian software provider specializing in logistics solutions. Its flagship platform, CargoWise, is widely used by freight forwarders, 3PLs, and logistics providers to manage freight operations, customs compliance, warehousing, transport, and port logistics. WiseTech’s customers range from small and mid-sized domestic and regional logistics providers to large multi national and global logistics providers, including all of the Top 25 Global Freight Forwarders and 46 of the Top 50 Global 3PLs.
Manhattan Associates (Ticker – MANH): Leading Supply Chain Commerce company offering software solutions that helps retailers, wholesalers, manufacturers, and logistics providers to manage their supply chain, inventory and omnichannel operations. Manhattan’s flagship platform, Manhattan Active, offers warehouse management, transportation management, and order management solutions. The company excels in Supply Chain Execution and is recognised as a Leader in Gartner’s Magic Quadrant for Warehouse Management Systems.
The Descartes Systems Group Inc. (Ticker - DSG): A global provider of logistics technology solutions serving transportation providers (air, ocean, and trucking), third-party logistics firms, freight forwarders, customs brokers, and distribution-focused businesses. Descartes offers a comprehensive suite of software for routing, transportation management, e-commerce fulfillment, customs compliance, global trade intelligence, and B2B connectivity. Its platform enables real-time shipment tracking, delivery scheduling, cost optimization, and regulatory compliance management.
SPS Commerce, Inc. (Ticker - SPSC): A leading provider of cloud-based retail supply chain management solutions, enabling seamless collaboration among retailers, suppliers, manufacturers, distributors, and logistics firms. Its SPS Commerce platform supports omni-channel operations, order fulfillment, and supply chain automation. Key offerings include Fulfillment, which streamlines order processing and invoicing, and Analytics, which optimizes sell-through data management for business partners.
Kinaxis Inc. (Ticker - KXS): A Canadian provider of cloud-based subscription software for supply chain operations in the United States, Europe, Asia, and Canada. The company is best known for it flagship product RapidResponse, recognized as a Leader in Gartner’s Magic Quadrant for Supply Chain Planning Solutions. The company serves midsize to large enterprises in aerospace and defense, automotive, consumer products, electronics, industrial, life sciences, logistics, and retail industries.
Note (12 Mar 2025): AU$ 1= $0.628, C$1=$0.693
2. Industry dynamics
Market size
Gartner valued the industry at $20.2 billion in 2022, with an expected CAGR of 15.2%, reaching $35.7 billion by 2026. Grand View Research valued the industry at $23.2 billion in 2023, projecting CAGR of 11.2% from 2024 to 2030.
Key Market Drivers
The SCM software market has consistently expanded at double-digit growth rates, driven by several key factors:
E-commerce and omnichannel retail: Increase in e-commerce and omnichannel retail is driving the need for SCM software to handle various sales channel integrations, fulfilments, fast-deliveries, inventory management and increased sale volumes.
Digital Transformation: Companies have digitizing their supply chains, replacing manual processes with SCM solutions to enable real-time visibility and improve operational efficiencies accross their global supply networks.
Globalization of Supply Chains: As organizations manage more complex supply chains, they are turning to SCM solutions to coordinate suppliers, manufacturers, 3PLs, and retailers in real time.
Cloud computing: The shift to cloud-based SCM solutions is accelerating adoption due to their scalability, cost-effectiveness, and faster updates compared to traditional on-premise solutions.
Emerging Technologies (AI & IoT): The integration of emerging technologies such as Artifitial Intelligence and IoT is accelerating industry growth by enabling predictive analytics, demand forecasting, real-time tracking of goods and automation. For example, AI-powered analytics help companies anticipate demand spikes or disruptions and optimize routes and inventory accordingly. Early adopters of AI-driven supply chain management have seen significant improvements (such as double-digit percentage reductions in logistics costs and inventory levels) by leveraging these tools. In fact, according to Gartner, over 75% of supply chain software providers will integrate AI and advanced data analytics in their applications by 2026.
Challenges
The industry is competitive and is generally fragmented with niche players, while large software enterprises like SAP and Oracle are controlling substantial share of the market, offering SCM as part of their larger suite of solutions. Their extensive customer bases and all-in-one platforms make it difficult for standalone SCM software providers to compete. Many companies prefer integrated solutions from vendors they already work with, making it harder for independent SCM software firms to win contracts. With a highly competitive landscape, SCM software firms must continually differentiate their offerings through innovation and specialized functionalities. Additionally, cloud-computing lowered the barriers of entry in the industry, enabling new AI-driven SCM startups to emerge and challenge incumbents.
