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

                            Mar 17, 2023 - Factory Demand Slows
                            • Rising interest rates and the strong US dollar are putting the US manufacturing sector at risk, The Wall Street Journal reported in March. New orders for manufactured goods shrank for the sixth consecutive month in February, according to surveys by the Institute for Supply Management. Also, manufacturing output is down 1.7% from its post-pandemic peak in May 2022, according to a three-month moving average of Federal Reserve data, WSJ reports. The Fed’s aggressive interest rate hikes are raising the cost of borrowing – making machinery purchases more expensive – while the strong dollar is depressing US exports. “As the Fed continues to hike, manufacturing is going to be in the crosshairs,” Jonathan Millar, senior US economist at Barclays PLC told WSJ. “It’s hard to see this sector not suffer some sort of a downturn that is more significant than what we’ve seen already.”
                            • Manually grinding iron castings is demanding work that can be eased through the use of adaptive technology, American Machinist (AM) reports. An example of adaptive technology is the Ironhand glove, the use of which is being pioneered at the Waupaca Foundry in Tennessee. It’s described by AM as “the world’s first '' soft exoskeleton designed for human hands to improve gripping strength and reduce the strain required of the machinist. The Ironhand system consists of a glove that covers all of a machinist’s fingers, and a power pack that the operator wears as a backpack or holstered to the hip. The system is activated when the operator starts moving their hand to perform a task, relying on sensors located on the palm and on the fingers. The most common use of the Ironhand glove is for manual grinding, but it’s also used for press functions and performing other repetitive tasks.
                            • Smaller manufacturers needn’t miss out on the opportunities and benefits of automation as the floor space required to accommodate robots shrinks, Modern Machine Shop (MMS) reports. The growing market for affordable, space-saving robots and pre-engineered robotic work cells enables shops that are tight on floor space to optimize workflows and deliver high consistency, efficiency and quality. Today’s robots boast smaller space requirements, with compact and lightweight six-axis robots that can be mounted close to workpieces and machines in existing lines and cells. Robots deployed for machine tending can improve throughput and operational safety while maximizing overall equipment effectiveness. Smaller robots can also be deployed for secondary operations such as trimming, laser cutting, laser marking, and deburring, according to MMS. Robots can help shops overcome challenges such as evolving customer requirements, supply chain issues, and labor shortages while elevating workforce productivity and maintaining fluid operations.
                            • A looming recession and higher financing costs are expected to cause companies to pull back on capital expenditures this year, The Wall Street Journal reports. A slowdown in investments in property, equipment and technology in 2023 would mark a reversal from the past two years when companies spent heavily on distribution centers, technology upgrades, and other big-ticket items, according to WSJ. Companies in the S&P 500 are projected to boost capital spending by an estimated 6% in 2023, compared with an estimated 20% increase last year, according to an analysis from Ernst & Young, using data from FactSet. Capital spending in 2021 rose by 9% compared with 2020, EY said. Higher interest rates have caused about 30% of CFOs to reduce planned capital spending, according to a recent survey from Duke University’s Fuqua School of Business and the Federal Reserve Banks of Richmond and Atlanta.
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