Mitigating Commodity Price Swing Risk

Mitigating Commodity Price Swing Risk

Just when there was light at the end of the proverbial tunnel and it looked like COVID-spurred commodity price swings were settling down, in comes inflation and a war, driving prices and uncertainties in the construction industry to unprecedented heights once again.

As reported on Nasdaq.com regarding the war in Ukraine, “The latest developments can slow down production activities and impact the export of commodities and goods. This is true as the tensions have led to supply disruption fears in an already-tight commodity market. A surge in prices of crude, natural gas, grains and metals has already been witnessed. The surging commodity prices can have a far-reaching impact on global economies like the United States and U.K., recovering from the pandemic-led slowdown and witnessing high inflation levels.”

What are construction companies supposed to do now to mitigate risks tied to sky high commodity costs? Here’s a few recommendations we’ve come across from the experts:

  • Evaluate your procurement plan and contracts with suppliers. According to consulting firm McKinsey & Company, cross-company collaboration for proactive decision-making (rather than reactive firefighting) and supplier negotiation strategies can make a big impact.
  • Update client contracts and proposals to include language and clauses that limit risk. For example, a price acceleration clause allows a contractor to revise a price based on the actual cost of labor and materials even after a contract is signed. A material substitution clause allows a contractor to substitute one material for another (should the original become unavailable). There are others: force majeure, material delay, mutual or bilateral material escalation clause, termination clause, risk splitting and thresshold approach, to name a few.
  • Embed risk mitigation tactics into all stages of a project, from bidding and contract to design, procurement and construction (according to com). For example, consider linking bids to cost indexes (i.e., ENR Materials Cost Index or AIQS Building Cost Index). Also, state the time-period that bids are valid. According to TradeLineInc.com, avoiding delays by being prepared for shovel-ready projects and just in time purchasing may help, while other sources say to buy in bulk for several projects and store materials (if possible).

In truth, despite commodity price swings and growing labor costs, industry experts remain optimistic about the opportunities the lay ahead, with good reason when you consider the construction boom expected as a result of the Infrastructure Investment and Jobs Act. Some predict there is going to be more work than construction companies, which will increase competition for their services.

With everything else going on, one thing you don’t need to worry about is accounting and taxes. Let RBT CPAs focus on what we do best (accounting and taxes) so you can focus on what you do best (construction). Give us a call.

Please note: The information in this post should in no way be construed as legal advice. If you need assistance with anything legal-related, please contact a legal expert for direction.

Skill Gap Part 2: Collaborating to Address Challenges in the Hudson Valley

Skill Gap Part 2: Collaborating to Address Challenges in the Hudson Valley

Manufacturing’s fourth industrial revolution, driven by artificial intelligence, cognitive automation, advanced robotics and analytics, and the Internet of Things (IOT) changing how work gets done and driving the need for more technology-savvy workers and skillsets. While employers have been preparing for changing workforce demographics for decades, none could have predicted the pandemic and its impacts on the workplace, including the great resignation, where employees are leaving the workforce in droves and holding employers to higher standards.

The pandemic combined with a generational shift in values has turned the labor market into an employees’ market, leaving employers to figure out what they need to do to compete for and win valued talent. As Baby Boomers retire, Millennials and Gen Zers are rising through the ranks with different values, redefining the workplace to account for things like work life balance, health, and job satisfaction.  Every industry – including manufacturing – is being challenged to not only successfully create the future of work, but also to do it in a manner that considers very different generational mores than in the past.

As highlighted in a joint study conducted by global consulting firm Deloitte and The Manufacturing Institute, the industry is facing the largest talent shortfall ever, with an estimated 2 million jobs unfilled between 2015 and 2025, leaving employers to answer:

  • How are manufacturing jobs and careers evolving?
  • What skills are necessary for the future of work?
  • What should manufacturers be doing to develop a talent pipeline where employees have the skills to work alongside advanced technologies?

These questions and the challenges prompting them have even made it to the White House, with a push for immigration reform that will help manufacturers attract and retain STEM talent for the future.

They also prompted The National Association of Manufacturers and the Manufacturing Institute to launch Creators Wanted in 2021 [LINK TO www.creatorswanted.org] – a campaign to change perceptions about manufacturing jobs and build a talent pipeline. Focusing on workforce development among students, women, veterans, underrepresented communities and more, the campaign includes online events and content, as well as a nationwide tour to educate students, parents, workers, and community leaders about modern manufacturing.

