Machine Shops
Industry Profile Report
Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters
Industry Overview Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.
Call Preparation Call Prep Questions, Industry Terms, and Weblinks.
Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.
Industry Profile Excerpts
Industry Overview
The 17,300 machine shops in the US process various materials, such as metal, plastic, or composites, to produce custom parts. Companies may specialize in a particular process (such as lathing) or an industry (such as automotive). Most projects are low-volume and require high precision. The industry consists of small- to medium-sized businesses – no large companies dominate.
Dependence on Manufacturing Sector
Demand for goods produced by machine shops is cyclical and highly dependent on the state of the manufacturing industry.
Dependence on Skilled Labor
Operating machine shop equipment requires a blend of technical knowledge and experience.
Industry size & Structure
A typical machine shop operates out of a single location, employs about 15 workers, and generates about $2.3 million annually.
- The machine shop industry comprises about 17,300 companies that employ 267,000 workers and generate $39.6 billion annually.
- Customer industries include aerospace, automotive, transportation, consumer electronics, and various equipment manufacturers (farm, medical, recreational).
- The industry consists of small- to medium-sized businesses - no large companies dominate.
- Nearly a third (32.2%) of US machine shops are in California, Texas, Ohio, and Michigan.
Industry Forecast
Machine Shops Industry Growth
Recent Developments
Nov 18, 2024 - Rising Prices and Labor Costs
- Producer prices for machine shops rose 1.4% in September compared to a year ago after rising 2.2% in the previous September-versus-September annual comparison, according to the latest US Bureau of Labor Statistics data. Employment by the industry declined by 3.6% year over year in September, extending a mostly downward trend from its post-pandemic high in June 2023, BLS data show. While machine shops trimmed headcounts amid cooling demand from customers in the manufacturing sector, wages rose 3.5% YoY in September to $27.25 per hour, BLS data show. The producer price index for machine shops, which measures the average change in prices received by consumers for their output, was unchanged in September versus August, when it reached a new high driven by higher labor and materials costs.
- Grant funding for workforce training or the purchasing of new equipment is a valuable resource that many machine shops overlook due either to a lack of awareness or the complexity of the application process, according to Modern Machine Shop (MMS). Grants are available from states and the federal government, with larger shops having more success obtaining federal money due to the greater impact those grants can achieve, including significant job creation potential and large-scale investment (common goals for federal grants), according to MMS. Small and mid-sized shops are more likely to access state grants, which vary by state but often include programs like Manufacturing Readiness Grants that support advanced manufacturing technologies. Indiana, for example, offers grants up to $200,000 for manufacturers investing in new equipment, while other states, including Michigan, have provided Industry 4.0 grants to help shops adopt cutting-edge technologies, MMS reports.
- Manufacturers’ new orders for machine tools rose to $360.8 million in August, up 22.7% from July but 12.0% behind the August 2023 new-order volume, according to the latest US Manufacturing Technology Orders (USMTO) report from the Association for Manufacturing Technology. August new orders brought the eight-month total for US machine tool orders to $2.86 billion, 11.5% less than the same period last year. The report noted that contract machine shops (aka job shops), the largest cohort of machine tool buyers, increased both the number and value of machines ordered for the first time since March. That’s a sign that production could continue to grow since job shops typically absorb elevated capacity needs from OEMs, according to AMT. The USMTO report is an indicator of future manufacturing activity because it quantifies machining operations’ investments in preparation for new production.
- Artificial Intelligence is set to increase productivity at machine shops in the same way that robotics has, Modern Machine Shop (MMS) reports. When properly used, AI will help revolutionize the machining industry and bring tools to make machine shops perform better, MMS asserted in a recent article. Specifically, AI will help with tool selection, determining the best milling and turning tools for a particular job, speeding and optimizing CNC programming; and monitoring and tuning the machining process to minimize vibration, according to MMS, adding that these three areas are only the tip of the iceberg of the things that AI can potentially improve in machine shops to streamline processes for greater productivity and profitability.
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