Valogix Blog: Thoughts for Inventory Planners and Business Partners

Inventory Planning for Small Parts - Part 1

This will be the first in a series of articles covering spare parts inventory planning using advanced technology solutions.

Inventory planning managers are looking for simple ways to reduce waste and improve profitability.  It is becoming more apparent that advanced technology can dramatically help but the technology must be affordable, quick to implement and have a high rate of return (ROI).

Service or spare parts inventory management is a prime candidate.  With many parts to manage and a lack of powerful tools, most companies with parts inventories have too many of the wrong parts.  The result is unnecessary inventory expense, while still suffering service-limiting stock-outs.

Manual efforts to improve this situation fail, because of the time-intensive nature of the problem.  A large number of parts, each with special considerations, quickly bog down someone trying to improve the parts purchases.

In the last five years, software products with more powerful spare parts planning capabilities have emerged.  These scientific tools have proven successful at lowering inventory 20-40%, while increasing service levels.  Until now, most of inventory planning products were targeted at the Fortune 500 companies.  Besides being very expensive—costing hundreds of thousands of dollars or more—they are complex and require highly skilled planners to operate.

Spare parts inventory planning divides into aftermarket service parts and MRO parts

The term “aftermarket service” applies to the activity of maintaining or enhancing equipment or machinery used by a different organization.  “MRO” refers to the same kind of activity, but accomplished by the same organization as the one using the equipment. 

Aftermarket Service covers the maintenance and repair of equipment and machinery.  For example, automobiles need routine oil changes and tune-ups as well as repair after accidents or a mechanical failure.  Service actions depend upon replacement parts for worn or broken components.  Unlike just-in-time manufacturing parts, service parts must be stocked “just-in-case” they are needed. 

Like retail distribution items, there tend to be a large number of different service parts needed to cover support of many different types of equipment produced over many years.  Moreover, these parts are needed in very low quantities.  For example, a major car manufacturer reported that over 90% of their service parts have usage rates of less than one unit per month.  Special forecasting algorithms can predict service parts requirements based on past history of part usage.

Aftermarket service can be performed by the organization selling the equipment to the end user (manufacturer or distributors or retail outlet), or by 3rd party service providers.  For example, a Ford car can be serviced by a local Ford dealer or by a local garage or by a franchised muffler, brake, or tire center.  In any case, the service organization tries to keep commonly needed parts on hand, while making sure parts with little demand can be obtained quickly when needed from an off-site location.

Another class of organization involved with aftermarket parts is the parts distributor.  This company sells parts to individuals and service organizations, rather than performing the service that uses the parts.

The “MRO” acronym has two different spell-outs, depending on the situation.  Organizations like electricity utilities and manufacturers with large, complex plants need to keep the facilities in good repair.  This activity is called “Maintenance, Repair, and Operations.” Organizations with fleets of transportation equipment (planes, railroad cars, trucks, or automobiles) need “Maintenance, Repair, and Overhaul” service to keep this equipment in good working order.  Common usage refers to the parts used for MRO as “spare parts,” rather than “service parts.”

 Inventory Planning Management Objectives

These different types of organizations have somewhat different objectives in their service parts management.  In aftermarket service, the primary objective is to fix broken equipment quickly to maintain the customer's confidence for future sales (and continuing service sales).  This requires having the parts in stock for the service action.

For MRO and some aftermarket service situations with stringent service level agreements, the primary objective is to make sure all critical (also called “essential”) parts needed for the end equipment to operate are on hand.  Other parts can be backordered if necessary.  For example, a CAT scanner might be sold with a service level agreement to fix any problem within 4 hours so the hospital using it can continue to serve patients.  A fuse may be essential for operating the equipment, but the plastic cap on a control box may crack with no loss in function.  Hence, the fuse must be stocked locally to assure the 4-hour repair time limit.

Finally, the objective with aftermarket parts distributors is to make sure they maximize profitability of the parts sold.  Thus, out-of-stock items, leading to lost sales, should either have a low margin or a low demand.

Coming soon - Part 2 of our Inventory Planning Series –MRO's 

Companies approach their parts inventory planning in many different ways - from seat of the pants guessing, to team collaboration, to spreadsheets that may invoke more team collaboration and manual changes, to forecasting software and some to advanced planning solutions. The more parts and locations you need to plan, the more complex.

