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 consists of 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.
                            Industry Forecast
                            Machine Shops Industry Growth
                            Source: Vertical IQ and Inforum

                            Recent Developments

                            Jun 18, 2024 - PPI Sitting at New High
                            • Producer prices for machine shops rose 1.5% in April compared to a year ago after posting a more substantial 7% gain in the previous annual comparison, according to the latest US Bureau of Labor Statistics data. April's producer price index was unchanged from March, which was a new high for the industry. Growth in employment and wages at machine shops has slowed as price hikes have moderated, reflecting a cooling of the US labor market and the broader economy. Employment by machine shops shrank 1.9% in April year over year, while average industry wages ticked up 1.1% over the same period to $26.48 per hour – below their peak in December but still trending upward – BLS data show.
                            • Contract machine shops significantly reduced their manufacturing technology orders in April compared to March, according to The Association For Manufacturing Technology’s latest US Manufacturing Technology Orders Report. April manufacturing technology orders totaled $317.9 million, down 25.6% versus March but off only 5.4% compared to a year earlier. 2024 has seen the weakest start to the year since 2020, when pandemic-related shutdowns caused orders to plunge. Year-to-date orders are tracking 16.2% below that of January through April 2023 amid declining sales of fabricated metal products. Machinery orders have been falling steadily since peaking in Q4 2021, according to the USMTO data.
                            • 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 with it tools that will 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.
                            • According to newly released Census Bureau figures, US capital expenditures for robotic equipment totaled $12,960 million (not statistically different than 2021) and accounted for 1.1% of total equipment expenditures in 2022. The manufacturing sector was the largest investor, accounting for over half (56.2%) of all robotic equipment expenditures that year. Amid a stubborn labor shortage, machine shops are relying increasingly on automation, including robots, for some tasks, and combining robots with CNC machines to achieve greater productivity. Collaborative robots or “cobots” are becoming increasingly popular in machine shops because they’re well suited for handling repetitive machine-tending tasks formerly performed by humans.
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