TORONTO (Reuters) - For many large companies, outsourcing is the norm as they seek cost savings at almost every level of production. Jason Tham, a former Kellogg’s (K.N) employee, saw an opportunity to help reduce the risk of something going wrong at each outsourced step. His solution: to create software that would streamline the supply-chain process and reduce costs even further.
Using research compiled by his father, an engineering professor, and $40,000 in personal capital, Tham built the software and launched Toronto-based Nulogy Corp. www.nulogy.com in 2002. Tham's signature PackManager product is an all-inclusive Web-based software that helps the middlemen in the supply chain -- called contract packagers -- improve their operating efficiency by tracking their inventory, production and labor information in real time. Contract packagers provide the creative packaging and displays that help make a product more attractive to consumers.
“The biggest intellectual property that we have is the real-time nature of the information that we provide to our users,” said Tham, who added some companies launch products as often as every three months when 10 years ago it was once a year. “What our software does is to enable the collaboration between the multiple parties to communicate more effectively, bring these products to market more efficiently, more cost effectively and faster.”
Tham’s research shows the Consumer Packaged Goods sector, which includes big brands such as Kellogg‘s, Proctor & Gamble (PG.N) and General Mills (GIS.N), outsources close to $20 billion annually to contract packagers. He predicts that number to triple over the next several years.
Nulogy’s revenues have grown more than 50 percent over each of the last four years and were up more than 70 percent -- to $1.2 million -- for fiscal year 2009, Tham says. The company will become increasingly attractive as a solution to companies looking to reduce their labor costs without sacrificing the reliability, flexibility and efficiency that brand owners depend on to get their products to market, he added.
Nulogy charges anywhere from $2,000- $4,000 a month for its software, which Tham said equates to the cost of “half an employee” and allows them to use that labor elsewhere.
“Rather than doing one or two launches of a product in a quarter, now you can do three or four launches with that same person,” said Tham, who admitted it has sometimes been a tough sell to convince companies to abandon their traditional way of doing things and embrace a new technology. “We had to educate the market on what we could provide them.”
Earlier this year Tham raised $600,000 in seed funding, mostly from angel investors, to help expand Nulogy’s sales and marketing push, with the intention of winning more contracts and bringing in more revenues.
“Today the challenge is bringing the right people on board and being able to get enough of them,” said Tham, who has grown the company from its original five founders to 19 employees. “Our goal in the next two years is to have Nulogy synonymous with contract packaging and manufacturing software.”