ITACNews June-July 2009

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Company KUDOS ...

Congratulations to the following NYC manufacturers:

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New NYS Loans and Grants

Empire State Development Corporation (ESDC) has announced a new loan and grant funding program to help revitalize the economy of New York State. Funds will be available for projects that facilitate an employer’s ability to create new jobs in New York State and/or retain jobs that are otherwise in jeopardy. Funds may be used for a variety of purposes, including land acquisition, acquiring existing businesses, capital expenditures, demolition and environmental remediation, renovation and construction, acquisition of new equipment and machinery, furniture and fixtures, and even some "soft costs."

Restrictions and fees apply and you may only apply for one form of assistance at a time. The minimum assistance amount is $100,000 ($250,000 for subsidized loans) and the maximum is $5,000,000. To download a copy of the guidelines, click here. For an application click here. For additional information, contact Empire State Development, New York City Regional Office 633 Third Avenue New York, NY 10017. 212-803-3130.

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What the Stimulus Package Means for NYC Manufacturers

The economic stimulus package (formally known as the American Recovery and Reinvestment Act of 2009 [ARRA] ) legislation includes spending initiatives for federal fiscal years 2009 through 2019, most of it occurring in federal fiscal year 2010. Appropriations total $787.2 billion, with funding in technology, science and research, infrastructure improvements, education, energy, healthcare and training. What will this mean for NYC manufacturers?

Stay Alert for Opportunities
One of the most important things to do is to remain alert to what's happening with the Stimulus Package money and then to think about what you have to offer to those industries that will be most affected. If you have appropriate products, start to identify customers or potential customers that might be a part of their supply chain and think about what you have or could have that might meet their needs. It’s important to pay attention to what's going on with the Stimulus Package in order to understand the new business opportunities that may result.

For example, science and research are high on the list of priorities for the Obama administration. As are education and health care. Do you produce a component used directly by a research laboratory, school or hospital? Do you or can you manufacture products for any of these supply chains?

How about infrastructure? Improvements will be made here too. Does your firm make materials used by the heavy construction industry or its supply chain? Could it? $250 Million has been allocated by HUD to promote energy efficient and green retrofits for multi-family dwellings.$100 Million to clean up dangerous lead in housing. $4.6 billion has been allocated nationally by the Department of Defense to upgrade thousands of Department buildings, including energy-related improvements and upgrades to military medical facilities. What do you or could you produce for these industries?

Energy—especially the development of green energy—will be very important. What products do you or can you provide to support companies in this industry? Keep your finger on the pulse of each of these industries, remaining alert for new opportumities. Talk to your customers, suppliers, trade associations, and other business associates about how you might work together to meet upcoming needs.

Governor Patterson's Office has created a website with information on how the stimulus money will be allocated within New York State. Among other things, the site lists several new programs and grant opportunities. To visit the site, click here.

Tax Credits & Other Incentives
In addition, the Stimulus Package provides tax credits or loans, for which you may be eligible. To understand how to take advantage of these credits, seek information from your tax accountant or local economic development organization. Loans are granted through banks and other lending institutions not directly by government agencies. Some of these may become easier to get as government assumes a greater portion of the risk, backing them up to 90%.

Other forms of funding will be funneled to local manufacturers through programs overseen by local economic development organizations, like ITAC. These may be targeted at specific industries or activities, so check back frequently for opportunities that may arise quickly. A few of these programs are described briefly below.

For more information, please call Sharanda Didier at 212-442-2990 or email her at sdidier@itac.org

 

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The Power of Cost Reduction: How $100 Saved can Equal $1,000 or more in Sales

by Richard Lanna, Sr.Vice President of Operations, ITAC

There are only two ways to increase profits: either increase sales or cut costs. In this economy, we may be more focused on cost reduction, which is often more under our control and delivers a great impact to the bottom line. The math isn’t rocket science: Operating Profit is calculated by looking at sales (earned revenue) and subtracting labor, materials, and all overhead. If your Operating Profit is 10%—typical for a small manufacturer—then for every $1,000 in sales your profit is $100. Conversely, when you reduce your costs by $100, it is the equivalent of $1,000 in sales. And it may be easier to reduce costs by $100 than to increase sales by $1,000.

