METALWORKING - Practical Machinistlosasso.com @losasso /losassoinc 4853 n. ravenswood ave. chicago, il 60640 773.271.2100 techspex.com @techspex 6915 valley ave. cincinnati, oh 45244

WHERE CREATIVITY MEETS ACCOUNTABILITY.

METALWORKING OPERATIONAL TRENDS SURVEYAUGUST 2014

LOSASSO.COM

@LOSASSO/LOSASSOINC

4853 N. RAVENSWOOD AVE.CHICAGO, IL 60640 773.271.2100

TECHSPEX.COM@TECHSPEX

6915 VALLEY AVE. CINCINNATI, OH 45244

650.726.7007

EXECUTIVE SUMMARY

Metalworking Trends Survey, August 2014, Published by: Techspex and LoSasso Integrated Marketing Page 3

In 2013-‐14, the metalworking industry appeared to be stable as the overall market continued its fourth straight year of steady-‐to-‐upward growth following the crash of 2008-‐09. This year, less than 50% of survey respondents reported business to be up, 29% reported business was steady (a 6% increase from last year’s results), and 8% reported business was down substantially (a 3% decrease from last year). While metalworking professionals are generally optimistic when looking forward, “finding qualified labor” continues to be a serious challenge for metalworkers, having the effect of slower growth. Though “government and politics” and “regulation and taxes” were indicated as the second and third greatest threats to business success, it’s hard to say if either had a direct effect on individual companies’ profits. A slower pace of change among metalworking companies is a result of improving economic conditions and declining fears about business failure. While in 2010, the necessity for change was critical for survival, more favorable business conditions over the last few years have reinforced the idea that if it ain’t broke, don’t fix it.

We were able to isolate survey respondent groups as strong or weak performers. Strong performers are more likely to report a high pace of change. Weak performers were three times more likely to report that training and education have no effect on their ability to compete and grow, while 55% of stronger performers found training and education critical to their business success.

By teasing out a series of tendencies, we were able to provide a snapshot of strong performers in 2013-‐14 in comparison with weaker performers.

Snapshot of the strong and weak performer Strong-‐performing respondents tended to be more open to change in general, and placed more value on training and education. They also reported a more positive impact from training and education programs than the weaker performers, who overall still placed value on training. The stronger performers were more likely to add new applications, processes or equipment than weaker performers. Strong performers saw a more positive impact in increasing their North American business and taking better advantage of global business and they were more likely to have moved or upgraded their facilities. Not only were strong performers more likely to increase their staff/add employees; they reported a more positive return/impact as a result of hiring more employees and paying for education and training.

Purchase drivers Key purchase drivers for machine tools are: support, control interface, brand and the latest technology. In fact, 57% of all respondents listed support as one of the top two driving factors in purchasing machine tools.

“Best warranty” ranks lowest on the list of important decision drivers (though we realize that “support” implies a form of warranty). This suggests that respondents are more concerned with their relationships with suppliers and vendors than they are with the written or factory-‐guaranteed warranty.


Methodology

The survey was emailed to a broad cross section of the metalworking industry between August and November 2014. There were 1,335 surveys completed. Results presented in this report do not include respondents who indicated they were non-‐manufacturers or whose operations were outside North America.

By the numbers

Out of 1,335 total respondents:

• 635 qualified and used in this sample as North American manufacturers (basic informational pool) • 386 qualified as management, which are North American manufacturers in management positions • 266 strong performers (business was up or substantially up in 2013-‐14) • 167 weak performers (business was down or substantially down in 2013-‐14) • 456 find it difficult to find and retain qualified labor • 52 are in a growing business and don’t have difficulty finding labor

Geography (only North American respondents reflected):

• 96% USA • 3% Canada • 1% Mexico

Demographics as reported by respondents are included in the following pages. All statistics are as reported with no manipulation.


36%

17% 9%

24%

14%

Types of Companies that Responded

Job shop supplying muleple end-‐user markets

Job Shop dedicated primarily to single market (i.e. Automoeve, Medical, Aerospace, etc)

Primarily a contract manufacturer for a few large customers

Original equipment manufacturer

Other manufacturer

0%

10%

20%

30%

40%

Less than 10 11-‐25 26-‐50 51-‐150 151-‐500 More than 500

37%

12% 11% 14% 14% 12%

Size of companies surveyed (in employees)


Business in 2014 has been steadier than previous years reported. In 2013, 29% of respondents said business was down while in 2014 only 27% of respondents reported a decline in business. Looking ahead to 2015, 45% of respondents are generally optimistic, stating business will be up.