In the Hudson Valley, the Council of Industry manufacturing association has multi-faceted, collaborative strategies addressing these issues in our region. From training programs and workforce development to networking, advocacy and more, the council offers comprehensive solutions for manufacturing organizations and members in our communities. Resources include:

  • Training A certificate program to train supervisors to lead; Hudson Valley Consortium Training, where six community colleges offer subsidized manufacturing related classes and certificates; and regulatory refresher training.
  • Workforce development A regional workforce development strategy; New York State Manufacturers Alliance Apprenticeship Program (NYMAAP) providing on-the-job training and additional instruction for those participating in three- to four-year apprenticeship programs (see more information below); the Recruiting Initiative campaign to market manufacturing jobs in the region and help local companies recruit talent; the Hudson Valley Pathways Academy, a program targeting grades 9 to 14, leading to an Associate Degree and building a talent pipeline; National Manufacturing Day events; connecting students with manufacturers and engineers; and org, a program to educate about modern manufacturing opportunities and career paths.
  • Networking Events to help manufacturing companies connect about business, Human Resources or Environmental Health & Safety, as well as special events.
  • Surveys & Data Participate in a regional survey to learn about pay and benefit practices, which come into play when creating rewards strategies to attract and retain talent.
  • Advocacy From Albany to Washington.

Of particular note is the Manufacturers Intermediary Apprenticeship Program (MIAP), which was created by the New York State Manufacturers Alliance of which the Council of Industry is a founding member and program administrator in the Hudson Valley. The program connects future skilled workers with small, medium, and large employers to secure paid apprenticeships in high-demand, competitive wage occupations, while completing their education.

Johnnieanne Hanson, Vice President of the Council, says interest in MIAP has grown during the pandemic, which likely put a brighter spotlight on recruiting and retention challenges. “What makes our program unique is that we’ve already done the legwork to create it. Employers don’t have to do anything other than express interest and start with even just one apprentice. So, it’s really appealing and do-able for a small to medium sized business that may otherwise not have the resources to build an apprenticeship program from the ground up.”

There’s also an abundance of financial support and incentives to get the ball rolling. “There’s money towards community college, tax credits, online learning licenses and grants for trainees,” Johnnianne says. “It’s a great time in terms of employers and employees have resources and support.”

The program can be used to attract new employees, incentivize new hires, and engage longer-term employees. “By investing in an employee, an employer is showing that it values the person, what they can contribute and their potential for the future. We’ve seen people who go through the program come out so happy and with such a sense of pride about the company investing in them. It means more than most realize,” Johnnianne adds.

The certifications can be viewed as the equivalent of a earning a college degree, while learning on-the-job skills and making an impact – two big values of the Millennials and Zers.  In turn, employers set themselves up to retain and develop high potential talent.

“As the saying goes, ‘The best time to plant a tree is 20 years ago; the next best time is today.’ So, while employers should have been preparing for the talent crunch decades ago, it’s not too late to become part of the apprenticeship program. It starts with just a phone call,” Johnnieanne concludes.

No doubt, there has never been a more exciting or challenging time in manufacturing. RBT CPAs are here to partner with you on everything accounting and tax-wise, so you’re freed up to focus on creating a strong talent pipeline and business for the future. Let us know what we can do for you.

How the Wage Theft Bill is changing the Construction Industry in 2022

How the Wage Theft Bill is changing the Construction Industry in 2022

The New Year brings with it new opportunities for growth, new projects to begin, and also, new laws to follow.

In 2021, New York State passed legislation that went into effect earlier this month, which shifts liability to general contractors for wage theft cases on private construction projects.

Up until now, construction contractors weren’t liable for their subcontractors’ employees’ wages unless there was an employment relationship between the contractor and the employee of the subcontractor. But this law which went into effect Jan. 4th, 2022, makes contractors on construction projects jointly liable for wages owed to employees of their subcontractors. It also allows contractors to demand payroll information from subcontractors and withhold payment if the information is not provided. The law exempts home-improvement contracts except for the construction of more than ten one- or two-family owner/occupied dwellings.

