ARTICLE

Machine shops can be affected by customers' fortunes

How their clients have done has reflected their own bottom lines

Sadler Machine has maintained its work force at around 50 employees, owner Tom Sadler says. (Liz Martin/The Gazette)
Sadler Machine has maintained its work force at around 50 employees, owner Tom Sadler says. (Liz Martin/The Gazette)

For some machine shops, there are few signs that the economy has recovered from recession. But others contend business is coming back.

At Sadler Machine Co., owner Tom Sadler said business remains sluggish at the company his father started more than 50 years ago.

“The economy is as slow as it has been,” he said. “I’d say it’s gotten worse in the last six months.”

Pete Christiansen, second-generation owner of P and D Welding and Machine Co. in Marion, also has seen a rough road to recovery.

“This is the slowest we’ve been since the business started in 1980,” Christiansen said. “We’ve had busy times in there, but it’s been five years since we’ve had six steady-busy months.”

Meanwhile, Phil Martin, owner of Advanced Manufacturing Services in Cedar Rapids, said 2008 was his second-best year since he bought the company eight years ago.

“In 2009, we were significantly down, but it’s built back up,” Martin said. “Last year was our best year revenue-wise, and 2013 projects to be even better.”

Advanced Manufacturing employs 12 and specializes in small stainless-steel parts for pharmaceutical and food services applications.

External Impacts

In an industry heavily reliant on manufacturing, machine shops’ fortunes tend to rise and fall with their downstream manufacturing customers.

How individual shops weathered the recession depended in large part on the resilience of their primary customers’ industries.

“A lot of the large heavy equipment manufacturers were hit hard by the recession,” Martin said, citing John Deere and the automotive industry as examples. “The machine shops doing production work for them really went down. Some didn’t make it.”

Both Advanced Manufacturing and P and D count Terex among their largest customers. The road construction equipment manufacturer closed its Cedar Rapids plant in 2010, blaming the shutdown on greatly reduced orders due to the global recession.

While Sadler and Christiansen said they still supply parts to Terex’s facilities in Oklahoma and Michigan, they reported orders are down significantly from where they used to be.

“Where before they may have ordered 20 parts every month, they are now ordering 10 parts every two months,” Sadler said by way of example.

He said one reason recovery is lagging is uncertainty about government funding for public works projects.

Christiansen said customers are waiting to see what happens.

“No one is going out on a limb. They don’t want to spend money unless they have to,” he said.

Jim Macek, manager of shop operations at Reliable Machine & Manufacturing Inc., said his customers were not greatly affected by the recession. The company, which has operated in Cedar Rapids for more than 70 years, makes pump parts for food processing equipment.

“The recession didn’t really hit the ag market and the food industry,” he said. “That’s one of the good things.”

Reliable was hit hard by the 2008 flood, however. Located at 415 H Ave. NW, it had eight feet of water throughout the operation.

It was a week before employees could start cleaning up.

Not wanting to see another flood, Macek said the company will be relocating to Hiawatha within the next 30 days.

“We would have liked to stay, but without flood protection on the west side, we can’t afford to risk the business again,” he said, adding there were some tense moments this past June.

“We had a mover ready to start moving stuff out even though the new building wasn’t ready yet.”

Signs of Recovery

With the move ahead, Macek is optimistic for the future of the business. He has observed some reshoring, with at least one customer asking Reliable to make parts for equipment that was manufactured overseas.

“One of our competitive advantages over China is that it takes two or three months for a part to ship from China,” he said. “Most customers don’t know what they want two or three months from now. We have a lot better lead times.”

Lead times are important to customers these days. They are ordering only what they need when they need it.

“The thing that’s noticeable to us is key customers ordering smaller quantities more frequently trying to manage their inventory more real-time,” Martin said. “The volume ends up being the same, but the lead times are shortened.”

Customers also are looking for competitive pricing.

“There’s a lot of activity on quoting that was not there in 2008 and 2009,” Martin said.

Until the lagging segments catch up to the rest of the manufacturing industry, the machine shops that support them are finding ways to adapt.

P and D has cut back to 12 employees from a high of 22 eight years ago. To make up for the lost volume from big customers such as Terex, the shop has been doing smaller jobs for more customers.

Sadler Machine has maintained its work force at around 50 employees. The company added a sales representative in Florida to seek out work from other locations, including Mexico.“We’re trying to reach out further to stay busy,” Sadler said.

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