Cost reduction is nothing new, but we may tire of hearing about it or think that we’ve already cut to the bone. But have we? At a recent breakfast seminar, hosted by the Maspeth IBZ, several simple cost cutting strategies that you may not have considered were presented:

Design - product development determines 80% of product cost and is difficult to remove after the fact. Consider having engineers work with manufacturers to develop products. Find vendors who will help you develop your products. Standardize your planning processes, using best practices, and eliminate those that are counterproductive.

Labor - we’re NOT suggesting layoffs but there are other ways to save cash while keeping valuable employees. Consider reducing or eliminating overtime. Ask employees to take a small pay cut or commission reduction, temporarily, in order to save jobs. Effectively minimize downtime by cross-training employees. It will increase their skill level, keep them motivated and help to keep things on schedule should another employee become ill. Investigate training grants to defray costs.

Materials - review usage and eliminate waste wherever possible. Review vendors, some may have changed their pricing strategies or may be willing to negotiate better terms.

Overhead - review all overhead costs, such as energy, lighting, water, waste hauling, cleaning, etc. Conduct audits to determine where cuts are feasible. Many companies offer free energy, lighting or water usage assessments and include valuable recommendations on how to save.

Real Estate - maximize use of your space. You may find that you do not need as much as you think and you may be able to sublet a portion of your space or renegotiate your lease.

Contracts - review vendor contracts to make sure you are getting the best from each. Determine how much you consume from a vendor annually, and renegotiate a price based on total volume. Ask a vendor for added services such as labeling, part inspection or packaging to eliminate the need to do these internally.

Financing - review interest rates on loans and credit card fees. Get competitive bids and/or try to renegotiate more favorable terms. Look into tax credits and other incentives.

Lean - incorporate Lean manufacturing techniques into your processes. Lean helps to reduce costs and its principles apply equally well to office and administrative tasks. If you aren’t sure how to go about this, contact a Lean professional for assistance.

The old adage: "a penny saved is a penny earned" takes on a new meaning. Through cost reduction, a penny saved can turn into a dime earned or even more.

For a free assessment to determine how you can cut costs in your company, attend ITAC’s breakfast seminar "The Power of Cost Reduction," Tuesday, June 16th. For more information, contact Sharanda Didier at 212-442-2990 or email her at sdidier@itac.org

 

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R&D Tax Credits: How to Get Credit for Improvements You’ve Already Made

Reprinted with permission from AllBusiness.com

Research and Development (R&D) tax credits have been offered in the U.S. government since 1981. If your business doesn’t do research, you may think this article can’t help you, but this year you may be wrong. Recently, the rules for R&D tax credits have been redefined. The criteria for qualifying have become more lenient, and now include a larger group of businesses, specifically manufacturers. You may be entitled to a share of the billions of dollars offered to small businesses this year and not even know it.

Improve Production
Originally, the R&D tax credit was offered by the government to businesses that invested in developing their products and services. For example, a manufacturing company that spent a month investigating ways to improve the durability of its materials qualified for a tax credit. Today, R&D includes credit for qualified research expenditures (QRE) as well. QREs are any costs or investments made to improve a business’s services. So, instead of only applying to companies that develop the quality of their products, the R&D tax credit applies to companies that develop their production process as well. QREs are a huge win for the manufacturing industry, where having an effective production process is crucial for having a superior business. If your company has invested in new, more efficient equipment, you could qualify for an R&D tax credit.

Encourage Employees to Do Independent Research
The new R&D tax credit rules also consider the wages of an employee involved in research to be a QRE. This means if you have an employee who has spent time researching ways to make production, products or services more efficient, his or her wages are considered a QRE and will be factored in to your total R&D tax credit.