Advocates say the law will incentivize general contractors to be more selective in the hiring of subcontractors, with the hope that greater oversight will promote safer working conditions on construction sites and force illegitimate subcontractors out of the industry. Opponents vocalize various concerns about the new law, including the belief that it overcomplicates the process for contractors.

Assembly member Latoya Joyner said, “This legislation protects the interests of hardworking construction workers over unscrupulous subcontractors. Wage theft is a crime of opportunity that disproportionately affects people who are already living paycheck to paycheck.”

The New York State Building & Construction Trades Council, representing more than 200,000 unionized employees, called the bill’s passage a “monumental victory for working people.”

Meanwhile, the Associated General Contractors of New York State, which represents construction employers, oppose the legislation.

While the group supports wage theft prevention, they view the legislation unfavorably because it extends liability for up to three years after a project has been completed. The new law “creates an unmanageable level of risk for general contractors,” according to Mike Elmendorf, CEO of AGC NYS. He says it “slows payments to subcontractors, and raises the cost of construction.”

Whatever your stance is, in order to reduce exposure to wage claims under the new law, New York contractors need to act now. It’s a best practice to consider revising standard contracts and developing procedures for collecting the information that contractors are entitled to receive from subcontractors under the new law. Specifically, upon a contractor’s request, a subcontractor must provide:

  • Certified payroll records containing “sufficient information to apprise the contractor…of such subcontractor’s payment status in paying wages and making any applicable fringe or other benefit payments or contributions to a third party on its employee’s behalf”;
  • The names of all of the subcontractor’s workers (including independent contractors) on a project;
  • The name of the contractor’s subcontractor with whom such subcontractor is under contract;
  • The subcontractor’s contract start date and duration of work;
  • The identity of unions with which the subcontractor is a signatory; and
  • Contact information for the subcontractor’s designated contact.

If a subcontractor at any tier fails to provide the above-mentioned information, the contractor may withhold payment otherwise due to that subcontractor. Make sure you are operating at peak financial efficiency by leaving your financial statements, internal auditing, and overall business analyses to a professional and reputable team. At our company, we prioritize developing a positive relationship that helps you prepare for the future and all of the uncertainty that comes with it. Contact us to discuss your specific team needs today, we are dedicated to helping our construction clients achieve success.

Sources: Governor.NY.GOV, NYSenate.Gov

Could This Training Plan Save the Supply Chain?

Could This Training Plan Save the Supply Chain?

It’s been nearly a month since a bipartisan group of lawmakers urged Labor Secretary Marty Walsh to speed up a federal program that recruits and trains new trucker drivers to help ease the supply chain bottlenecks that are disrupting the U.S. economy.

House Agriculture Committee Chairman David Scott, D-Ga., led more than 60 Democrats and Republicans in asking Walsh to expedite the application process for the Workforce Innovation and Opportunity Act (WIOA) grant program, which recruits underprivileged job seekers for different industries. The program provides job training for dislocated workers, low-income individuals, and unemployed youth.

WIOA Programs are designed to help job seekers access employment, education, training, and support services to succeed in the labor market and to match employers with the skilled workers they need to compete in the global economy. The best part? It’s happening here, in our communities and you can get involved if it’s not already a part of your life. It requires states to strategically align their core workforce development programs to coordinate the needs of both job seekers and employers through combined four-year state plans, fostering regional collaboration within states through local workforce areas.

“With turnover rates for large, long haul truckers reaching the 90 percent mark and the lag time for training and onboarding new drivers lasting several months, it is critically important DOL enact these measures as soon as possible…Unless we exhaust every possible avenue in which to address this crisis, we risk worsening supply constraints for manufacturers and rising prices on consumer goods,” the lawmakers wrote to Walsh.

In a separate letter to the Biden administration, The American Trucking Associations warned that the industry is short 80,000 drivers. The group endorsed the lawmakers’ letter to Walsh.

Appearing with Timothy Dooner and Michael Vincent on FreightWaves’ WHAT THE TRUCK?!? Program, CEO of A&M Transport Andy Owens recently discussed the pivotal role that WIOA can have in boosting trucking industry awareness and employment opportunities. Owens who has served on the Southwestern Oregon Workforce Investment Board since 2015, said that anyone can get involved in a variety of capacities.

