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Differentiating Your Machine Shop: Why Making Parts Is No Longer Enough (Part 1)

Point of Difference



Published on

Dec 19, 2022

Without a point of difference and a strategic advantage for your machine shop, your customers decide based on price. That is a race to the bottom where everyone loses.

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Key Takeaway: Without a point of difference and a strategic advantage for your machine shop, your customers decide based on price. That is a race to the bottom where everyone loses.

This three-part blog post explores how the machine shop market is changing and what to do about it. The first post explores why being different matters so much today. In the second post, we explore why being different matters. Whether you have our robots or are planning on adding them, in the third post, we explain how to position that robot as a part of your point of difference.

Better Is NOT Better

Better and best are two concepts defined in the eye of the beholder. To try and market your machine shop as being better than others or being the best at something won’t work. You don’t define what is better; your customer does that.

If you want to succeed and grow, you’ve got to stake out a different position in the market. Think about Fischer Investments.

Their ads are all about one thing: We are different from other money managers. We are so different that most customers come from other money managers. They imply that they are better than other money managers but don’t say it directly.

It used to be there were three types of machine shops:

  • Production shops: they ran 900 or 1000 or more pieces per job at a very low cost/part
  • Job shops: they ran 20 to 900 pieces, or what some called middle-sized jobs
  • Prototype shops: specialized in small runs, fast turnaround at a premium price.

Up to the late 1980s, based on human skill, if you had a couple of master machinists, you could specialize in those hard-to-do jobs and carve out a nice living.

Those master machinists and their skill levels were the points of difference for that machine shop. Those machinists separated you from the other machine shops in the area.

Master machinists are in short supply. With highly skilled machinists being the point of difference, perhaps two shops in ten could produce a complicated part.

There may not be much difference in price between the two shops. You aren’t competing with ten area shops for the work; you are only competing with the other shop that could produce the part.

The CNC machine changed some of that because the computer replaced some skill sets and attention to detail. The CNC was more repeatable, so making parts, especially long runs, got much cheaper and faster. The amount of scrap was reduced.

The CNC machine changed the industry by allowing companies to be competitive without finding and keeping master machinists. Before the CNC machine, not everyone could drill the hole exactly where it needed to be on every piece. If you had that skill set, that was a point of difference that you could build a business around.

Then came CADCAM software. That changed the playing field even more. Now the skill advantage was less because everyone had the same tools. The CNC eliminated master machinists as the competitive advantage because lesser-skilled people could do the job of a master machinist. The machine did the work, not the human. The software just reinforced that.

Now the points of difference are not as compelling. Machining at closer tolerances is available to anyone who buys the right equipment. There is no longer a skill-to-skills comparison between your shop and the next.

How do you stake out a point of difference?

You can be in the parts production business if you’ve got the right CNC machines. You may be able to shave a penny here and a penny there and make a living. But now you are competing with others with the same machine and capabilities.

What is your point of difference when competing with all the other shops with the same equipment? If nothing stands out, it is the price.

But selling on price doesn’t build your business or help your customers. Taking low-margin business is a strategy. Oftentimes, your team doesn’t treat low-margin business the same way it treats higher-margin businesses. That can happen without the team knowing they are treating low-margin customers differently.

We all know that if a customer is buying on price and not much else, chances are that they will take it when they can find a lower price. That leaves you in a different position.

Maybe you have great design skills. Maybe you look at a part and offer some design suggestions that will reduce the price; you can earn the business that way. But you have to be capable of doing that regularly. Your customers could continue demanding a lower price. Is that what you want?

The prototype shop model was interesting because there was a real need to create 3 or 4 model pieces to test and ensure that this part fit the bill on every level. Making prototypes is interesting work for top machinists. They love the challenge.

With the advent of CADCAM software and 3D printers, the prototype business is undergoing dramatic changes. You can probably make a living if you have an established customer base. But as 3D printing improves, it becomes more difficult to make a good living.

Think About It.

What would be your point of difference between someone with a 3D printer and your machine shop? What would be your competitive advantage?

Think about turnaround times. How do you stack up against 3D printing operations and delivery time?

The one place you may have an advantage is the material. If someone wanted the part made from 4140 steel, that could be an advantage. You can’t print in 4140 just yet. You can’t print in stainless steel yet. As new materials are developed, they may have advantages over 4140 or stainless. Then what? If you are a prototype shop, what are you going to do?

How will you compete against 3D printers unless you add them to your shop and become a full-service prototype shop?

What do all of these changes do to your position in the market? You can still do well if you have a well-established, long-held customer base. But you still have to set yourself apart from the rest. If not, your customers will leave you behind.

Maybe your point of difference is ISO Registration or Accreditation. If you have ISO 9001 Registration, that helps. If you sell to the aerospace world, AS9100D Accreditation helps get you over the hurdle of being considered, but it does not guarantee you’ll win more work.

ISO 13485 Accreditation might help with medical devices. But having the credential will get you in the door, but it won’t guarantee you’ll leave with an order. Even with a credential, you must position yourself as different from others.

You may have the credential, but you still have to explain to your potential customers what problems you solve for them and what makes you different.

The credential can make you different because it shrinks the competitive playing field to only those companies with that credential. You still have to be different from the other machine shops with the credential. And you still have to explain what problems you solve for your customers.

If you don’t differentiate yourself from your competitors, you are sunk.

Watch for subsequent parts of this blog post, where we explore how to position your machine shop in solving customer problems.

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