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MANUFACTURING & WHOLESALE DISTRIBUTION INDUSTRY NEWS
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| | March/ April 2016 |
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Get a New Perspective on Your Industry: Take the 2016 Monitor Survey
Now in its 11th year, the 2016 RSM Manufacturing & Distribution Monitor is gathering the perspectives and expectations of senior industry executives as they navigate a volatile business environment. The 2016 Monitor will assess manufacturer and distributor business conditions, growth strategies, use of information technologies, and cybersecurity issues. Your participation provides vital information and real-world insights for manufacturers, distributors, industry trade associations, and government policymakers. Please complete the questionnaire to the best of your ability, based on conditions at your company. It should take approximately 15-25 minutes to complete the questionnaire. Please submit your questionnaire by April 22, 2016.
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Machine Shop Best Practices
Each year, Modern Machine Shop conducts a benchmarking survey among manufacturing companies. From each survey, they establish an elite benchmarking group that represents the top 20 percent of machining businesses, referred to as "Top Shops."
There are a few key shop floor metrics which demonstrate that Top Shops have established an effective overall approach to machining. Spindle utilization is one such metric. Top Shops report a median spindle utilization of 75 percent compared to 65 percent for other shops. Another important metric is overall equipment effectiveness (OEE). OEE is the product of the percentages of three equipment utilization indicators: machine availability, optimal rate that machines operate, and quality yield. Top Shops had a median OEE of 73 percent compared to 65 percent for other shops. Also, in each year that the survey has been offered, Top Shops' use of machine-tending robots has increased, with nearly a quarter of Top Shops using them in 2014.
The biggest indicator of business health is profit margin, with Top Shops reporting a median profit margin of 13.5 percent compared to 8 percent for other shops. Also, Top Shops are growing at a faster pace - 17.5 percent compared to just 7 percent for other shops.
Human Resources was the last area of focus. As in prior years, there wasn't much of a difference in the amount that Top Shops and other shops pay their employees. However, Top Shops once again cited other ways to reward and retain their good employees. For example, a higher percentage of Top Shops offered annual review and pay-raise programs (90 percent compared to 48 percent), paid medical benefits (75 percent compared to 43 percent), and bonus plans (71 percent compared to 30 percent).
For the full article click here or contact Scott Olinger, CPA, CGMA, CPIM at 800.880.7800 ext. 8466 or email solinger@hsccpa.com.
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The Anatomy of a Data Breach
Many organizations believe that they have nothing worth stealing. They believe that they are too small and are invisible to hackers. However, any data has value to hackers and your information is at risk. Small and mid-sized businesses are vulnerable to breaches of credit card data, personal information, and employee records due to weak security measures. Ninety-four percent of the attacks on businesses occur to organizations of 1,000 employees or less. An organization's industry does not alter the risk of a breach; your data is still valuable.
If a breach does occur, the costs are both monetary and reputational. The average cost to resolve an incident per year is $10 million with no cap on damages. These attacks primarily come from hackers preying on vulnerable areas such as weak or stolen credentials and unsecured employee mobile devices. Many organizations are worried about internal breaches, however 92 percent of attacks originate outside the organization. Most breaches come from simple attacks such as malware, skimming, and phishing rather than from a targeted criminal effort. Many of these breaches go undiscovered by the organization. Eighty-two percent of breaches were discovered by a third party, seventy-five percent took weeks to discover, and sixty percent of small and mid-sized business breached were out of business within six months.
Vulnerability is driven by the need to collect, analyze and share data. Those needs will only grow in the future, and information will become more valuable to criminals. With increased risk of attacks and no cap on damages, organizations - regardless of size - can no longer ignore data breaches.
For more information contact Kyle Wininger, CPA, CICA, CVA, CFE at 800.880.7800 ext.1412 or email kwininger@hsccpa.com.
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FASB Simplifies the Valuation of Inventory
The Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2015-11, "Inventory: Simplifying the Measurement of Inventory" in July of 2015. Under this new ASU, inventory will now be valued at the lower of cost or net realizable value rather than the lower of cost or market standard. This clarification simplifies the multiple definitions of market previously in use which could potentially cause different results. The amendment only applies to inventories measured under first-in first-out (FIFO) or average cost methods. The amendment is effective December 15, 2016 and should be applied prospectively. Early application is also permitted.
For more information click here or contact Scott Olinger, CPA, CGMA, CPIM at 800.880.7800 ext. 8466 or email solinger@hsccpa.com.
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Where Opportunity Knox
Where Opportunity Knox is an organization dedicated to the goal of transitioning veterans and/or military spouses to jobs in the Greater Louisville Region. Over 130 employers partner with Where Opportunity Knox in the Louisville region to provide new opportunities for soldiers, sailors, airmen and marines looking to make the transition to civilian life. Where Opportunity Knox has recently been partnering with Fort Campbell, an Army base located near the Kentucky - Tennessee border. Around 500 soldiers from Fort Campbell transition out of the Army each month, and many are looking for assistance in making this important change in their life. Where Opportunity Knox provides the support and opportunities that these veterans are looking for, and helps bring qualified and disciplined new job candidates to their partner organizations. If you would like to be part of Where Opportunity Knox, or if you are part of a company that wants to connect with these remarkable candidates, please visit www.whereopportunityknox.com for more information.
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Review Your Buy-Sell Agreement
If you co-own your business, the business continuity agreement (or buy-sell agreement) is one of the most important documents that you will sign. The buy-sell agreement controls the transfer of ownership in a business when certain lifetime or death events occur. A buy-sell agreement should be executed when the company is incorporated. Without it, one owner's desire to exit the business can transform long-time co-owners into adversaries.
The best way to avoid this is to agree in advance on the method of appraising value and payment terms when all of the co-owners are on the same page - looking out for the ultimate welfare of the company and not knowing whether they will ultimately become a buyer or seller. The agreement can and should establish the value of the stock, set the terms and conditions of the buyout and give additional protection to all owners.
For more information, contact Kyle Wininger, CPA, CICA, CVA, CFE at 800.880.7800 ext. 1412 or email kwininger@hsccpa.com.
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ABOUT OUR MANUFACTURING & WHOLESALE DISTRIBUTION INDUSTRY TEAM
From increased competition and continuous quality improvement demands to rising employee benefit costs and declining margins, manufacturers and wholesale distributors are facing greater challenges than ever before. In addition to the services you would expect from an accounting firm, we have a dedicated team ready to assist you with the unique challenges and issues facing your industry.
A number of our staff members belong to The Association for Operations Management (APICS) with some having achieved the CPIM and CIRM certifications. We understand your key issues and possess the drive and determination to help you manage your company on a proactive basis. This commitment positions us at the cutting edge of the industry and enables us to spot trends and deal quickly with the issues your company may be facing. |
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SEE WHAT ARE CLIENTS ARE SAYING...
" When we needed to change auditing firms, Harding & Shymanski was very responsive. We called on a Friday and they were on site the next business day. After engaging HSC, they worked with our team to substantially increase the efficiency of our accounting processes which resulted in reducing the turn around time for year-end financial statements by over 2 months. In addition, they facilitated our Lean Office initiative which resulted in substantial savings to the company."
- Doug Bawel, Chairman of the Board, Jasper Engine Exchange, Inc.
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Harding, Shymanski & Company, P.S.C.
800-880-7800 | info@hsccpa.cm | www.hsccpa.com
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