“Like with any volunteer position, you’re going to get out what you put into it; you can make it a full-time job or just make it a hobby,” Owens said, adding that appointments to the board are made by a recommendation from a community group like your like Chamber of Commerce and then approved through a county commissioner or its equivalent office. “The idea of workforce boards is to determine what industries or sectors you want to support, and then allocate appropriate funding to the local Workforce or Employment offices to help recruit and train a workforce to support those industries.”

So what’s a realistic goal while we wait to learn what the Labor Secretary will do? Be proactive and get involved in your local workforce development board. You can advocate for the industry and help secure more government funding for employment offices to train more truck drivers and hopefully better promote the industry as a whole. Contact our RBT team of professionals to review your specific manufacturing needs. Additionally, if you would like to submit feedback or topic ideas for future articles our team produces, please feel free to contact us at TLideas@rbtcpas.com.

Sources: DOL, CNBC, Freight Waves

The Not-So-Secret Tax Savings Tool You Need to Know About

The Not-So-Secret Tax Savings Tool You Need to Know About

Normally, it takes almost four decades to fully recover the cost of commercial property through depreciation deductions – and as you know, time is money.

As a manufacturing company owner, you may own the building, or several buildings, where your goods are produced. Luckily, there’s a worthwhile alternative that can help you claim much faster write-offs. Let’s dive into the incredible savings that your future can hold if you opt to commission a cost segregation study.

How Does Cost Segregation Work, Anyway?

A cost segregation study allows a business to recoup its investment in qualified property faster than usual by identifying various building components that may be classified as personal property or land improvements, which are subject to shorter write-off periods. For instance, some property may be classified as five-year, seven-year, or 15-year property eligible for accelerated depreciation methods. Land improvements are depreciated over 15 years using the 150% declining balance method.

Manufacturers that acquire a building may benefit from three depreciation-related tax breaks for building components identified in a cost segregation study including a Section 179 deduction, a first-year bonus depreciation deduction, and a MACRS deduction.

As a general rule, “personal property” is defined in IRS regulations as tangible depreciable property (other than buildings and their structural components) used in certain industries, such as manufacturing, as well as several other specialized types of property.

Notably, manufacturers often benefit from identifying equipment foundations, exhaust and ventilation systems, and security systems as tangible personal property. Costs of landscaping, underground utilities, and site lighting may be written off as land improvements.

How Much Savings Are We Talking?

Depending on your circumstances, about 20% to 40% of the eligible costs of a light manufacturing facility may constitute tangible property and land improvements. The benefits may be even greater for a heavy manufacturing company. It’s common for 30% to 60% of the eligible costs of a heavy manufacturer to be reclassified to tangible property and land improvements.

Let’s review a potential scenario. For example, if you buy a building for $5 million in 2021, the annual straight-line depreciation deduction would be about $128,205 ($5 million divided by 39 years). However, let’s say your CPA performs a cost segregation study and determines that you can reclassify $1 million of the cost (20% of $5 million) as property that can be depreciated over seven years. You decide to take advantage of the deduction and bonus depreciation rules that allow you to immediately deduct the cost of those components in the tax year it was placed in service. So, you can deduct $1 million plus $102,564 on the remaining $4 million of cost ($4 million divided by 39 years).

What’s Right for Your Business?

The best time to perform a cost segregation study is the tax year that your company buys the building, but a cost segregation study can be commissioned any time after the acquisition, renovation, or construction of the facility. How much could your business save by performing a cost segregation study? And which tax breaks will save you the most over the long run? Our Manufacturing Services Group works with businesses in diverse industries including building materials, food processing, specialty sporting goods, commercial lighting, health, beauty, pharmaceuticals, and more. Whatever the size of your venture, we can help you meet your goals, now and in the future. Contact our RBT team of professionals for more details about how a cost segregation study could improve your situation.

Sources: © 2020, Powered by Thomson Reuters Checkpoint

How to Save Big with Construction Management Software

How to Save Big with Construction Management Software

Running a successful construction company requires a lot of hard work, organization, and coordination. Your team is relying on you to communicate plans, your client is relying on you to communicate issues that may arise, and you are juggling multiple schedules, budgets, timelines, (personalities…), and maintaining a safe work environment. Before we head into the new year, it’s important to reevaluate your current workflow and determine how effectively your team is working. Remember, inefficient project management equals lost revenue.

