Intangible Assets Support U.S. Manufacturing
U.S. Manufacturing is on the rise. Between new technologies and the ‘re-shoring’ of jobs, the U.S. is the only industrial nation to maintain positive manufacturing growth over the past three years.
This positive growth has fueled capital expenditures on traditional tangible assets such as plant, property and equipment (PP&E). As Ocean Tomo Chief Executive Officer James Malackowski stated in their 2015 Intangible Asset Market Value Study, “Fueled by a three-fold wage increase in China versus 2000, the gap is closing on the hidden costs of off-shoring – packaging, shipping, duty, the carrying cost of inventory, among others. Lower energy costs in the U.S. along with exploding domestic investment in 3D printing, or additive manufacturing, will also fuel a return to tangible domestic investments. Combined, such change is poised to measurably alter the manufacturing landscape capping the long-term rise of intangibles.”
Even with the stabilization of Intangible Assets due to an increase in tangible assets by manufactures, Intangible Assets remain significantly more valuable and aren’t going anywhere. This is because tangible and Intangible Assets work together hand-in-hand. You cannot have tangible assets without Intangible Assets.
For example, say a company develops a new 3D printer that can manufacture Inconel engine components for aerospace application. While there are a significant amount of tangible assets that go into manufacturing the printer (CNC machines, assembly jigs, hand tools, work stations, assembly line, tooling, etc.), the Intangible Assets necessary to create it are even greater.
The tallying of Intangible Assets begins with a management team that pertains expertise in the industry. The management team creates an organized workforce, including an R&D team. The R&D team is made up of people with the know how to design and produce the 3D printer. Knowledge that the team doesn’t already posses is gained through training. The team leverages this know how and training to create new, patentable technology.
Once the technology has been created and patented, other Intangible Assets are necessary to successfully bring the product to market.
Contracts and technical agreements must be drafted with suppliers to manufacturer subcomponents. Favorable financing for the project must be secured. The quality group must develop new procedures to ensure quality control. Technical writers must write an operations manual and other technical documentation for customers. IT must create a knowledge management system to track development changes and lessons learned.
The Marketing team must create an advertising campaign. Trademarks and copyrights must be applied for. Promotional material created. Website domains secured. Website created/updated.
This example names seventeen Intangible Assets. In reality there would be two to three times more, at a higher value then the tangible assets.
Many people think of manufacturing as a big number on the PP&E line of the balance sheet. As this example shows, the big number should be on the Intangible Asset line, increasing your equity.
BUSINESS INTANGIBLES, LLC™ is a firm working with businesses by placing emphasis on their Intangible Assets. By utilizing our ENTERPRISE VALUE ACCOUNTING SYSTEM™ we Identify, Capture, Grow and Sustain the Intangible Assets that make up the majority of value within a company.