Manugistics Focuses On Profit Optimization

ByDoug Bartholomew You've heard of ERP, SCM, and CRM, but are you ready for EPO? Manugistics Group Inc. thinks that enterprise profit optimization will be the next big thing for manufacturing companies. The Rockville, Md.-based software company plans to carve out a leadership role in this emerging market with the scheduled launch of its EPO package this summer. With more than 1,100 companies using its software packages for supply-chain management, Manugistics wants to use its leverage in the market to make manufacturers aware of the potential gains to be achieved with this new breed of software. "Companies have to make more automated business decisions to drive productivity, and that's what optimization software does," explains Gregory J. Owens, chairman and CEO of Manugistics. Manugistics' vision of EPO includes combining both supply-chain management and the revenue-boosting capabilities of pricing and revenue optimization (PRO) software. The company already offers both packages separately, but will bring out EPO, the integrated version, this summer. Adds Owens, "Pricing affects everything. It changes demand. We are going to see that EPO, with its pricing revenue optimization component, is the next big thing." PRO basically helps companies set-and re-optimize prices of products to achieve the greatest margins. For instance, simply churning out large volumes of products may not yield the best bottom-line results. "You need to see whether responding to an RFQ is a profitable thing to do," Owens says. "The software helps you figure out how to get the most margin out of your raw materials and products," he says. "Manufacturers should be asking, 'How should I satisfy that order?' not 'How can I satisfy it?'" he points out. In some cases, he says, higher sales of one product may in effect cannibalize sales from another, costing the manufacturer money in the end. AMR Research has estimated that global manufacturers' have the opportunity to reap about $95 billion in gains through profit optimization.