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Are Your Product Lines Profitable? – 7/13/12

Are Your Product Lines Profitable?

When you think of Dell, what immediately comes to mind is a highly successful company that is the world’s number three provider of desktop and notebook PCs. But the company also offers a wide range of servers, switches, software and peripherals, as well as a full portfolio of services including consulting, support, systems integration and training.

Recently Dell added to that portfolio with an offering that speaks directly to the upper echelons of the legendary “missing middle” – that misleading but handy term referring to the hundreds of thousands of small to medium sized manufacturers who have yet to fully embrace what advanced manufacturing techniques like modeling and simulation have to offer.  These same manufacturing customers also could use some help in creating effective profit and pricing strategies across their multiple product lines.

 

That’s where Dell Product & Profit Analytics (DPPA) comes in.

DPPA is an IT solution that allows manufacturing companies to predict the impact market conditions can have on their products and profitability by linking detailed material, manufacturing, and selling costs from across all business systems.  The solution is a mix of Dell Services ERP implementation, its hosting and integration expertise, and core business intelligence to provide real-time, what-if simulations, and predictive analytics.

DPPA has some tough challenges to contend with.  For example, most manufacturers, due to mergers and acquisitions, have evolved multiple ERP and BI solutions making it difficult to obtain the “single view of the truth” needed to analyze product-line profitability. These generalized systems may not adapt well to specific manufacturing profitability requirements that require a purpose-built solution.

Other problems include the need to gather data from a variety of sources such as data warehouses, financial and CRM databases, or even Excel spreadsheets sitting on someone’s hard drive.  Also, information needs to be acquired in real time, 24/7; even the missing middle operates in a global economy.

Addressing these challenges, Mike Morrison, executive director, Dell Services – Manufacturing, says, “DPPA is a focused, purpose-built analytics engine that looks at various components of manufacturing information and provides profitability analysis for our customers.”

He explains that the software gathers information – such as bills of material, actual costs, labor costs, and supply chain data – and aggregates the information into a pre-built analytic model.  This allows the company to determine the level of profitability it is realizing for each product and each customer.  And, equally as important, the manufacturer can track changes in such key factors as labor and material costs, pricing requirements, and logistical issues and quickly analyze their impact on profit.  The solution can be applied to both continuous and discrete manufacturing environments.

The engine is platform agnostic and sits on top of single or multiple ERP systems, such as those provided by SAP, Oracle or QAD.  Support is not yet available for Microsoft Dynamics but that’s in the works, according to Morrison.

The solution’s ability to provide access to accurate, timely and comprehensive information on profitability for individual products and services allows manufacturers to make critical business decisions in a number of areas.

For example:

  • The degree of flexibility salespeople have in making pricing decisions
  • Strategic decisions on the composition of the product portfolio
  • How to structure supply chain in order to reduce costs of less profitable product lines
  • What marketing strategies to adopt to drive or shape demand
  • Which customers to focus on and which ones to hand off to third parties for sales, service and support
  • Decisions on distribution channel discounts, terms and conditions
  • Negotiating supplier contracts for materials, subassemblies, contract labor, etc.

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