Rothschild says that today manufacturers’ decisions on pricing, production, and sales management use analytic methods that from an economic perspective lead to a distorted presentation of profitability.This is where PVS comes in with their PV Accelerator™ (PVA) tool, targeted toward asset intensive manufacturing companies who have a complex product line with hundreds or thousands of Stock Keeping Units (SKU). PVA has the capability to identify hidden pockets of profit in products that are of low margin but move swiftly in the manufacturing process, thus generating more profit per hour. Profit per hour or quarter is what shareholder’s pay for. The tool integrates seamlessly with current Enterprise Resource Planning (ERP), Manufacturing Execution System (MES), and other data systems without draining the IT resources.
Often, companies witness situations where excessive equipment investments lead to over-capacity and over pricing that drives away profitable orders and lowers utilization.
According to Rothschild, the dependence of manufacturing management teams on margin per unit rankings to make decisions in sales and production is not sufficient. Unit margin is a necessary metric, but it is just a snapshot which doesn’t take into account the speed that margin is flowing through the manufacturing process. PVS approaches this limitation through profit per hour of machine time as the common metric for decisions about production, pricing, sales, investments, and customer and account management.
Although companies sometimes try to build complex Excel models to do this analysis, Excel is not equipped to deal with thousands of tabs and data linkages and still allow managers to drill down to any level of detail and get an answer back in seconds.
For a CEO, the most looming question is, “how to increase the revenue and profit of the organization?” Rothschild’s response: “PVS was able to prove the success of this methodology to many of our clients including a global packaging manufacturer who used the profit-per-hour metric to identify poorly performing products. With PVA, the client was able to increase profit margins from 11 percent to 16 percent in two years.” With PVA, companies for the first time have a metric to measure the opportunity cost of production capacity and base decisions on metrics that are aligned with the shareholder objective of increased Return on Assets (ROA).
PVA has the capability to identify hidden pockets of profit in products that are low margin, but move swiftly in the manufacturing process
Scaling to great heights with profit planning and control solutions, PVS plans to expand from their current base of six offices in the U.S. and China, to serve clients in all the major manufacturing centers in the world. With PVA’s “what-if” simulations enabling manufacturers to achieve profit gains, coupled with their insightful analytics of the current profit performance, the company is bound to see more success with their clients.