What’s the real value of construction project management software?

A new market study published by market research company Global Industry Analysts Inc. (GIA), released its report to summarize the global market outlook for the next few years. The report presents fresh perspectives on opportunities and challenges in a significantly transformed post COVID-19 marketplace. The global market for Construction Management Software estimated at $1.4 Billion in the year 2020, is projected to reach a revised size of $2.9 Billion by 2026. The U.S. market is estimated at $426 million in 2021, while China is forecast to reach $625.2 million by 2026.

What can construction project management software accomplish for your company?

Construction project management software is collaborative technology that allows the parties involved in a construction project to find, share, and update information related to the project. Common functions of these tools handle various aspects of the project such as scheduling, contract and permit management, quality assurance, and safety. While selecting a specific program is extremely personal and preferential depending on your business strengths and weaknesses, we want to mention ten of the key features that most construction project management software will include, as outlined by the research team at Construction Coverage where you can also find a list of their top 2021 software picks.

  • Document Storage & Management
  • Submittals
  • RFIs
  • Change Orders
  • Instant & Remote Syncing:
  • Daily Logs
  • Digital Plan Markup
  • Punch Lists
  • Reporting
  • Integrations

What are examples of how you can save big with construction project management software?

  • Save on employee wages by getting teammates up to speed faster than traditional methods
  • Stop wasting money searching for project files or documents with software that keeps everything organized and easy to find quickly
  • Cut traditional training costs by allowing new employees to understand your workflow through the software, instead of lengthy one-on-one employee training sessions
  • Fewer mistakes equal more savings! Integrating management software will eliminate costly human errors that waste time and money for your company

Many construction management tools take care of documents exchange between the contractor and the owner, their subcontractors, suppliers, or other involved parties with storage and collaboration capabilities for project plans, subcontractor contracts, receipts, and other important documents. Taking advantage of this technology can streamline your daily operation, allowing your team to have access to organized reports that summarize things like project progress, budget, and spending information. Additionally in the increasingly remote-heavy working world, working offsite won’t be a problem with cloud-based products. At a time when you and your team need to access information instantly, this software is a game-changer. Do you want to make sure you are operating at peak financial efficiency? Our professional RBT team that specializes in construction clients is here to help, contact us today.

Sources: Yahoo Finance, Construction Coverage

Need to Know: Biggest Blockchain Benefits

Need to Know: Biggest Blockchain Benefits

To stay competitive and successful, New York manufacturers need to embrace the latest innovations.

In recent years, manufacturers around the world are becoming increasingly interrelated using blockchain technology. How popular is the technology? Amid the COVID-19 crisis, the global market for blockchain in manufacturing was estimated at $32.6 million in 2020, and is projected to reach $980 million by 2026 according to a new market study published by Global Industry Analysts Inc., (GIA).

Blockchain technology has the potential to transform the supply chain by automating processes and making it virtually impossible for someone to make unauthorized changes. It can streamline the supply chain, improve transparency, facilitate auditing and reduce costs. So, how can you maximize the benefits of this technology?

Wait, What Is Blockchain?

First, let’s make sure you know what blockchain is, and we’ll go from there. Blockchain is a database that relies on a chain of data blocks and is linked by cryptography. It’s designed to deter data modification. Instead, once the data is recorded, it can’t be altered retroactively, making it difficult for a single user to gain control of the system.

One of the main differences between blockchain and a typical database using tables is the inherent structure. With blockchain technology, the information is stored in the blocks holding various sets of information. When the block is filled, it’s added to the existing chain. Any new data that’s compiled is stored in a new block that can be subsequently added to the chain. If you’re still struggling to understand this technology, here is a helpful short video you can watch to illustrate it further.

Blockchain Benefits?

Blockchain technology offers enhanced visibility across the entire manufacturing process, including operations at supplier warehouses, on the plant floor and all along the supply chain. As participation grows, users can benefit from the ledger structure to improve efficiency. Blockchain technology may help improve the following aspects of the manufacturing process:

  • Identification of problems in products
  • Product designs
  • Identity management
  • Asset and procedures tracking
  • Quality assurance
  • Compliance with regulations
  • Overall efficiency

Which Operational Aspects Are Improved?

