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 17,600 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 15 workers, and generates about $2 million annually.

    • The machine shop industry consists of about 17,600 companies that employ 265,200 workers and generate $35 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

                            Nov 14, 2022 - Manufacturing Tech Orders Up in September
                            • Appearing to shrug off fears of an economic slowdown, new orders for manufacturing technology rose almost 13% in September 2022 over August, to $519.3 million, according to the latest US Manufacturing Technology Orders Report from The Association For Manufacturing Technology (AMT). However, September new orders were down 12.4% from September 2021, marking the first time an International Manufacturing Technology Show (IMTS) September had a lower order value than the year earlier period. Total orders in 2022 reached $4.2 billion, an increase of 2.7% over the first three quarters of 2021. “We’re seeing the typical bump in orders brought on by IMTS and ‘the IMTS effect,’ but orders throughout 2022 are expected to fall short of 2021 order levels – the largest year in the program’s history,” said Pat McGibbon, chief knowledge officer at AMT.
                            • Metalworking activity was stable in October 2022, reversing the trend toward contraction in recent months, Modern Machine Shop (MMS) reported in November. The Gardner Business Index (GBI) for Metalworking hovered around 50, which signals no change from the prior month, for the second month in a row, reflecting stability of most of the six index components that had been losing ground in the three months prior. New orders and exports contracted again, but at slower rates than in September, while employment and production stayed flat. Backlog also was essentially unchanged, while supplier deliveries continued to lengthen at slower rates, entering levels in line with more typical, pre-pandemic readings, according to MMS. Employment was the only metric to show growth.
                            • The rising value of the US dollar relative to the euro, Japanese yen, British pound, and other currencies is giving foreign producers a price advantage in the US market while making US exports more expensive, The Wall Street Journal reported in October 2022. The unfavorable exchange rates threaten to derail the rebound in US manufacturing, especially for companies with large overseas sales and operations. Industry analysts cited by WSJ said unfavorable exchange rates will likely crimp industrial manufacturers’ revenue . But exchange rates cut both ways: The currency shift is helping some domestic manufacturers that import foreign-made components for use in their US factories.
                            • The Occupational Safety and Health Administration (OSHA) is considering lowering permissible levels of lead in the blood of employees in various industry sectors that could potentially affect more than 1,000 firms. Businesses in the fabricated metal product manufacturing sector (NAICS 332000), which includes machine shops, would be impacted if OSHA takes action, according to The Fabricator. According to OSHA, some companies in the sector likely have employees with blood lead levels (BLLs) greater than 5 micrograms per deciliter. The agency, which issued advance notice of the proposed rulemaking in June, has agreed to extend the comment deadline two months to October 28 due to controversy. Many states already have lowered lead exposure thresholds, putting pressure on OSHA to re-examine its 45-year-old standard.
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