In many machine shops, there’s plenty of discussion around cutting costs. However, the conversations often end with little to no concrete plan in place to actually make it happen. The truth is that opportunities for cost reductions don’t just appear out of thin air. They require strategy, discipline, accountability, and a willingness to disrupt “business as usual.”
High-Performance Shops Prove That Results Require Action
In a recent NTMA operational survey, high-performance shops outpaced typical shops in profitability by an average of 10 percentage points.
What sets these companies apart?
1. Strategic Sales Growth
High performers grew sales 8.5% faster by targeting the right work. In other words, they took on high-demand jobs that better supported their margins.
2. Gross Margin Improvement
These shops had a 9% higher gross margin, with:
- Labor costs that were 5% lower. Note that this wasn’t due to reduced wages, but through more strategic work assignments and smarter delegation of meaningful work.
- Overall factory costs that were 6% lower, driven by intentional changes in operations.
3. Employee Productivity
Employee productivity was 19% higher, thanks to better technology, stronger planning, and workplace cultures that remove barriers to getting work done.
Above all, these companies have one major attribute in common: they don’t just talk about improving their outcomes, they put in the work.
Culture Drives Cost Reductions
Driving change in a modern CNC machine shop isn’t always comfortable. Long-time supplier relationships and “the way we’ve always done things” can feel safer than pursuing improvement.
But avoiding change leads to stagnation. Shops that cling to comfort are making an active decision to rest on their laurels rather than pursuing profitability. This isn’t just a leadership issue; high costs limit what every team member has the potential to earn. A shop that fails to improve eventually fails to compete, and that affects workers and their families.
Becoming a high-performance shop means:
- Examining old assumptions
- Challenging internal comfort zones
- Creating a culture of accountability
- Evaluating existing supplier relationships and identifying new vendors that could reduce costs
Practical Steps: How to Run a Machine Shop with Intention
Cost reductions must be deliberate, measured, benchmarked, and reviewed continuously.
Here are tactical moves every CNC business can make:
- Review costs line by line: Inventory, materials, energy, tooling, and logistics should all be analyzed and negotiated.
- Use the right tools for the job: For instance, automated resources can allow employees to spend more time on high-value work.
- Get your people involved: Teams must understand how improvement helps their careers, not just the company’s bottom line.
- Create a clear plan that focuses on efficiency: Define priorities, track progress, and communicate the “why.”
Opportunities for Cost Reductions, Exclusively for NTMA Members
This is where NTMA can help shops take action faster. Our exclusive member programs include:
- Our first-of-its-kind cutting tool program with PTSolutions
- Discounted tooling from partners like Grainger
- Operational benchmarking and guidance from industry experts
- Best practices from high-performance peers
Choose Your Future: Typical or High-Performance?
When it comes down to it, only 25% of shops we surveyed are considered high-performance. The remaining 75% are leaving major profit on the table.
A high-performing future requires focus, change, accountability, and a willingness to disrupt comfort. Because cost reductions aren’t accidental; they’re earned.
Shops that take decisive action are likely to build a more resilient business that can enhance outcomes with automation, withstand workforce changes, improve efficiency, and grow year over year.
NTMA is here to help you get there. Let’s move from conversation to action, together. Not an NTMA member yet? What are you waiting for? Learn more about the benefits of joining our dynamic manufacturing network.