0%

5%

10%

15%

20%

25%

30%

35%

Down substaneally

Down somewhat

Steady Up somewhat Up substaneally

7%

16%

26%

31%

19%

4%

14%

25%

32%

25%

11%

18%

22%

30%

16%

8%

19%

29% 30%

12%

Which best describes general business condiNons for your company within the past year?

2011

2012

2013

2014

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

Business will be up Business will be steady

Business will be down

I don't know

45%

29%

11% 14%

Manufacturers are generally opNmisNc about the 2015 outlook


0%

10%

20%

30%

40%

50%

60%

Unaware of them

Aware of them, don't see value

See some value

See a lot of value

9%

21%

53%

17%

10%

23%

54%

12%

Indicate the value of the following to your business/company

Online forums, discussion groups, comment boards or peer reviews

Webinars or online training for products and applicaeons


More than 70% of respondents frequently use online forums/peer sites and printed trade magazines to learn about new products, tools and techniques to help the business compete and grow. About 60% of respondents frequently use information from supplier websites and directly from their tooling supplier.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

9% 12% 7% 6% 7% 10% 17%

26% 24% 16%

21%

16% 16% 13% 21%

18%

30% 31% 43%

46%

37% 48% 49%

47% 44%

35% 34%

32% 21%

40% 31% 30%

22% 21% 9% 11%

Where do you learn about new products, tools and techniques to help the buisness

compete and grow?

Frequently use

Someemes use

Rarely use

Never use


When planning to invest in new equipment or machining processes and solutions, 74% of respondents rank search engine research and direct contact with sales representatives/distributors as the most important sources available to them.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1 2 3 4 5 6

3% 1% 2% 2% 8%

86%

4% 12% 14%

22%

45%

3%

2%

7%

16%

47%

22%

5%

33% 14%

28%

11% 11%

2%

17% 44%

25%

11% 3%

1%

41%

23% 16%

7% 11%

3%

Rank informaNon sources available to you when you are planning to invest in new equipment or

machining processes and soluNons

Search engine research, i.e. Google

Search directly on key supplier websites

Make direct contact with sales representaeve or distributor

Industry-‐focused print magazines

Industry-‐focused websites and other online resources

Other

Most important Least important


When selecting tooling or other key components to be used with equipment, 37% of respondents rely heavily on direct contact with tooling supplier sales and technical representatives. Additionally, 24% of respondents find general online research using search engines as another important source of information.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1 2 3 4 5

24%

15%

24% 20%

13%

13% 23%

22% 23%

14%

37%

24% 14%

13%

7%

18%

23%

16% 18%

20%

6% 12%

20% 20%

36%

When selecNng tooling or other key components to be used with your equipment, what sources of

informaNon do you rely on to choose the supplier or brand?

Printed trade magazines

Direct contact with machine tool builders or the machine tool distributors who sold me my equipment

Direct contact with tooling supplier sales and technical representaeves

Tooling supplier websites

General online research using search engines, to find arecles, peer reviews, videos and other related content



Over the past year, significant and important changes have occurred less frequently compared to previous years reported, suggesting that the longer the market trends up, the slower the pace of change.

0%

10%

20%

30%

40%

50%

60%

2011 2012 2013 2014

52%

38% 34% 31%

36% 42% 42% 43%

9%

15% 18% 21%

1% 4% 4% 4%

Describe the pace of change over the past year

There have been significant and important changes

There has been some change

We have not changed much

Not applicable because it is a very new company


In 2013, “support,” “upgrading technology,” and “brand”—in that order—were the key machine tool purchasing decision drivers. In 2014, the key decision drivers are “support,” “control interface,” and tied for third are “brand” and “latest technology.” Familiarity with control interface moving into the number-‐two driver position may reflect a slowing pace of change as companies become satisfied with current conditions.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1 2 3 4 5 6

16% 18% 16% 15% 16% 19%

10% 18% 18% 19% 16%

18%

32% 25%

18% 12%

7% 6%

16% 14%

14% 18%

18% 20%

18% 16% 19%

16% 18%

13%

7% 10% 14% 20% 25% 24%

Confidence in support is the most important purchase driver for machine tools

Best warranty

A control interface that our operators are familiar with

Latest technology

Confidence in the general support: installaeon, repair, spare parts, availability

Confidence in the local distributor

Machine tool brand



22% of new machine buyers package the tooling with the machine, giving tooling suppliers the opportunity to introduce their brand when new machines are purchased.

