Manufacturing is growing, in part fueled by reshoring, but job shops need to become savvy marketers to attract new business, says Mitch Free, CEO of MFG.com., an online marketplace that helps companies source custom parts, tooling and other products.
In a survey of 259 small manufacturing companies, MFG.com found that 78% are optimistic about their sales and profits for 2012. Just under half reported they are operating at 70% or more of capacity. The report notes that the rule of thumb in the job shop industry is that companies reach the breakeven point when they are running at 75% of capacity.
Some 40% of manufacturers surveyed said they had benefited this year from reshoring, where they had received a contract that was previously sourced to a foreign supplier.
I was impressed with that number, said Free. I didnt expect it to be that high.
Standing out from the Pack
While he is optimistic about the growth of manufacturing in the United States, Free said small manufacturers need to adapt to a changed environment where they must differentiate themselves from competitors and pursue global opportunities.
Small manufacturers can't be successful as generalists, said Free. They need a unique selling proposition. If they are in the business of machining titanium components that are no bigger than a breadbox for commercial airplanes, then that has to be their niche.
Once they have defined a niche, Free said, job shops can promote their exceptional capabilities, charge a premium for their services and make a really good profit.
Potential customers are very active in the market right now sourcing for varied reasons like moving to a more distributed supply chain or looking for local partners they can innovate with, he noted.
The survey found that more than 80% of job shops get little or no business from outside the United States. Free said small manufacturers traditionally have not had an export mindset because of the size and vitality of the U.S. market. But in the future, he said, these companies must focus more on major consumption markets such as China, India, Indonesia and Russia.
A Potential Drag
A potential drag on small manufacturers is an inability to find skilled workers. Job shops are reporting one of their greatest challenges is finding skilled employees, said Free. Sourcing professionals have reported that they want to reshore more work but are having a tough time finding high-quality suppliers with capacity. This is especially true in the areas that were hit hard by offshoring.
While technical schools and community colleges are ramping up programs to produce more skilled workers, Free said small employers must also take on some of the challenge by establishing apprenticeship programs.
Some of the guys I know say they are willing to take people with the right aptitude and attitude, said Free. If they have some mechanical aptitude and are good with computers, because everything is CNC these days, they are willing to train them.