Latest in Supply Chain Management

This is important if you are trying to understand what lies ahead in supply chain management.

ProLogis, a leading global provider of distribution facilities and services, recently released the latest edition of the ProLogis Supply Chain Review entitled, “RFID - Lessons Learned.” It is based on interviews conducted with 31 supply chain leaders and describes their companies’ preparations or strategies for dealing with radio frequency identification (RFID) technology as well as the lessons that they have learned.

Leonard Sahling, head of the ProLogis Research Group, noted, “To date, the high cost of RFID tags and readers has generally outweighed the potential benefits. But technological breakthroughs announced during the past few months have reduced these costs by about a third. Within the next year or so, we expect to see a sharp acceleration in the number of companies that have purchased state-of-the-art RFID systems and incorporated them into their supply chain operations.”

Key findings of the Supply Chain Review include the following:

• RFID technology is designed to provide users with enhanced visibility across their supply chains—i.e., accurate information about the quantity, location and status of all products, at all points within their supply chain.

• Enhanced visibility will facilitate greater efficiencies across the supply chain, resulting in higher inventory turns, major cost savings, faster deliveries, and extensive cooperation and collaboration among supply chain partners.

• Although it may appear at this stage that the benefits from RFID accrue mostly to retailers whereas the costs are borne by suppliers, recent interviews with supply chain leaders revealed several instances where suppliers have realized major improvements in the efficiency of their supply chain operations after adopting RFID technology.

• How soon RFID technology succeeds in revolutionizing supply chain operations remains to be seen. This technology is still being developed and refined, and the overall costs of RFID tags and readers currently outweigh the benefits. Tag costs are falling, however.

• In deciding whether to implement RFID, companies must decide whether the incremental benefits, above those derived from barcode scanning, are great enough to make the return on investment (ROI) worthwhile.

• To date, companies have mostly limited themselves to conducting initial research or building business cases for RFID applications. In effect, they are dipping their toes into the water, rather than taking the plunge.

Read more here. And read my earlier article on supply chain management

The Price Auto Workers Pay For Their Loyalty

General Motors Corp. retirees represented by the United Auto Workers pay nothing now for their health care coverage, but most would have to pay up to $752 annually in deductibles, co-payments and monthly premiums under a tentative agreement reached this week between GM and the union.

Under the agreement, GM hourly workers would contribute $1 per hour in future pay increases to a new fund to help pay for retirees' health coverage. Single retirees would pay up to $370 in deductibles and fees for their coverage. And most retirees and all active hourly workers would pay higher co-payments for their prescription drugs.

The agreement would exclude around 74,000 low-income retirees whose GM pension is $8,000 a year. Most of those are elderly or are the surviving spouses of GM retirees, the UAW said.

Read more here.

More Bad News in the Auto Sector

Dana Corp. added to cutbacks by the struggling auto parts industry, saying it will eliminate 5 percent of its salaried work force, close two plants and sell parts of its business to sharply reduce costs.

The company said last month it expected changes after cutting its profit forecast for the year in half as the industry comes to grips with soaring steel and energy costs and overcapacity.
Dana plans to narrow its product line by selling businesses that employ about 9,800 people worldwide. The company will focus on its light- and heavy-vehicle drivetrain products and sealing and thermal products.

The businesses that Dana plans to sell -- engine hard parts, fluid products and pump products -- had sales of $1.3 billion and employed 9,800 workers in 2004. The company had sales of $9 billion for the year.

It also plans to close plants in Bristol and Buena Vista, Va., that employ 545 people. And the Automotive Systems Group plans to shift certain steering shaft operations from Lima, Ohio, to Mexico, eliminating about 100 of the 385 jobs at the U.S. plant.

Meanwhile, Dana has stepped up it offshoring sourcing activities from China and other international production locations.

More here.

Outsourcing: Others Say It Will Grow

Global expenditure on outsourcing services will continue to rise, 'back-sourcing' will become minimal, client control will increase along with their ability to manage contracts, and any existing 'fear' of outsourcing will soon dissipate.

