In Q4 2017, amid the US legislative progress made on tax reform, manufacturers' optimism rose to unprecedented heights. This is according to the results of the Manufacturers' Outlook Survey conducted by The National Association of Manufacturers (NAM). The quarter showed the highest level of optimism in the survey's 20-year history, with optimism being at historically high levels throughout 2017.
This is great news for US manufacturers who, under the Senate's plan, will see tax burdens fall starting in 2019 but will be able to fully expense investments starting a year earlier. This will allow businesses to reduce profits in 2018 under higher tax rates and to begin earning more under lower rates in 2019. We therefore expect investment in equipment to continue rising this year. This is backed up by The Conference Board Economic Forecast, which recently outlined that progress on tax measures, along with continued strength from business and consumer confidence, will lead the economy to near 3 percent growth in 2018.
The multimillion-dollar growth question
With optimism riding high for CEOs in the US manufacturing sector, the question has to be asked: how confident are you that your supply chain and manufacturing facilities can respond to and capitalize on growth opportunities for your firm? If you are not sure, you could potentially be leaving tens of millions, if not hundreds of millions, of dollars in revenue on the table due to an inability to fulfill orders and deliver on your customers' expectations.
In our experience helping CEOs and private equity partners, we often find that there can be significant bottlenecks to throughput and limitations to an organization's ability to respond to demand in three key areas. To bring this closer to home you may want to ask yourself the following questions:
- How confident are you that your suppliers could respond quickly to an increase in demand? Do you have appropriate optionality of supply?
- How confident are you that your manufacturing facilities could cope with an increase in demand? Where are the potential bottlenecks?
- How confident are you that your logistics capability has the capacity and responsiveness to cope with an uptick in demand and ensure accurate, on-time delivery?
If you don't have confidence in your answers, I would like to suggest that it may be time to assess your procurement, manufacturing and logistics functions to identify potential bottlenecks, release cash, reduce costs and capitalize on growth to achieve your 2018 EBITDA goals.
Our industry and practice experts can help. Contact us to arrange an in-depth Total Value Optimization™ (TVO) analysis across your buy-make-move-fulfill supply chain.
About Us
Maine Pointe is a global implementation-focused consulting firm trusted by many chief executives and private equity firms to drive compelling economic returns for their companies. We achieve this by delivering accelerated, sustainable improvements in both EBITDA and cash across their procurement, logistics and operations to enable growth. Our hands-on implementation experts work with executives and their teams to rapidly break through functional silos and transform the buy-make-move-fulfill supply chain to deliver the greatest value to customers and investors at the lowest cost to business. We call this Total Value Optimization (TVO)™.
Maine Pointe's engagements are results-driven and deliver between 3.5:1-12:1 ROI. We are so confident in our work and our processes that we provide a unique 100% guarantee of engagement fees based on annualized savings. www.mainepointe.com