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
Recent Developments
Apr 18, 2024 - Wages Rising Amid Falling Employment
- Employment by machine shops fell 1% in January compared to a year ago after rising 2.9% in the previous annual comparison, according to the US Bureau of Labor Statistics. Longer term, employment by the industry in 2023 was down about 6% compared to 2019. The decline in the number of machinists employed in the US is due to automation, industry consolidation, and a shortage of skilled labor, among other factors. Meanwhile, average wages at machine shops rose 1.9% in January year over year to $26.20 per hour, representing a 16.6% increase over January 219, BLS wage data shows.
- 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.
- 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.
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