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Fab shop customer mix: Hitting the right spot

Last week the Fed raised rates a quarter of a percent. On the heels of this, the already strong U.S. dollar rose. Then the stock markets reacted, not to the Fed rate increase (which many have expected for a long time), but to the declining price of oil and the economic state of emerging economies.

All this happened in the face of a declining U.S. manufacturing sector; the PMI from the Institute for Supply Management dipped again into contraction territory in November.

Well, happy holidays to us.

Brighter times may be ahead. Chris Kuehl, economic analyst for the Fabricators & Manufacturers Association International, is also the economist for the National Association of Credit Management, for which he puts together the Credit Managers’ Index. Modeled on the PMI (above 50 is expansion, below 50 is contraction), the CMI tends to be a harbinger.

Credit managers don’t focus on the present; they care about the future. For the past few months that index has remained firmly in expansion territory, though the index did drop a few points in November, as reported in Kuehl’s Fabrinomics e-newsletter from FMA.

Still, I’ve spoken to a number of fabricators during the past months, including dozens at the FABTECH show in November. No doubt, some are struggling, especially if they’re tied to the energy sector and agriculture. But how shops are faring really depends on the customer mix and the specific OEM plants those fab shops serve.

For instance, at FABTECH I spoke to John Reed, shop manager at Spec Fab in Honey Brook, Pa., just down the road from where agriculture equipment maker New Holland has its roots. Considering this, shouldn’t Spec Fab be suffering? Not really, Reed said. That’s because the New Holland, Pa., plant focuses on small hay balers. Small equipment sales haven’t suffered like the large combines and related monster machines. Farmers may not have the money to shell out cash for massive equipment, but they need to keep their farms operating, and hay balers help them do that.

2016 really will be about hitting the right spot when it comes to the customer mix. Some sectors will continue to struggle, but others will thrive.

A historic event yesterday gave me confidence for the future. In 2008 I spoke with engineers at SpaceX about its growing manufacturing operation. Back then the company was still basically in the prototyping phase, but even then it was reshaping the way rockets were made.

Yesterday the company successfully landed a rocket vertically. After years of effort, SpaceX really is hitting the spot, literally and figuratively.

Figuratively, the future will really be about hitting the right spot—the right mix of fabrication services, talent, technology, and customers. No matter what economic headwinds may come, the right mix will help a custom fabricator land on its feet.

About the Author
The Fabricator

Tim Heston

Senior Editor

2135 Point Blvd

Elgin, IL 60123

815-381-1314

Tim Heston, The Fabricator's senior editor, has covered the metal fabrication industry since 1998, starting his career at the American Welding Society's Welding Journal. Since then he has covered the full range of metal fabrication processes, from stamping, bending, and cutting to grinding and polishing. He joined The Fabricator's staff in October 2007.