 

 

 

 

Business One - Inventory Planning Effective and Easy

Discover an affordable, seamlessly integrated inventory planning optimization solution to SAP Business One for small and midsize businesses. A solution that frees up your resources (including cash), reduces losses from obsolescence, and increases service levels. The tools you need to forecast, plan, and optimize inventory, manage your business more efficiently and meet the demands of customers and suppliers are powerful and affordable.

Inventory planning solutions that forecast, plan and optimize an inventory are found in widespread acceptance in large enterprise companies but these solutions can cost between hundreds of thousands to millions of dollars, take months to implement and are generally not affordable or usable by SMBs.

Eliminate manual work and guesswork to determine forecasts, replenishment plans, stocking levels and reorder points. Because the system handles these tasks automatically, you keep current as business conditions change. Alerts warn you of potential problems before they happen, giving you time to proactively resolve an issue before it becomes a customer service problem.

Because excess and obsolete inventory items are identified, you can maintain your inventory at an optimum level for your current business conditions. Optimization re-balances your inventory mix, which further reduces costs while increasing insight and control of your inventory. You get an added benefit of improving your positive cash flow quickly and with less time.

This  easy-to-use inventory planning solution is designed to provide dramatic savings quickly, usually within a few months. As an example, based on an inventory value of $1,000,000 and an average inventory reduction and productivity gains of approximately 20% - 30%, as much as $200,000 to $300,000 in positive cash flow can be realized.  That is anywhere from $16,666 to $25,000 per month.

If your inventory investment is $5,000,000 a 20% reduction means a $1,000,000 savings. When you calculate the monthly savings it equates to 19% of the total inventory reduction. This is a combination of reduced cost of money, insurance, warehouse cost, personnel, etc. That’s $15,833 every month and in the first year adds almost $190,000 to your bottom line.

With the integrated solution, there is no need to use the manually-intensive MRP module in Business One. The MRP module is specifically designed to plan material requirements used in manufacturing and to a lesser extent for finished goods inventory. The module generates Production and Purchase Orders needed to produce a final product in the quantities and time specified by the product's schedule - taking into consideration all the requirements for the product's child items.

The user must create a scenario using a 6 step process for each item. If you have hundreds of items to plan every week, this process can be overwhelming much like using spreadsheets. Every time you need to change a parameter like lead time or location or service level, you need to start the process over again. Plus, there is no optimization in the MRP module, so you do not get the cost savings and other benefits mentioned above.

Respond to this blog and ask for a demonstration to see for yourself.

Why wait?  Inventory planning doesn’t get any easier or better than this.

 

 

Inventory Planning and Optimization for 2012 – The Clear Advantage

Happy New Year!  2012 brings the promise of improving global economies. Balancing short term resilience with longer term needs is what is needed now.  Reducing costs, buying less, increasing productivity, improving cash flow is important, and to keep these inventory objectives balanced and in perspective you need an efficient way to optimize these important business demands.   Improve your competitive advantages responsibly and efficiently with inventory planning optimization solutions.  Waiting until its too late in your ordering cycles will invite your customers to investigate other opportunities, and that can happen by making the reduction of the wrong item at the wrong time.
 
If your company tends to reduce items with the highest investment because it creates a larger reduction faster, what it actually does is creates potential stock outs, higher backorders and increased expedited shipping – and, even more importantly, customer dis-satisfaction.  We all know that when customers are unhappy they become former customers.  Randomly cutting inventory has been proven time and time again to be the wrong strategy as does overstocking your inventory.

Now, more than ever, you have a lot of choices for improving your inventory investment. The Cloud is a viable alternative to investing in On-Premise inventory planning software. Software-as-a-Service (SaaS) provides an affordable way to utilize some of the most powerful inventory planning and optimization solutions on the market.

Why should you be interested? SaaS applications provide many benefits you just cannot achieve on-premise.  Benefits include:

• Lower upfront capital:  By going to a SaaS model, you avoid the up-front capital requirements and funding requests, and pay for the software as an on-going expense.
• Faster implementation:  There is generally less overall set-up time, and in some cases, companies can often leverage the hosted solution’s existing integrations with existing key ERP solutions.
• Faster “time-to-value”:  Given a more rapid implementation, the time-to-value and positive cash flow returns are more rapid than a traditionally deployed on-premise implementation.
• Reduced internal IT resource requirements:  No installed application software or hardware to manage over time. 
  Overcome objections to best-of-breed software:  Some companies are finding that they are able to overcome the objections or rules against implementing software that does not come from the company’s ERP provider if they use a SaaS model.
• Fit for “on-demand” usage:  Users can truly access these solutions when they need them anytime and anywhere 24x7.
• Staying current with technology:  The software will periodically be automatically upgraded with enhancements to functionality. This should serve to keep users on the current platform, and keep them from falling behind the state of the art over time, sometimes badly so.