These are the finding of a study put out by LogicaCMG. The study, undertaken by Leslie Willcocks of Warwick Business School and Sara Cullen of Cullen Group, encompasses over 1,200 organisations from across Europe, USA and Asia-Pacific, compiling views into a list of 'Top Ten' predictions for the next five years.

The study has also highlighted the importance of the CEO in executing successful outsourcing initiatives and notes that one-third of outsourcing deals could fail due to lack of CEO involvement.

Outsourcing of IT and other business processes is likely to move from a 2005 average of 12 per cent of organizational costs to 20 per cent by 2008.

Business Process Outsourcing (BPO) will overshadow and incorporate IT outsourcing and mainstream BPO expenditure is likely to grow worldwide by 10 per cent a year from $140 billion in 2005 to over $220 billion by 2010.

Outsourcing is here to stay and 'back-sourcing' will be minimal at a tenth of contracts, which come up for renewal. The most popular course of action at the end of a contract will continue to be to extend it with revisions, a quarter being re-tendered. In addition to this, the study states that outsourcing will help 'insourcing' and market disciplines will determine in-house service provision.

Comment: I hope this isn't true.

Read more here.

Outsourcing: Some Say It's Leveling Off

About half of Silicon Valley's outsourced jobs are winding up in India, Silicon Valley-area managers told a recent survey by a team of faculty at Santa Clara University's Leavey School of Business. The survey has tracked outsourcing by regional companies over the last three years, and registered a slight decline in the number of companies taking jobs out of Silicon Valley last month.

"Outsourcing as a drain on area jobs seems to have leveled off," Mario Belotti, the W.M. Keck professor of economics at the Leavey School of Business said in the survey. "This leveling off is consistent with the latest monthly increases in the county labor force and civilian employment. Recent gains in both of these economic variables have been somewhat higher than similar gains for the U.S. as a whole."

Comment: I hope they are right.

Read more here.

India Outsourcing Situation

India is winning thousands of jobs away from American communities. As the economic developer for your area, you should be well-versed in outsourcing trends and how they impact your business and industry base.

Here are some key facts you should know about outsourcing in India:

-At NASSCOM2004, leaders unanimously agreed that the Indian market has reached the next level of maturity and is set to grow.

-By 2008, McKinsey & Company forecasts IT services and back-office work in India will swell fivefold, to a $57 billion annual export industry employing 4 million people and accounting for 7% of India's gross domestic product.

-More than half of the Fortune 500 companies are already outsourcing work to India.
-The research firm Gartner on the other hand claims 1 in 10 US technology jobs will go overseas by the end of 2004.

-According to Forrester Research, in the next 15 years, more than 3 million US white-collar jobs, representing $136 billion in wages, will depart to places like India, with the IT industry leading the migration.

-Additionally the telecom bubble has burst and growth has been sluggish. Telecom majors like Lucent and Nortel are cutting costs and trying to recover heavy investments. They are therefore looking at Indian software companies to provide offshore solutions to manage their network operations, support systems, billing software, OS integration and business process re-engineering.

Interested in knowing how outsourcing is impacting industries in your area? Contact ED Futures for a study price estimate: dtia@don-iannone.com or call us atL 440.449.0753.

India and Its Economic Regions

Economic developers in American communities should 'go to school' on how regional economies are advancing in India (and other developing nations as well). Study this map. You will be hearing more about these regions as economic centers in the future. To learn more, click here.

"Google" the ED Futures Website

A reader asked whether there is a way to search the ED Futures website. Very good question.

Yes indeed, you can search the site. Just scroll down mid-page and look on a right side of the site for the "Google button" with a white box around it. Check the box to search "Economic Development Futures," enter a keyword you want to search for, and click the blue Google button.

You will get a set of search results, which you can use to find ED Futures articles that interest you. It's that simple.

Book Review: The Outsourcing Revolution

The Outsourcing Revolution by Michael F. Corbett (Dearborn Publishing, 2004) is a must read for economic developers trying to understand outsourcing and what it means to businesses in your communtiy. Also, read my related article on the subject earlier this week here.

