Tax Effective Supply Chain Management

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Amidst today’s challenges of regulatory action and economic turbulence, change is the only constant. For prescient enterprises, change also provides opportunities: to transform operations, redesign processes and emerge as stronger market leaders. Business transformations that align operational and business changes with tax planning can yield significant after-tax savings and increase shareholder value. This is where Tax Effective Supply Chain Management (TESCM) becomes an essential tool of leading enterprises.

Our decades of experience helping businesses align their tax and operational goals have shown us that TESCM structures must be sustainable upon audit, flexible to provide scalability and designed to help reduce business disruptions during the TESCM project phases.

EY will help tailor a TESCM structure that complements the scope of your business change and grows as your business expands.

Relocating functions, risks and people causes business disruptions. EY’s globally integrated network of business advisory and tax professionals have assisted companies in designing and executing TESCM structures worldwide with recognition that the minimization of business disruptions is paramount. We are experienced in managing TESCM projects of varying scope, and our processes incorporate decision points that accommodate resources that companies may commit to the project.

What is TESCM?

TESCM is based on fundamental business changes that occur within the context of a company’s supply chain processes. These processes may include:

  • Product design
  • Production planning
  • Sales
  • Research and development
  • Manufacturing
  • Overall corporate control
  • Procurement
  • Logistics
  • Make vs. buy decision
  • Marketing

Once a company’s business processes are identified as changing, the first step in a TESCM process is to sort the activities within each process as high-value versus routine functions. High-value functions drive companies’ strategic decisions; they determine what products to produce, which markets to enter and how best to execute the corporate strategy. High-value functions entail risk, and should concomitantly earn higher returns.

It is people, however, who execute functions and manage risks. By redeploying decision-makers — and the functions and risks that they manage – to centralized and possibly tax-favored jurisdictions, companies may realize material operational and tax benefits through efficiencies and by earning a greater proportion of their profits in a tax-efficient location. Routine activities, deriving a smaller amount of taxable profits, might remain in higher-tax jurisdictions or re-locate elsewhere as business needs dictate.

TESCM is the process of identifying and reallocating functions, risks and people in the most tax-efficient manner, within the context of a businesses’ overall operational goals and restructuring plans.