July 24, 2006
With the announcement of its latest product release, Maxager Technologies has made available a subscription service for its enterprise profit and price optimization software. Maxager's software looks at both margin and velocity to reveal how fast each product, customer or market generates cash and profit. It is a tool for manufacturers to determine how close they come to hitting their return-on-assets (ROA) performance targets. As manufacturers try to improve profitability and compete against global rivals, they increasingly turn to software specialists like Maxager for this sort of help. Ventana Research believes such a solution can be part of an overall performance management strategy, especially one that provides managers with decision support, based on profitability, for determining which products to make and sell.
In June 2006 Maxager Technologies announced Maxager 7. The new release is completely Web-based and offers software as a service (SaaS) hosted by Maxager. Version 7 also includes the ability to do what-if planning, which enables proactive operational decision-making. It also supports variance analysis, which is the ability to compare plans to actual results in order to make midcourse corrections.
Managing the performance of a manufacturing company is a multifaceted task that, among other things, requires measuring and monitoring of multiple key performance indicators (KPIs). But investors and shareholders evaluate manufacturers on one central KPI - the financial return on assets. ROA is especially critical for companies that serve a commodity industry, such as steel or plastics, where capital assets are large. In these companies senior managers in finance, sales, marketing and production take on the task of determining how physical assets can be made more productive.
To do this, the decision-makers must answer four basic questions: • What product mix would optimize our asset base?
• Which products should we sell to which customers to maximize profitability?
• Which plants should manufacture which products to optimize efficiency?
• What is the best product pricing strategy?
Answering these questions correctly requires considerable math. To make the thousands of trade-offs that will optimize annual ROA, decision-makers need access to timely, relevant and detailed information that will show exactly how each choice will impact ROA. That's where enterprise profit optimization (EPO) software like that from Maxager comes into play. EPO software looks at both margin (profit divided by units) and velocity (units divided by asset run time) by pulling data from enterprise resource planning (ERP) and manufacturing execution systems to yield a topographical map of how fast each product, customer or market generates cash and profit, as well as how close it is to return-on-asset performance targets.
As manufacturers seek ways to improve profitability and compete against lower-cost overseas competitors, they increasingly are turning to the software specialists in enterprise profit and price optimization for help. Several of these vendors recently have risen above the usual software industry noise. For example, Vendavo has partnered with SAP, and Metreo was recently acquired by Symphony Technology Group, the holding company for SymphonyRPM. These vendors, as well as Maxager Technologies, offer software to help manufacturers optimize margins and keep revenue on track with forecasts. But licensing this new software typically is not cheap. Ventana Research believes Maxager's new SaaS offering provides a less costly way to test the claims of achieving better ROA, and it increases the likelihood Maxager can persuade more OEMs, manufacturers and distributors to consider EPO software as part of their performance management technology portfolio.
Ventana Research believes that all manufacturers, not just the ones with large capital assets, should look to applications like Maxager's to support decisions regarding profitability in product and customer mix, sales and profit planning, strategic pricing and production planning. The information that this kind of software generates can be a vital part of a manufacturer's overall performance management strategy, especially since it can provide managers with decision support for which products to make and sell based on their expected profitability.
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