The first myth about outsourcing is that it’s new. Actually, the term dates to the 1970s, when manufacturing companies seeking efficiency began hiring outside firms to manage less-than-essential processes. Outsourcing worked.

Today many manufacturers outsource 70% to 80% of the content of their finished products. Large companies commonly outsource half of their IT operations. Organizations outsource their entire back office operations, including human resources, payroll and accounting. Companies may soon be more outsourced than “in-sourced,” signifying a fundamental reorganizatio that will affect employees, managers, customers and executives. Consumer choices will increase, product costs will drop and workers’ roles will change.

Today, outsourcing is at a crossroads. Companies no longer outsource only vertical busines units. The new cross-functional approach follows a process horizontally throughout an organization — so-called business process outsourcing, or BPO. Now more companies are seeking strategic advantages based on outsource alliances. While the relentless push to operate more effi ciently remains the driving force behind outsourcing, it has also become a competitive, strategic marketplace tool, allowing companies to improve response times and develop new products faster than ever. Once focused just on reducing expenses, today’s outsourcing initiatives are likely to help companies do things they previously could not do.

Once technology made it feasible to outsource operations abroad, media attention made outsourcing part of the public lexicon. Intense debate ensued as jobs left domestic boundaries and headed overseas. Opponents often overlook outsourcing’s benefits, such as allowing consumers to buy better products for less money. And, tens of millions of stockholders of major companies benefited as the value of outsourcing companies markedly increased.

More than 90% of companies say that outsourcing is an important part of their growth strategy. Management expert Peter Drucker calls outsourcing America’s fastest-growing industry, involving such companies as ARAMARK Corporation, Electronic Data Systems Corporation (EDS), General Electric (GE), International Business Machines Corporation (IBM), United Parcel Service of America, Inc. (UPS), Xerox and others. Many U.S. fi rms provide outsourcing services. Outsourcing is one of the very few business techniques that can transform a firm fundamentally and increase its competitiveness exponentially.

According to survey results from the 2004 Outsourcing World Summit, a trade show, only 3% of companies outsource to achieve innovation. An equal percentage outsources to conserve capital for other investments or to improve product quality. About 4% believe outsourcing will increase revenues. About 9% outsource to obtain skills they can’t find or can’t afford. Some 12% of firms outsource to obtain the benefits of a variable cost structure. Another 17% say outsourcing helps them improve their organization’s focus. And fully 49%, or almost half, say cost reduction is the primary benefit. How significant are the savings? In 1988, General Motors Corporation had 3,290 employees in various departments handling payable s, payroll and accounts receivable. GM reengineered its accounting processes without outsourcing and reduced the number of people doing that work to 560, slashing costs in this area 60%. When it outsourced those activities in 1998 it reduced costs another 20%.

Want to learn more, order the book at Amazon.com here.

Book Review: Advanced Supply Chain Management

Every economic developer should understand the ins and outs of supply chain management. It is the key to understanding how your area is connected to other places across the global. Here is a book that can help: Advanced Supply Chain Management, by Charles C. Poirier. It's six years old, but rich in wisdom.

Here is Poirier's central message. Your supply chain holds the answer to your business woes. The key to growing your business is not your strategies, your technology, or your people. It is your ability to manage the chain of vital inputs that you need to create your product and services. Every company has one, and every company relies on one for its survival — but not every company realizes that the secret to its long-term success lies in its ability to improve and perfect its supply chain.

Efforts to bolster supply chain management have been going on for over a decade. Alternatively called logistics reengineering, process redesign, or distribution-channel improvement, they all aim at the same target: reducing costs by improving the logistics of purchase and distribution of vital resources. Today’s successful companies have formed networks for sourcing raw materials, storing and distributing products, and ultimately delivering them to the customer. This is the essence of supply-chain management. In the past, these efforts focused on what the company could do internally to make the process more efficient. Unfortunately, this approach limits the effectiveness of your supply chain, and impairs your ability to compete.