So, before you wait another moment, do yourself, your employees and your customers a favor and take a serious look at Cloud based inventory planning and optimization solutions and begin 2012 with a clear advantage.

Valogix Inventory Solutions Include Genuine Inventory Optimization

There are a lot of inventory planning solutions available from all types of companies around the world.  Many are designed for large enterprise companies as they cost hundreds of thousands of dollars and are highly complex. Some so complex a math or science degree is required just to operate the system. Others at the low end may be just point solutions for just forecasting, as an example, or offer individual modules you need to buy separately.

Most of these solutions include a forecasting capability either their own or from an included third-party provider. They usually also offer min and max levels, safety stock and replenishment calculations. Most require you to manually set replenishment levels and have you select the appropriate forecast method.

But how many offer real inventory optimization and why is this important? There are many reasons why inventory optimization is critical for conducting business in today’s ever challenging economic climate.

First of all is the cost of carrying, holding and managing an inventory. The costs for most items are steadily increasing, real estate costs and taxes are up and shipping costs are through the roof. Inventory optimization provides a great balanced inventory to meet expected demand, while reducing costs and better controlled spending for additional stock purchases. Planning in a timelier manner reduces the need for expediting orders in from vendors, which in-turn reduces the need for expediting shipments to customers.

Secondly, optimization dramatically improves the financial performance of an inventory because buying and stocking are more in-line with expected customer demand. It helps to reduce and almost eliminate the future build-up of excess inventory and dead stock.

Third, there are too many known and unknown variables that can affect your inventory and subsequent customer service levels to manage properly. Just forecasting and planning your inventory leaves you wide-open to problems in meeting both your financial goals and customer expectations. Trying to plan with spreadsheets is even a worse situation that will eventually lead you to higher costs and lower service producing a higher level of customer dissatisfaction and lost business.

• Setting the re-ordering parameters (e.g., Safety Stock or Min/Max levels) manually is an extremely tedious activity.  Hence, it tends to be done infrequently, and does not adjust to changed demand factors.  Valuable buyer/planner time should not be taken up by such activity.

• Optimization of the re-ordering (replenishment) parameters can lead to dramatic cost savings. Computers can do it frequently, so the results dynamically reflect demand changes.

Basically, what inventory optimization does is balance the investment in an inventory with the fill-rate (service level) goals of a company. There are also financial considerations, constraints that can also be applied in the development of the algorithm. These highly complex algorithms work behind the scene so as not to confuse the user or make them fearful of using optimization to help manage their inventory.

We have determined that you can dramatically improve the effectiveness of the optimization algorithms by adding heuristics into the overall process equation. Heuristic refers to experience-based techniques for problem solving, learning, and discovery. Heuristic methods are used to speed up the process of finding a satisfactory solution, where an exhaustive search is impractical.

The customer results of using advanced inventory planning & optimization show they achieve:

• Reduced inventory by 20% to 40% or more usually within 6 months or less
• Reduced expediting and emergency shipments by 35% or more
• Improved productivity by reducing planning time by 60% to 80% or more
• Controlled and reduced replenishment spending by 15% or more
• Improved service levels by having the right items available when your customers want them by 5% to 15% or greater
• Reduced stockouts by 15% - 30% or higher
• Increased sales of 15% to 15% or more
• Reduction in cost of goods by 5% to 10% due to improved vendor relations

Make sure you review the inventory solutions carefully and find out if they include genuine inventory optimization algorithms. You owe it to yourself, your company and your customers to choose the right solution to help solve your inventory planning needs affordably.

Inventory Planning - Easier Than You Think

Did you know that certain inventory planning solutions are easier to use than ever? Until recently Small and Mid-size Businesses (SMB) did not have affordable, easy to use software tools to help them effectively manage and balance their inventory investment. Software solutions that forecast, plan and optimize an inventory are found in widespread acceptance in large enterprise companies but these solutions can cost between hundreds of thousands to millions of dollars, take months to implement and are generally not affordable or usable by SMBs.

