No one has ever said being a shop owner is easy. Between seasonal fluctuations in demand, a rapidly changing economy, lack of skilled labor, increasing foreign and domestic competition, and adopting new technologies and automation, there is a lot to keep track of. Here are the six most common pain points that keep shop owners up at night.
1. Existing Customers Pushing for Lower Prices
It is no surprise that customers always push their shops for a lower cost per part (CPP). In the days of high volume production with little variation, chasing the lower CPP made sense. But in today’s world of rapidly shifting market demand, the best shops are those that can iterate on product lines quickly. Time is their most important asset and total cost of ownership (TCO) is their most important metric. However, there is a disconnect between recognizing time over cost as the real value in 21st-century manufacturing, and machine shops continue to feel the squeeze of customers focused on CPP instead of TCO.
Manufacturing is a crowded space. OEMs have been with the same suppliers for decades. International suppliers with below market pricing have forced many U.S. shops to operate on razor-thin margins.
3. The Cost of Quoting RFQ's
Working through RFQs only to face rejection is not just a costly scenario, it’s a frequent one. A survey by Modern Machine Shop revealed that the average shop has a quote to book ratio of only 60%. This means that shops lose nearly half of the RFQs they bid on. That’s not just a waste of time for them, but also a waste of time for customers comparing bids.
4. Time lost waiting on Materials and Secondary Processes
Shops can be fined up to $10,000 for each minute that their shipments are delayed (Business Forward Foundation, 2014). Relying on external vendors to supply materials and deliver on time adds to the risk of potential fines. Add to that complex or unnecessary secondary processes that take time and can cause their own set of delays, and one can quickly see how a small bump anywhere in the material sourcing or production process can snowball into delays and fines further down the line.
5. Lack of skilled labor
As stated in IDC Manufacturing Insights, the skills gap is something manufacturers must address. The silver tsunami of aging workers retiring from positions or leaving jobs earlier than expected is real, and there is not enough skilled talent available to fill the gaps.
6. Overbidding on RFQ's
RFQs are such a headache that it comes up twice in the list of things that keep shop owners up at night. There is a large discrepancy between pricing and cost that is negatively impacting shops, as well as their customers. This discrepancy comes down to many things, but customers not understanding the true cost of manufacturing is at the heart of it.
This blog was originally posted on MakeTime April 8, 2016 and has been updated and re-posted as part of the MakeTime and Xometry Merger.