Product Profitability Optimization Software

Integrated Business Planning Delivers a Unique Combination of Profitability and Process Modeling to Maximize Product Performance


Isolated decision-making is the number one killer of product profitability; it limits understanding and prevents decision-makers from conducting effective “what-if” scenarios.

Isolated Decision-Making Kills Product ProfitabilityWithout a platform for holistic decision-making, managers struggle to understand the interdependent relationships of their products within the supply chain. Without understanding the true financial impact of the product mix, managers cannot align and optimize activities that deliver the greatest value to the organization.

River Logic’s Product Profitability Optimization Solution, built on constraint-based modeling technology and Enterprise Optimizer® | Server 2008, delivers capabilities that significantly improve the profitability of a company’s product portfolio.

The Product Profitability Optimization graphic represents the holistic approach to product profitability. As indicated by the colored circles and text, Enterprise Optimizer (EO) enables companies to simultaneously balance decision-making while considering the unique perspective of each department and product line.

Product Profitability OptimizationThis example also includes a range of decisions, resulting from an EO “solve.” In the center are the diamonds that generate the highest return. For optimum performance, products in this category should be heavily promoted in order to expand the segment. The overlapping gold areas indicate a different requirement for product profitability optimization, which includes price increases, channel changes, and the adoption of co-packers.

EO | Server 2008 can conduct and compare “what-if” scenarios. This enables decision-makers to solve product-related models using a variety of objective functions, including net income, cash flow, and NPV.

River Logic’s Approach

River Logic’s Integrated Business Planning (IBP) system optimizes product profitability, incorporates activity-based costing, constraint-oriented process modeling, and comprehensive financial modeling to provide:

  • A single model using operational, financial, KPI metrics, and business constraints for integrated planning
  • True product performance drivers using a system-wide view of the business, including all variables, interdependencies, suppliers, channel partners, and customers
  • Activity-based costing (ABC) and advanced financial modeling methodologies for calculating full costs and profits, including by-products—on a forward-looking basis
  • Visibility into marginal opportunities, including all variables (e.g., input costs, resource productivity, etc.) to yield an accurate measure of “how would the sale of an extra unit of product or SKU” impact company revenue, profitability, cash flow, capacity utilization, market share, and other important metrics
  • Impact of product-related decisions on Cash Flow, Balance Sheet items, ratios such as Return on Net Assets (RONA) and Return on Invested Capital (ROIC)
  • Impact of product-related decisions on sales and channel volumes, pricing, capacity utilization, inventory requirements, and other operational metrics
  • Optimal performance by defining the best strategy and tactical actions for each product group or family in a given scenario, using financial, operational or key performance indicator (KPI) metrics as the objective function


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