Ultra Consultants does not provide tax advisory services or tax-related advice to our clients. The blog post focuses on how new tax structures may support a company’s ability to invest in process improvements. We recommend you discuss your particular situation with a tax advisor.
The U.S. Tax Cuts and Jobs Act signed into law in December 2017 has significant implications for manufacturers and distributors considering capital investments.
One key impact is the reduction in the corporate tax rate from 35 percent to 21 percent, which many see as increasing potential to spur investment in new technology, plant and equipment expansions, workforce investments and other key areas.
The publication Industry Week asked manufacturers for their reaction in a recent article. Those companies surveyed cited the ability to invest in innovation, technology, facilities and workforce as a key outcome of the revised regulations.
Additionally, in a Computer Weekly article, it’s noted that Gartner is predicting a sizeable jump in IT spending on enterprise software in the manufacturing sector.
Specifically, the research suggests that enterprise software will continue to show strong growth, with worldwide software spending increasing by 9.5 percent in 2018 and by 8.4 percent in 2019 to reach a total of $421 billion.
Looking at Impact of Tax Regulations on Manufacturing? Consider 5 Areas of Investment
While Ultra Consultants does not provide tax advisory services or tax-related advice to our clients, what’s considered here is how the new tax structure impacts a company’s ability to invest in process improvements.
As manufacturers and distributors look at the new tax regulation and how it frees up resources for improving operations, consider these five areas of investment.
1 – Business Process Improvement
As you consider new or upgraded technology solutions, it’s essential to first frame the project in terms of business process improvement. It involves understanding unique business requirements and transforming business processes to drive efficiency and ROI.
Consider an investment in proven methodologies that drive enterprise-wide business process improvement. It’s an approach that requires a step-by-step road map, starting with a vision of the future state from the current state, education, and moving to defining the business value for each aspect of the project. Done well, business process improvement aligns the expectations of management, improves team efficiency, eliminates process waste and reduces time to benefit.
2 – Enterprise Software Selection
Evaluating enterprise software requires a depth of expertise and a vendor-neutral independence. It includes gathering unbiased information about the top enterprise software vendors and matching the right solution by industry and unique market considerations. This is a time consuming process best offloaded to independent consultants.
As you consider the impact of tax regulations on manufacturing as a way to free up funds for investment, be strategic regarding the enterprise software selection process. Put the focus on:
- Features and functionality
- Vendor synergy
- Solution agility and viability
- Technology alignment
- Total cost of ownership
- Implementation confidence
3 – Enterprise Software Implementation
Successful enterprise software implementation flows directly from the effective foundation of future business process visioning and transformation.
As you evaluate investments, note what makes a technology solution implementation successful. The process includes managing the functional implementation to achieve the future state, governance of the many decisions required during implementation, and overall project management to achieve on time and on budget success.
It involves much more than just dropping in a new software product and functional training.
Think carefully. See 5 guidelines for choosing an ERP consultant.
4 – Business Process Transformation
Going beyond technology implementation, true business performance improvement is a transformation. It integrates the best practices of Six Sigma, Lean, Agile and other industry methodologies to promote a successful business process transformation.
When assessing the impact of tax regulations on manufacturing and the chance to allocate resources to streamline operaitons, consider a commitment to maximize business potential by defining and executing the activities needed to drive business value and improve productivity.
This incorporates best practices, benchmarked efficiencies, and organizational change management techniques designed to achieve a greater competitive advantage for your company.
5 – Organizational Change Management
Moving beyond technology change, organizational change management should be addressed throughout the project, transitioning your staff and entire organization from your current state to your desired future state.
Effective organizational change management seeks to focus on people, processes, structures and culture to unleash business potential. And business process improvement project should include organization change management as a key in driving success.
Learn More: Impact of Tax Regulations on Manufacturing and Improving Operations
As noted above, Ultra Consultants does not provide tax advisory services or tax-related advice to our clients. However, Ultra’s team of independent ERP consultants is in constant dialogue with mid-sized organizations. It’s clear from these conversations that it’s a new chapter for companies as regulations have decreased the corporate rate on businesses for 2018 and beyond.
Forward-looking companies are now evaluating how these savings can be used to invest in driving true business process transformation.
Contact Ultra to consider your strategies in the face of this new business environment.