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JOB SHOPS

During the period of 2000 to 2003, job shops faced difficult years, as the industry experienced negative growth of 1.6 percent. The strength of the national economy plays a significant role in creating market demand. According to Dun & Bradstreet, in 2006, the U.S. job shop industry reached a total market size of approximately $30 billion. Companies equipped with state-of-the-art technology – such as computer numerically controlled (CNC) machines – will be in a better position to compete. The market is highly competitive, and product quality, reliability, on-time delivery and prices are the major areas of competition. Customers typically prefer to remain with a source they have found to be reliable in the past.

The job shop industry is facing several challenges that may affect its outlook. One challenge in particular includes customers who expect to pay the lowest price; this can be especially challenging because industry participants not only compete within the United States, but also globally. Another challenge is that parts are getting smaller. Parts quoted for automotive, transportation and electrical applications are shrinking in size and mass which is necessary to reduce energy demand and to improve both operating and purchasing economies. Parts that remain in the United States for manufacture have requirements regarding dimension, concentricity, surface finish and other parameters that are at – or just beyond – the limits of most widely available equipment. Many parts must be made using the latest technology, but many shops are still waiting to justify that kind of investment. Leading shops have already made this investment, but pricing battles often make their newer precision technology uncompetitive regarding price.

The U.S. job shop market is also affected by widespread globalization in the manufacturing industry. While globalization is an important driver for the Asian markets, especially the Chinese and the Far East markets, it adversely affects the U.S. market. The shift toward Asian and Eastern European markets is mainly due to economic compulsion, with companies eager to take advantage of the lower labor rates in these countries compared to developed countries in North America, Europe and Japan. Most of the growth in the Asian markets has come at the expense of North America and Europe. Companies (such as those engaged in the automobile industry) have shifted many operations to Asia, and job production is moving to Asia. However, the shift rate is anticipated to level off, as the labor rate disparity between the Asian and North American/European markets will lessen.

The following are simply a few topics both you and your IPA consultant can discuss in order to enhance sales and improve your job shop.

• Innovation. Job shops need to further invest in research and development (R&D) in order to bring to market innovative, higher-quality and more durable products that can be sold at higher prices. Recently, more companies have been adopting IT solutions, such as the Internet Parts Ordering open standard, which works to replace fax and phone communication between manufacturers, distributors and end-users, thereby increasing efficiencies throughout the industry.
• Inorganic Growth. Recently, many job shops in the United States have attempted to insulate themselves against volatile economic conditions via acquisitions and a focus on higher-margin, higher- growth sectors. More industry participants should work towards this goal as this has allowed many U.S. job shops to capture the benefits of scale, strength and scope thereby improving profitability.
• Supply Chain Management. Job shops can benefit from more efficient supply chains. For example, the introduction of automated merchandise planning systems can assist with inventory and forecasting demand. Inventory management systems help companies to not only optimize product replenishment, but to shorten lead times as well.

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