In the vast majority of companies, spreadsheets are the common tool in use. They are time-consuming to build and maintain, are usually static data repositories, and according to a prior study by a major consulting firm over 90% of them contain significant errors. But they do serve a purpose for reporting.

Advanced inventory planning and optimization software not only automates the entire planning process, it dramatically increases the positive cash flow of a company. By smartly reducing inventory investment, reducing stockouts, decreasing expedited shipping costs, and reducing planning time all contribute to more available cash. Add to that increased sales and productivity and the gains will also lead to an improved competitive advantage.

Investing in smart solutions that improve your inventory planning is an important business decision. It may be counterintuitive; the concept of spending money to save money, but it is true with inventory optimization.  Managing your inventory manually can be not only time consuming but error prone as well. The challenges resulting from this inefficient process can be:

• Poor ability to recognizing “Demand variability”
• Difficulty in setting and maintaining accurate stocking levels
• Dealing with critical “Stock-outs”
• Low inventory turns
• Increase in excess and obsolete inventory
• Inability to easily forecast more accurately
• Wrong mix of available items 
• Added complexity in determining how much to order, when to order, and where to stock

Some of these solutions have user-friendly interfaces that do not rely heavily on confusing icons and or abbreviations. They automatically do all the calculations and present the results in a clear, understandable fashion. This makes it easier to make key decisions about what to buy, how much to buy and when to have it available for sale.

Another facet of these easy-to-use solutions are the dramatic savings they provide. As an example, based on an inventory value of $1,000,000 and an average inventory reduction and productivity gains of approximately 20% - 30%, as much as $200,000 to $300,000 in positive cash flow can be realized.  That is anywhere from $16,666 to $25,000 per month.

If your inventory investment is $5,000,000 a 20% reduction means a $1,000,000 savings. When you calculate the monthly savings it equates to 19% of the total inventory reduction. This is a combination of reduced cost of money, insurance, warehouse cost, personnel, etc. That’s $15,833 every month and in the first year adds almost $190,000 to your bottom line.

With these easy-to-use solutions, there is no need to put off using advanced inventory planning and optimization solutions. Every day you delay, you are missing out on the opportunity to free up CASH. Cash right now, that’s at hand sitting in your inventory.

Respond to this blog and ask for a demonstration to see for yourself.
Why wait?  It doesn’t get any easier or better than this.

Section 179 Investment Tax Incentive and Valogix Inventory Solutions

In these challenging economic times, it is important to make use of every tool available to cut costs and improve after-tax profits. You may have the ability to deduct 100% of your investment in IT, meaning hardware and software purchases made by December 31, 2011. 

Section 179 of the Business Tax Provision of “Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010” extended the Bonus Depreciation.

Bonus Depreciation – the additional first year depreciation deduction that has been allowed for investment in “qualified property” for 2008 through 2010 is extended through 2012.

• Available for qualified property acquired and placed in service on or after January 1, 2008 and before January 1, 2013.

• Qualified property acquired and placed in service after September 8, 2010, and prior to January 1, 2012, is eligible for a 100 percent first-year depreciation deduction.

• Qualified property that does not satisfy the acquisition and placed-in-service rule immediately above is eligible for 50 percent first-year depreciation deduction.

 Qualified property – property is required to be new:

1.  Tangible property to which MACRS applies that has an applicable recovery period of 20 years or less

2.  water utility property

3.  Most types of computer software as defined under § 167(f) (1) (except software that is considered an amortizable section 197 intangible); and

4.  Qualified leasehold improvement property

 

Here is what is allowed:

Section 179 Expense – a taxpayer may elect to treat the cost of any section 179 property as an expense which is not chargeable to capital account. Any cost so treated shall be allowed as a deduction for the taxable year in which the section 179 property is placed in service.
 
Property may be expensed under Code Sec. 179 whether bought new or used. By contrast, property is eligible for the new 100% first-year write-off only if it is new.

Dollar Limitation: the aggregate cost which may be taken into account for any taxable year shall not exceed –

 $250,000 in the case of taxable years beginning after 2007 and before 2010,
 $500,000 in the case of taxable years beginning in 2010 or 2011, and
 $125,000 in the case of taxable years beginning in 2012
 $25,000 in the case of taxable years beginning after 2012

Reduction in Limitation: the limitation for any taxable year shall be reduced (but not below zero) by the amount by which the cost of Sec. 179 property placed in service during such taxable year exceeds –

 $2,000,000 in the case of taxable years beginning in 2010 or 2011,
 $500,000 in the case of taxable years beginning in 2012, and
 $200,000 in the case of taxable years beginning after 2012

We highly recommend you check with your financial officer and or accountant to determine if this is right for your business. It does not appear, at this time, that the U.S. Congress will extend or create a new similar incentive.

