Manufacturing Resolutions Must Go Beyond the Basics
by Justin Mentele
In our personal lives, the start of a new year lends itself to renewed focus on our health, our relationships, and perhaps our savings accounts. In manufacturing, your start-of-the-year goals focus on growth: pricing, production, and presence.
This year, that is not enough. The challenges that await manufacturers in 2022 will call on you to accelerate your work in a few key areas or perhaps launch an aggressive start.
As you plan for 2022, while I’m not advising that you abandon your traditional focus on growth, I am advocating that you incorporate efforts to resolve issues in four pressing focus areas.
People are your No. 1 asset. Double down on hiring.
Labor was a pain point long before 2020, but there’s little doubt that the pandemic has compounded the challenge. And now, the infrastructure bill has caused concerns over possible pricing and scarcity of materials. Combined, these factors should not deter your efforts to attract and retain talent.
It has now become more important than ever that you get creative, proactive, and diligent with scouting and retention practices. Resolve to increase your hiring and retention efforts—even more than you are.
Evaluate Supply Chain. Fill Gaps. Eliminate Vulnerabilities.
Most of us thought that the supply chain problems of 2020 would have dissipated by now. That led many manufacturers to kick the can down the road on evaluating vendors.
Several analysts are forecasting these problems will persist through mid-2023 or beyond. Use the disruption as an opportunity.
Explore local sourcing and diversification. Consider building the number of smaller vendors you use to reduce your dependence on bigger or overseas vendors. Onshoring, and using multiple vendors from multiple countries, can alleviate your supply chain dependencies and enable you to navigate varied geopolitical landscapes.
The first step to balancing your pursuits of both onshoring and diversification is taking a deep dive into your current supply chain. Consider things like the country where the vendor is based, any geopolitical difficulties, their financial viability, logistics difficulties, etc. Once a true picture of your supply chain is understood, the gaps and vulnerabilities will present themselves, as will the opportunities for positive change.
Resolve to identify and repair vulnerabilities in your supply chain to make it nimbler for now and the future.
Invest in Cybersecurity
Due to the focus on innovation and an increasing reliance on connected products, the manufacturing industry is particularly vulnerable to cyber risks. And yet, one-password entry points have often been the cause for many large corporate data breaches. An HVAC system vendor of a large retail chain was the opening for another breach. No business, large or small, is immune.
Resolve to evaluate and address organizational cyber risk areas and upgrade technology/systems where needed.
While entry points and openings should be continuously monitored, make a special effort to do due diligence with executives/boards, human capital, intellectual property, industrial control systems, connected products, and vendors as well.
Editor’s note: Members of ¹û¶³´«Ã½ now have access to a no-cost online service to protect against cyberattacks. The Association has partnered with Enquiron to provide the Shortline Cyber Resource Center at no charge to members. This resource provides easy access to information, training and tools to help companies prevent a cyberattack and respond effectively if they fall victim. Learn more, and get started, here.
If you use Cryptocurrency or Offshore Accounts, Ensure Your Compliance
The IRS is focusing on cryptocurrency in the coming year. Beginning on Jan. 1, 2023, new regulatory changes expand broker reporting requirements to digital assets like cryptocurrency and add digital assets to the current rules requiring businesses to report cash payments over $10,000. The Act would define a digital asset as “any digital representation of value which is recorded on a cryptographically secured distributed ledger or any similar technology as specified by the IRS.”
Resolve to be extra vigilant and proactive when answering the required form questions. It’s imperative to discuss cryptocurrency and offshore accounts, and the steps needed to become and remain compliant.
Overcoming Obstacles with Resolute Resolutions
While there is no doubt that there are more obstacles to overcome now than ever in the manufacturing world, a major step in mitigating them is to take these actions for your business this year, and more effectually, for the long term.
Where we personally fail in upholding our annual resolutions, it is important our management resolutions are held to enable growth in our pricing, production, and presence.
Justin Mentele, CPA, is a principal at KCoe Isom specializing in manufacturing services. He works across all financial spheres—audit, tax, and consulting—to help his clients understand their financial performance and make adjustments that dramatically impact profitability, efficiency, and employee retention.