Globalization and automation are just a few of the trends bringing real impact – both beneficial and challenging – to the market. And that’s not even considering the volatility in source materials and related transportation costs, or the challenge of finding skilled labor.
How can you stay in the lead?
That’s what we’re here for. We help manufacturing and distribution companies evaluate their processes, distribution channels, team members and infrastructure to increase profitability, while protecting against large scale supply chain disruptions.
Our services typically result in:
- Improved cash collections
- Lean manufacturing
- Accurate job costing
- Decreased domestic and international tax burden
- Efficient audits
- Real-world application of new accounting standards
- Stronger cybersecurity
- Improved eCommerce
We help companies streamline inventory management, increase efficiency and transform entire processes.
What is your manufacturing outlook for the year ahead?
Whether your business is meeting revenue goals or falling short, there are always opportunities to benefit from a performance improvement plan. We have decades of experience analyzing businesses, identifying opportunities and tailoring solutions to maximize value.
Does your company innovate or streamline resources to boost efficiency? Repetitive manual tasks like inventory tracking can be expensive and labor intensive. The right optimization can help you avoid business disruptions, increase accuracy, improve resource planning and lower costs.
Is your business optimizing tax opportunities and transactional value?
Our highly specialized tax specialists assist with tax planning and analysis, multi-state tax compliance and consulting, debt allocation, tax deferral strategies and more.
We stay up to date on the latest tax-related developments in your industry to help you navigate any impact on your business.
Has your business developed a new product or service? If so, we can find opportunities for a business like yours to save thousands of dollars by qualifying for a Federal Research Credit (also known as R&D Credit.)
Also, we can help you take advantage of the new Foreign-derived intangible income (FDII) incentive to reduce your U.S. tax burden for corporations with income that comes from exporting products tied to intangible assets, such as patents, trademarks, and copyrights, held in the United States, or perform services for foreign persons.
In addition, we can help you analyze the effect of the new GILTI inclusion, and foreign tax credit associated with income earned in foreign corporations. Or help you with compliance when a transfer pricing study is needed.
We serve clients who produce and distribute in diverse industries that include:
- Agricultural products
- Apparel and textiles
- Building materials
- Food and beverage
- Furniture and household goods
- Machinery and electronics
- Motor vehicles
- Petroleum
- Professional equipment and supplies
- Sporting and recreational goods
Navigating Tariffs in Manufacturing & Distribution
What are tariffs and how do they affect manufacturers?
Tariffs are government taxes on imported goods. As global policies shift and tariffs on imported goods rise, manufacturers and distributors face new challenges from a rapidly evolving trade landscape — but also potential opportunities for those better positioned to adapt.
Manufacturing tariffs directly raise costs for essential inputs like steel, aluminum, electronic components, and machinery. Companies that rely heavily on foreign sourcing often see their profit margins shrink as these costs increase throughout their production processes. Many businesses struggle to absorb these additional expenses while staying competitive.
However, manufacturers and distributors with strong supplier and customer relationships may be able to retain more of their previous margins by negotiating more favorable terms and passing a portion of higher costs through increased sales prices. Those who source the majority of their raw materials domestically may also find themselves at an advantage, avoiding some of the volatility and cost increases tied to global supply chains.
Changing federal tariff policies create uncertainty for manufacturers who need to make long-term sourcing and production decisions — but companies with resilient supply strategies and strong partnerships are often better able to navigate these challenges and even gain a competitive edge over other competitors.
How do tariffs disrupt U.S. supply chains and distribution?
Supply chain tariffs disrupt manufacturing networks by increasing costs for critical materials. Companies must find new suppliers, often at higher prices than their original sources.
Tariffs push distributors toward domestic alternatives, which can cause delivery delays, higher logistics costs, and quality issues. When the U.S. government implements tariffs suddenly, businesses don’t have time to renegotiate contracts or change suppliers smoothly.
Distribution companies see higher import costs translate directly to increased wholesale prices. This squeezes profit margins and forces price increases that hurt competitiveness.