If you want to advance to the head of the supply-chain management process, you will have to commit to a process and not expect to take one great leap forward. Each step along the way must build on earlier initiatives. The cultural change required to share information with new business partners is not to be underestimated. You can accelerate your company’s transition through the early phases to the advanced stages. Do not assume increased efficiencies at each stage, however, since First-Level economic improvements have been shown to be largely fictitious.

Want to know more? Buy the book at Amazon.com here.

Colorado Gets New Lifestyle and Spirituality Spa

Ananda, a $40 Million Lifestyle Community Featuring The Rocky Mountain Chopra Center & Spa Under Development at Westin Westminster

Westminster Promenade Development Company, LLC, announced plans for Ananda, Inspired Living, a $40 M real estate project to be built adjacent to The Westin Westminster Hotel & Conference Center. Ananda will include The Rocky Mountain Chopra Center & Spa, as well as 60 lifestyle residential units and retail shops.

Westminster, CO was chosen as the location because the city incorporates so many of Colorado's lifestyle benefits into one area. Located equal distance from downtown Denver and Boulder, the city is known for its high tech and biotech industries, its hiking and bike trails, and some of the best public golf courses in the state.

"We are thrilled that the Chopra organization chose The Westminster Promenade as the location for the very first Chopra Center in the central United States," states Tim O'Byrne. "We believe that the synergy of Chopra, the Westin hotel and Ananda, Inspired Living, will bring a whole new tourism element to Colorado's Front Range."

On the partnership in Colorado, Dr. Chopra states, "The Center is the heart of my life's work. I am inspired by the quality and dedication of the people who are helping me develop this beautiful facility and programs."

Ananda's residential lifestyle units will range from 600 sq. ft. studios to over 4,000 sq. ft. three-bedroom penthouse units, and will range in price from $200 K to over $1 M. The units will be accessible to the hotel via a covered sky-bridge that connects the hotel's existing recreation area to the spa. Two floors of the facility will feature condo-tel rooms, to be owned and occupied by private owners, but available to be placed in a hotel rental pool at the owner's discretion.

The centerpiece of the 17,000 sq. ft. Chopra Center will have unobstructed views of the Flatiron Range of the Rocky Mountains. Yoga classes, aerobics classes, treatment rooms and a salon offering all-natural facials, manicures and pedicures will be available for both men and women.

The Architect/Designer is Boulder, Colorado's Oz Architects and the interior designer is Atmospheres by Kris Hansen. The team is designing the project to continue the ASID award-winning "High-Plains" design and architecture of the adjacent hotel.

For additional information, see http://www.myananda.com/ or call (303) 410-5050.

CONTACT: Susan Stiff, +1-303-410-5033, susan.stiff@westin.com , for
Westin Westminster

Recent Economic Oulook by Chicago Tribune

In the aftermath of two hurricanes that helped push the price of gasoline beyond $ 3.00 per gallon, Americans are taking a seat-of-the-pants approach to fighting back. Namely, they are staying home.

Not only are they driving less and buying fewer new cars, their ability to cut back on trips to the mall is casting a pall over retailers, who fear that the holiday spending season will be a bust.

One area that appears exempt from any buyers' strike, however, is housing. The love affair between home buyers and ultra-low mortgage rates, which has fed a 10-year construction boom, seems unimpaired.

A fresh test comes Wednesday, with a report on September housing starts. Economist Lynn Reaser is looking for a tiny decline, to an annual rate of 2 million units from 2.01 million a month earlier.

"Although there are some signs of cooling, especially among sellers of high-end homes who have been forced to reduce prices, builders remain relatively optimistic," said Reaser. of Bank of America's investment strategies group in Boston.

The fact that long-term mortgage interest rates pushed above 6 percent last week, to their highest level in seven months, suggests that construction is headed toward a soft landing, but no crash, she said:

"Because job growth remains on track, and interest rates are rising only moderately, the outlook for real estate remains positive."

Read more here. (Free registration required)

State Business Tax Comparisons

We have been doing some state tax research for a private business client.

In the process, we ran across some useful data from the Federation of Tax Administrators (FTA) that you might want to know about. You can download a nice Excel spreadsheet containing some "sanitized" data from our research by clicking here.

