Every year Modern Machine Shop sends out a nationwide survey to understand how machine shops are running. They use the data to analyze the current landscape and provide best practices for the shop floor. This data shows what top shops around the country are doing to improve profitability, and productivity.
Based on survey results from 300-400 participants, Modern Machine Shop picks their “Top Shops” of the year. These shops are invited to the Top Shops conference to network with colleagues and peers and speak during panel discussions to educate others.
Here are some of the key takeaways from the 2019 Top Shops Conference:
Running lights out can increase profit by 3-10%
The top 25 percent of shops run machines 14 hours per day, versus 8 hours per day in the bottom 25 percent. These top quartile shops are rapidly shifting towards unattended machining, and it shows in their profit margins. Profit margins in shops running lights out were 3 percent higher than those who were not. One of the Top Shops Conference panelists, an operation out of Long Island, NY, reported a profit increase of 10 percent after going lights out.
Implementing lights out does come with its challenges, so it is crucial to assess the risks involved.
30% of shops surveyed already use connected devices
Connectivity and technology are working their way into every industry, and machine shops are no exception. Implementing a “smart” machine shop is becoming easier than ever with regular MTConnect standards being released to include more machine shop devices.
Machine shops implementing both unattended manufacturing and connectivity in their shops showed 9 percent higher profit margins than shops who had not implemented either. Those shops also saw a 6 percent higher profit margin over shops who are only running unattended machining.
Of all the shops interviewed, 30 percent had already implemented some connectivity, and 75 percent had a plan to begin implementing within the next few years.
Not only will connectivity make your shop more efficient, but it can also help to attract and keep a younger generation of workers. Millennials and Gen Zers currently makeup over 50 percent of the workforce and are more attracted to jobs involving technology. Connectivity can help with bringing a younger generation into the machining environment.
Top quartile shops outspend bottom quartile shops 9 to 1
When it came to investments in the business, the top quartile of shops is spending $450,000 on capital equipment per year, versus $50,000 per year in the bottom quartile. These investments go towards automation, machine upgrades, safety upgrades (fire suppression, pollution control equipment, interlocks, etc.), and shop floor improvements.
The survey also showed that the top quartile of shops is using machine tools that are less than 5 years old while the bottom quartile use machines 10 years old or older. With the rapid technological advancements in the industry, newer machines will have technology, processes, and tooling that can have significant impacts on the productivity and speed of machines versus those older machines.
Specialization drives higher profit margins
Becoming specialized allows machine shops to stand out from their competition. Yes, they give themselves a narrower customer base. However, if they have become the expert in their field, they will see more profit from customers who understand the value the shop is providing.
The quote-to-book ratio in the top quartile of shops is 40 percent, as opposed to the 68 percent in the bottom quartile. While bottom quartile shops are winning more quotes, most of what they win is low profit margin business. Some shops even lose money on projects.
In many cases, specialization comes from more complex processes and parts to make a shop’s offering unique. The highest performing shops were shown to use four- and five-axis machining because the level of precision and complexity is greater. This allows the shop to produce higher value and more specialized parts.
Sitting through the Top Shops conference provided a unique insight into key metrics of successful shops, as well as trends in the machining industry. A digital world is driving shops to become more efficient, connected, and specialized to excel at their craft. Although challenging, it has shown to be highly rewarding when properly implemented.