The recent tax bill continues to dominate headlines. If enacted, it will have a unique impact on virtually every business category and could have far-reaching implications on manufacturing businesses in particular. However, there’s one specific aspect that could leave a mark on the manufacturing space for years to come: new equipment write-offs.
Under current tax policy, businesses are required to write-off new equipment purchases over a period of years. However, if the proposed bill were to become law, over the next six years, businesses that purchase new equipment will be able to deduct all costs of the purchase in the same fiscal year.
With this added benefit, new equipment orders could boost the durable goods market, which slid again in October by 1.2 percent. Manufacturers must adapt their business models to prepare for this uptick in orders, with the goals of increasing customer loyalty and maximizing financial performance.
Below are three ways manufacturers can prepare for this shift today:
Maximize Product Uptime
Manufacturers no longer sell just a product, they sell service. Today’s customers set forth product uptime expectations in service level agreements (SLAs), and to guarantee the expected level of product uptime, manufacturers must focus on a proactive, predictive style of maintenance.
With this possible uptick in new product orders as a result of the new tax legislation, manufacturers must be prepared to maintain an increased number of assets for their entire lifecycles. Today, most manufacturers use a break-fix model of service, a reactive method where repairs are made after a product has already failed. In the uptime world, manufacturers must incorporate technologies like the Internet of Things (IoT) and predictive analytics into everyday business practices, as well as adopt sophisticated after-sales service solutions that automate and optimize nearly every facet of the service supply chain. By repairing parts before they ever fail, manufacturers ensure an amazing customer experience—one that will keep loyal, repeat buyers coming back.
Capitalize on IoT Data
Companies across industries and verticals, including manufacturing, have a wealth of data, but up until this point have been unsure how to use it. With the growth in IoT, as well as smart parts equipped with sensor technology, manufacturers can now combine this data with sophisticated after-sales service technology to trigger the need for a replacement part before equipment is ever out of service. Real-time updates and information on performance through next-age sensor and computing technology enable manufacturers to accurately forecast when a product is in need of maintenance. This removes the guesswork and complications that come with a sudden breakdown or performance malfunction – and ultimately helps manufacturers deliver exceptional service experiences.
Invest in Human Capital
To keep up with these changes, manufacturers need staff with a complete understanding of all equipment, and the technology behind it. Even with an uptime-centric model, problems can only be addressed as fast as service technicians can make repairs.
To make sure customers are being attended to as quickly as possible, manufacturers should provide service teams with access to the best knowledge training possible, especially as seasoned baby boomer techs begin to retire. This presents a key challenge for manufacturers who will have to replace boomer knowledge and skills, while also designing technical resources that address newer equipment. Fortunately, as this younger generation enters the workforce, they’re more prone to adopting new technologies.
While the proposed tax bill is not yet law, manufacturers should keep a close eye on its progress and possible ramifications. Regardless, the world is changing, and with evolving customer expectations and market demands, manufacturers must be equipped to meet any challenge that comes their way.