If you would like to know more about ED Futures' economic development research capabilities, call us at: 440.449.0753 or email us at: dtia@don-iannone.com

ED Futures Newsletter

Welcome to the Latest Issue of the ED Futures Newsletter.

As you have probably noticed, I have changed the approach to the newsletter, which continues to rise in popularity. Last week alone, 31 new people signed up from across the world. Speaking at two major conferences the week before helped stimulate new subscriptions.

The new format basically takes you to the ED Futures website front door. The old format consisted of a small collection of recent articles posted to the the website. As I've said in the past, the main action is definitely on the website.

You may have noticed that I am including more target industry profiles and company analysis in in our posts to the website. This is for two reasons: 1) this work is a major strength of our company; and 2) ED organizations need good industry and business intelligence.

I would like to call your attention in particular to a recent ED Futures article on how to approach team-building for economic development. You can access it here.

If you know someone who would like to sign up for the newsletter, just provide them with this link, which can be used to directly sign up for our mailings.

Thank you.

Sincerely,

Don Iannone
Publisher

Tel: 440.449.0753
Email: dtia@don-iannone.com

Strategic Trends: Business Outsourcing

Outsourcing has become a way of life in many industries worldwide. The trend to send business out of house is one that economic development leaders need to become better informed about because of its major impact on existing business activities and local jobs tied to those activities.

Outsourcing in general is approximately a $260-billion global industry. Industry revenues continue to grow rapidly, especially in developing nations like China and India.

A significant portion of outsourcing revenue is created in information technology services, including the creation of software and the management of computer centers. Another major portion lies in business process outsourcing (BPO) areas such as call centers, financial transaction processing and human resources management.

Offshoring, on the other hand, covers such a wide variety of nations, products and practices that it would be difficult to put a number on it. A significant share of offshoring revenue is created by contract manufacturing of electronics, including laptop computers, cellular telephones and consumer electronics such as iPods. Another major sector in offshoring is contract manufacturing of shoes, apparel and accessories.

In order to consider the outsourcing and offshoring industry, it is best to define the terms upfront, since the words are often used in conjunction and are sometimes used incorrectly.

To begin with, “outsourcing” can be defined as the hiring of an outside company to perform a task that would otherwise be performed internally by a company (or government agency), generally with the goal of lowering costs and/or streamlining work flow. Outsourcing contracts are often several years in length. Companies that hire outsourced services providers often do so because they prefer to focus on their core strengths while sending more routine tasks outside for others to perform. For example, typical outsourced services include the operation of human resources departments, telephone call centers and computer departments.

Next, “offshoring” refers to the rapidly growing tendency among U.S., Japanese and Western European firms to send both knowledge-based and manufacturing work overseas. The intent is to take advantage of lower wages and operating costs in such nations as China, India, Hungary and Russia. The choice of a nation for offshore work may be influenced by such factors as language and education of the local workforce, transportation systems or natural resources.

For example, China and India are graduating high numbers of skilled engineers and scientists from their universities—thus enabling these nations to attract massive engineering, research and development contracts. Also, some nations are noted for large numbers of workers skilled in the English language, such as The Philippines and India. In many cases, offshoring utilizes less-skilled labor working for low wages in plants that manufacture such items as shoes, apparel and generic computer components.

“Captive offshoring” is used to describe a company-owned offshore operation. For example, Microsoft owns and operates significant captive research and development centers in China and elsewhere that are offshore from Microsoft’s U.S. home base. The goals of captive offshoring include greater company control through direct ownership, along with lower operating costs and the ability to utilize highly educated local workforces.

There is also such as thing as “offshore outsourcing,” and you will occasionally see this phrase used in the press. In this case a company outsources operations, such as manufacturing, to an offshore organization.

Finally, there is “insourcing,” which refers to situations where an outsourced services provider moves into, and sets up shop in or near, a client company’s facility. For example, it is common for major companies to sign agreements with IBM Global Services, EDS, Perot Systems and other outsourcing firms whereby these firms take over and operate a client’s internal computer department. Here’s a non-technology insourcing example: ARAMARK Corporation will build and operate snack bars, employee cafeterias and executive dining rooms within a client company’s facilities.

