Precision manufacturing: the scale of the opportunity

Norval Scott
August 17, 2023
Precision manufacturing: the scale of the opportunity

Manufacturing is a sector under pressure: from inflation and rising costs of energy and materials, and a lack of skilled workers. Within the industry, precision machining is a specific bottleneck, as the difficulty of producing components on time, to standard and on budget inhibits innovation and prevents the world from making what it wants, when it wants. 

At CloudNC, we’re developing solutions for those problems, starting with our new CAM Assist software that greatly accelerates how quickly a CNC machine can be programmed, allowing factories to become more efficient and productive. 

So we’re good at identifying what the issues are that manufacturers face - but maybe that means we’re guilty of, at times, ignoring the big picture: what opportunity does technological success represent for the sector, and producers within it? 

Here’s our take, all based on some approximate numbers we’ve run within CloudNC as part of our efforts to model the sector. 

Manufacturing: the state of play

Firstly, the observable precision manufacturing sector is enormous. As far as it’s possible to tell, over $1 trillion of parts and components is produced worldwide, every year. 

Zooming in on the detail within that vast figure, somewhere around $40 billion is spent on paying people to program CNC machines - the mini-factories that are used to make high-spec metal parts and components for anyone who needs them.

And yet the factories that run those machines aren’t as efficient as they could be. With all the myriad blockers, obstacles and inefficiencies that they face (from shortages of skills to the challenges of accurately quoting for work, and then scheduling it), no establishment is at 100% efficiency, and some inefficient factories run at 10% of their theoretical maximum capacity.

So although those numbers are pretty rough, what is clear is that there’s a lot of slack in the system - and if you could tighten any of it, then there’s a lot of potential upside. What might that look like?

All about 4X

Let’s take a ‘normal’ factory - say, three CNC machines - operating at industry-standard levels of productivity. According to our base assumptions, that normal factory might operate on revenues of $1m a year, with a profit of around 9%: or $90,000 a year. 

For the sake of this example, let’s say we can fix all of that factory’s inefficiency problems overnight. So all of a sudden its machines are running at full capacity, it can get all the staff it needs to operate them, and it’s able to estimate and schedule work super quickly and efficiently.

According to our best estimates, formed by analysing the sector and crunching the numbers, fixing those problems together would create around $350,000 a year in combined savings and profits for your average factory (in effect, increasing profits by around 4x). 

Now, we’re well aware that that improvement is purely theoretical: in reality, such a leap forward in efficiency gain would be practically impossible to achieve, at least in one step. 

Still, the figure offers a glimpse of where technological gains might point for forward-looking factories that are able to effect even a small proportion of them: not just incremental increases on the balance sheet, but actual step changes in efficiency and profitability. 

Fixing the output gap

Extrapolate any of those gains out across multiple facilities, and you end up with a much more productive manufacturing sector. And that’s critical, because of the forthcoming output gap that poses challenges to how our entire global economy functions. 

Taking the US as a focus, if you correlate trends from various sources - like census data, economic growth and numbers entering and exiting the workforce - it’s clear that manufacturing has a problem. Quite simply, demand for parts and components will increase substantially, but the skilled workers to run the machines to service that demand won’t exist

In fact, according to our projections, the ‘output gap’ between predicted demand and industry capacity could be as high as $500bn by 2030. 

That’s an astronomical number - and, of course, a hypothetical one - but even if it contains only the merest grains of truth, the direction of travel is clear: at current rates, the US manufacturing sector will struggle to keep up with demand. That means it runs the risk of becoming a massive blocker within the domestic economy, preventing other sectors that rely on parts and components from growing as they might. 

That’s why the US government is placing such a high priority on bolstering its domestic industry at the present time, and it’s why new technologies play such an important role in the equation too: as without them, the global economy runs the risk of slowing down or even stalling. 

The good news? Breakthroughs are, we believe, here, not least in the form of CAM Assist. And forward-looking companies can grab a larger slice of an enormous manufacturing pie by adopting them now and getting a headstart on the competition. 

Want to know more about our solutions? Get in touch to find out more about CAM Assist, and how it can future-proof your business!

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