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Who owns a larger shop?

I've always been fascinated that machine shops can grow so big machining other company's parts!

Precision machining is so damned competitive, it's wild these big shops can make significant hourly rates, which are required to grow and maintain such large businesses.

When I think of a large machine shop, my mind automatically assumes it is a "factory", that is machining their own products.

There can be huge differences between hourly rates for subcontract manufacturers versus product manufacturers. Subcontractors are offering essentially a commodity, and thus have to compete with many rivals. Whereas product companies offer their own products to the market---priced at where the market will bear.

And the markups on products can be substantial enough to produce an equivalent to hundreds of dollars per hour (or even thousands) for a shop rate.

Highly specialized subcontractors may be in this pricing category, but I can't see how a CNC subcontract machining company can compete at "product line hourly rates"?

How can job shops grow so big, from a pricing-power standpoint?!!

ToolCat
Our shop was started in the late 80's and fell into a very niche market where there's high demand for said "name brand" parts that we make and it just took off from there (I'd love to give more details but due to legalities I can't advertise on public forums). Given, we do have our own engineering department where changes to the customers parts are made after approval most if it is cosmetic/ aesthetics. Believe me, as an employee of 4 years so far I don't understand it either but I'm well taken care of and I enjoy what I do which I'm thankful for everyday as many can't say the same.
 
Guess my math is different from others math:rolleyes:

I know a job shop that runs 20 HMC's
each operator responsible for 2-3 machines.
3 shifts of 7 operators, So 21 operators total.

lower paid operators, because they have 3-4 programmers separate.

With this scenario, don't know how one could math out that a small shop could compete, or that this shop could not charge less than a small shop.

guess i need more maths:D
 
I was watching a video the other day about a one man welding shop from Michigan. The guy is swamped with work but he said that one job he has is welding caterpillar oil pan casting from the factory. He said he did more than 1000 a year. If a one man shop can have a contract like that, I can only imagine what kind of production contract big shops have.
I have one worse, a 6 part assembly, approx 120-150 sets per month, average $70k per month, 30% material cost, So $50k per month on only one assembly of 6 parts.

And that's one customer, and only one PO from them.

shit can get real!
 
Guess my math is different from others math:rolleyes:

I know a job shop that runs 20 HMC's
each operator responsible for 2-3 machines.
3 shifts of 7 operators, So 21 operators total.

lower paid operators, because they have 3-4 programmers separate.

With this scenario, don't know how one could math out that a small shop could compete, or that this shop could not charge less than a small shop.

guess i need more maths:D
I git what you're saying. But...

Most smaller shops don't work on long-term contracts, they work on purchase orders as they are issued by the customers.

The challenge for a huge shop isn't so much pricing, but the need to acquire long-term contracts. And I think there lies the key to building such a large shop: the ability to sell, acquire, and deliver on multi-year purchase orders.

No company that operates on random, weekly purchase orders is going to be able to buy an army of HMC's, I wouldn't think.

The volume pricing power that large shops have can often be negated by their overhead though....

ToolCat
 
We have no product of our own, and no long term contracts. I don't have an army of HMC's but we have a fair amount of CNC's. I also spend 25 percent of my time doing sales to ensure we have work month after month.
 
Guess my math is different from others math:rolleyes:

I know a job shop that runs 20 HMC's
each operator responsible for 2-3 machines.
3 shifts of 7 operators, So 21 operators total.
So our plating place was kind of dinky, small potatoes even for the industrial park we were in. 400 workers :) Lots of our customers now are in the 2500 - 3500 employee range. You ain't shit if you're less than a thousand ...

Gleason was all set to buy one of the older major gear machine plants in Chongqing I think ? It was all going great until they said "So we'll have to lay off 2,000 people" and the city said "Been nice talking to you ! Don't let the door hit you in the ass on your way out ! Have a nice life !"

Different priorities ...

With this scenario, don't know how one could math out that a small shop could compete, or that this shop could not charge less than a small shop.
If the big shop is busy. If the big shop is only running 50%, then the little guy has the bigger stick ...

guess i need more maths :D
Please, not math ! we hate math !
 
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Yeah I have a couple customers that if I scale will pull orders from slower less reliable small shops.
The difference in overhead doesn't have the compounding variable as high as the profits created, not even close!
unless your a dumb ass and hire too many over paid office and sales people, that will divide it further, expensive ass machines also, well for at least the loan term anyway.
 
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Guess my math is different from others math:rolleyes:

I know a job shop that runs 20 HMC's
each operator responsible for 2-3 machines.
3 shifts of 7 operators, So 21 operators total.

lower paid operators, because they have 3-4 programmers separate.

With this scenario, don't know how one could math out that a small shop could compete, or that this shop could not charge less than a small shop.

guess i need more maths:D

Well, you've just described a "larger" shop who's core operation is HMC.
You think they'd be compatible for nothing but turned parts?
Wire EDM?
Grinding?
Welding?
 