Want to know more about outsourcing? Contact ED Futures for a price quote on its research services related to outsourcing. Tel: 440.449.0753. Email: dtia@don-iannone.com

Target Industry: NAICS 33911 - Medical Equipment and Supplies Manufacturing

Industry Definition

This industry is comprised of businesses that are primarily engaged in manufacturing medical equipment and supplies.

Examples of products made by these establishments are: laboratory apparatus and furniture, surgical and medical instruments, surgical appliances and supplies, dental equipment and supplies, orthodontic goods, dentures, and orthodontic appliances.

Participants in the industry supply to wholesalers as well as directly to hospitals, private medical practices, and laboratories.

Note: The industry does not manufacture laboratory instruments, X-ray apparatus, electromedical apparatus (including hearing aids), and thermometers (except medical).

Industry Revenue, 2003-2004: $65 billion
Industry Employment, 2003-2004: 320,266 people
Number of Establishmenst, 2003-2004: 15,850 businesses

Products/Services

The main products or services supplied by the industry are:

Laboratory apparatus and furniture manufacturing - Hospital beds, operating room tables, laboratory balances and scales, furnaces, ovens, centrifuges, cabinets, cases, benches, tables, and stools, Dental Equipment and Supplies Manufacturing- Dental chairs, dental instruments, delivery systems, dental hand instruments, and dental impression material, Ophthalmic Goods Manufacturing- Prescription eyeglasses (except manufactured in a retail setting), contact lenses, sunglasses, eyeglass frames, and reading glasses made to standard powers, Dental Laboratories- Dentures, crowns, bridges, and orthodontic appliances customized for individual application, Surgical and Medical Instrument Manufacturing-Medical, surgical, ophthalmic, and veterinary instruments and apparatus (except electrotherapeutic, electromedical and irradiation apparatus), Examples include syringes, hypodermic needles, anesthesia apparatus, blood transfusion equipment, catheters, surgical clamps, and medical thermometers, Surgical Appliance and Supplies Manufacturing- Orthopedic devices, prosthetic appliances, surgical dressings, crutches, surgical sutures, and personal industrial safety devices (except protective eyewear).

Downstream Industry Linkages

The industries listed below are the major buyer industries of Medical Equipment and Supplies Manufacturing:

42145 - Medical, Dental and Hospital Equipment and Supplies Wholesalers
62111 - Offices of Physicians
62121 - Offices of Dentists
62132 - Offices of Optometrists
62151 - Medical and Diagnostic Laboratories
62211 - General Medical and Surgical Hospitals
62423 - Emergency and Other Relief Services

Upstream Industry Linkages

The industries listed below are the major supplier industries of Medical Equipment and Supplies Manufacturing.

32612 - Plastics Pipe, Pipe Fitting and Unsupported Profile Shape Manufacturing
32622 - Rubber and Plastics Hoses and Belting Manufacturing
32721 - Glass and Glass Product Manufacturing
33531 - Electrical Equipment Manufacturing

Major Players

The Major Players in the industry are the top 5-10 companies in the industry based on total revenue.

Johnson & Johnson
General Electric Company
Medtronic, Inc.
Baxter International Inc.
Tyco International Ltd.

Industry Conditions

Medical Equipment and Supplies Manufacturing is in a mature phase of its life cycle, which means that the industry is generally growing at the same rate as the economy. Capital/labor intensity is medium and the uptake of new technology is high. The industry's globalization level is medium and the trend is faster than the economy.

The industry has a medium level of exports, which means exports generate between 5% and 25% of the industry's revenue.

The industry has a medium level of imports, which means imports generate between 5% and 25% of the industry's domestic demand. Exports are steady and imports are increasing. The level of regulation is high and increasing and government assistance is medium and steady.

Want to learn more? Contact ED Futures at 440.449.0753 by phone, or by email at dtia@don-iannone.com for a price quote on a full industry profile.

