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 17,230 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 Industry

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 13 workers, and generates about $2.3 million annually.

    • The machine shop industry consists of about 17,230 companies that employ 264,300 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

                            Mar 18, 2024 - Price Increases Eased in 2023
                            • Producer prices for machine shops rose 1.4% in December compared to a year ago after rising 6.7% in the previous annual comparison, according to the US Bureau of Labor Statistics. Employment by machine shops was relatively flat (up just 0.2%) in December year over year while average industry wages continued to climb, reaching a record high of $26.88 per hour in December, up 3.1% versus a year ago, per the BLS. Wages at machine shops have continued to rise despite a slowdown in the US manufacturing sector, suggesting that competition for skilled workers is still intense.
                            • Contract machine shops decreased their orders for manufacturing technology in January to the lowest level since July 2023 and by 27.1% compared to the previous month, according to the US Manufacturing Technology Orders Report published by The Association for Manufacturing Technology. Contract machine shops – the largest customer of manufacturing technology – are experiencing subdued order activity amid a protracted slump in US manufacturing. The Institute for Supply Management’s (ISM) manufacturing PMI fell to 47.8 in February from 49.1 in January marking the 16th consecutive month the PMI remained below 50, which indicates contraction in manufacturing. Moreover, US manufacturing employment fell by 4,000 jobs in February, according to the BLS. On a positive note, the February ISM survey showed inventories declining for a third straight month, which the ISM considered as positive for future new orders and production growth.
                            • The US manufacturing sector is undergoing a paradigm shift in payment practices, with real-time payments poised to replace traditional methods, according to PYMNTS Intelligence. Real-time payments (RTPs) – instant payments that are processed immediately and continuously, 24/7– are poised to replace checks, ACH (automated clearing house), and other traditional forms of payment, changing the way businesses conduct financial transactions. A study by PYMNTS Intelligence and the banking association and payments company The Cleaning House finds that 96% of manufacturers expect RTPs to replace traditional checks when making payments, while 87% anticipate the same for receiving payments. Similarly, 81% of firms forecast RTPs replacing standard ACH payments for making payments, while 84% predict the same for receiving payments. However, traditional payment methods will still have a role to play, according to PYMNTS Intelligence, with payment by cash and credit cards expected to remain relatively common.
                            • Shop class is making a comeback in US high schools, Modern Machine Shop (MMS) reports. A recent MMS article links the current skilled labor shortage in metalworking and CNC machine shops to the near disappearance of shop class from middle and high schools from the 1990s through the 2010s. It largely blames the “No Child Left Behind Act” of 2002, which increased accountability by requiring all schools to help all of their students meet state-set standards. Pressure to meet federal guidelines left little time for career and technical education (CTE) programs and deprived students of the opportunity to learn technical skills and employers of a pipeline of qualified applicants. Per the Michigan Dept. of Education, 95% of high school students enrolled in a CTE program graduated in 2022 versus an overall graduation rate of 81%. Moreover, CTE graduates are out-earning graduates who didn’t focus on CTE.
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