________________________________________________________________
NOTICE

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN BY VALOGIX TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.

The information contained herein is of a general nature and based on authorities that are subject to change.  Applicability of the information to specific situations should be determined through consultation with your tax adviser.

 

Solving Complex Inventory Challenges with Technology

Complex environment creates inventory challenges
Inventory management has become more challenging in today’s complex and competitive business environment. Yet many companies are still maintaining inventories manually, and performing complicated computations using spreadsheets and point solutions. Keeping track of reorder points can become an overwhelming task as businesses grow. And standard spreadsheets offer little help in driving down costs and improving revenues because they are time consuming and frequently contain multiple errors. Ray Panko, University of Hawaii compiled data from numerous studies that indicates up to 90% of spreadsheets contain significant errors.

Where is the money hiding?
It is common to find excess and obsolete stock representing thirty-sixty percent of inventory and to find that five-forty percent of the time customer demands cannot be met (based on Valogix’s experience). At worst, companies lose sales; at best, they must ship items at a premium in order to fulfill orders, further driving down the profit margins.

There is good news on the (planning) horizon
Automated planning tools are designed to remove complexity and improve inventory mix. They dramatically reduce the amount of time required to properly plan inventory. By automatically forecasting, replenishing and optimizing, companies can manage inventory more efficiently and meet the demands of customers and suppliers at lower costs for a powerful competitive edge.
Automated planning tools work in conjunction with ERP software to improve the inventory planning processes. Automated tools consider several factors—budget, carrying costs, planning horizon, leads times and more—to create an optimal stocking quantity. The entire planning process must be in sync to create a plan that works—from forecasting to setting stock and calculating replenishment levels, and from purchasing to production.

How advanced planning solutions work

1. They are dynamic, changing as business   condition change.
2. They account for many variables, ensuring the right coverage without over/under buying.
3. They calculate an optimal quantity, saving money without sacrificing service levels.
4. They eliminate the need to manually review every item and manipulate data.

Inventory planning is a competitive advantage
Advanced inventory planning and optimization not only automates the entire planning process, it also dramatically increases positive cash flow. Smartly reducing inventory, mitigating stockouts, decreasing expedited shipping costs as well as planning time mean less money going out, and more money to invest in the business. Increased sales and productivity gains add to the competitive advantage.

Using planning solutions in the cloud
We deliver our 100% web-based solution as a “virtual appliance.” By wrapping all the technology into a  virtual appliance, customers have the ability to use the latest in technology quickly, thanks to a rapid implementation process. Using the software via SaaS not only frees up cash and resources, but delivers an up-to-date product without lengthy upgrades and expensive hardware; all that is needed is the Internet.

The benefits of cloud-based planning
Unlike solutions installed on premises, cloud-based planning offers significant benefits to both users and companies.

• Multi-user platform (Linux, Windows, Unix)
• Browser UI
• Enhanced Security

Inventory optimization has big payback

• Reduced inventory investment by at least 20%
• Reduced expediting and emergency shipments by 35%
• Improved planner productivity by reducing planning time by 60% - 80%
• Ability to control and reduce replenishment spending by 15%
• Stockouts reduced by 12% - 22%
• Increased productivity by 5% to 10%
• Improved employee and customer satisfaction

Why Aren't You Investing in Inventory Planning Solutions?

Investing in smart solutions that improve your inventory planning is an important business decision and necessary in today’s global and troubled economy. Sometimes the concept of spending money to save money is very hard to accept. There are no guarantees the investment will pay off, so there is some level of risk involved. But, is it any riskier to do nothing? To maintain the status quo?
There are many reasons or excuses for not upgrading to a modern, easy to use advanced inventory tool.

Which Category do you fall in?

• Internal effort to implement, meaning it will take too much time and effort
• We will be able to manage our inventory effectively with an advanced inventory solution into the foreseeable future
• Cost of software and services
• We are too small
• Solutions are too complicated

Today’s flexible technology provides solutions that will work for any size business, are automated and very easy to use and with Software-as-a-Service (SaaS) cost is no longer an issue.

