The Unseen Capacity
Capacity utilization figures conceal the likelihood that it is a particular type of capacity going unused. Also: the debut of a new column.
Manufacturing capacity utilization in the United States has been about 76 percent throughout the past year, per the Federal Reserve. In other words, about 24 percent of the capacity in the average plant has been unused. But manufacturing portal MakeTime says there is a story inside this metric that the figure itself isn’t telling.
MakeTime, based in Lexington, Kentucky, is like a broker for U.S.-based machining. Shops the company qualifies through on-site evaluations can join its network and make their open capacity available. Buyers of machined parts bring their work to MakeTime, which prices jobs and guarantees on-time completion by these suppliers. With around 700 shops now in the network, the company has a perspective on open capacity.
Director of Business Operations Ryan Kelly says the story the U.S. utilization number isn’t telling relates to the type of capacity being used. Throughout MakeTime’s network, older or simpler machine tools are waiting, he says. A recent one-day view of the network showed 7,200 hours of available open time for basic turning and 7,000 hours available for three-axis vertical milling.
Meanwhile, more sophisticated machining capacity is committed. Indeed, Mr. Kelly says the demand for five-axis machining surpasses the network’s available capacity by at least two times. There is a mismatch between high-complexity machining and simpler machining (a mismatch the company is addressing by recruiting more five-axis shops), and this same phenomenon likely exists throughout U.S. manufacturing.
If true, then machining is more strained than the utilization implies. A shop running at 70 percent might effectively be booked if that last 30 percent represents simple machines that cannot be applied to the complex work the shop is now seeing.
But another implication of the mismatch is something Mr. Kelly sees as a business developer, and as someone with hopes for both the company he works for and the success of U.S. manufacturing overall. There is an opportunity there, he says. Likely it’s an opportunity for reshoring. All of that basic machining capacity that is available could be put to use at an economical price. The demand for machining within the United States may have shifted toward higher-value work, but the basic machines haven’t disappeared. As a result, it is like there is an outsource nation in our midst—a virtual, invisible, domestic outsource supplier embedded inside of U.S. machining capacity. What might come of putting all that capacity to use?
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Something else: With the January 2017 issue, we debut a new column called “The View from My Shop.” Find the first column here. Each month, a different guest columnist involved in leading a machining facility will offer an insight he or she has learned, applied or come to appreciate in this work. The column will add to the voices in this magazine, and provide an additional outlet for experiences and perspectives that are useful to share. Look to the column to learn how other shop leaders like you see their roles. And if you would like to be a future guest writer for the column, feel free to contact me.