Job Shop Spending

U.S. metalcutting job shops plan to increase their capital spending significantly next year. According to the recently completed 2008 Capital Spending Survey & Forecast conducted by Gardner Publications, Inc. (parent company of Modern Machine Shop), job shop spending on machine tools and other capital equipment is predicted to total $1.7 billion, almost doubling 2007 levels.

Factors that might be behind this increase in spending come from several quarters:

• The weak U.S. dollar makes U.S.-manufactured goods attractive to overseas buyers. It also makes manufacturing in the United States attractive to foreign businesses.
• Off-shoring is becoming less attractive to U.S. companies that market manufactured goods. Manufacturers in China face rising costs because of changes in government rebate programs, a tightening labor market and environmental pressures. There is a growing awareness among U.S. companies of the “true cost of off-shoring,” especially in light of product recalls for quality and safety reasons.
• A number of large corporations have adopted a business model that relies almost entirely on outsourcing manufactured components. Boeing, for example, assembles airplanes but makes few of the components in-house.
• Productivity gains in U.S. manufacturing are bringing costs down. Widespread adoption of lean manufacturing techniques plus investment in equipment with greater automation and increased capability are reducing labor input.

For job shops, the year ahead will be one of promising opportunities and persistent challenges, and they’ll have to take steps to keep the momentum going.

• Job shops must continue to aggressively reduce direct labor costs and non-value-added activity. Lean manufacturing and automated machining cells must be a priority that is reflected in investment programs.
• Job shops must promote their capabilities assertively, tailor their marketing messages and seek expanded customer bases. Web site enhancement and participation in online marketplaces are two areas likely to get more attention.
• Job shops must stay focused on workforce development. The skill sets needed on the shop floor are shifting. Managers will have to be more flexible and creative about training options, which are changing rapidly. For example, on-demand instruction through online channels is emerging as an effective and affordable option.