The survey, conducted in fourth quarter 2006, polled executives and managers at chemicals, metals, electronics and other complex manufacturers and found:
- 92 percent of respondents felt that the ability to analyze the speed with which the organization produces the most profitable products or serves profitable customers and markets was very to somewhat important,
- 71 percent do not have software or systems in place to analyze combined margin and production run-rate data, and
- Only 5.7 percent of respondents use profit per minute to measure profitability.
Although respondents overwhelmingly (92 percent) believe that analyzing the speed with which they produced profitable products was important, 71 percent don't have software or systems in place to do so. The result is that very few manufacturers (5.7 percent) have the ability to use a metric that is aligned with r eturn on assets ( ROA).
The survey also showed:
- Sales and marketing groups use revenues and sales as their primary metric (81 percent had it as their first choice).
- Production teams most often focus on costs (78 percent) with production speed (67 percent) second.
- Finance departments use both costs (86 percent) and margin-based profits (86 percent) as their primary metrics.
Combining production velocity with margin produces a profit-per-minute metric. Being time-based, this metric is directly linked to ROA. It can be used at an operational level to measure the profitability of individual products, customers, deals, markets, sales regions, salespeople and production facilities. Then, everyday decisions about which products to make, who to sell them to and where to make them can be made collaboratively to maximize annual corporate profits and ROA.
For more information, visit http://www.maxager.com.This piece is brought to you by the Information Management editorial staff.
Be the first to comment on this post using the section below.