If asked, most executives would probably tell you that they would rather concentrate on selling their highest-priced product line–or at least the one boasting the most attractive margins. Certainly, that would have been Rene J. Robichaud's response before his oil services company began using the Maxager 7 profit optimization (PO) Web-based solution.

Back then, NS Group, a $600-million Newport, Ky.-based maker of tubing and pipe for the oil industry at which Robichaud is CEO, used basic margin comparisons to determine its manufacturing mix. Today, with the Maxager tool, NS has added one additional element–velocity–to its calculations and that has made all the difference. "Typically, managers will say I make $100 on product A and $200 on product B, so it makes more sense to produce more of product B," says Michael Rothschild, CEO of Maxager Technology Inc., a provider of an online "profit-optimizing" service. "But what if product A is produced more than twice as fast as product B? Strikingly, most people don't think like this. Our product, Maxager 7, gives you that information. We have a set of methods and algorithms, 100% Web-based, that allow us, on the fly, to calculate at whatever level of detail you want, the profit per minute, or 'profit velocity', of each product line."

According to Robichaud, the Maxager approach has led to significant changes in corporate strategy. "We've had products that had a very high price, which we thought were better for us to sell," the CEO says, "but we have now found that some of our lower-priced products had a much higher profit per hour." Robichaud says that since the company has been running its factories "full-out," it becomes obvious that the focus should be on making the latter products. "I know we've dropped products because of the new information we have."

Complete your profile to continue reading and get FREE access to Treasury & Risk, part of your ALM digital membership.

  • Critical Treasury & Risk information including in-depth analysis of treasury and finance best practices, case studies with corporate innovators, informative newsletters, educational webcasts and videos, and resources from industry leaders.
  • Exclusive discounts on ALM and Treasury & Risk events.
  • Access to other award-winning ALM websites including PropertyCasualty360.com and Law.com.
NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.