DISC Offers Tax Advantages for Georgia Exporters
By Jacqueline Harris
DISC Offers Tax Advantages for Georgia
Exporters
By Yelena Epova, CPA and Robert
Verzi, CPA
As recently reported in GlobalAltanta.com, Georgia
exporters are a bright spot in an otherwise unfavorable economic
landscape. There is additional good news for Georgia exporters-an
overlooked export tax incentive is available which can reduce
federal and state income tax on such exports by 50 to 100
percent!
Specifically, if your business has either type of transaction
listed below, you can convert ordinary income (taxed at about 34 or
35%) to capital gain income taxed at 15%. The following types of
income qualify for this special tax benefit:
1. Exported property which is manufactured in the United States
and used outside the US or,
2. Engineering or architectural services rendered for projects
located (or proposed for location) outside the United States.
To take advantage of this tax incentive, you will have to form a
U.S. corporation and elect for it to be treated as a domestic
international sales corporation (or DISC). The DISC is essentially
a paper company and needs very little substance. Its taxable income
is computed using special pricing rules, but it does not pay U.S.
income tax. A DISC can earn income in an amount equal to the
greater of:
- 50% of the taxable income of your export sales; or
- 4% of the gross receipts on the export sales.
The amount determined under the 4% method cannot exceed the
total amount of taxable income derived from export sales. The
income earned by the DISC would be subject to the 15% income tax
when distributed to its shareholders.
Here's how it works:
- Company XYZ forms a DISC. Company XYZ has $3,000,000 of export
sales.
- Assume that the cost of goods sold relating to these sales is
$1,500,000 and other expenses are $500,000, leaving a net export
profit of $1,000,000.
XYZ Corporation would use the 50% method (described above)
since this alternative would generate the most tax benefit.
Therefore, $500,000 (50% of $1,000,000) would be subject to tax at
15% instead of the corporate rate of 34% (if XYZ was a C
corporation) or 35% if XYZ were and S corporation (assuming the
shareholder is in the top marginal individual tax rate). Assuming
the later, XYZ Corporation and its shareholders would save $100,000
($500,000 * (35% ‐ 15%)) in federal income tax per year. In
addition, state income taxes can be saved by using the DISC
structure. The savings is unlimited. The more your business
exports, the more the potential tax savings.
Taxpayers can take advantage of these substantial savings only
after they form a U.S. corporation and make an election to treat
the company as a DISC.
Please feel free to contact Yelena Epova or Robert Verzi,
International Tax Partners with Habif, Arogeti and Wynne, if you'd
like to discuss this tax savings opportunity.
About the authors:
Yelena Epova leads HA&W's international services group.
She specializes in advising domestic and international companies on
international tax issues and tax planning strategies regarding
inbound and outbound operations.
Robert Verzi is an international tax partner with
HA&W. He has more than 25 years of experience providing
international tax solutions to publicly and privately held
corporations on an array of international tax matters, such as
foreign tax credit management and utilization, structuring foreign
and domestic operations, international mergers and acquisitions,
and export tax incentives.
Make the Commitment to Energy Management
By Jacqueline Harris
Contributed by: Mark Bell, Empower Energy
Technology, Make the Commitment
to Energy Management.
Regardless of the business you operate, implementing an
effective Energy Management plan is a proven strategy for cutting
and controlling costs with excellent returns. Integrating
your Energy Management plan into your overall Supply Chain, and
treating energy as an asset rather than an expense, could have a
dramatic return on your bottom line.
A recent report by Aberdeen Group entitled "
Energy Management, Driving Value in Industrial Environments"
pointed to several important key metrics of manufacturing
organizations with effective Energy Management reports. Such
as:
- Best-in-Class companies are able to reduce energy consumption
by 15% as compared to Laggard companies, who increased the energy
consumption by 6%.
- Best-in-Class companies are outperforming their corporate goals
for operating margin by 14%.
- Best-in-Class companies realize 90% Overall Equipment
Effectiveness, which is 24% higher than Laggard companies.
- Best-in-Class companies gain real-time visibility into energy
data by being three-times as likely as Laggards to adopt energy
management systems.
- Best-in-Class companies are two-times as likely as Laggards to
take energy costs into consideration while scheduling
production.
According to a recent report from McKinsey & Company,
Unlocking Energy Efficiency in the U.S. Economy, "The industrial
sector offers 3,650 trillion end-use BTUs of NPV-positive energy
efficiency potential, equivalent to 18 percent of its forecast
energy consumption in 2020." Contrast that to the sobering
fact that, per the U.S. Energy Information Administration, world
manufacturing energy consumption is projected to increase by 44
percent from 2006 to 2030.
By leveraging existing, and improved, Supply Chain systems,
equipment automation, and existing energy assets, manufacturers can
better measure and monitor energy consumption within their
facility. The effective management and monitoring of equipment
loads allows for more effective peak-demand management (a
considerable component of a utility bill) and improved automation
of production processes for optimal energy asset management.
That energy is essential is a given-without it no company would
be in business. Thus all businesses must manage energy to an
extent, if only to ensure its availability. Beyond that basic need,
decisions relative to energy options and opportunities will depend
on how significant the cost and environmental effects of energy are
to business operations, broader business strategy and positioning
considerations.
Read more on how to
Make the Commitment to Energy Management.
To find out more about how www.empoweret.com
can ssist you in optimizing Energy decisions contact Mark
C. Bell at 404.681.3270.
TwinEngines Instrumental in new TAG Manufacturing Society
By Jack Burnett
TwinEngines approached TAG with an idea to help Georgia
manufacturing businesses work together to become more
competitive. As a firm specializing in manufacturing
operations management for small and mid-market companies,
TwinEngines believes that bringing manufacturers together to
discuss and learn about information and technology will
increase the competitiveness, performance, efficiency, and
profitability of their businesses.
Come learn about the TAG Manufacturing Society at the kick off
meeting on April 7th at the 755 Club - Turner Field. Enjoy
the opportunity to network with peers in the
Manufacturing/Technology industry, and hear from an industry
leader.
Register Here
For those of you familiar with the Business, Braves and Bottom
Line educational series by TwinEngines, you will be right at
home. After the event, stick around for some baseball -
Braves host the Cubs! It's sure to be an evening you won't
want to miss. Contact Rachel Sevin, society liaison, for
more information: rachel@tagonline.org.
