The power of finding a niche

A few weeks ago at the FABTECH trade show in Chicago, I ran into (almost literally, in fact) Nathan McMasters, president of Diversified Metal Products, an Idaho Falls, Idaho-based contract fabricator specializing in products for the energy, transportation, and nuclear fields. Our five-minute chat told a lot about what’s going on with this confounded economy that, for many, refuses to break out of its funk. McMasters said company sales were up 20 percent from 2010, and after talking with a few dozen shop managers at the show, I discovered that wasn’t an unusual number.



Thing is, McMaster’s headcount hasn’t increased by the same amount. The shop employs 85 people, and during the recession the company retained all of its skilled personnel. It did this for several reasons. One, the company’s niche--especially its nuclear work--is specialized and requires highly trained individuals, people managers didn’t want to let go. Two, Diversified’s business never took a dramatic nosedive, thanks in part to its specialized niche. The company fabricates gloveboxes and other critical metal products for the nuclear sector, and there just aren’t many players in the field.

But even if business did drop significantly, Diversified probably wouldn’t have let go too many of its core personnel. It simply couldn’t function well without them. Conversely, the firm hasn’t brought on many people since the downturn. Managers have hired a few front office workers, but Diversified maintains essentially the same core group of skilled fabricators.

Finally, McMasters said he doesn’t expect the business to grow as quickly next year, and that’s just fine with him. “Growth is not our objective now,” he said. “We want to make good money on the work we have.”

McMasters’ status report paints a picture of the economic status quo: The highly skilled have kept their job all along, and they’re becoming even more valuable as their company revenues grow. These people have thrived on being in the right place at the right time, and in the right niche.

As reported by Reuters, global manufacturers based in the states,  like Caterpillar and Boeing, are predicting slower growth in 2012. Europe is a wildcard at this point, and China has continued its monetary and fiscal balancing act, tapping on the economic brakes and raising interest rates to fight inflation. Some predict the country soon may be easing on the gas (lowering rates and lending) to pump up economic growth.

Despite such uncertainty, though, Reuters pointed out that long-term investors still maintain a bullish view on manufacturing’s future. That long-term demand shows the power of finding a sustainable niche--a societal need that won’t go away. Manufacturing isn’t easy. It usually doesn’t make people rich overnight. But it’s a business where hard work over years can pay off.

According to McMasters, not many fabricators can make nuclear-grade gloveboxes like Diversified Metal Products can, and many fabricators who survived the recession tell a similar story. They serve a niche better than anyone else, sell their ability to solve technical problems, and employ those with unique skills companies crave.

Overall, the world economy continues to teeter on a tightrope, but after several tumultuous recessions, manufacturers know the drill. They have learned to walk that tightrope with relative ease, which may be why manufacturers have emerged from the downturn looking better than most.