FandMmag.com |

The key in 2010 is to remain financially viable and manage the business carefully, even as things improve. It's important to avoid the temptation to take on excessive risk or pursue business on unfavorable terms just to generate revenue. The current short-term market conditions will require many difficult and correct decisions to navigate safely to the twin objectives of survival and long-term success.

Attracting new business, access to financing, rising health care costs, and skilled labor are likely to be the biggest challenges facing small-to-medium sized metalworkers next year. Current business conditions continue to slide for some, yet most have weathered the deepest part of the recession and are “surviving.”

Typically, manufacturing lags behind the overall market anywhere between six to eight months. That being said and looking forward, expect to see business slowly start to rebound toward the end of the first quarter of 2010. OEMs have slowly depleted their inventories and will require additional manufacturing for existing products and programs. We will likely see an increase in new product development.

From the buyer side, long standing relationships, company loyalty and “buddy systems” are becoming more of a thing of the past. Baby Boomers are retiring and the next generations are now establishing ground with a completely different style and mentality. These buyers are doing more research online, fixating on price and speed of delivery. Competitive pricing will take an even more active role in years to come as companies must continue to find efficiencies in the way they operate.

Flexibility and speed of delivery will play a more significant role in the competitiveness of manufacturers in the upcoming year. As the overall economy begins to rebound, there should be intermittent surges in demand; buyers will look to those companies who can deliver a quality product at an expedited rate. Additionally, manufacturers will need to increase their sales efforts and look toward expansion into new markets. It is no longer a “safe bet” to rely solely on those customers they have always done business with.

As a general rule, a manufacturer should have no more than 50 percent of their business in any one market and no more than 20 percent of their business with any one customer. Obviously there are exceptions to this, especially if a company serves a very niche market and has developed unique processes. However, diversification has been the saving grace that has allowed manufacturers to survive when times are tough.

Metalworking is one of the most significant economic engines in our country, yet it has lost its market appeal over the years as we looked more to evolving technologies and services. As an industry, we need to re-educate the consumers, elected officials, and ourselves as to the value and stability manufacturing brings to our country. It is vitally important the U.S. manufacturers network together to form a united front. Belonging to national trade organizations and “getting involved” is a key to pushing a manufacturing agenda that supports small-to-medium sized manufacturers.

Most cutting tool companies will have to adjust their business models to make profits on a much smaller sales volume in a fiercely competitive environment. Only the “fittest” companies will endure. In addition, recognizing the importance of demonstrating the value of advanced tooling and machining methods, cutting tool manufacturers need to reach out to the users of their products, invite them to make their requirements known and collaborate with them on creating solutions and demonstrate the value of new technologies and methods.

There is a lot of uncertainty about the future and what it holds. As a result, cutting tool companies are focusing on the projects at hand and staying close to their customers in order achieve the best results. It is a buyer’s market and the customer is King. When spending his money, he can demand absolute supplier excellence in price, product performance, availability and support. Cutting tool manufacturers must position themselves to deliver better, more affordable products faster, and back it all up with the best customer service and technical support.

U.S. manufacturing companies can compete with anyone in the world. We have gone through enough downsizing over the years and faced enough inferior imported products that the remaining players are among the best in class. Our industry is embracing the latest developments in machining and tooling technology and employing some of the most innovative and productive workers in the world.

The most critical issue in our market is much like the general economy: confidence. We need the working people to have confidence in their personal situations, the businesses to have confidence in the near future, and the bankers/investors to have confidence in the businesses. We like to think that unemployment is the primary indicator for the economy, but the 80+ percent employed that are working are actually having the immediate effect.

Challenges more related to our industry involve convincing our customers and potential customers that productivity investments are still a sound expenditures. It still makes sense to reduce piece part costs even if the process is not at 100 percent capacity. These investments will pay off big time in the future, placing those companies that invest ahead of their competition. Convincing customers to invest is further complicated by the staff reductions that were required by most manufacturers to survive the current recession. This simply makes it harder to get time with an open-minded decision maker.

The tooling/workholding business did not receive the same blow from the meltdown that hammered the machine tool business. I would not say that the toolholding/workholding business is solid, but there is a clear indication that manufacturers are making parts. Our consumable and semi-durable products are showing steady month over month increases in sales in the U.S. and worldwide. Products such as quick change devices that truly increase machine time have experienced only minimal declines in sales throughout the downturn.

Manufacturers are starting to receive steady orders and confidence is building daily, meaning they will have to get more out of the machine resources they currently have in the short-term. This will be good for the tooling and workholding suppliers that focus on productivity products. Our industry is facing 2005 – or worse – revenue numbers in the 2010 information age. Customers today go to the web to research products and solutions to problems. The open education base provided by the Internet will play a key role in success over the next five years that will not be comparable to the past.

With a smaller pie, price pressure will get worse before it gets better. Manufacturers must all remain focused on participating and helping our customers in their business requirements and needs.