Mission Statement
The TAG Manufacturing Society is dedicated to professionals who
participate in the technology of manufacturing production and
supply chain and seek innovative thinking and leadership to drive
operational excellence.
- By utilizing technology as the catalyst for positive change,
our members will apply new technologies to increase the
competitiveness, performance, efficiency, and profitability of
their businesses.
- The Society will focus on the "best practices" aspects of
manufacturing and utilize information and technology to produce
world-class processes.
Society Objectives
The Society will be member driven and promote manufacturing
business through technology activities, education, events, and
resources that will:
- Allow members to connect and share with other industry
professionals, share strategies and tactics, promote the group,
contribute, cultivate understanding, and exchange strategies to
facilitate operations excellence
- Result in white papers, blogs, podcasts, guidebooks, research
studies, webcasts and other resources that accelerate learning and
knowledge transfer
- Participate in regional events such as the Manufacturing
Appreciation Week and hold various Summits to promote manufacturing
excellence
- Create a repository of shared information that can assist each
manufacturing buseinss in achieving their goals
The goal of the TAG Manufacturing Society is to be a technology
leader in support and data integration of all manufacturing
initiatives across the value chain including web presence,
logistics, shop floor, manufacturing operations, front/back office
integration, and quality assurance. It will consist of
members from all areas of manufacturing.
Next Steps
2010 Georgia Legislative Report by GIA
By Administrator
Contribued by: Lee Lemke, Executive Vice President,
Georgia Industry Association
Scroll down for the very latest industry news from the
State Capitol.
The Georgia Industry Association is tracking state
legislation that could potentially impact industry and
manufacturing business. From new leadership in the state
House to expected budget short-falls and a gubernatorial election
on the horizon, GIA keeps us up-to-date on important changes at the
Georgia Capitol.
Senate Appropriations Chairman Jack Hill said "with January
marking the halfway point for fiscal year 2010, Georgia's overall
total revenue collection shortfall now stands at $1.148 Billion or
-13.7%.
Transportation
Governor Perdue released his recommendations for the amended
FY2010 budget and the recommended budget for FY2011. The
FY2010 amended budget calls for a further reduction of the state
budget from $18.6 billion to $17.4 billion by the end of the fiscal
year ending June 30.
The 2010 budget recommendation includes $300 million in
bond projects for transportation. The Governor laid out a
vision for committing a similar amount in the future budgets, which
total as much as $3 billion over the next decade. The bonds will be
paid back using state general funds rather than motor fuel taxes,
which are declining at a time when transportation needs are
increasing.
"This is the ultimate accountability system, the DOT will be
responsible for delivering projects, and the legislature will
answer to the voting taxpayers in deciding whether to continue
making these investments," the Governor said.
Voters in each region will have the ability to decide on new
transportation improvements by voting on a one percent sales
tax. If the district votes yes, the additional sales tax
collected in their district will be used to fund their list of
projects. If the district votes no, the tax will not be levied.
The Governor also recommended $68 million for the deepening of
the Savannah River Harbor. The joint federal-state project will
deepen the shipping channel from 42 feet to 48 feet allowing the
world's biggest ships to call on the Savannah Port.
Read more about legislative activity affecting industry
during the 2010 Legislative Session:
Manufacturing Business and Technology Evaluation
By Jack Burnett
It is important to take a wholistic view of your business and
technology when implementing information systems. This
entails an evaluation of your manufacturing business and
technology, your market and growth plans. Don't spend the time
for analysis and study up front, and you risk ending up with
silos of information and inefficient work processes as a
result. Synchronizing informatin flow throughout your
organization and with customers, partners and vendors allows
manufacturing firms to operate more effectively. There are
four areas to evaluate when implementing information systems.
The Business Processes area defines the
business strategies and describes the various department and
customer groups. The rules of collaboration and workflows
associated with the business processes are defined.
Requirements for this area are completed first to understand the
operating culture and overarching processes to which business
applications are applied.
Business
Applications consists of the services,
transactional applications and systems that support the business
processes. System designs and technical scope are created to
solve particular business problems for specified users.
Line-of-business systems are identified, and integration with the
current and future applications is defined. We typically see
business applications categorized as Web, Sales/CRM, Operations and
Financials.
The Information Architecture describes the
business data that is exchanged and shared between employees
and customers, employees and other employees, and all people
participating in the manufacturing value chain. Databases and
systems used to store data are identified. The rules for
access are determined, and the security rules are mapped to user
groups, applications, and data.
The foundation is the Infrastructure
Architecture, which describes the requirements of the IT
hardware and networks supporting the web and transactional
applications. Definitions of access methods for internal and
external user groups, and the connectivity of systems to support
business processes are defined.
At TwinEngines, I create strategic roadmaps defining an
implementation plan for the right-size applications at the
right time. I deliver the strategy first, and
then deliver solutions to unique business problems that
companies face in ecommerce and sales, manufacturing and
logistics, and repair and warranty. Our focus at
TwinEngines is on small and mid-market companies, providing
businesses with the best value.
Key steps to avoid hiring errors and hiring the right people
By Jacqueline Harris
Brad Wolff, Director Business Development, Jumpvine, Inc.
contributed the following article:
Key steps to avoid hiring errors and hiring the right
people
"Begin with the end in mind" when you
hire. You need to know just what you want this
person to do and accomplish (the end result of his/her efforts) in
this role and write this down. This allows you to write a
quality job description so that you can attract the best
people. This also helps you determine what credentials you
desire the candidates to have on paper (their resume).
- Create a "model candidate" and write down these
characteristics. Use the information you
gathered from step one to help you determine the skills,
personality and other characteristics you would like this person to
possess. Write down these specific characteristics so
that you can develop questions to evaluate each candidate's fit
with respect to these traits.
- Determine what type of manager you are and factor that
in: Being honest with yourself about your own
personal style and your available time to train and manage can be
critical to hiring people that work out well for you. For
example, if you are the type of manager that likes to be closely
involved in on a day to day basis, then focus on candidates who
prefer a manager that gives a lot of direction and
feedback.