Why are tariffs increasing costs for manufacturers and distributors?
Tariffs on imported goods have significantly raised costs for manufacturers who depend on machinery, electronic components, and other essential materials sourced from abroad. Companies often turn to alternative suppliers, but these replacements rarely match the low prices of established international sources. Additionally, tariffs on steel and aluminum continue to drive up packaging costs for manufacturers and distributors.
Distribution companies face direct cost increases as higher import prices flow through to their purchase expenses. This squeezes margins and often requires customer price increases, creating competitive pressure — particularly for low-margin products.
Building resilient supply chains through supplier diversification typically involves higher costs than relying on long-established global sources. However, sourcing more supplies from within the U.S. can offer significant advantages: shorter lead times improve inventory flexibility, and better alignment of supply with demand can help companies more effectively manage cash flow while mitigating some of the uncertainty of global trade.
How can companies optimize their supply chains to manage tariff risks?
Businesses that rely too heavily on tariff-affected regions face sudden cost increases and regulatory challenges. Supplier databases, trade networks, and industry partnerships help identify alternative sourcing when key suppliers face tariff impacts.
Reducing dependence on single countries or suppliers enables effective tariff mitigation strategies. Geographic concentration, especially from targeted nations, creates vulnerability to abrupt cost increases.
Expanding supplier networks to include domestic sources and countries with favorable trade agreements provides protection. Nearshoring with regional suppliers reduces tariff risks and delivers competitive advantages through lower logistics costs and less geopolitical exposure.
Can manufacturers use transfer pricing strategies to mitigate tariff costs?
Transfer pricing applies to companies that purchase or sell goods, services, or intangible assets from related entities in foreign countries. For these companies, higher tariffs may already be reflected in their transfer pricing studies, which are designed to account for changing costs while ensuring compliance with arm’s length principles. However, shifting supply chains or business models as a result of tariffs may cause the current transfer pricing analysis to be obsolete.
While transfer pricing is primarily a compliance exercise, it can also help manage tariff impacts through approaches such as:
- Lower customs values: Re-evaluating prior value assessments for imported goods to reduce declared import values and tariff obligations.
- Restructuring distribution networks: Shifting functions, reallocating risks, or establishing local subsidiaries to optimize supply chains.
- Unbundling transactions: Separating service fees or intangible property costs from product pricing to lower customs valuations.
It’s critical to maintain proper documentation and comply with all regulatory requirements. For companies that qualify, a well-designed transfer pricing policy can support both tax compliance and tariff management.
How can long-term tax planning help manufacturers balance operational agility?
Manufacturers can achieve operational flexibility while maintaining strategic tax planning through these approaches:
Integrate Tax and Operations: Align tax planning with operational decisions. Consider location-based incentives when selecting manufacturing sites and optimize vendor selection for both cost and tax benefits.
Use Tax Incentives: Take advantage of R&D tax credits for technology development expenses. Use accelerated depreciation methods like Section 179 and bonus depreciation for immediate equipment deductions. Explore state and local incentives for investment and job creation.
Optimize Inventory: Maintain appropriate stock levels through just-in-time practices to reduce taxable income and improve cash flow.
Manage Risk Proactively: Stay current with changing tax laws and conduct regular operational risk assessments to identify potential tax exposures.
What steps should manufacturers take when tariffs change?
Map Supply Chain: Document current sourcing by identifying where raw materials, components, and finished goods originate from. List primary suppliers and locations, evaluate which suppliers face tariff exposure, and research alternative suppliers less affected by tariffs.
Analyze Impact: Calculate how tariff rates will increase production costs. Determine whether costs can be passed on to customers without losing demand. Evaluate inventory strategy, including building stock before tariffs take effect.
Diversify Sourcing: Reduce single-source risks by exploring domestic sourcing and finding international suppliers in countries with favorable trade agreements.
Control Costs: Identify ways to improve operational efficiency to offset tariff impacts. Use lean manufacturing principles to minimize waste and streamline processes.
