A perfect storm is forming which may batter your 2018 fulfillment strategy. First, late in 2017 lead times for purchasing capital equipment lengthened. Second, the new tax law accelerates depreciation of equipment and buildings creating more demand for capital products. Finally, vacancy rates for existing warehouses are down, driving prices up.
Here is more detail on each trend:
Longer Lead Time for Capital Products
In the final months of 2017, as the economy continued to improve, we saw lead times on capital equipment such as racking and automation increase significantly. Here are some examples:
- Warehouse projects requiring large quantities of racking are on 10-12-week lead times, once the design is agreed upon. The used market is virtually non-existent. For a smaller project we could find only enough racking to support a 25,000-square-foot facility
- Power conveyor and sortation equipment are on 12-18-week lead times from approved design
- Some newer lines of forklifts from major manufacturers have 24-28-week lead times
- In ordering 60 bays of basic steel shelving, four major manufacturers we dealt with all had 4-6-weeks lead times
Rewriting of Federal Tax Code
This blog should not be construed as accounting, legal or tax advice. Because the law has yet to be codified or written in IRS published guidelines, accounting and tax professionals are unsure of how the law’s principles will translate into details. Seek the guidance of accounting and tax professionals in order to understand the details as they emerge.
There are provisions for property and capital investments that will be able to be written off on an accelerated basis. This includes investments made in late 2017 as well as investments in 2018 through 2022. They apply to…