- Plan ahead to determine when to begin the hiring
process. A rule of thumb to go by is that the
process will usually take longer than you expect. If you have
a specific start date in mind, you need to allow time to receive
qualified candidates' resumes, interview the candidates, make
offer and allow a few days to get a final decision and 2-3 weeks
from resignation until start date.
- Consider candidates with more future potential and less
experience as well as those that can do the job
immediately: Companies often narrow their choices
too much and would benefit from considering both candidates who
have the experience to come in and do the current job right away
and those who will need to learn and grow into the current job but
have the potential to do a lot more once they master the current
duties.
- Make sure your vacation, benefits and pay match up with
the people you are hiring: The type of pay and
benefits a company offers is often related to the industry they are
in and the type of people that they usually hire. Be prepared
to find ways to flex if needed to minimize the gap between the
market for the people you seek and your company
offerings.
- Have a hiring process developed prior to starting the
search and stick with it while remaining flexible when
needed. If you do not have a well thought out
process in place, you are likely to make hiring mistakes that could
have been prevented. When you meet a candidate you like, it
is easy to be influenced by emotion and impulse. This can
cause you to avoid taking this person through all of the important
steps in a good hiring process.
- Develop your process for initially sourcing/finding
candidates prior to actually sourcing your candidates:
This may seem obvious yet it is a very challenging area that is
often not planned for in advance. There are many methods of
finding good quality employees. This includes the following:
Internal employee referrals, internet ads, candidate resume
postings on career sites, industry and professional associations,
personal affiliations and recruiting firms.
- Be very aware of the message you send by how you
interact with the candidates during the hiring process.
The best candidates are usually in the highest demand by your
competitors in the employment market and typically receive multiple
offers. As a result, in addition to considering money,
location, job duties and other factors, they will usually take into
account how they feel about working for you. Remember to do
what you tell them you will do. If you say you will call on
Monday, then be sure to do this.
- Be flexible on number of people you need to interview
on a position. If someone is an excellent fit based on
what you have already decided you are looking for in the previous
steps, don't hold off on this person simply because you did not
interview a specific number of candidates yet.
Keeping Morale High in a Down Economy
By Jacqueline Harris
Brad Wolff, Director Business Development, Jumpvine, Inc.
contributed the following article:
Keeping morale high in a down economy
Amid our current economic downturn, many managers are realizing
that keeping morale intact is crucial but more difficult to
achieve. Businesses have to motivate survivors of layoffs as well
as prepare to compete for talent when the economy rebounds.
With companies reducing their staff, it has forced employees to do
more work with fewer rewards in the form of bonuses, raises and
benefits than under normal times. As a result, companies are
faced with the challenge of producing equal or better products and
services under more hazardous conditions.
Sound fundamentals of human relations are of utmost
importance in managing through these challenges: Here are
three approaches that can have a positive impact:
1. Communication: Send clear, unambiguous and
well thought-out messages to staff about what's going on. A
monthly face-to-face "status update" meeting between staff and
executives to convey that there are no secrets at the company.
These steps can cut stress, boost transparency and shows convey the
message that we are "all in this together".
2. Fairness: A sense of fairness has a direct
influence on morale. This means communicating in a respectful and
kind manner, letting people voice complaints without repercussions,
explaining the rationale for job cuts, and making those cuts as
fairly as possible. Allowing the staff to participate in
solutions can go a long way when it is feasible. For example,
if you need to cut $1 million in salaries, you can let the staff
know that you need to either lay off four people or have each
person reduce his/her pay by 10% and let them vote on what they
prefer.
3. Acknowledgment of value: Providing positive
feedback and showing an interest in people's work has a direct
effect on morale because it increases their feeling of importance
and competence. Simple emails saying "Good job" or "Thanks for your
hard work" can go a long way. In addition, giving workers a
chance to enhance and broaden skills - by moving around within the
organization or working with different people - also helps them
feel less trapped in their jobs at a time that salary increases and
bonuses have been reduced or discontinued.
Here are three approaches that can have a negative
impact:
1. Social events: If it appears that social
events are used in lieu of more relevant measures, they can
backfire. It can appear that money is being poured into
socials instead of where it is more important. Having said
this, when employers follow the positive approach guidelines above,
social events can be helpful when they involve simple gestures of
gratitude at a small amount of money spent. Examples of this
would include things like a ping-pong tournament, scrabble contest,
softball game, picnic etc. Anything that allows people to
play together and interact in a fun way can foster good,
cooperative feelings that pull people together in appreciation of
their employer
2. Tolerating slackers: With employees
being asked to do more for less, workers who do not handle their
fair share or do poor quality work add an extra burden to those who
do. Don't let good employees carry weak performers.
Letting some people get away with doing less work can breed
resentment among harder-working colleagues. It is also wise to
balance out workloads if they appear uneven.
3. Abandoning normal practices that are positive in your
culture: Just because there's a downturn, it doesn't mean
you should eliminate things that are appreciated and not overly
costly. How well you manage people (or how your organization treats
people) in tough times impacts today's morale as well as your
reputation in the market and sends a powerful message that may well
matter when times improve.
Additional considerations of importance:
In addition to salary, rewards and benefits play an important
role in employee morale. Employees expect certain benefits
even under challenging economic times. The reality for
employers is that they pay a large amount of money for these
benefits, many of which are not truly valued. Since
what employees value changes over time the downturn might be the
right time to take an objective look at all of the things that you
provide for your employees and compare this to the things that your
employees truly value.
Providing a simple questionnaire for your employees to
anonymously communicate what benefits and rewards matter most
to them can be a starting point in gathering this
information. If what you offer now is not aligned with what
your employees value, you are investing your resources where they
do not provide the return on investment that you are seeking and
your employees are potentially not satisfied either.
With creativity and flexibility employers can often achieve
their desired result at equal or fewer dollars than they currently
spend. Since employees vary in what they value, honoring
these differences while keeping the value of the rewards fairly
equal can go a long way in improving morale and employee
satisfaction levels. For example, if you decide to cut back
on $2000/yr per employee in the benefits/rewards that are not
really valued per employee feedback, you may replace these with a
small variety of choices from which employees can select. One
person may want to receive this money in cash compensation while
another wishes to take an extra week of paid vacation.
Additional ideas that may have merit in your
organization:
1. Rewards programs that include bonuses for bringing
ideas that decrease expenses or increase revenue.
