Are Your Product Lines Profitable? 

When you think of Dell, what immediately comes to mind is a highly successful company that is the world’s number three provider of desktop and notebook PCs. But the company also offers a wide range of servers, switches, software and peripherals, as well as a full portfolio of services including consulting, support, systems integration and training. 

Recently Dell added to that portfolio with an offering that speaks directly to the upper echelons of the legendary “missing middle” – that misleading but handy term referring to the hundreds of thousands of small to medium sized manufacturers who have yet to fully embrace what advanced manufacturing techniques like modeling and simulation have to offer.  These same manufacturing customers also could use some help in creating effective profit and pricing strategies across their multiple product lines.

That’s where Dell Product & Profit Analytics (DPPA) comes in.  

DPPA is an IT solution that allows manufacturing companies to predict the impact market conditions can have on their products and profitability by linking detailed material, manufacturing, and selling costs from across all business systems.  The solution is a mix of Dell Services ERP implementation, its hosting and integration expertise, and core business intelligence to provide real-time, what-if simulations, and predictive analytics.

DPPA has some tough challenges to contend with.  For example, most manufacturers, due to mergers and acquisitions, have evolved multiple ERP and BI solutions making it difficult to obtain the “single view of the truth” needed to analyze product-line profitability. These generalized systems may not adapt well to specific manufacturing profitability requirements that require a purpose-built solution.  

Other problems include the need to gather data from a variety of sources such as data warehouses, financial and CRM databases, or even Excel spreadsheets sitting on someone’s hard drive.  Also, information needs to be acquired in real time, 24/7; even the missing middle operates in a global economy.

Addressing these challenges, Mike Morrison, executive director, Dell Services – Manufacturing, says, “DPPA is a focused, purpose-built analytics engine that looks at various components of manufacturing information and provides profitability analysis for our customers.”

He explains that the software gathers information – such as bills of material, actual costs, labor costs, and supply chain data – and aggregates the information into a pre-built analytic model.  This allows the company to determine the level of profitability it is realizing for each product and each customer.  And, equally as important, the manufacturer can track changes in such key factors as labor and material costs, pricing requirements, and logistical issues and quickly analyze their impact on profit.  The solution can be applied to both continuous and discrete manufacturing environments.

The engine is platform agnostic and sits on top of single or multiple ERP systems, such as those provided by SAP, Oracle or QAD.  Support is not yet available for Microsoft Dynamics but that’s in the works, according to Morrison.

The solution’s ability to provide access to accurate, timely and comprehensive information on profitability for individual products and services allows manufacturers to make critical business decisions in a number of areas. 

For example:

• The degree of flexibility salespeople have in making pricing decisions
• Strategic decisions on the composition of the product portfolio
• How to structure supply chain in order to reduce costs of less profitable product lines
• What marketing strategies to adopt to drive or shape demand
• Which customers to focus on and which ones to hand off to third parties for sales, service and support
• Decisions on distribution channel discounts, terms and conditions
• Negotiating supplier contracts for materials, subassemblies, contract labor, etc.

DPPA also allows companies to create “what-if” simulations in a safe, sandbox environment – for example, the ramifications of a natural disaster such as earthquake or fire or equally potentially disastrous, but not so natural happening as an unexpected, highly aggressive pricing move on the part of a competitor.  Other scenarios can examine such variables as the impact of reshoring (i.e. bringing home manufacturing capabilities that had been outsourced overseas – a concept that is gaining momentum in the U.S.), or other major changes to the company’s supply chain. 

DPPA is a mix of manufacturing-oriented software solutions that have already proven their efficacy in handling real-world processes such as supply chain management, inventory management, materials purchasing, transportation, manufacturing overhead and many others.  It has been designed and implemented in partnership with pVelolcity, a leader in analytics engines and consulting for the manufacturing industry. 

Dell says the DPPA solution can be deployed with Dell’s services organization in 45 to 90 days.  The usual approach is to launch a pilot that encompasses a subset of the company’s products and operations, which can be subsequently scaled to full deployment.

For missing middle manufacturers, DPPA provides them with “…the ability to make effective and efficient corporate decisions based on real-time, predictive data,” Morrison said when the solution was launched last November. 

“Whether it’s empowering decision-makers with insight and control, providing the ability to answer critical business questions from all areas of the company or enabling companies to identify, with confidence, what contributes most to overall margin performance, Dell Product & Profit Analytics can help manufacturers save a significant amount of time and money, all in a seamless package,” he concluded.