Wednesday, May 1, 2002
Over the last several years, a flood of university professors have left the ivory tower of academia in search of riches as high-tech entrepreneurs. While their successes have been mixed, most professors find the excitement of capitalism to be a welcome change from the staid trappings of university life. And then there’s Sridhar Tayur.

Tayur attended IIT in his birthplace of Madras before coming to the United States and earning his Ph.D. at Cornell University. With little interest in entering the business world, Tayur went straight into teaching. He joined the faculty at Carnegie Mellon’s Graduate School of Industrial Administration as a professor of operations management in 1990, and earned tenure in 1996.

But the professor’s scholarly publications in the field of supply chain management soon drew the attention of the business world he had avoided. In addition to his full-time teaching duties, Tayur found himself moonlighting as a consultant for various companies, including such august corporations as Intel, Caterpillar, General Electric and IBM. These firms sought Tayur out for his expertise in a field called “stochastic optimization,” which uses complex mathematical formulas to predict and prepare for uncertainties in the supply chain.

Answering the Call

With so many companies seeking Tayur’s advice, the otherwise content professor couldn’t help but be suspicious. “Around 1999 I started thinking, ‘Why are these companies calling me? Don’t they have the SAPs and Oracles of the world to help them? Maybe I’m cheap compared to other consultants.’” After checking to make sure that his services were not, in fact, cheap, Tayur came to the conclusion that there just might be a serious market for the information he and his peers regularly offered up to wide-eyed undergraduates in 50-minute lectures.

In March 2000 Tayur took leave from his duties at Carnegie Mellon and formed the supply chain software firm SmartOps. With little experience in software development, Tayur’s fist task was assembling a team of experienced developers who could transform the formulas swimming around inside his head into algorithms that would be the foundation for the company’s software. Taking advantage of his extensive contacts in the industry, he quickly put together a team of seasoned supply chain executives along with several of his former students.

By February 2001 the company had released its first product, and in June of that same year it raised $10 million in first round funding from Pittsburgh-based Adams Capital Management. What SmartOps has developed is something it calls “Active Tactical Planning.” According to Tayur, this is software that is able to figure out the optimum inventory levels for multiple locations across a company’s entire supply chain. The software works in concert with the ERP software offered by Oracle and SAP, and the advanced planning software provided by firms such as i2 and Manugistics.

Timing is Everything

“A lot of companies invested in ERP to get visibility of data. But the important thing is not where your stuff is, it’s where your stuff should be,” explains Tayur. To date, he says, companies have been forced to rely on consultants to manually extract this kind of intelligence. At the heart of his company’s product is its use of a stochastic system, which means the software is not defined by a set number of variables. In business speak, this translates into superior forecasting abilities, as the software can provide increased visibility into the disparate factors driving a company’s inventory. Identifying such drivers can be particularly valuable to companies that are launching new products or running promotions that will significantly affect their supply chains.

“SmartOps is one of a small number of really sophisticated optimization solvers out there,” says Kevin O’Marah, an analyst for the technology consulting firm, AMR Research. a O’Marah notes that SmartOps has been wise to apply its software to inventory planning, a task that companies need constant help with, and which can provide instant returns in the form of near-term cash. He knows of two other startups, Optiant and Rapt, which are using similar optimization techniques, though neither is focusing on broad inventory planning issues.

SmartOps has also benefited from addressing a problem that has been pushed to the forefront by recent events. With high-profile companies like Cisco and Nike suffering major inventory overhangs in recent years, sorting out supply chain issues has become a top priority for many businesses. The tragedies of September 11, which reeked havoc on companies’ supply chains, have only heightened such concerns.

“Most software out there just assumes everything is normal,” says Tayur. “The real problem for companies is they don’t know what’s going to happen next week or next month.” Though SmartOps doesn’t reveal the names of its customers, Tayur says early customer wins have included several seven-figure deals with major players in the pharmaceutical, heavy machinery and consumer packaging industries.

When My Service is Done

Even with his company’s early success, Tayur remains indignant about his new life as an entrepreneur. “I never really wanted to start a software company. I’m looking forward to the day I can go back to my other life.” Besides teaching, a major part of that “other” life is movies. A self-described film buff who takes in over 100 pictures a year, Tayur’s office wall is adorned with a doctored poster from the sci-fi movie The Matrix, showing the professor facing off with Keanu Reeves in a famous back-breaking action scene from the film.

So waht about bringing the rough-and-tumble world of supply chain management to the big screen? “It’d be nice to create movies where technology and software people are given a more third-dimensional view,” he says. “In the few movies where they exist, they are usually just some geeks in the background. But I guess guys like me would have to write it.” That’s probably a leap he won’t end up making.

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