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Production Speeds Lead To Profit

Production Speeds Lead To Profit

Maxager's enterprise service showed a steel maker that high margin products do not necessarily generate the most cash per minute.

A U.S. steel manufacturer serving the automotive, construction and appliance markets needed to improve profits and its return on assets and wanted to accomplishthe task by incorporating production speeds for each product. Management realized that margin alone was not sufficient to generate an accurate view of profitability. Production run times had to be included because a product with a high margin that moved slowly through the mill might generate less cash over the course of the fiscal year than a lower margin product that ran much quicker would.

The company's finance group entered huge amounts of cost and production speed data into an Excel program and tried to manipulate it, which proved extremely time-consuming and cumbersome. Furthermore,it was impossible to present the data easily in graphical format and distribute it to sales, marketing and production groups and senior management. What the company finally did was to incorporate Maxager's hosted enterprise profitoptimization service.

Maxager delivered the graphical capability and seamless incorporation of production speeds that the steel company needed. Service implementation was quick.

It was loaded with data and generating results within 60 days. In addition, as a software service, there was no need to buy hardware or software.

Viewing operating data through Maxager's profit-perminute lens provided some surprising insights for the steel manufacturer. And the system put the commercial, production and finance groups on the same page.

In the first six months of using Maxager's profitoptimization service, the steel company estimated that it increased profits by morethan $15 million simply due to product mix changes. Plans are also in the works to use Maxager to model changes in all cost components to further improve profitability and to use the service's strategic pricing capability to model how price decreases and expected demand increases in certain products might improve profits. The company also intends to use the service in pricing negotiations with its customers.

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