2. Telecommuting options
3. Four-day work weeks
4. Transportation subsidies
One final consideration before implementing changes in any areas
above would be to "think through" and get the advice of people you
trust before rolling out changes. If you currently experience
poor-morale, then thoughtlessly conceived changes can worsen morale
problems because employees can perceive them as insincere ploys by
management.
Contact Jumpvine for additional information or
assistance.
Office: 770-394-8536(direct) | Toll Free: 866-606-1205 | Fax:
770-394-8928
400 Northridge Rd., Suite 200, Atlanta GA 30350 | bwolff@jumpvine.net
www.jumpvine.net
Georgia Entrepreneur and Small Business Assistance Program
By Administrator
Karen Fite at the Georgia Tech Enterprise Innovation Institute
contributed the following article on the OneGeoriga Authority
funding and assistance program for entrepreneur and small
businesses:
The OneGeorgia Authority and the Georgia Department of Economic
Development recognized the fertile soil that rural Georgia has to
offer small businesses and entrepreneurs. Yet, they
understand the challenges that face many of these businesses as
they dare to succeed and grow. In an effort to continue
building on the state's policies and programs to enhance, support
and grow small businesses and entrepreneurs in Georgia, they
ventured to establish a new service program targeted to
entrepreneurs.
Through the Entrepreneur and Small Business Assistance Program,
Georgia Tech Enterprise innovation Institute and University of
Georgia Small Business Development Centers have combined resources
and service to extend our current entrepreneur and small business
programs and services. This program works to provide expertise by
connecting these businesses to the appropriate resources, expanding
into new markets and providing highly specialized technical
assistance through Georgia's research universities and other
qualified service providers. TwinEngines is one service provider
supplying expertise in lean web presences, eCommerce and search
engine optimization.
The activities provided will be targeted to entrepreneurs and
small businesses located in eligible and conditionally eligible
counties within Georgia's service delivery regions, as identified
by the OneGeorgia Authority. Companie must have less than 100
employees and are in Georgia's identified strategic industries or a
qualified supporting industry, as identified by the Commission for
New Georgia. Those strategic industries include Advanced
Communications, Aerospace, Agribusiness, Automotive, Bioscience,
Defense, Energy/Environment, Financial Services, Information
Technology, Logistics/Transportation, Manufacturing, New Media and
Tourism.
The services will be provided in six areas to eligible
companies:
1. Mentoring & nurturing to support
start-up companies and small businesses
Developing Business-to-Business and Peer-to-Peer Networking forums
allowing opportunities for the entrepreneurs and CEO participants
to learn, share their experiences with their peers, and make
effective use of the time and talents of the participants.
2. Access and prospecting new markets (domestic and
international)
Helping companies develop new markets by providing market
data for identifying niche markets, expanding their current
customer base or expanding into international markets. Market
data will be provided as well as guidance on the use of the
information to development of new products or markets to grow
healthy, profitable revenue streams for the entrepreneurs and small
business.
3. Marketing through technology
Assisting small businesses and entrepreneurs in their
efforts to market through technology will be provided through
training and direct assistance with the use of contracted
consultants, such as TwinEngines. These
services will include assistance with eCommerce, lean website
development and enhancement, search engine optimization, and social
media/networking.
4. Specialized manufacturing and technical
expertise
Assistance to small manufacturers for specialized manufacturing
technologies and technical expertise will primarily be provided by
EI2's existing manufacturing extension service, the Georgia
Manufacturing Extension Partnership (GaMEP). Assistance
will be provided in three primary areas: Lean Manufacturing,
Automation, and Software Technologies.
5. Business development & growth
Assistance in this service category will be provided by UGA and
Georgia Tech's network of business and entrepreneurial
consultants. Consultants will meet with a company's owner
and/or management team to discuss the company's challenges and
opportunities. Based on this initial consultation, the
consultant and company will agree to a course of work with stated
goals, action plan, timeframe for completion, and identification of
anticipated impacts.
6. Defense and other state and federal
contracts
The Georgia Tech Procurement Assistance Center (GTPAC), housed
within EI2, helps Georgia businesses identify, compete for, and win
government contracts. Contracting assistance is provided for
federal, defense, state, and local procurement opportunities.
This no-cost assistance comes in the forms of teaching, mentoring,
and coaching. Clients are also provided with a complete set
of tools to research and identify government contracting
opportunities. Our services take the form of classroom
instruction, customized electronic bid matching, and one-on-one
counseling.
For more information, contact Karen Fite, ga-esb@innovate.gatech.edu.
SETAAC Helps North Carolina Garment Manufacturer
By Jack Burnett
Nancy R. Fullbright, SETAAC, contributed the following case
study showing how SETACC helps Southeastern manufacturers compete
with imports:
Mack and Mack, a Greensboro, N.C.-based women's apparel
manufacturer, is something of an anomaly. It is a U.S. cut-and-sew
manufacturer in a country where nearly 91 percent of the 20.8
billion garments purchased in 2006 were imported. It has increased
employment in an industry where employment decreased from 585,700
in 1998 to 204,800 in 2007. And it has managed to do all of this
while the U.S. trade deficit soared to $62.2 billion in July
2008.
"We design, cut and sew better women's wear for distribution to
some 65 specialty boutiques throughout the United States. Our
entire operation - administration, design, production, shipping,
receiving and a retail outlet - is housed in a single,
7,300-square-foot building in downtown Greensboro," explained John
Davis, co-owner (with his wife Robin) of Mack and Mack. "The
textile and apparel industry, once prominent elements of our local
economy, has moved offshore to take advantage of huge cost savings.
We have established a niche market, but until we become a household
name we will always work on narrow margins. And that is where the
SETAAC program has been a great help."
The Southeastern Trade Adjustment Assistance Center (SETAAC),
based at Georgia Tech's Enterprise Innovation Institute in Atlanta,
helps manufacturers develop and implement turn-around strategies to
better compete with imports. SETAAC project manager Mark Hannah
conducted an initial review of Mack and Mack and helped the company
prepare an application for the U.S. Department of Commerce. Once
the company was approved for funding, Hannah developed an
adjustment plan that detailed projects to receive funding support,
including assistance in marketing and sales, new product
development and equipment training.