Part of manufacturing is constantly improving your operation to boost efficiency. The main areas blockchain can help manufacturers in is improved performance and product quality. Ultimately, this leads to increased revenue and profits. Manufacturers who use blockchain typically see results in the following four areas of day-to-day business operations:

  1. Quality control. Besides in-depth tracking up and down the supply chain, blockchain creates definitive documentation of quality checks and production data. Significantly, the database tags each product and automatically records each transaction, including quality checks and updates.

In addition, the system may be set up to provide automated quality checks that generate and write measures directly to the blockchain. This eliminates the need for other traditional checks for quality control involving suppliers. It may also reduce the number of audits required for verification of quality controls.

  1. Tracking and tracing.Data is more transparent and accessible through blockchain technology. The system provides a permanent digital record of materials, parts and products, creating a single “voice of authority” for all participants.
  2. Better maintenance.Blockchain creates the potential to support maintenance improvements, such as automated service agreements that can accommodate the influx of new types of machinery. With blockchain, machines can easily be scheduled for maintenance and serviced with greater speed and efficiency. For instance, a request for machine maintenance or a replacement part may be automatically triggered. After the procedure is performed, payment processing is instantly implemented. In addition, blockchain keeps track of maintenance records. These procedures are currently still in the development phase, but they’re widely viewed as an important component of the system.
  3. Intellectual property protection.Don’t ignore the role that blockchain can play in protecting intellectual property and deciding whether to produce parts in-house or with an outside supplier. The blockchain data may create a virtual certificate of authenticity, helping prove that property is owned in the event of a patent dispute.

What’s Next?

Blockchain technology may result in a new business model for manufacturers to achieve competitive advantages in 2021 and beyond. Wondering if this technology is right for you? Contact RBT’s team of dedicated professionals now to discuss whether this approach should be a part of your long-term strategy.

Sources: GIA, © 2020, Powered by Thomson Reuters Checkpoint, Lucas Mostazo,

Construction Confusion Surrounding Delta Variant

Construction Confusion Surrounding Delta Variant

You have probably heard talks of the delta variant of COVID-19 while scanning the latest news headlines.

Within New York State, we are entering into yet another phase of unchartered territory for private companies to navigate during this ongoing public health crisis. Given how much more easily delta is spread, should employers be concerned about this new threat? We want to ensure that your team is prepared for the next steps to stay safe and healthy on your job sites, with as little disruption as possible.

The delta variant is a more transmissible, more contagious strain of COVID-19.

Currently, it accounts for about 83% of new cases in the United States. It is surging in areas with lagging vaccination rates, like the Midwest and upper Mountain States, where cases and hospitalizations have recently spiked. Evidence is mounting that the delta variant is capable of infecting fully vaccinated people at a greater rate than previous versions, and concerns have been raised that they may spread the virus to extremely vulnerable, unvaccinated populations, according to virologists and epidemiologists. Ironically as the conversation surrounding the rapid delta strain spread heats up, statewide precautions are cooling down.

When June’s federal statistics indicated that New York State cleared the 70 percent of vaccinated adults threshold, Gov. Cuomo lifted all state-mandated COVID-19 health and safety requirements.

And while current CDC evidence finds that the current vaccines are effective against the delta variant (meaning those vaccinated will likely avoid getting severely sick or dying), discussion is swirling about vaccine effectiveness beyond the six-month mark. Just weeks ago, the city’s building department relaxed face-covering guidance per state and federal regulations. “The Department is rescinding our COVID enforcement to reflect changes in state guidelines,” said Department of Buildings spokesperson Seth Stein in early July. Just this week, however, New York City Mayor Bill de Blasio announced that all New York City workers, including police, fire, and education employees, will be required to be vaccinated by September 13 or else submit to a weekly test. The mayor also urged private entities to consider setting similar vaccine mandates for their workplaces. If you’re confused about what the wisest next move is as an employer, you’re not alone.

As you’ve likely noticed, there has been a lot of mixed messaging from state officials throughout the pandemic, and new data is constantly changing the game plan for public safety, which means you need to be diligently aware of official health guidance.

