Tag Archive: tax law

The Resilient Supply Chain: Global Trade Unrest

September 30th, 2018

In today’s Amazonian environment, the customer experience is of paramount importance.      Nothing else matters if the customer isn’t happy. Thus, all the conversations going on about trade really just come back to the customer.  What is the best way to service your customers?

 

 

In manufacturing circles, there are many elements converging to strengthen manufacturing in the United States:

  • There are lots and lots of customers in the U.S. and they all want products and services delivered rapidly (making it less conducive to producing half way around the world).
  • Customers change their minds frequently and last minute changes aren’t conducive to long transit times.
  • The new tax law has made the tax rates much more comparative to other nations.  
  • Deregulation has definitely made manufacturers more on par with other nations.
  • Technology improvements have made it more cost effective to produce in the U.S.

Globally Interconnected
Even though manufacturing is surging in the U.S., we live in a globally interconnected world.  Very few, if any, clients source 100% of all materials within the U.S. If you go to suppliers twice removed, you’ll definitely be in global territory.  Thus, global trade remains a key issue.

Tariffs
In logistics circles, there is a lot of concern about the impacts of tariffs on global trade.  Will customers still bring in the same level of imports? If not, how will that impact the ports, distribution centers and transportation?  

Interesting that it hasn’t slowed down yet. The ports are having a record breaking year. We’ve seen price increases start to occur as they are passed on to the next person in the supply chain.  However, the question remains – is this good or bad? And will it substantially change the supply chain in any way?

Global Trade
Certainly there are a lot of heated discussions surrounding global trade.  We have clients who are positively impacted because it just makes them more competitive and on par with the rest of their industry.  And we have clients who are up in arms because their raw material prices are increasing and they are concerned about how to pass it on to their customers.  Will this put them at a disadvantage vs. a competitor who doesn’t source from overseas? Or does it just even the playing field?

Strategic Questions and Decisions
Strategic decisions are beginning to be impacted as well.  For example, Ford decided to not produce a new small car in China.  With the 25% import tariffs, it no longer made financial sense. A few clients are thinking about whether to expand into Mexico and the U.S.  There is uncertainty with NAFTA . However, the experts believe something will carry forward. Perhaps with a resilient supply chain, the key is to not guess and focus on your customer.  If your customers are in the U.S., Mexico is closer to the U.S. than China. That is a fact that won’t change. One thing is definite – things will continue to change and evolve.

Have you built resiliency into your supply chain so you can successfully navigate ever changing business conditions?



What Should Manufacturers Be Thinking with Potential Tax Changes?

December 11th, 2017

There has certainly been a lot of conversation about the potential tax law changes!

 Michael Kouyoumdjian, managing shareholder of RP&B CPAs, did a great job of going through the potential changes and impacts to manufacturers and distributors in a discussion with trusted advisers who work with them everyday.  Of course the issue is that there is no way to know what will happen.  But, if we look at what is most likely to occur (that is part of the House and Senate bills), we can start thinking about down-the-line impacts.

 

 

Decreasing Tax Rates and Accelerating Expenses
The bottom line is that the tax rates for manufacturers and distributors will go down overall.  It has passed as a flat tax of 20% thus far.  However, it certainly has the potential to creep up.  It also appears that there will be an increase in the ability to expense asset purchases.  Of course, as one would expect, there are exceptions and offsets that will change this simplistic picture but these trends appear likely.  Are you thinking about what impacts these likely changes will have on your business?

What Should We Consider and/or What Impacts Could Arise?
As Michael said (and I completely concur), we should never run our businesses based on tax consequences. Instead, we should make good business decisions.  That doesn’t mean we shouldn’t be thinking about likely impacts so that we are ready to take advantage of opportunities and redeploy resources as makes sense to maximize growth and profitability.  As a general rule, it is likely businesses will increase their investments, so let’s start there.

Investing in Automation
Since there is also a BIG push on automation and robotics to maximize performance to increase profitability and locate manufacturing closer to the customer, it seems likely that one of the areas of investment will be in automation equipment.  Additionally, in order to maximize performance, we are seeing additional investment in systems and technologies to increase efficiencies, automate processes and collaborate with supply chain partners.  Thus, ERP, CRM, MRP, barcoding, artificial intelligence, IoT, and data analytics are likely to continue to surge in terms of interest and investment.  Also, if businesses can minimize the labor component and locate manufacturing closer to the customer, it wouldn’t be surprising if we saw an increase in re-shoring and U.S. manufacturing.  What will that do to your supply base, workforce etc.?

Have you begun planning for the impact of tax changes?