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Job Shop Feasibility Question … Crazy Idea for Symbiotic Relationship

johnsnd

Plastic
Joined
Nov 9, 2017
So I have what may or may not be a crazy idea. I am an engineer at a big company and I work at a location in Chattanooga TN that focuses on RnD and one offs for the big company. We have a fairly large machine shop with room to grow. In the shop we have a Haas VF6, VF5, Okuma captain L70, and about a 15 other small machines. Our internal workforce, ie machinists, is getting ready to retire and we are slow to staff up. We are even out sourcing because it is getting to the point where it is cheaper. If we were a machine shop we would have closed up long ago but we are really a bunch of engineers using the shop at about 20% capacity. The company is too bloated to go after small work because our legal contracts are so stringent that nobody is interested in signing it just to get some parts made.

The big idea … I pitched to my management is to hire a motivated and talented individual to basically come in and run a business out of our location. We already paid for the machines, we paid for tooling, and we pay for facility costs. This individual could run a turnkey business with no startup cost, and only have to worry about labor, materials, and tooling. We could cover the cost of machine maintenance and even buy new machines to support their business. For us we just really need talent to support our R&D work. So if they could do cam work and support us they could run the business autonomously. I assume the parent company would want some kind of kick back but I imagine it could be off of profits only. Or maybe they keep track of how much work they do for us and charge us the same rates but we credit for the year. It seems like an amazing win-win symbiotic relationship.

The hitch is, my manger is very risk adverse and passive. The way I see it the parent company bares none of the risk. If said manager succeeds then we win, if they fail then we get someone else and try it again. I would imagine that the person running the shop could be much more competitive than other shops without some of the operating costs. They could run 24x7 if need be.

So my question to all you talented people out there is, am I missing anything? Are there potential pitfalls I should be aware of? Is this a good deal and would you jump at the chance? I am about to take the reins, make a business plan, run the numbers, and tell my boss’s boss. I am not interested in running the shop as I am pretty happy as an engineer. My goal is to see the location grow and take on more design work. To do that it would be nice to offset our current cost by another revenue stream. If the machine shop business offset the facility costs, or was even less of a drain then it is currently, that would be great.
Thanks ahead of time for your thoughts and comments.
~Nick
 
Having worked for some very large companies, what you are proposing would be just a pain the butt for them. The machinery has been bought and paid for. It may or may not have been written off on the books, most likely it has. As far as the facilities, they are just a line item in a ledger somewhere. If the company need the space they would get rid of the machines by scrapping or used machinery dealer ($.20 on the dollar). The advantage of being able to get prototype or one off parts is to management insignificant. Plenty of outside suppliers can handle that. Paper work, liability, insurance....would be waayyyy more an issue than any value.

The only way I see something like to work is if the shop is in a separate building that could be sold intact. The terms of the sale could be quite liberal but none the less it would be a clean break.

Tom
 
Nah. If you’re only running at 20% capacity it’s not going to be enough income to feed the guy that wants to run the shop. If he brings in outside work to fill idle time what happens when that conflicts with your perceived gotta have it now job. You gonna be happy with next Tues.?

Ok so you’re good with next Tues. The guy finishes the other job at the end of the day Fri. decides to take a long weekend cuz your job only takes an hour and a half so he’ll just get in early and have it done before you come in for the day. How you gonna feel about that?

Over the years I have had multiple customers ask me to move in-house and be their personal machine shop. Ain’t gonna happen. See above scenario. I’m a one man shop and I do that all the time.
 
Based on my experience it will never fly. These big companies are most worried about any risk to their pile of money. They will opt to hire it out first.
 
Why not look for "that guy" to run the place, and then put him in charge of a newly formed incorporated business, that's wholly owned by the parent company...? Then your company has full authority, so you don't have to worry about conflicts of interest. The subsidiary could be sold off in the future if need be.
 
How many machinists are currently working there? Can you do with 1/5 of the workforce, thereby transforming the job from a 20% to a 100% of the time sort of thing?