Construction companies have largely adopted their own, individualized variations of safety precautions to protect workers. Some sites require masks to be worn at all times, others only require masks for unvaccinated employees or site visitors. Some are still adhering to six-foot social distancing measures, others have lifted that requirement completely. While construction site requirements in the city do not represent sites throughout the state, oftentimes the industry sees a ripple effect statewide. At this time, your company should reassess current site work safety protocols and determine whether or not workers are satisfied and feeling protected. If you haven’t checked in with your team via an in-person meeting or a digital anonymous survey lately, now is the time. Ultimately while health officials and lawmakers are citing rising concern over the new delta strain, it is up to your team to determine what course of action makes the most sense for your business and work culture. At RBT, we aim to pass along useful, relevant information to help our communities succeed, grow and prosper. As we continue to dedicate time and resources to helping our construction clients achieve success, we look forward to connecting with you and your team.

Sources: DOL, CDC, NPR, Reuters

What it Means to Get Lean: 4 Steps to Smarter Manufacturing

What it Means to Get Lean: 4 Steps to Smarter Manufacturing

Manufacturing success typically relies this golden rule: produce more, spend less.

There is no better illustration of how to successfully follow that rule, than to practice lean manufacturing. Lean manufacturing is defined by Twi Global as a production process based on an ideology of maximizing productivity while simultaneously minimizing waste within a manufacturing operation. The lean principle sees waste as anything that does not add to the value that customers are willing to pay for. The benefits of lean manufacturing include reduced lead times and operating costs and improved product quality. Lean companies operate as efficiently as possible, using the least possible staff time, equipment, and raw materials. In the high-cost, high-risk environment we’re living in, efficient use of raw materials is more essential than ever before. Below are four steps your team can take to boost profits as we finish out the year and head into 2022.

  1. Use Raw Materials More Efficiently

As you’re well aware, the prices of many manufacturing inputs — like metals, chemicals, and lumber — have skyrocketed over the last year. In June, manufacturers reported the biggest price jump in 42 years. The Institute for Supply Management’s manufacturing price index rose to 92.1% last month, up 4.1% and hitting its highest mark since July 1979. It was the 13th straight month of price increases in the sector. Add to the mix that rising fuel prices have increased shipping costs, cyberattacks, and geopolitical instability threaten the viability of supply chains due to delays and price fluctuations. It’s not exactly an easy environment to operate in.

Rethink the term “waste” if you think it just refers to scraps on the plant floor. Waste can include excessive energy consumption, defects, motion, transport, queue time, and inventory. Analytical tools can help reduce waste by limiting the number of “touchpoints” that slow down or complicate the production process. Start by collecting data at every touchpoint in the supply chain and production cycle. Apply the metrics that make sense for your industry. If your processes require raw materials to cool down or heat up, factor the time into your equation. When your fact-finding is complete, assess the ways you can increase future efficiency.

  1. Give Incentives to Workers

Remember, frontline workers often provide the most effective solutions. As a bonus, engaging your workers in the brainstorming process can help with their buy-in when you implement changes. We cannot overstate enough how essential workers are in terms of successful lean manufacturing. Financial incentives can help persuade your employees to ramp up production. You can approach this through:

Individual incentives: which focus on specific tasks performed by frontline workers to increase productivity and avoid delays. If you can isolate certain tasks where a definitive need for improvement is identified, giving individuals a specific list of set goals may be the optimal approach.

Team incentives: which reward collective efforts. Because most tasks are done in conjunction with others, team incentives are usually easier to implement. Manufacturers can provide team incentives to improve the overall efficiency of the assembly line and encourages cooperation among workers.

  1. Extend Lean Principles to Offices

Lean efforts initially focus on the production process because it provides the most significant direct benefits, but the same principles can be applied to your back offices and corporate headquarters. These locations may also be affected by cost increases, supply disruptions, and delays. Apply the principles you’ve learned on the plant floor to selling, accounting, and other administrative functions. For instance, you might break office staffers into groups based on products or marketing aspects.

  1. Seek Outside Guidance

It’s easy to miss operational inefficiencies when you’re too close to the process. At some point, you might call in external guidance. This could include reaching out to industry specialists or financial consultants with experience helping companies in your niche implement lean strategies. Do your research and rely only on reputable sources. For more insight on how to help your business thrive and adapt, contact our Manufacturing Services Group today to schedule a conversation. Whatever the size of your venture, we can help you meet your immediate and long-term goals.