Delphi: Picking Over the Bones

Delphi Corporation is falling apart. If I were going to make a bid for a piece of what is left, I would make a grab for the company's medical device business.

From auto parts to healthy hearts? Delphi Medical Systems is applying the engineering expertise of its parent company, auto parts colossus Delphi Corporation, to the medical device market.

Delphi Medical Systems brings its parent's prowess in such things as sensors, display technologies, advanced power sources, and temperature control to bear in the development of dialysis machines, in-vitro monitoring devices, and vital signs monitoring equipment. The company also pursues the commercial market with data storage, imaging, and telecommunications solutions.

Delphi Medical Systems has operations in Colorado and Michigan.

Latest on Delphi Automotive

Auto supplier Delphi Corp., which filed for bankruptcy protection this past week, expects to close plants as part of its restructuring, and while the company hasn't said which plants are on the chopping block, some are at more risk than others.

Delphi already has shifted 11 unprofitable plants in Alabama, Georgia, Indiana, Kansas, Michigan, Mississippi and Ohio into their own division, called the Automotive Holdings Group. Plants in that 3-year-old unit have historically been consolidated, sold or closed. Delphi has 44 U.S. plants, although not all of them are producing parts now.

Delphi also has said it wants to focus on high-tech parts such as satellite radios, safety systems and fuel-efficient engines in its U.S. plants and make low-profit, labor-intensive parts elsewhere. That could be good news for plants like the one in Kokomo, Ind., which makes complex products like the electronics that control air bags, but bad news for the workers making spark plugs and oil filters in Flint.

Check out the Delphi website for more information.

Laws That Screw the Self-Employed and Entrepreneurs

I think most economic developers would agree that America is not creating enough "high quality" jobs for its citizens. That's a major problem all economic developers should be concerned about. While none of us should ever stop trying to hold onto and attract employers that create high quality jobs, we need to give much more attention to the self-employment and entrepreneurial path to economic development. In many cases, self-employment is the only way people can find a "wealth-building job."

I run a small boutique consulting company that serves the economic development industy. Being self-employed is my strategy to provide a "high quality" job for myself and support my family. Frankly, that is the only way I can remain in Greater Cleveland, which is doing an even worse job than a very large number of other metro areas in retaining and creating high quality jobs. So, you can imagine why I am concerned about situations like the one told in a recent Tax Foundation (TF) article.

Here is a clip from the TF article. Please read it and consider the issues and their implications for self-employed people, entrepreneurs, and small business owners in your area.

"Imagine you are the proprietor of a small software company, selling your products to customers all over the United States. Your offices are based in your home in South Carolina. You are the only employee of the company. You make occasional sales trips to other states, but generally only sell through advertising your products in magazines and on your website.

You recently made a sale to a customer in New Jersey. The customer is a casino and is using your software to help manage its activities. One day, you receive a letter from the state of New Jersey. They demand taxes from you for the privilege of doing business in New Jersey, and they want you to register to do business in the state. The total cost of the registration fee plus the minimum taxes due exceeds the revenue received from the software sold to your New Jersey customer.

Is it right for New Jersey to levy taxes on your small software company? Oliver Wendell Holmes once said that taxes are what we pay for civilized society. But is it right for a small business with no offices, employees, or other physical presence in New Jersey to pay taxes for government services offered in the Garden State?

H.R. 1956, the Business Activity Tax Simplification Act of 2005, would require a corporation to have employees or real property physically present in a state before it could be required to pay state business activity taxes (e.g., income, franchise, or gross receipts taxes). Physical presence—as opposed to the most popular alternative, economic presence—is the correct standard for our 21st century international economy. Under physical presence, your small software company would not have to pay tax in New Jersey or anywhere else in the world where you merely sell products to customers."

Think about this one. Read more here.

State Business Tax Comparisons

Looking for a quick comparison of state business taxes. Look not further, Here is a useful starting point. Download the Tax Foundation's ranking of state tax climates here.

Note: The State Business Tax Climate Index is a measure of how each state's tax laws affect economic performance. Many state and county tax laws in place at the beginning of the year are tallied. The higher the score, the better the businesstax climate.