Firms that are accepted into the SETAAC program pay for 25
percent of the diagnostic visit and report. The Department of
Commerce generally pays half of the cost of project implementation
for activities to benefit the company. Private sector consultants
submit quotes for implementing the identified projects and the
company chooses which consultant to hire to execute the outlined
changes.
"With SETAAC defraying most of the cost, we were able to have
one of our newly-hired designers trained on our pattern digitizing
equipment, which would have cost us around $4,000," Davis said.
"Normally, we would have depended on the limited in-house
experience available, along with our outdated help manuals.
Instead, we were able to have a trainer spend a week at our
facility with our designer, giving her invaluable insight into the
latest techniques."
Mack and Mack's equipment digitizes garment patterns and prints
them on perforated paper; sizes can automatically be scaled in the
computer. According to Davis, it is not feasible to send the
patterns to overseas factories for production because of their
strict quality control.
"Admittedly, our business model is unusual. We have a very
attractive boutique in the front of our facility and, once you get
further in, there are glass doors through which you can see people
at sewing machines making the clothes that are on the sales floor,"
he said. "Almost all the clothes hanging in the store are made in
black - because that's a color we know we can always sell - and you
can try them on. You choose the style and color, and in two weeks
you can pick up the clothes that have been made specifically for
you. Making one outfit at a time is one of our best selling points
and, at the same time, one of the things that is most challenging
in terms of growth."
SETAAC has also helped Mack and Mack upgrade its Web site, a key
component of the company's marketing strategy. Davis notes that
having the Web site configured for e-commerce has allowed Mack and
Mack to increase its sales and diversify its revenue sources. In
fact, the company exceeded $1 million in sales last year for the
first time since 2003 and increased its workforce from 12 to 17
during the same time period.
"It's partly natural business growth, but I do feel the growth
was abetted greatly by having the assistance provided by the
program," Davis said. "We have created three jobs - two in
production and one in administration - and retained all of the jobs
we already had. Having the additional help has allowed my wife and
me to focus on the bigger picture."
Mack and Mack was founded in 1995 by Robin Mack Davis who
started out cutting garments on a ping pong table in her parents'
basement. After five years, the firm relocated to its current
location in the historic district of downtown Greensboro. The firm
has grown over the years, and now sells its original designs in 65
upscale boutique clothing stores nationwide. According to Davis,
SETAAC's assistance will help the small manufacturer continue to
grow and compete in a global economy.
"I can think of few other government programs for small
businesses where the intended benefits are so well-targeted and so
effective," he said.
To learn more about SETAAC and how to get started, visit the SETAAC
website.
Southeastern Trade Adjustment Assistance Center (SETAAC)
By Jack Burnett
SETAAC contributed the following article about their trade
adjusment assistance program:
Has your manufacturing business been impacted by
import competition? If so, you are not alone.
Fortunately, many manufacturers have been able to receive federal
assistance to improve their competitiveness and profitability.
The Southeastern Trade Adjustment Assistance Center (SETAAC)
administers a U.S. government program that can provide up to
$75,000 of U.S. government funds on a cost share basis for
manufacturing firms that have been impacted by low-cost
imports absorbing market share. This program is available to
all U.S. manufacturing businesses that have experienced
declines in sales and employment due to import
competition.
The Southeastern Trade Adjustment Assistance Center (SETAAC),
based at Georgia Tech's Enterprise Innovation Institute in Atlanta,
helps manufacturers develop and implement turn-around strategies to
compete better with imports in eight Southeastern states:
- Alabama
- Florida
- Georgia
- Kentucky
- Mississippi
- North Carolina
- South Carolina
- Tennessee
Last year, SETAAC helped more than 30 companies. On
average, these companies received $42,000 in matching funds. In the
last three years, SETAAC's clients have increased sales by 26
percent and improved productivity by 28 percent.
SETAAC's role is to partner with manufacturers and guide them
through the 3-step process of certification, diagnosis and
implementation. There are various projects types eligible for
funding. Some common project examples are:
- ERP and production software installation and integration
- Production system innovation or re-engineering
- Quality compliance certifications/CE/ISO upgrades
- Lean manufacturing, Six Sigma, continuous improvement programs
and custom process engineering solutions.
- Strategic planning and target market
identification/planning
- Identification and development of new products and new
markets/prototyping
- Export feasibility assistance
- Web site design/e-commerce implementation and/or sales
literature
The program funds cannot pay for assets, but can pay for
projects that improve a company's competitive position.
There is no cost to the firm to get certified.
To learn more about SETAAC and how to get started, visit the SETAAC
website or contact Maria Gorges, Program Director, at (404)
894-6787.
Southeastern Trade Assistance Adjustment Center
(SETAAC)
Enterprise Innovation Institute
Georgia Institute of Technology
760 Spring Street, NW, Suite 330
Atlanta, Georgia 30332-0640
Manufacturing Business Hurt by High Corporate Tax Rates
By Jack Burnett
The Organization for Economic Cooperation and Development (OECD)
released new data showing that the United States corproate tax rate
is getting more out a whack with the rest of the industrialized
world. And that is a bad thing. High tax rates
tend to adversely affect a business' and a
nation's ability to attract capital, jobs, and economic
growth.
The average tax rate of OECD nations fell to 26.5% after Sweden,
Czech Republic, South Korea and Canada lowered their rates this
year. The United States corporate tax rate is at 39.1%, only
behind Japan when looking at industrialized nations.
Great Britain is learning the hard way; they recently lost
McDonalds' and Google's European operations so those companies
could lower their tax bill.
Manufacturing business can be hurt by high corporate
tax rates, because high tax rates cause manufacturers to
not accumulate capital that is needed to increase
productivity. Lower productivity causes GDP to
decline.
The Tax Foundation also addresses the effective tax rate
argument when considering the US tax code:
"To many "new economy" firms that produce ideas and services, and
whose profits are derived from intellectual property and licensing,
the statutory tax rate is the effective rate because these
firms don't have large plant and equipment costs to depreciate.
They are highly sensitive to the statutory rate and, because they
are not capital-intensive, can most easily locate their operations
in jurisdictions with the lowest tax rate."
