CVP optimizer
The Markowitz-Sharpe approach as used in application to planning, marketing and logistics
Economy. Management. Marketing. Econometrics. Logistics. CVP analysis. Optimizing.

Overview Reorder Point Investment Planning CVP analysis

Planning Pricing Software Forecasting


Are you in charge of logistics management and planning for your company's activities? Do you want to increase income and reduce costs for a wide range of goods and services you produce and render? Do you want to use a powerful Markowitz-Sharpe-approach-based tool for portfolio investments analysis as applied to your company's business? If you do, the CVP optimizer is sure to help you find real reserves and reduce the routine work you do when analyzing profitability and working on planning!

Everyone who is involved in planning industrial or commercial activities is aware of a very high extent to which costs depend on the volume of products released to the trading network. On the other hand, the curve that shows how income depends on demand and prices is not just a simple line, especially if income and demand are so far at the stage of being forecast. But what if we combine these two kinds of relationships in one diagram? How does income really depend on costs? In that case we obtain a graph that shows a complicated curve. Now again, what if we take into account forecast errors and large amounts of goods that yield a return and require expenses at the same time? We then obtain an intricate surface graph with ridges and dips looking like a heavy sea. It may well be that while on a voyage on that rolling sea you might not be able to make final plans, but you are more than likely to find a way of really cutting costs which actually come down to quite a lot of money! If you are ready to set off on that voyage, this program is going to be your reliable sailing ship equipped with all the tools and instruments needed for navigation - from a direct cost optimizer to a simple model of the inventory control system! Overview or CVP Optimizer in a Nutshell...

Example: Profitability forecasting errors

Name: Product

Price for sales: 100

Cost of production: 85

Demand distribution:

Quarter

I

II

III

IV

Sales

1000

500

1000

1500

Demand average: 1000

Demand min: 500

Demand max: 1500

Variation (max-min): 1000

Type of statistics distribution: even

Solution: production plan for the next quarter = demand average = 1000. But probability of illiquid stocks P = 0 only for the minimum of Demand.

Analysis

Usual calculation

Statistical calculation (average)

Optimum statistical calculation

Production plan

1000

1000

650

Illiqud stocks

0

250

11

Income forecast

100000

75000

63875

Expenseses

85000

85000

55250

Profit

15000

-10000

8625

Profitability,%

17.64

-11.77

15.61

Probably the first solution is the mistake! Use the CVP optimizer!


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