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
Dec 18, 2024 - Jobs Fall While Wages Rise
- Producer prices for machine shops rose 1.2% in November compared to a year ago after rising 1.2% in the previous November-versus-November annual comparison, according to the latest US Bureau of Labor Statistics data. Employment by the industry fell by 3.1% year over year in October, extending a mostly downward trend from its post-pandemic high in June 2023, BLS data shows. While machine shops are trimming headcounts amid cooling demand from manufacturing customers, average industry wages rose 3.9% YoY in October to a new high of $27.49 per hour, BLS data show.
- A sharp rise in the Gardner Business Index’s (GBI) Future Business Index to 62.6 in November 2024 compared to about 55 a year ago is stoking optimism that metalworking activity – long in contraction – will improve in 2025, Modern Machine Shop (MMS) reports. While the metalworking industry continued to face challenges in November – posting a composite GBI of 44.7 – its upward trend over the past quarter signals a possible bottoming out of the current contractionary cycle that began in early 2023, per MMS. (An index reading below 50 indicates contraction.) Four of the six index components – supplier deliveries, exports, production, and new orders – showed improvement compared to the previous month, with only employment and backlogs posting declines. The increase in the Future Business Index suggests industry leaders are anticipating more favorable conditions in 2025, likely driven by November’s election results, per MMS.
- 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.
- 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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