The OECD economists reported,
"Corporate income taxes appear to have a particularly negative
impact on GDP per capita. This is consistent with the previously
reviewed evidence and empirical findings that lowering corporate
taxes raises TFP (total factor productivity) growth and
investment. Reducing the corporate tax rate also appears to be
particularly beneficial for TFP growth of the most dynamic and
innovative firms. Thus, it seems that corporate taxation affects
performance particularly in industries and firms that are likely to
add to growth."
Read more about the report and analysis of corporate tax rates and
their affect on manufacturing businesses here.
Quick Start - Georgia’s brand name for workforce excellence
By Administrator
Rodger Brown, Director Marketing and Communications, Quick
Start. contributed the following article:
The dedicated team at Quick Start, contributed the
following about the strategic workforce solutions delivered to
Georgia manufacturing businesses by Quick Start:
When cable network CNBC announced its latest ranking of
"America's Top States for Business," the business-news leader
noted: "Many states point with great pride to the quality and
availability of their workers, as well as government-sponsored
programs to train them."
Yes, many states do. But only one state can point to its ranking
as No. 1 on CNBC's list for the quality of its workforce and
workforce training. That's Georgia. And that's not the first time
Georgia has been recognized for workforce development. For nearly a
decade, Expansion Management magazine conducted an annual
survey of site selection professionals to rank states in workforce
training. These are the professionals who advise companies on the
best locations to make investments, start a new manufacturing
business and create jobs. Georgia scored the top spot numerous
times, ranking No. 1 overall for all the years of the survey.
What accounts for that success? Such an achievement is always a
team effort. State agencies, our technical colleges, the university
system, individual communities, and our corporate partners in
economic development collaborate to tell Georgia's story. What
seals the deal with regard to workforce is the quality and
effectiveness of the strategic workforce solutions delivered by
Quick Start, a part of the Technical College System of Georgia.
For 42 years - since 1967 - Quick Start has been providing
workforce training for small and mid-market companies creating and
keeping jobs in Georgia. Quick Start's services are provided free
of charge to new companies as an economic development incentive to
locate in Georgia, and to existing companies to support them as
they expand or implement new technologies to stay competitive.
Customized training - training the right people with the right
skills to precisely meet each company's needs - is Quick Start's
core business. But that's not as simple as it sounds. Today, those
fundamental, practical skills incorporate higher-level challenges
-- critical thinking, collaborative team skills, and dedication to
continuous improvement. Companies are continually upgrading
processes, developing new products, and implementing new
technology, and these advances demand a new way of thinking about
workforce training. Today's environment calls for strategic
workforce solutions.
"Strategic workforce solutions" is not just a catchphrase. To
deliver a strategic workforce solution, Quick Start must understand
a company's culture, its products, markets, goals and manufacturing
business challenges, as well as the specific requirements for
different jobs. This strategic understanding then informs the
relationship between Quick Start and the client company, adding
value every step of the way -- from assessing and selecting
candidates, to training new employees, and building efficient,
productive teams. It's this deep and broad value proposition that
earns Quick Start and Georgia the international recognition and top
rankings that continue to grab headlines.
That's also how Quick Start has evolved as the top brand name
for workforce solutions. Usually, people don't think of state
agencies in the same way they think of commercial products or
services that compete for brand awareness and brand recognition in
the marketplace. Quick Start, however, is different. To effectively
partner with manufacturers, Quick Start has to operate like a
business itself. "Quick Start" is a registered trademark, and the
state of Georgia has 42 years of stellar performance invested in
the brand proposition represented by the name. It's a priceless
asset that helped Georgia businesses create or save 17,601 jobs
last year alone.
As all businesspeople know, this is how brands work. Our range
of experience - from manufacturing to biotech, warehouse and
distribution, and business operations - and our range of clients -
from locally owned and operated businesses around the state to
international corporations - all contribute to the meaning and
value of the brand name Quick Start.
Quick Start is Georgia's unique brand advantage that means
world-class performance, rapid and efficient training, effective
and strategic partnership, and bottom-line return on
investment.
Best of all, for companies creating or retaining jobs in
Georgia, Quick Start's strategic workforce solutions come free of
charge.
No wonder Georgia wins.
Rehashing the “Manufacturing” economic past and tips for the future..
By Jacqueline Harris
I was reading not too long ago about some of the economic ups
and downs for Georgia Manufacturing businesses over that last
few years..
REHASHING THE PAST ......
Good old Textile manufacturing, one of Georgia's oldest
industries, remained the most important industrial source of income
until 1999 when output from food processing exceeded it. From 1997
to 2001, annual textile output declined 8.4% whereas output from
food processing increased 12.1%. Other manufacturing areas were
also increasing, so from 1997 to 2000, there was an overall
16% increase in Georgia's manufacturing output. It was
startling to hear that more than half of the gain was lost in the
national recession in 2001, as manufacturing output fell 8.3% in
one year, reducing the net gain since 1997 to 6.4%. The national
recession of 2000 impacted Georgia's economy worse than most, as
its annual growth rates at the end of the 20th century dropped
abruptly to 1.5% in 2001. The state lost more than 133,000 jobs
from January 2001 to October 2002. Layoffs in the fourth quarter of
2002 amounted to a 2.2% increase over the fourth quarter of 2001,
the worst performance in the country.
TIPS FOR THE FUTURE ......
Advance 10+ years - what can we do to keep the
Manufacturing Industry alive and profitable, retain jobs, grow
your manufacturing business and overall, increase your
bottom-line.
Let's just start with the day-today trials. It's been
said that all too often, day-to-day business gets in the way
of making a manufacturing business more successful. In 2009,
today's highly competitive, ever-changing world market,
small-to-mid-sized manufacturers that want to continue their
success need to do more than just build a product and hope for the
best. Business Executives "Manufacturers" need to look up
from their desks and see what's happening to their business,
customers and the market. Revaluate your marketing efforts, groom
your existing customer lists and revisit old customers, see if new
projects are available. Take a look at current market needs and see
how your product fits. Most business executives are
often too busy with day-to-day fire-fighting and too close to the
subject to look ahead and do what's necessary for
success.
So what's the answer? Many believe that in order to stay
profitable, manufacturers -- like every other organization -- must
practice profit-focused strategies, including a planned profit
model. Walk the shop floor, check for bottle
necks, check and double check your inventory logs, make sure
your manufacturing website is one of your TOP marketing efforts
and make sure everyone is onboard and actively
contributing. Don't rely on excel spreadsheets to track
your progress and inventory, and don't rely on post-it notes and
email to relay a message, make sure your presence is not just
the picture on the wall or the voice behind the big door.