Or do you believe you have a good process in place using one or several or all of the following:

• Spreadsheets
• Accounting Applications
• Multiple disparate applications
• Legacy applications
• Home-grown applications
• Forecasting stand-alone package

There is a saying “you don’t know what you don’t know.” So, how do you find out what’s right for your business? You may think your inventory is under control, but can you be sure?  You may be waiting for the economy to improve. It’s now been several years since the downturn how much longer can you afford to wait? Your competitors are not waiting.

By putting off using an advanced inventory planning and optimization solution, you are missing out on the opportunity to free up money and resources. Advanced inventory planning and optimization software not only automates the entire planning process, it dramatically increases the positive cash flow of a company. By smartly reducing inventory investment, reducing stockouts, decreasing expedited shipping costs, and reducing planning time all contribute to more available cash. Add to that increased sales and productivity and the gains will also lead to an improved competitive advantage.

Waiting costs you thousands of dollars every day, disrupts your business and antagonizes customers and employees.  A few solutions like ours are web-based and can be implemented in an easy-to-afford SaaS model or installed On-Premise. Why wait?  It doesn’t get any easier or better than this. Download our free e-book, the State of Inventory Planning now to see how your business could be working smarter.

Free Webinar Download: Boost Your After Profit Taxes

On Thursday, June 30, experts from KPMG, Aberdeen Group, Valogix and EntryPoint Consulting discussed how to use current tax incentives to boost your bottom line.
 
Combining tax incentives with business and inventory optimization systems, companies are provided a rare and short-lived opportunity to boost after-tax profits while reinvesting and growing their businesses in three steps: Depreciation, Optimization and Investment. These incentives expire at the end of this year, so don't wait any longer!

                     Download the Entire Webinar Now


Here’s a brief overview of the tax discussion in the webinar:
Business Tax Provision of “Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010” includes provisions that:

• Extend for two years current individual income tax rates
• Extend bonus depreciation and section 179 expensing
• Provide temporary changes in wealth transfer taxes
• Provide temporary employee payroll tax cut
• Extend current tax rates on capital gains and dividends

Bonus Depreciation
The additional first year depreciation deduction that has been allowed for investment in “qualified property” for 2008 through 2010 is extended through 2012

• Available for qualified property* acquired and placed in service on or after January 1, 2008 and before January 1, 2013
• 100 percent deduction is allowed for qualified property
• 50 percent first year deduction for qualified property
• Off the shelf software
  
• Implementation costs
• Training costs
  

Section 179 Expense
A taxpayer may elect to treat the cost of any section 179 property as an expense which is not chargeable to capital account. Any cost so treated shall be allowed as a deduction for the taxable year in which the section 179 property is placed in service.

•  Property may be expensed under Code Sec. 179 whether bought new or used. By contrast, property is eligible for the new 100% first-year write-off only if it is new.
•  Dollar Limitation: the aggregate cost which may be taken into account for any taxable year shall not exceed–
• $250,000 in the case of taxable years beginning after 2007 and before 2010,
• $500,000 in the case of taxable years beginning in 2010 or 2011, and
• $125,000 in the case of taxable years beginning in 2012
• $25,000 in the case of taxable years beginning after 2012
  
• Reduction in Limitation: the limitation for any taxable year shall be reduced (but not below zero) by the amount by which the cost of Sec. 179 property placed in service during such taxable year exceeds–
• $2,000,000 in the case of taxable years beginning in 2010 or 2011,
• $500,000 in the case of taxable years beginning in 2012, and
• $200,000 in the case of taxable years beginning after 2012

*Qualified Property:

• Equipment (machines) purchased for business use
• Tangible personal property used in business
• Computers
• Computer software (“off-the-shelf” software)
• Office furniture/equipment
• Property attached to your building that is not a structural component of building (ie., printing press)
• Partial business use (equipment that is purchased for business and personal use – generally, deduction will be based on the percentage of time your use the equipment for business purposes)

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THIS INFORMATION WAS COPIED WITH PERSMISSION FROM THE WEBINAR SLIDES PREPARED BY KPMG. ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN BY KPMG TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN. 

You (and your employees, representatives, or agents) may disclose to any and all persons, without limitation, the tax treatment or tax structure, or both, of any transaction described in the associated materials we provide to you, including, but not limited to, any tax opinions, memoranda, or other tax analyses contained in those materials.

The information contained herein is of a general nature and based on authorities that are subject to change.  Applicability of the information to specific situations should be determined through consultation with your tax adviser.

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