3. Key Metrics
Revenue Growth
All five companies achieved solid revenue growth over the last 5 years. WiseTech global has experienced the highest revenue growth, achievieving a 5-year CAGR of 23.2%, followed by Kinaxis at 20.3%, SPS at 17.8%, Descartes at 14.9% and Manhattan at 11%. However, this comparison is not entirely apples-to-apples, as WiseTech, SPS, and Descartes have been more active in M&A than Manhattan and Kinaxis. Among the group, Manhattan was the only company to report a revenue decline in 2020, as its business was affected by pandemic-related disruptions in key customer markets, as well as the short-term effects of its transition to a cloud-based subscription model.
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Profitability
On profitability, WiseTech stands out with an impressive EBIT margin of 39%, demonstrating its dominant position in logistics software, its strong pricing power, and the stickiness of its platform among global freight forwarders. Descartes follows with a 29% EBIT margin, reinforcing the trend that logistics software companies tend to have higher margins than SCM software providers.
At the lower end of the spectrum, Kinaxis operates with a significantly lower EBIT margin compared to peers. This is largely due to higher mix of professional services (implementation and support) which is nearly 30% of revenue and inherently carries lower margins than software subscriptions. Additionally, it possibly reflects higher competion and ultimately lower pricing power in the Supply Chain Planning market that Kinaxis mainly operates.
Source: Koyfin (affiliate link with a 20% discount for StockOpine readers)
Asset Turnover
From an efficiency standpoint, Manhattan holds the highest asset turnover ratio, reflecting its strong revenue generation relative to its asset base. SPS Commerce and Kinaxis follow closely behind, while Descartes and WiseTech rank lower due to their higher levels of M&A activity. This is also evident in their balance sheets, where goodwill accounts for 56% of Descartes’ total assets and 55% of WiseTech’s, compared to just 8% for Manhattan and 10% for Kinaxis.
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Returns on Capital
On Return on Capital (ROC), Manhattan is the clear leader, delivering an impressive 51% ROC, significantly outpacing its peers. This superior ROC is driven by organic growth and aggressive share repurchases, with Manhattan reducing its share count by approximately 16% over the last decade. In contrast, WiseTech ranks second with an 11% ROC, benefiting from strong margins, but at the same time, its heavy M&A activity drags down its capital efficiency. Kinaxis has the lowest ROC at 2%, reflecting its lower profitability.
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Debt to Equity
When assessing financial leverage, all five companies maintain relatively low debt-to-equity ratios, presenting minimal financial risk. Descartes has the lowest leverage at just 0.6%, whereas Manhattan has the highest at 17.2%, though still at comfortable levels.
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Valuation
Turning to valuation, the industry’s EV/EBITDA multiples have contracted in recent months, trading below their five-year average levels. High industry valuations have historically been supported by strong revenue growth, stable profitability, and long-term secular tailwinds.
As this analysis looks at the ratio in isolation, since factors like moat, financial health, and earnings quality are assessed in the metrics we looked earlier, we rank them based on deviation from their 5-year average. Kinaxis ranks first with a 31.7x (53.9x-22.2x) deviation, followed by Manhattan at 18.2x (45.9x – 27.7x), SPS at 13.5x (33.3x – 19.8x), and WiseTech at 10.5x (48.8x – 38.3x).
Source: Koyfin (affiliate link with a 20% discount for StockOpine readers)
Estimated EPS growth
Looking ahead, analyst estimates for EPS growth over the next three years favor WiseTech, with a projected CAGR of 33.2%, followed by Kinaxis at 27.2%, Descartes at 22.6%, SPS Commerce at 16.4%, and Manhattan at 7.4%.
Source: Koyfin (affiliate link with a 20% discount for StockOpine readers), StockOpine Analysis
4. Total score & Conclusion
Note: In each category, we assign 3 points to the top-ranked company, 2 points to the second, 1 point to the third, and 0.5 points to the fourth. Equal weighting is applied across all categories to mitigate personal biases, except for Returns on Capital, which we consider one of the most critical ratios in assessing a company. Therefore, we've doubled the score for this metric.
Using our weighted scoring system, WiseTech Global ranks as the clear winner, followed by Manhattan Associates. If we had to highlight one stock for further analysis, it would be WiseTech Global, given its high profit margins, strong growth profile, and dominant market position.
Thanks for the industry overview. I own WTC but I have been a little scant on my competitive analysis so this was a good refresher for me. Not sure how much digging you have done into WTC but there are some real governance issues there at the moment, which is hanging over the share price. Australian Financial Review have covered it in depth. It's a great company but a really good example of the trouble a company can get into if they are lacking in the G department.