Georgia Manufacturers Are More Profitable Than Previous Years But Investing Less In Innovation

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Manufacturers emphasize low price and decrease investments in innovation

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Georgia manufacturers saw profitability increase by 13 percent between 2012 and 2014, though they may not be focused on the long term. According to the results of the 2014 Georgia Manufacturing Survey, conducted in partnership between Habif, Arogeti & Wynne, LLP, the largest-Georgia headquartered tax, accounting and business consulting firm, the Georgia Institute of Technology, Georgia Department of Labor and Kennesaw State University, 14 percent of Georgia manufacturers chose to compete on low price, as compared to six percent that compete through innovation and technology, a shift from the previous year’s survey results.

“The reduced investment may simply signal a transition between the slow economy of the past several years and one that is getting back on a growth track,” said Karen Fite, director of the Georgia Manufacturing Extension Program (GaMEP), a federally-supported program that helps manufacturers improve their competitiveness.

“Companies that want to grow must shift away from low-cost strategies and innovate through new technologies, research and development, and new products and processes,” said Adam Beckerman, partner-in-charge of HA&W’s Manufacturing & Distribution group. “A simple way to fund innovation is by taking advantage of federal and state tax credits.”

The research reveals that 27 percent of Georgia manufacturers conducted R&D in-house between 2012 and 2014, while only 16 percent used R&D tax credits to subsidize the costs incurred by their R&D projects. Georgia manufacturers are leaving money on the table.

“Georgia manufacturers that aren’t taking advantage of the federal and state research and development tax credits are missing out on an opportunity to keep more of their cash,” said Beckerman. “This is cash that can be reinvested in their business to fund more R&D or train and hire workers with the necessary technical and basic skills needed in their manufacturing facility.”

Concerns grew among Georgia manufacturers about a lack of basic and technically skilled workers for Georgia facilities, showing the most growth in the category of manufacturing concerns over 2012 levels. Twenty-eight percent of Georgia manufacturers indicated that they had problems finding employees with technical skills, while 22 percent had issues finding workers with basic skills. What is interesting, however, is that, though manufacturers recognize a lack of skilled workers, 29 percent of Georgia manufacturers spent no money on training their employees in 2013.

“The Georgia Retraining Credit is an often overlooked tax credit that Georgia manufacturers can take advantage of to train their current employees on certain equipment, technology, processes or software,” said Beckerman. “The credit creates a huge opportunity for Georgia manufacturers to provide their workforce with the technical training that many lack by covering a manufacturer’s direct expenses for training sessions.”

To achieve long-term success, Georgia manufacturers must constantly innovate and improve their technologies. The 2014 Georgia Manufacturing Survey found that the majority of technology spend was on the plant floor, with the implementation of software for scheduling, inventory control or purchasing.

“Investment in technology is key to continued growth,” concluded Beckerman. “Best practices indicate that manufacturers need to place a greater emphasis on the value of analytics and data that enable them to better understand the wants and needs of the market and improve product development.”

The results of the 2014 Georgia Manufacturing Survey are based on the responses of 504 Georgia manufacturing companies contacted during the first half of 2014. The Georgia Manufacturing Survey is conducted biennially to benchmark the modern manufacturing technology, practices and techniques being used by Georgia manufacturers. The information obtained from the survey is used to improve manufacturing assistance programs and regional innovation initiatives that help Georgia companies compete, improve their profitability and create jobs for Georgians.

For more information about the results of the 2014 Georgia Manufacturing Survey, contact Adam Beckerman, partner-in-charge of HA&W’s Manufacturing & Distribution group, at adam.beckerman@hawcpa.com or 404-898-7542.

About Habif, Arogeti & Wynne, LLP (HA&W):
HA&W has been recognized as a “Best of the Best Accounting Firm” in the United States. Since 1952, clients throughout the U.S. and in more than 40 countries have counted on HA&W to build value, manage risk and drive growth. As the largest tax, audit and business advisory firm headquartered in Georgia, our expertise across a broad range of services and industries provides clients with winning financial practices and insights to help them grow at every stage of their business lifecycle.

To learn more about HA&W, visit http://www.hawcpa.com.

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Kayla Payne
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