Get Credit for Past Expenditures
A further addition to R&D credit was accepted by the IRS in January 2007: a new way to calculate your total tax credit called the Alternative Simplified Credit. This alternative allows businesses to use QREs accumulated in the past 3 years as a baseline for their credit in the current year. So, any service development, product research, or process improvements made by your company in the past 3 years could be deducted from your taxes this year.

Why R&D?
Improving the quality of your services to decrease the quantity of your taxes is an ideal opportunity, but according to a 2008 survey by RSM McGladrey, an accounting, tax and business consulting firm, only 15% of manufacturing companies plan to take advantage of R&D tax credits this year. R&D tax credits encourage global competition, expand the number of services the U.S. market has, and raise the American standard of living by introducing better products. Not only do they contribute to our country’s market share at an international level; they also create more local jobs in the form of research positions. The bottom line: Take advantage of this opportunity to improve your services, boost our country’s standards, and get a break on your taxes in the process.

For more information or a free assessment to determine whether you are eligible for R&D tax credits, please call Sharanda Didier at 212-442-2990 or email her at sdidier@itac.org

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Marketing Green Products and Supply Chain

By Barbara Swenson and reprinted with permission from All Business.Com

Green manufacturing has become a powerful marketing tool. Consumers increasingly have begun buying green products that are more cost effective, healthier, and leave less of a carbon footprint on our planet. As a result, manufacturers are developing products that fit this need. At the same time they are implementing supply chains that are greener.

The basics of green manufacturing focus on minimizing the impact of the manufacturing process on the environment. It begins with the development of green products and extends to implementing a green supply chain. Once this has been done, green manufacturing can be turned into a marketing advantage. Manufacturers viewed as being green, such as Toyota and General Electric, have converted the concept into more sales.

The basic characteristics of green manufacturing include:

Product development studies show that the design stage determines 70% of a product’s environmental impact. Paper made from chlorine-free bleach and a light bulb that uses half the amount of electricity are two products that have lessened the impact of manufacturing on the environment. One reduces the amount of a toxic material and the other reduces consumption of natural resources, which in this case translates into saving money by cutting energy costs.

Government agencies are now buying more green products and services. Between federal, state, and local, this amounts to over $600 billion in sales. In response to governmental needs, several green products are under development. These include both plastic flatware (forks, spoons, and knives) and plastic garbage bags that are biodegradable. Biodegradability results in a substantial savings for many local communities that pick up green waste. If customers gather leaves and such into plastic bags, the garbage company has to remove all the bags, which is costly. With the biodegradable garbage bag, everything can be composted together which translates into huge savings.

To be successful, green products require a green supply chain. Supply chains involve everything from the purchase of production materials to the delivery of the finished product to the customer. This means every aspect of a business needs to adopt a green approach. To make this happen, manufacturers need to implement an overall green strategy.

One company that implemented a green supply chain strategy is Custom Print. An offset lithographic printer of commercial color products with annual sales of $4 million, Custom Print made the decision to green their process, which wound up saving them approximately $40,000 annually. The areas they concentrated on included:

As a manufacturer, once you’ve created green products and implemented a green supply chain, the next step is marketing to your customers. This involves: 1) getting your product certified
; 2) including your product in green procurement systems and lists
; 3) appropriately labeling your green product; and
4) developing strategies for marketing.

Two organizations that certify green products are Green Seal and Green Certification Systems.

When developing strategies for green marketing to consumers, manufacturers need to keep these key concepts in mind: 1) understand green consumers and, through their needs, identify opportunities for green products; 2) emphasize the direct benefits of a product, such as health or overall cost; and
3) give consumers the information they need to buy green while maintaining your credibility by only making substantiated claims regarding your product and supply chain.

For free energy, water or waste assessments to help your company reduce its carbon footprint or for information on developing greener products, please call Sharanda Didier at l 212-442-2990 or email her at sdidier@itac.org

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National Institute of Scinece and TechnologyNYS Foundation for Science, Technology and InnovationThe New York City Council

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