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

We purchase new tooling with the

machine

We purchase new tooling and buy it separately from our tooling supplier

We usually tool it up with tools that we

already own

Other

22%

42%

30%

7%

When purchasing a new machine tool, how would you typically handle the

tool-‐up of the new machine?


“Added efficiencies and eliminated bottlenecks” has been consistently reported to have the most positive effect on business. The simplest tweaks are usually the easiest to prove effective. The leading “neutral” responses (“increased North American business” and “increased employee compensation”), suggest that it may take time before these actions yield positive results.

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

43%

20%

30%

35%

5%

20%

1%

32%

41%

21%

47%

37%

25%

13%

20%

16%

34%

18%

24%

29%

20%

27%

Of the following acNons that your company has taken over the last year, what has been the effect?

Posieve

Neutral

Negaeve

(asked of management)


This year, 63% of respondents report “finding qualified labor” extremely challenging to the success of their company, marking this factor for the eighth time in nine annual surveys as the greatest challenge facing manufacturers.

0%

10%

20%

30%

40%

50%

60%

70%

28%

12%

27%

15%

30%

20%

16%

22%

45%

20% 23%

55%

25%

56%

50%

56%

44%

54%

48%

35%

40%

36%

17%

63%

16%

35%

14%

36%

30% 31%

19%

40% 41%

How challenging are each of the following to your company's success?

Not a problem

Somewhat challenging

Extremely challenging

(asked of management)


In general, change correlates with positive impact. This year, three activities were reported by more than 40% of respondents to yield positive impacts. All but two types of changes yielded more positive than negative responses. It’s not a surprise that reducing employees and decreasing compensation would result in a negative impact, especially during generally good economic conditions.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

37%

25% 13%

20%

16%

34%

18%

24%

29%

20%

27%

43%

20% 30%

35%

5% 20%

1%

32% 41%

21%

47%

Change tends to have a posiNve impact on manufacturing

Posieve

Neutral

Negaeve

N/A


When management was asked about the biggest threats to business, respondents find the following somewhat to extremely challenging: “Finding qualified labor” [88%], “cost of new technology” [85%], and “general economic conditions” [84%].

“Employee competence” and “regulation & taxes” were also cited as challenging threats to business.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

28%

12% 27%

15% 30%

20% 16% 22%

45%

20% 23%

55%

25%

56%

50%

56%

44% 54% 48%

35%

40% 36%

17%

63%

16%

35%

14%

36% 30% 31% 19%

40% 41%

Finding qualified labor remains the number-‐one threat to North American Manufacturers

(management polled)

Not a problem Somewhat challenging Extremely challenging


This year, 48% of respondents said buying new types of equipment/applications had the most positive impact on business. Reorganizing the shop floor, buying faster equipment and adding software or CAD/CAM capability also netted positive results.

Last year, reorganizing the shop floor for greater efficiency was the most effective positive influence on business.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

12%

11%

12%

9% 6%

5% 10%

17%

7% 5%

10% 16%

43% 27%

48%

10% 8% 14% 7%

45%

2% 12%

31% 35%

Capital investment in equipment had the most posiNve impact of any addiNon to the shop

We didn’t do this Negaeve Neutral Posieve


Purchasing intent in the next 12 months is approximately the same as the last 12 months, but with a shift in emphasis to different types of machines.