If the 'new guy' needs to hire a crew to do your work, he needs the cash flow to pay them every week, regardless of whether he's doing your work or his own 'paying work'.

I dunno, I'd be leery of getting work done in a place where the 'owner doesn't own'. Who gets sued if something goes awry? Who assigns the blame and to what and where do they assign it?
 
For the life of me I can't figure out who you work for and I've lived in/near Chattanooga most of my life. Westinghouse? Terracon?

Anywho, your boss is likely to worry about liability as well. Say, this person makes widget X for company Y that makes helicopters. Widget X fails, several people die from earth poisoning. Company Y faces a lawsuit and drags you into it.

Go talk to Chattanooga State, start up an apprenticeship program while you still have time with the old timers. If you paid enough and the work was interesting enough, you'd be able to drag a few from other shops in the area.
 
Well it looks like the nays have it. I guess I was being a little too naive that a partnership could work out. All the points addressed are ones I had considered. I just thought it would be possible to sort things out. The comments about legal not wanting to get involved in such a deal was my biggest concern. Thank you all for your feedback
 
We tried to do this the other way around at a place I used to work. We had a lot of empty space in our building and we had a local shop we liked that was struggling to stay afloat. We offered to let him move in to our space, and count it against work. He declined, and honestly that was probably the right decision for both parties involved.

The value to the in house machine shop is that you can walk down and get something done *right now* without the internal paperwork and "stop everything now" machine shop fees from an external shop. You also have control over quality, timing, and hopefully a short path between the person who knows how the part must function and the person who knows how the part can be made.

The way I see it almost every step towards a commercial shop is a step away from the current benefits. I have seen a similar thing work with merging two types of engineering work, but in that case it was a firm where their main work was 50% capacity of "this week" projects, and they filled the holes with some "anytime in the next year" projects. Sometimes those other projects would go weeks without work as the "right now" projects were 100%. Most machine work can't afford that sort of wait.
 
The other issue not touched upon is finding "that guy". "That guy" likely already has his own shop. Most businesses starting from scratch fail which means that most people that think they are "that guy" really aren't. So to fin the right "that guy" you'd have to go through the several candidates over months or years all the while the guy hiring/firing, filling in and finding new candidates is slowing morphing into "that guy". Shit that's exactly how I ended up running my shop.
 
If you switch "that guy" for "that company", then it can apparently work. Edison Welding Institute down the street contracts out the operation of their internal machine shop space and equipment, and the shop does work mainly for EWI. I know some equipment is 'legacy', but don't know the particulars of what stays or goes, or whether existing employees were retained in the contract. The contracting company has their own machine shop in the area. I don't know if there is cross-polination of either the work or the personnel. I also don't know first-hand if this is still the current arrangement. My info is 8 years old or so.

Other large companies in the area outsource internal segments of their operations as well. Case in point: Cardinal Health has an outside contractor run their cafeteria operations, and some of their facility operations (things like setting up furniture in rooms, handling the general business loading dock). Stuff that is not core to their medical endeavors.

Chip
 
Chip's idea sound like it might be something worth considering. Maybe one of your best soon to retire machinist could incorporate and then be contracted for a set price and set time to run your parts in your shop.
The contract could be renegotiated periodically.
 
Chip's idea sound like it might be something worth considering. Maybe one of your best soon to retire machinist could incorporate and then be contracted for a set price and set time to run your parts in your shop.
The contract could be renegotiated periodically.

You must have a different idea of what 'retiring' means than I do :D
 
One of the nearby aerospace co.s does this. They have an in-house tool room, but sub work out to a retired (from there) machinist who has some machines at home.
 
We could cover the cost of machine maintenance and even buy new machines to support their business.

The way I see it the parent company bares none of the risk.
Are you fucking kidding me? You think your boss is really going to foot the repair bill when the "tenant" crashes his machine? This idea is fraught with risk to your business.
 








 
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