Everything has to be looked at and massaged and included in
the planned profit model.
Economy recovering? Ways to emerge with an advantage
By Chris Zimmerman
I recently read an article by Tom Emmrich, president,
Americas, Dassault Systèmes that I couldn't agree with more.
Here are few points of summary:
This current downturn by some economist's estimations is around
18 months old. So if current indicators (and history) are any
guide, then the recovery has begun. What can a
manufacturing business do to be ready to emerge stronger
and more capable and competitive? Here are a few areas that
we believe are critical:
- Efficiency starts with manufacturing technology. Utilizing the
latest manufacturing and information technologies and best
practices can drive greater efficiencies, free time for innovation
and give an organization the flexibility and core set of tools
needed to succeed when the economy rebounds.
- Automated PLM can speed innovation to market. Companies with a
strong product lifecycle management strategy will be able to
respond more rapidly to market changes or increases in demand by
being able to iterate digitally on various product alternatives,
and then quickly move to market while the competition is still
getting started.
- Innovation starts from within and means more than a casual or
informal awareness of the market and industry - and must pervade
the entire company, not just a few people. You need to develop a
culture of innovation and process discipline to support it.
- Collaboration is critical to the nimble business. To be a
successful manufacturing business in today's markets means you must
have the ability to seamlessly connect with your partners,
suppliers, customers and branch offices.
- Operating efficiently is the most important aspect of improving
and preparing your company for success when the markets take a
favorable turn. An economic downturn is, in fact, the perfect time
to evaluate internal processes to identify ways of working which
require evolution.
Regardless of the condition of your manufacturing business, a
review of many of the tenets of a good business are important to
realize future savings, and more importantly, to return to growth
faster and to win market share.
Click here
to review the complete article by Tom Emmrich.
Manufacturing Business Economic Update
By Jack Burnett
I listened to Dr. Jeff Humphreys, Director of the Selig Center
for Economic Growth at the University of Georgia's Terry College of
Business, at the TwinEngines' Business, Braves and the Bottom Line™
event July 21, 2009. He provided an economic forcast with
insights for manufacturing businesses.
Dr. Jeff Humphreys summarized his discussion with this
advise for a manufacturing business:
He believes the recovery will start in the 4th quarter of 2009, and
"now is the time to plan and act for the recovery - not a vigorous
recovery, but more of a flat, slow recovery".
Here are other highlights from Dr. Humphreys from the
discussion at our educational seminar:
- Last fall in 2008 the country was very close to the precipice
of an economic failure. 3 causes occurring at same time:
- Cedit failure
- Housing failure
- Financial crisis
- The federal government's actions helped avoid a Great
Depression 2.0, but there were other key factors:
- Social safefty nets in place that were not in place in the
1930's
- FDIC helped stall the panic
- The massive global response helped
- "Almost through all the really bad stuff." The economy will
continue to decline with the recovery in the 4th quarter, but exact
timing will depend on the improvements to the credit market
- There was a one-year income loss during this
recession.
- Because of the massive loss, the recovery will not be the
normal quick bounce back from a recession - slower and
flatter. Can't rulle out stagflation.
- Wealth destruction in the the middle class is unprecedented -
includes large home equity losses
- Job Loss Prediction:
- 280,000 in GA - 250,000 all ready
- 7,500,000 in USA
- Expect unemployment to peak just north of 11% nationwide
- These 5 Headwinds indicate recession very near end
- Credit Market thawing
- Housing activity (starts & sales) already bottomed
- Oil prices will be lower this year
- Inflation is not today's problem
- Wealth destruction ended at end of 1st Quarter '09
- Fed will take back rate custs mid 2010 so now is the time to
look at business loans
- Federal stimulus does not have much productivity dividend, so
payback of stimulus will be a drag on the recovery.
- Georgia Notes:
- Did not experiene the huge losses in housing, but did have a
supply bubble that hit prices.
- 12% price drop in houses, but short sales and foreclosures
overstate that drop
- Major sector of Manufacturing tied to housing in GA
- In 1999 there were 3.9 M jobs in GA; today there is 3.9 M jobs
in GA. Lost a decade of job growth and return to
pre-recession numbers won't happen until 2013.
- GA does enjoy stimulus from 3 areas today
- Population Growth
- Productivity Increases
- State and Federal stimulus
Manufacturing Business Update
By Jack Burnett
I checked my Twitter account over lunch and kept seeing positive
article after positive article regarding the state of manufacturing
around the globe. When it reached six
articles showing manufacturing business getting better (or
less bad), I just had to compile links to all of them here in one
place. Take a minute to enjoy the positve news from surveys
and reports on June 2009 global manufacturing activity:
Companies Are Collaborating to Cut Costs
By Jacqueline Harris
Andy Williams, Partner, M33 Integrated Solutions,
contributed the following about blog:
Companies Are Collaborating via Portals to Cut
Costs
The doom and gloom mentality stemming from our country's
financial crisis has set in. By now, you have probably been
presented with countless old and new strategies for weathering the
economic storm. As is usually the case, some of these
strategies work for some of the companies out there, but none of
the strategies work for all of them. Still, that doesn't mean
they're not all worth investigating if it means you might find the
strategy that works for you.
One of the trends that we've seen emerging in this economy is
network collaboration portals. And why not? With the
ubiquity of information management systems and the ability for
multiple parties to communicate in real time, collaboration is an
idea whose time has come. It's not the right fit for every
company, but it's becoming a major driver for cost reductions in
the companies that are making it work.
Logistics veterans might describe collaboration as an over-hyped
solution that rarely gets results in the real world.
Effective collaboration means creating a network of trading
partners that enables shippers to operate more efficiently and at a
lower cost as a group. In the past, collaboration was
prohibitive to business because the labor required in coordinating
activities canceled out the cost savings. But with the
widespread adoption of web-based logistics planning tools, as well
as the growing reliance on Third Party Logistics (3PL)
partnerships, shippers have the capabilities necessary to integrate
distribution channels and transportation providers to minimize
collective distribution costs and execute 'best-practice'
solutions.
