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Industry Profile
Machine Shops
SIC Code: 3599
NAICS Code: 33271
Industry Overview:
There are approximately 22,000 companies in the U.S. machine shop industry. These companies have a combined annual revenue of $30 billion. The industry is highly fragmented with the top 50 largest companies only generating 15 percent of the industry’s revenue.
Competition:
Sales in the industry are fueled by general U.S. manufacturing activity. Profitability is influenced by engineering capabilities and efficient operations. The industry is generally labor intensive, requiring a skilled workforce. Smaller companies can compete effectively by specializing in niche services.
Products, Operations & Technology:
Machine shops typically own specialized tools and machinery that can be used to perform specialized metalworking operations such as drilling, boring, tapping/threading (cutting threads in a hole/cutting threads on a bolt), milling (leveling a surface) and grinding. As precision is often a requirement in many jobs, the machines are often computer-controlled.
Operating activities are divided into four main segments: pre-production, machine setup, production and quality control. Machine setup can be a time-consuming and expensive process, and often must be completed for each job. A significant expense are the consumable tools and equipment used during operations: machining bits, drilling bits, milling heads, cutting tools and abrasives.
Sales & Marketing
Direct contacts and relationships with local manufacturers are typically a major source of revenues. Since the end product of machine shops is typically specialized and customer-specific, most machine shops require a high level of technical consultation between machine shops and customers. As such, the majority of work is typically for regional companies. Machine shops may serve a wide customer base of local manufacturers.
Manufacturers of auto parts, aircraft parts, electronics and industrial machinery are some of the major national consumers. Companies are generally awarded contracts through competitive job bidding. Jobs are generally awarded based on a combination of price, quality, and ability to meet deadlines. Quality and the ability to meet deadline requirements are generally more influential than price.
Equipment & Machinery:
Machine shops require large investments in machinery and equipment. Equipment such as drill presses, lathes and milling and grinding machines may cost several hundred thousand dollars. However, much equipment can be purchased with financing provided by manufacturers.
Workforce:
Machine shops require a workforce with developed technical and engineering abilities. However, employees may only need equipment-specific training. Continuing safety training for its’ workforce should always be an emphasis, as the industry injury rate is 50% higher than the national average.
Economic Statistics and Information:
Index of Industrial Production - Federal Reserve Board
Change in Producer Prices - Bureau of Labor Statistics
Industry Forecast
The output of US machine shops is forecast to grow at an annual compounded rate of 5 percent between 2009 and 2014. Data Published: October 2009
Machine Shop Production Growth Recovers Then Moderates
Forecast provided by First Research. First Research forecasts are based on INFORUM forecasts that are licensed from the Interindustry Economic Research Fund, Inc. (IERF) in College Park, MD. INFORUM's "interindustry-macro" approach to modeling the economy captures the links between industries and the aggregate economy.