Well, you've just described a "larger" shop who's core operation is HMC.
You think they'd be compatible for nothing but turned parts?
Wire EDM?
Grinding?
Welding?
Ahh yeah, I see where your goin. yep!

Yeah your not taking that stuff in, and yeah a lot of them don't have any turning, or are all turning.

Once you pack all that shit together, especially fab shop shit like welding, bending... I think your kinda gett'n off in the woods.

Like these small shops say'n their a machine shop but they are more what my boss would say we were which was "manufacturing whores" "we'll do any thing for money"

grinding, welding, bending, surface finish, heat treat.......manufacturing whores, anything for money 🤣

And that type of shop, like a lot of little shops, is not really the same thing, an off the beaten path deal, a guy willing to do anything with the skills and tools he has.

This is where people need to read "FOCUS, The future of your business depends on it"
 
This is where people need to read "FOCUS, The future of your business depends on it"
Mmmm, I kinda think if you are in this for the business end ? You're sort of an idiot. Just about anything else gives a better return with a lot less hassle and investment. You kind of have to like it, which is not a good position to be in, from a business point of view.

Unless you're in defense, which is basically a giant fuck-you to the people of the country.
 
Fore sure,
Yeah it's kind of a shit business model, I like it so that does make it better.

I think I would rather do something I like and make less dinero.
Then to do something I don't care for but make millions :D
 
Like these small shops say'n their a machine shop but they are more what my boss would say we were which was "manufacturing whores" "we'll do any thing for money"

I used to contract out all machining. A manufacturing whore was exactly the kind of shop I looked for. With big specialized shops I could wait several months for a finished part as the work-in-progress passed from shop to shop like machining > coating > laser engraving. A whore would get finished parts to me in 2 weeks.
 
I git what you're saying. But...

Most smaller shops don't work on long-term contracts, they work on purchase orders as they are issued by the customers.

The challenge for a huge shop isn't so much pricing, but the need to acquire long-term contracts. And I think there lies the key to building such a large shop: the ability to sell, acquire, and deliver on multi-year purchase orders.

No company that operates on random, weekly purchase orders is going to be able to buy an army of HMC's, I wouldn't think.

The volume pricing power that large shops have can often be negated by their overhead though....

ToolCat


Did you actually read that link that I posted?
(you "liked" it)

I think that fella checked all of your boxes.


----------------------

Sweatin' to the Oldies!
Ox
 
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Did you actually read that link that I posted?
(you "liked" it)

I think that fella checked all of your boxes.
I get that magazine Ox, and read the article.

The guy is an anomaly...big time! Couldn't speak English when he came to America, took a machining class because he thought it looked manly, started a shop in northern California in 2005---just a few years after coming to America, and now has a hundred thousand square foot CNC subcontract shop with over 100 employees.

There's just not that many people in the entire world that could do what he did. Gotta give him credit, it takes special kind of drive, perseverance, smarts, stress management, and people skills to accomplish anything close to what he has.

And being in California was his ace-in-the-hole, I'd say. Tons of high-tech CNC machine work available, and lots of it on longer-term contracts by all the tech companies in the state and Western region.

A name that comes to mind who has created similar success, in a similar time frame, is Glenn Seekins. He started with a Haas Mini-Mill in his garage, and came to PM to learn how to run it. Some 20 years later he owns a firearms manufacturing powerhouse. I'm not sure how big he is, but it has to be in the hundreds of people.

Glenn was a bit different than the purely-subcontract California guy. Glenn developed many of his own-design firearms accessories, eventually designing and building complete high-end rifles, sold through distributors worldwide. And the guns sell for big bucks, which allows him the "big hourly shop rates" to grow like a mad man.

ToolCat
 
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And being in California was his ace-in-the-hole, I'd say. Tons of high-tech, high-dollar CNC machine work available, and lots of it on longer-term contracts by the tech companies with little-to-no in-house machining.
He's close to a few other big shops in the area with similarly large horizontal FMS cells, many of which supply parts to semiconductor companies like Applied Materials.

That industry is feast or famine. Hats off to them.
 
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Just curious,
When I originally started using this site a year a go or so, I thought 'shop owner and management' cool.
that definition can differ, now a year in seems most are just lone rangers, a guy out in a shed on some land with a couple machines.

I know large ones like Orange Vise, and Maritool are on here, and Dennis/dstryr, but I wanted to see how many daily drivers on here actually own a large shop.

Now I don't mean you have 20 manual machines that all together cost less than an auto saw. I mean you have over a million$ in CNC machines and around a dozen employees or more,
you get the drift.

I would think if you had a business that large your not on here trading blows with us sheep, but thought I'd ask, genuinely curious. :cheers:
What is a larger shop?
8,000 sq.' four on the floor. 6 hands including office.
 








 
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