Most companies have adopted lean practices over the last decade,
but there's a natural barrier that keeps independent companies from
reaching the next level of savings. Let's put this concept in
more understandable terms: I can negotiate a very low rate
for a cab ride for myself, but it won't be cheaper than splitting
the fare with someone else.
Most companies do not currently have the resources to search and
create these collaborative networks independently. In today's
down economy, options to smart-source this network creation
initiative to a third party partner are increasing. It is
critical to investigate any future partner's ability to create and
host network collaboration communities.
When like companies in like markets collaborate to form a
collective distribution network, either independently or through a
third party, they will inevitably benefit from reduced costs and
faster time-to-value. The companies that comprise such a
network, share in best-practice solutions, while solidifying
reliable relationships with providers that typically wouldn't
present a partnership fit independently. Carriers newly
introduced to these networks find immediate synergies with the
other companies, often increasing their availability in critical
lanes for their original client. Additionally, with over 80%
of the trucks on the road carrying less than full trailer loads,
collaboration allows cost sharing for shippers, increased carrier
revenue, reduced capacity demand in the market, and often faster
transit times.
In this economy, everyone is trying to do more with less.
There's no question that most companies will come out of this
recession leaner than they were when it began, but the competitive
advantage will go to those companies that used this time to
implement new partnerships and processes that will increase
efficiency when the economy turns around. Forward
thinking management at proactive companies will create that
advantage through collaboration.
Tough times? Use them wisely!
By Chris Zimmerman
Recently, I have spoken to many companies who have taken the
approach to hunker down and wait for the storm to pass:
taking the path of expense cutting, halting any capital or
discretionary spending, and reducing sales and marketing
initiatives. Although for some, this is the prudent move, for
many an opportunity has presented itself. We all know, and
history has shown us, that the economy will rebound and in most
cases, manufacturing businesses will be there after the
storm.
So in these down times, what can we do and what can we gain?
A few potential ideas:
- Examine all process and procedures for:
- Redundant or double data entry
- Highly manual processes (high potential for errors)
- Examine the use of spreadsheets in production (limited
visibility)
- Data availability to the appropriate parties (executive,
back-office, customers, vendors)
- Utilize technology to solve the above issues
- In most cases using the systems already owned
- Potential manufacturing business gains:
- Increased market share when business increases
- Increased profitability through a more scalable business with
no expense increase
- Improved operational efficiency for a clearer view of data for
better decision making
- Broader view of all data across the entire business
- Improved process can allow for reallocation of over staffing
and head count
It is not always for the faint of heart to make bold moves in
difficult times, but more often than not, they will be rewarded for
their foresight with a more dominant business.
The link below is to a blog post from the President of SGIA, he
agrees that the time is right for business and process
improvement.
Last to Move - First to Lose
Georgia QuickStart for Manufacturing Businesses
By Kevin Seefried
Many manufacturers are not aware of the resources available
through Georgia Quickstart. This group is a true jewel for
Georgia and a key asset when attracting new manufacturing business
to the state like the recent Kia plant located in LaGrange.
Georgia QuickStart doesn't just focus on new business, they
also work to help keep and grow existing manufacturing business
through training and retraining programs. These
training programs are a great way to educate workforces on
new solutions, business systems and processes at small and
mid-market companies.
I was glad to read in the Georgia
QuickStart Winter 2009 Newsletter, that the
Camilla, Georgia Ethanol plant had its first grind as it starts
operation. I had the opportunity to drive by and see
this facility last year as I headed down to our annual beach
trip and was very impressed.
Also, be sure to check out the last page of the
newsletter to see how this group is making an impact in the
state of Georgia and in your area.
By
Eric Taub, CFA, Founder/Managing Partner at Verus Carbon Neutral
Partnership LLC. contributed the following about carbon
emissions:
Carbon Emissions - Don't Miss the
Train
Whether you believe in human-induced (anthropomorphic) Climate
Change or not, there is a very real chance that your business will
be affected by the regulations surrounding Cap and trade. It will
create a layer of costs for companies that are not prepared.
Subsequently, your company's carbon footprint will become an
important tool. Don't be surprised when your stakeholders expect to
see it on your next annual financial statement.
Currently, there are seven Cap-and-trade bills pending, some of
which have bi-partisan support (one is co-sponsored by Senator
Specter who recently became a Democrat). The most recent of which
is the Waxman Markey bill. President Obama has made it very clear
that he supports Cap and trade. Finally, the EPA has recently moved
to regulate CO2 as part of the Clean Air Act (a George H. Bush
legacy). The EPA set a level 25,000 metric tons of CO2 as a
starting point; affecting over 13,000 manufacturing facilities in
the US.
You could say the Climate Change train is coming down the tracks
at a good clip and you have three choices: lead, follow or get out
of the way (don't get run over). Don't worry it's not all doom and
gloom for your business. The choice to climb aboard basically means
that you choose to create assets and these assets can serve many
different purposes:
- hedge against energy costs
- investment in intellectual property, patents, etc.
- competitive advantage
The best way to hedge against high energy cost is to use less of
it. With some coaching, most manufacturing companies can trim their
energy use by at least thirty percent. If you accomplish that,
congratulations, not only have missed getting hit by the train,
you're on board with a first-class ticket. This means you were able
to switch to an energy-saving culture. There are detours to watch
out for; like the big sign that says electricity is only at about
14 cents a kilowatt hour. You can avoid that detour by remembering
how some of the airlines prospered by having the vision to hedge
jet fuel when it was cheap.
Now if your manufacturing business is particularly energy savvy,
you may develop energy-saving products or technologies that are
marketable or attractive to investors. So, instead of being a mere
passenger on the train, you get to supply it with energy. If your
company is big enough to get directly effected by Cap and trade,
the use of these assets could help you create valuable CO2 offsets
as well.
If you want to steer the train you have to join the list of over
100 business members on Chicago Climate Exchange. Members include
companies like Dell, IBM, Ford Motor Company, and American Electric
Power (and a number of lesser-known smaller businesses as well),
all of which have made legally-binding commitment to cut their CO2
emissions.
To get a base line of where your CO2 is coming from you must
measure your carbon footprint. Without a metric that tells you
where you are it's difficult to determine if you're on the right
track of building assets or the wrong track of creating
liabilities.