Capital spending carries the rebound into 2012

For small shops, such spending may not be a matter of choice

THE FABRICATOR® JANUARY 2012

January 10, 2012

By:

Manufacturing technology consumption took an unprecedented dive during the recession, but since then the industry has bounced back dramatically. In the metal fabrication arena, most technology categories are experiencing some healthy gains, as reported by the 2012 Capital Spending Forecast, a study compiled by the Fabricators & Manufacturers Association.

Capital spending carries the rebound into 2012 - TheFabricator.com

Manufacturing technology consumption took an unprecedented dive during the recession, but since then the industry has bounced back dramatically. In the metal fabrication arena, most technology categories are experiencing some healthy gains, as reported by the 2012 Capital Spending Forecast, a study compiled by the Fabricators & Manufacturers Association. As usual, consumables lead the pack. At more than $228 million, consumables spending projections surpass those made even before the downturn, which shows just how busy shops are.

Some larger-ticket items, though, are the real eye-openers. Spending projections for laser cutting machines increased by 50 percent, to more than $212 million, a level that again surpasses projections fabricators made before the recession. Projected spending on hydraulic press brakes jumped 26 percent, to more than $163 million, and waterjet machine spending could be set to spike 64 percent.

Not every category had gains. After projected spending skyrocketed last year for turret punch presses, plasma cutting systems, and mechanical stamping presses, figures for these machines decreased this year. Still, these minor dips were the exceptions rather than the rule. The study reported that overall, U.S. metal fabricators this year could spend more than $2.1 billion on manufacturing technology. That’s near prerecession levels.

Such spending has mystified economists and pundits. At this writing, the International Monetary Fund expected the U.S. GDP to grow only 1.8 percent in 2011. Credit is far from loose. Unemployment remains high. What gives? For an explanation, the 2012 Capital Spending Forecast provides some clues.

Most metal fabrication in this country occurs within small and medium-sized businesses, many employing fewer than 50 people, and it is this demographic that may lead the spending spree in 2012. Averaging the responses from plants employing between 20 and 49 people, the study pegged projected spending for this group at $447,775—an 84 percent increase over last year. For shops with fewer than 20 employees, the study revealed average projected spending of $186,085, a 49 percent increase. Meanwhile, at larger shops the numbers increased less dramatically, and for the largest companies, even decreased slightly (see chart).

By themselves, $447,775 and $186,085 don’t sound astronomical, considering the price of advanced machine tools. But consider this: According to the U.S. Census Bureau, more than 90 percent of manufacturing firms have fewer than 50 employees. In the fabricated metal products sector, 86 percent fall into this category. Individually, these businesses may spend small amounts, but collectively they drive this country’s manufacturing technology consumption.

From here we can put the “who” (small business) and “what” (large equipment like laser cutting machines) together and perhaps answer the burning question: What’s really driving such spending amid economic uncertainty?

I can take a stab at it, at least for the metal fabrication sector. Consider a 20-person shop. One operator may run two lasers that feed into press brakes, then into welding and finishing. Postrecession, some fabricators have reported that high quality and quick delivery are becoming much more important than price. A small shop must respond quickly, or it will go out of business sooner or later. So what if one laser is out of commission for a day? That shop’s capacity drops by half immediately, starving all other operations of work. Say goodbye to quick response. Now consider a 180-employee fabricator with eight cutting lasers. If one goes down, capacity certainly drops, but part flow doesn’t come to a screeching halt.

Most small fabricators are job shops. They’re highly variable operations. Orders change. Because time isn’t as negotiable as it once was (all orders seem to be needed yesterday), capacity is the one variable left a shop can control. These days a fabricator may have plenty of capacity to meet demand, but do they have enough excess capacity to respond quickly to an unexpected job?

The smaller the shop, the more critical uptime at individual machines can be. Here, another press brake or laser may help build excess capacity, which buffers against the unexpected. This may be leading shop owners to open their wallets for newer, faster, and more reliable equipment.

At this point in the recovery, weaker shops down the street may have shuttered, which could mean that more work is out there. If the recession’s survivors can’t meet increased customer demands now, they certainly can’t expect to keep those customers throughout the next downturn.



FMA Communications Inc.

Tim Heston

Senior Editor
FMA Communications Inc.
833 Featherstone Road
Rockford, IL 61107
Phone: 815-381-1314

Related Companies

More in Shop Management from TheFabricator.com

Published In...

The Fabricator®

The FABRICATOR® is North America's leading magazine for the metal forming and fabricating industry. The magazine delivers the news, technical articles, and case histories that enable fabricators to do their jobs more efficiently. The FABRICATOR has served the industry since 1971. Print subscriptions are free to qualified persons in North America involved in metal forming and fabricating.

Preview the Digital Edition

Subscribe to The Fabricator®

Read more from this issue

comments powered by Disqus