Issues

Key areas of challenge and opportunity

You have told us that manufacturing companies face a number of specific issues and challenges. Having worked closely with a number of you in responding to these issues, we have outlined below what we see as some of the key areas of challenge and opportunity.

We look forward to your continued views on these and other issues facing companies with manufacturing operations in Ireland. To discuss the specific challenges and opportunities facing your business, give us a call.

Green procurement

Have you considered opportunities for embedding “green procurement” in your operating model? Does your plant and equipment purchasing strategy include a life-cycle assessment of energy efficiency? Have you considered renewable energy sources? Could your manufacturing waste be recycled into a useable product? Are you maximising opportunities to work with suppliers to reduce packaging and other costs through green initiatives? Have you considered opportunities around how you transport products?

Renewable energy mix

As increasingly stakeholders, consumers and companies are demanding a fundamental shift in energy use, do you consider your business to be a clean and sustainable energy leader? Have you made plans to increase the share of renewable sources in your energy mix to attain energy security? As the marginal cost of conventional fuel increases, do you have a strategy to maintain the cost competitiveness of energy? Have you considered biomass, ocean, wind, geothermal, hydro or solar power?

Green innovation

Effective innovation in the manufacturing industry is key to succeeding in a competitive market. Could your business achieve a competitive advantage and build sustainable practices through opportunities presented by the ‘green economy’? Are you keeping one step ahead of the competition? Have you considered offering value added or niche products to customers? Are you investing in R&D to develop new eco-friendly products or process technologies?

Lean manufacturing

Have you experienced significant stock holding costs, stock obsolescence or loss of orders or customers from stock shortages? Are you balancing raw materials ordering, production scheduling and customer demands to maintain the optimum stock level? Do the costs associated with your investment in working capital exceed the benefits? Have you assessed you optimal inventory model?

Getting the most from your people

How is turnover of your high performers impacting the business? Are you providing sufficient compensation and an effective mix of benefits including non-financial incentives to retain the right people and maximise return on your investment? Are you optimising talent - do you know what motivates your key employees and are they sufficiently challenged? How does your employee productivity compare with your peers?

Supply chain risk

Have you identified suppliers most critical to your strategy, operations, performance and reputation? Have you considered financial data and qualitative information to get an accurate risk profile? Are there areas where you are risking more than you’re saving by relying on a particular supplier? Which suppliers would cause critical operational problems if they were to default? How vulnerable or viable is each supplier? How do your supplier’s operations, as reflected by its quality and economics, align with our business goals and brand?

Research and development

Are you missing an opportunity? Less obvious activities which are outside the ‘white coat definition’ of research and development (R&D) are often overlooked as potentially qualifying for this 37.5% effective tax relief rate e.g. how to improve a process or the yield from a process or how to substitute a cheaper raw material for an existing one without affecting output etc. Are you maximising your existing R&D claim? Are you maximising the full range of R&D grant assistance available to you as a manufacturing or international traded services company?

Outsourcing

Have you considered outsourcing as an opportunity to reduce cost and provide you with greater flexibility to focus on broader business issues? If considering outsourcing, how do you ensure that you select the right supplier, maximise key contract deliverables and effect a smooth transition? If you have already outsourced functions, are you maximising your current arrangements?

Maximising capital allowance

In line with recent Government focus on reducing greenhouse gas emissions, tax legislation was recently introduced to promote the use of energy-efficient equipment. Have you recently purchased or are you considering investing in equipment which may qualify for 100% capital allowances in the first year? Have you considered all opportunities in this area e.g. air conditioning or security systems often categorised as buildings or leasehold improvements for financial reporting may be regarded as plant and machinery for tax purposes? Are you maximising the cash flow benefits of your capital allowances?

Simplifying your business model

Does your corporate structure have many legal entities? Have you considered reducing the legal entity footprint to achieve sustainable cost reduction and efficiency gains through a closer alignment between a simplified management model and simplified legal and tax structures? Can you shift focus from short-term cost reduction programmes to wider structural and transformational change initiatives? Could you reduce compliance costs? Do you have overlapping management structures and duplicate back office functions? Could you reduce your internal “cost of doing business”? Are your regional and local priorities consistent?

Effective IT and production systems

Have you updated your production schedule to realign machine flows, improve equipment set up and enhance plant layout? Have your streamlined the process to eliminate operations and processes that do not add value? Are you maximising use of technology, thus minimising the extent of manual intervention? Have you explored all the capabilities and reporting functionalities of your current systems? Are you maintaining your systems and considering the impact on quality and effectiveness? Will the reduction in your capital investment adversely impact on your competitiveness?

Integrated safety performance

How could cost cutting measures impact your safety performance? Are your existing procedures sufficient to address your legal and regulatory obligations? Have you considered the impact of workplace safety on your reputation? Have you developed a safety program and guidelines which enforces appropriate employee behaviour?

Sustainability - financial reporting

Are you meeting the expectations of the users of your accounts in relation to reporting on sustainable activities? Do you know what your competitors are doing to gain competitive advantage in this area? Have you identified the appropriate drivers and relevant metrics in your business? Do you have a process in place for the proper collection, control, reporting and monitoring of activities in this area? Have you identified and prioritised the risks and opportunities? Have these risks been appropriately disclosed in your Director's Report? What does your company want to be known for in relation to sustainability?

Security of supply

Is your supply chain secured against man-made and natural disruptions? Do you understand the entire global movement of your raw materials? Have you assessed how dependent your business is on particular logistics hubs or locations? Have you considered how you could reduce the impact of threats in these locations? Have you assessed the vulnerability of your business model to high impact events? e.g. earthquake in Japan, volcano in Iceland etc. How would it affect your business if insurance companies stopped covering major risks?

Carbon emmision trading

Does your business emit carbon dioxide? Do you have a mechanism in place to identify record and monitor carbon emissions? Have you considered the impact of the single EU-wide cap and allocation of allowances, on your business? Have you realigned your business strategy to incorporate the price of carbon into your overall business plan? What processes and controls do you have in place to ensure that allowances are appropriately surrendered and that no penalties or fines are incurred? Are you appropriately accounting for your carbon credits?

Contact us

Alisa Hayden

Partner, PwC Ireland (Republic of)

Tel: +353 1 792 6294

Ronan MacNioclais

Partner, PwC Ireland (Republic of)

Tel: +353 1 792 6006

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