0%

5%

10%

15%

20%

25%

30%

Non

e Ve

recal M

achining Cen

ter

Horizon

tal M

achining Cen

ter

5-‐Axis Machining Cen

ter

Borin

g Machine

Ve

recal Turning Cen

ter

Horizon

tal Turning Cen

ter

Mill-‐Turn Ce

nter

Swiss Type Lathe

Cylindrical Grin

der

Surface/Form

Grin

der

Tool Grin

der

Mule-‐funceo

n Grinding Cen

ter

EDM Sinker

EDM W

ire

Waterjet

Laser

Press B

rake/She

ar

Punch Press

Welde

r Ba

r Feede

r Ro

tary Transfer

Addieve Manufacturin

g Equipm

ent o

r 3D Prinen

g Other equ

ipmen

t

24%

30%

17% 16%

4%

6%

15%

12%

9%

5% 7% 7%

2%

3%

10%

6%

10% 10%

4%

13%

5%

1%

10%

6%

Intent to purchase equipment in coming 12 months (compared to prior 12 months)

2014

2013

2014 percentages are shown numerically

AddiNve Manufacturing Equipment or 3D response N/A in 2013


Regulation and pressure to keep prices down were extremely challenging for weaker performers.

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Not a problem Somewhat challenging Extremely challenging

14%

44% 43%

26%

42%

32%

How challenging were regulaNons?

Weak Performers

Strong Performers

0%

10%

20%

30%

40%

50%

60%

Not a problem Somewhat challenging

Extremely challenging

16%

43% 42%

24%

50%

26%

How challenging was customer pricing pressure?

Weak Performers

Strong Performers


Weak performers are almost three times less likely to change compared to strong performers.

Compared to strong performers, weak performers are three times more likely to reject training and education as a means to help them compete and grow.

0%

10%

20%

30%

40%

50%

Not applicable because it is a very new company

We have not changed much

There has been some change

There have been significant and important changes

5%

31%

46%

18%

2%

11%

44% 42%

Strong performers are adaptable, much more likely to report a high pace of change

Weak Performers

Strong Performers

0%

10%

20%

30%

40%

50%

60%

Not helpful Helpful Criecal

14%

43% 43%

5%

40%

55%

Training and educaNon impact on ability to compete and grow

Weak Performers

Strong Performers


Though they recognize the benefit, weaker performers are not seeing the dramatic effect of adding new applications/processes or new equipment to help them succeed like strong performers are.

0%

10%

20%

30%

40%

50%

60%


11%

59%

31%

6%

23%

39%

The effect of adding applicaNons and processes on success

Weak Performers

Strong Performers

0%

10%

20%

30%

40%

50%

60%

70%


7%

62%

32%

6%

48% 46%

The effect of adding equipment to compete and grow

Weak Performers

Strong Performers


As many strong performers believe it’s not helpful as believe it’s critical to expand into new markets. This dichotomy suggests that exploring new markets may be a high-‐risk investment compared to other possible actions. Weaker performers may be experiencing “the grass is greener” syndrome as they indicate that expanding into new markets is critical for their survival.

0%

10%

20%

30%

40%

50%

60%


14%

49%

38%

23%

56%

22%

Expanding into new markets in order to survive

Weak Performers

Strong Performers


There is little difference in the perception of strong and weak performers regarding the importance of cutting costs.

0%

10%

20%

30%

40%

50%

60%


10%

53%

37%

7%

57%

36%

Importance of cu`ng costs

Weak Performers

Strong Performers


With less skilled staff available, weaker performers are more dependent on support from suppliers than strong performers. The flip-‐flop between strong and weak performers in the helpful and critical level of importance columns may indicate that day-‐to-‐day support is more important to weaker performers, while strong performers are more dependent on suppliers’ support when exploring new processes.

0%

10%

20%

30%

40%

50%

60%

70%


13%

68%

20% 16%

60%

24%

Dependence on suppliers for support to help company compete and grow

Weak Performers

Strong Performers

Importance of supplier assistance


These two charts mirror each other perfectly, indicating that weaker performers tend to value staff less as a critical component of success than stronger performers.

0%

20%

40%

60%

80%

100%


74%

22%

5%

82%

16% 2%

Weaker performers are most likely to reduce staff...

Weak Performers

Strong Performers

0%

10%

20%

30%

40%

50%

60%


43%

49%

8%

15%

60%

25%

...while stronger performers are more likely to increase staff.

Weak Performers

Strong Performers


The significant gap between strong and weak performers in the first three columns of both charts tells us that strong performers experience a much more positive impact as a result of adding new customers. This suggests that weaker companies are less likely to grow their way out of trouble.