Source: © 2020, Powered by Thomson Reuters Checkpoint

Have You Considered this USDA Loan Program?

Have You Considered this USDA Loan Program?

Looking for loan money? It’s time to consider The United States Department of Agriculture (USDA). Yes, even if you are scratching your head and thinking, “but my manufacturing operation has nothing to do with farming,” you could still be eligible. The USDA is indeed responsible for developing and executing federal laws related to farming, forestry, rural economic development, and food. But your company may still qualify for USDA guaranteed loans regardless. These loans are very similar to Small Business Administration (SBA) loans, but with a focus on promoting small businesses and creating jobs in rural communities. The USDA Rural Development program improves the economic health of rural communities by increasing access to business capital through loan guarantees which enable commercial lenders to provide affordable financing for rural businesses.

Who qualifies for the Business and Industry (B&I) Guaranteed Loan Program?

  • For-profit or non-profit businesses
  • Cooperatives
  • Federally-recognized Tribes
  • Public bodies
  • Individuals engaged or proposing to engage in a business

In terms of restrictions: individual borrowers must be citizens of the United States or reside in the U.S. after being legally admitted for permanent residence. Additionally, private-entity borrowers must demonstrate that loan funds will remain in the U.S., and the facility being financed will primarily create new or save existing jobs for rural U.S. residents.

 What is considered an eligible area?

  • Rural areas not in a city or town with a population of more than 50,000 inhabitants
  • The borrower’s headquarters may be based within a larger city as long as the project is located in an eligible rural area
  • The lender may be located anywhere in the United States
  • Projects may be funded in either rural or urban areas under the Local and Regional Food System Initiative
  • Check eligible addresses for Business Programs

How can my company use these loan funds?

  • Business conversion, enlargement, repair, modernization or development
  • The purchase and development of land, buildings and associated infrastructure for commercial or industrial properties
  • The purchase and installation of machinery and equipment, supplies or inventory
  • Debt refinancing when such refinancing improves cash flow and creates jobs
  • Business and industrial acquisitions when the loan will maintain business operations and create or save jobs

What can these loan funds NOT be used for?

  • Lines of credit
  • Owner-occupied and rental housing
  • Golf courses or golf course infrastructure
  • Racetracks or gambling facilities
  • Churches or church-controlled organizations
  • Fraternal organizations
  • Lending, investment and insurance companies
  • Agricultural production, with certain exceptions (1)
  • Distribution or payment to a beneficiary of the borrower or an individual or entity that will retain an ownership interest in the borrower

What is the maximum amount of a loan guarantee?

The loan guarantee percentage is published annually in a Federal Register notice. B&I loans approved in Fiscal Year 2021 will receive an 80 percent guarantee. While there is no minimum loan amount, USDA B&I loans generally do not exceed $10 million (with some exceptions going up to $25 million or more). Most USDA business loans are between $200,000 and $5 million, with the average loan amount around $3 million. There are, however, requirements on the loan-to-value ratio, which are based on how you plan to use the funds. This also means that you’ll need to make a down payment for the loan.

What are the loan terms?

The lender will establish and justify the guaranteed loan term based on the use of guaranteed loan funds, the useful economic life of the assets being financed and those used as collateral, and the borrower’s repayment ability. The loan term will not exceed 40 years. Interest rates are negotiated between the lender and borrower. Rates may be fixed or variable. There is an initial application guarantee fee, currently 3 percent of the guaranteed amount. There is a guarantee retention fee, currently 0.5 percent of the outstanding principal balance, paid annually (2). Reasonable and customary fees for loan origination are negotiated between the borrower and lender. Qualifying projects may receive a reduced fee of 1 percent.

How do I get started?

Applications are accepted from lenders through USDA local offices year-round. Interested borrowers should inquire about the program with their lender, and lenders interested in participating in this program should contact the USDA Rural Development Business Programs Director in the state where the project is located. For more ideas to help your business thrive in these challenging times, contact our Manufacturing Services Group today. Whatever the size of your venture, we can help you meet your goals, now and for the future.

Sources: USDA, Value Penguin