Machine Shops

Industry Profile Report

Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters

Industry Overview Industry Structure, How Firms Opertate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.

Call Preparation Quarterly Insight, Call Prep Questions, Industry Terms, and Weblinks.

Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.

Industry Profile Excerpts

Industry Overview

The 17,900 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.

Manufacturing Moving Overseas

Machine shops are small- to medium-sized businesses, and are generally unable to supply customers who move manufacturing overseas where production costs are considerably lower.

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 14-15 workers, and generates over $2 million annually.

    • The machine shop industry consists of about 17,900 companies that employ 263,700 workers and generate $39 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

                            Coronavirus Update

                            May 14, 2022 - Machine Tools Orders Surge
                            • Shrugging off uncertainties, US manufacturers continued to invest in new capacity in the first quarter, resulting in the strongest quarter for new machine tools orders in more than 20 years, American Machinist reported in May. New orders for machine tools rose to $552.3 million during March, up 15.2% versus February, and ending the quarter with the highest order total – $1.47 billion – for any comparable period since 1998. The March result is 20.4% higher than the March 2021 figure, and puts the current year-to-date order volume at $1.47 billion, 26.5% ahead of the January-March 2021 total, according to the Assn. for Manufacturing Technology’s (AMT) US Manufacturing Technology Orders report. On a regional basis metal-cutting equipment orders were strongest in the South Central (up 39.1%) and Northeast (31.8%), although all regions reported positive order activity, according to AMT.
                            • Machine shops that repair or fabricate equipment for manufacturers are poised to benefit from increasing investment and production at US factories. Total private investment in new industrial equipment and machinery peaked in the fourth quarter of 2021 and remains at a decades-long high, according to data from the US Bureau of Economic Analysis. Supply chain woes resulting from the COVID-19 pandemic are behind the energized efforts to bring manufacturing back from overseas, a move often referred to as reshoring, after decades of outsourcing, to China in particular. New commitments by manufacturers to sustainability are also playing a role, with the opportunity to reduce pollution and fossil fuel consumption in transportation across oceans emerging as a selling point, reports The New York Times.
                            • The market for cutting tools, which includes machine shops and other manufacturers, rose 17.2% in March 2022 versus February and 10.6% compared to March 2021, according to the latest Cutting Tool Market Report. The dollar total for US cutting tool orders in March 2022 was at a level not seen since prior to the pandemic, in October 2019.
                            • Machine shops are part of the manufacturing sector but also rely on other manufacturing industries for business. The Institute for Supply Management (ISM) projects a 6.5% 2022 revenue increase for the manufacturing sector in 2022. The ISM noted in its Semiannual Economic Forecast released in December 2021 that 65% of its respondents expect 2022 revenues to top 2021 revenues, with 15 of the 18 manufacturing sectors tracked by ISM pegged for revenue growth. Manufacturing continues to perform at a strong level, going back to March 2020, with March 2021 being the high point over a 12-month period through November 2021.
                            • Many machine shops that are hoping to increase automation in response to manpower issues are focusing first on secondary finishing operations that are conducted offline to remove excess material on parts fabrication. Much of this work is still performed by hand using oscillating tools, grinders, files, abrasive hand pads, and wire brushes. Secondary operations such as honing and polishing can be accomplished using a variety of abrasive tools mounted in a CNC machine toolholder and carousel without taking the part offline. In addition to reducing in-shop labor requirements, completing surface finishing in the same operation as machining also speeds production of high-volume parts.
                            • Employment at machine shops increased 3.6% year over year in March 2022 but was down 4.5% compared to pre-pandemic March 2020.
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