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You're Making Money, But How Fast?

Profit optimization begins to consider the time it takes to make a product

By Dave Lindorff | Updated on August 01, 2006

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.”

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