0%

10%

20%

30%

40%

50%

60%

70%

Posieve Neutral Negaeve We didn't do this

22%

47%

5%

26%

69%

24%

0%

7%

Impact of increasing North American business

Weak Performers

Strong Performers

0%

10%

20%

30%

40%

50%

60%


18%

26%

5%

51%

40%

27%

3%

40%

Impact of increasing global business

Weak Performers

Strong Performers


Moving or upgrading the existing facility and especially adding new employees had a significant positive impact for strong performers. Weak performers saw a positive vs negative impact from moving or upgrading by a 4:1 margin, but didn’t see nearly the benefits that strong performers did. Surprisingly, for weak performers, almost as many said that adding employees had a negative impact as the amount that said it had a positive impact. Their inability to either manage new hires to productive results or find productive employees may explain their weak performer status.

0%

10%

20%

30%

40%

50%

60%


21% 14%

5%

59%

37%

20%

3%

40%

Impact of moving or upgrading facility

Weak Performers

Strong Performers

0%

10%

20%

30%

40%

50%

60%


11%

26%

7%

56% 56%

22%

3%

19%

Impact of hiring new employees

Weak Performers

Strong Performers


0%

10%

20%

30%

40%

50%

60%

70%

80%


7%

24% 17%

52%

4%

15%

7%

74%

Reducing total # of employees rarely makes a posiNve impact

Weak Performers

Strong Performers

Impact of reduced total # of employees

0%

10%

20%

30%

40%

50%

60%


11%

35%

3%

51%

26%

39%

3%

32%

More strong performers increased compensaNon, impact is neutral to posiNve

Weak Performers

Strong Performers

Impact of increased employee compensaNon


0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%


29%

23%

1%

47%

41%

27%

2%

31%

Stronger performers pay more, get more posiNve impact out of employee educaNon and training

Weak Performers

Strong Performers

Impact of paying for employee educaNon, training


The message above is that existing suppliers need to do a better job taking care of customers in order to dissuade them from trying new vendors. When clients try new suppliers the experience is almost never negative.

0%

10%

20%

30%

40%

50%

60%

70%

80%


1%

18%

8%

72%

1%

20%

5%

74%

Pay cuts are rare regardless of performance, have neutral/negaNve impact

Weak Performers

Strong Performers

Impact of reduced employee compensaNon

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%


33% 38%

3%

26%

44%

32%

3%

21%

Adding and changing equipment and vendors has strong posiNve impact

Weak Performers

Strong Performers

Impact of added/changed equipment/consumable vendors


Weak performers may have helped their situation had they more readily attempted to find efficiencies and eliminate bottlenecks, which was found to be the most effective action resulting in a positive impact; it’s also the action with the lowest cost of implementation. But by a 2:1 margin, weaker performers tried this less often than strong performers.

0%

10%

20%

30%

40%

50%

60%


17% 22%

5%

57%

27% 26%

6%

41%

Management change frequency was comparable between strong and weak performers, but strong

performers get marginally becer impact

Weak Performers

Strong Performers

Impact of management changes

0%

10%

20%

30%

40%

50%


36% 30%

5%

29%

49%

32%

3%

16%

Stronger performers got becer results from adding efficiencies/eliminaNng boclenecks

Weak Performers

Strong Performers

Impact of adding efficiencies/eliminaNng boclenecks


Labor correlation

We distinguished between two groups of people who were in growing businesses – those few who found it easy to find and retain qualified labor (52), and the majority who found it difficult to find and retain qualified labor (456). Adjusting for size, we compared the two to reveal that training is much more crucial to businesses around which qualified labor is in short supply.

0%

10%

20%

30%

40%

50%

60%

Employee training not helpful

Employee training helpful

Employee training is criecal

21%

50%

29%

4%

38%

58%

When it's difficult to find labor, training becomes criNcal

Find it easy to find labor

Find it difficult to find labor

How difficult is it to find and retain qualified

labor?

Documents

METALWORKING - Practical Machinistlosasso.com @losasso /losassoinc 4853 n. ravenswood ave. chicago, il 60640 773.271.2100 techspex.com @techspex 6915 valley ave. cincinnati, oh 45244