DIEMAKERS GET DOWN TO BUSINESS
February 2002
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Steel rule die manufacturers must confront the challenges of price pressures and technology investments.
A two-part industry survey, developed and conducted by the International Association of Diecutting and Diemaking (IADD) and packagePRINTING, gathered diemakers' perspectives on the business climate as of June 2001, and then reassessed the landscape after the September 11 terrorist attacks.
Who are today's diemakers?
In tallying the results of the survey, the expected profile emerged of an industry of small, established, family-owned companies. The highest percentage (46 percent) of responding die shops has 25 employees or less, and has been in business an average of 27 years. Seventy-seven percent are family-owned, and the majority of respondents (69 percent) had sales in the $1 million-$10 million range in 2000.
More than half (54 percent) have seen major management changes in the past three years, with 31 percent reporting the reorganization of divisions or departments; 17 percent citing a transition to next-generation management; and 6 percent seeing the sale of a division or of the entire company.
Steel rule die manufacturers reveal that, most often, business comes from a wide array of sources. Seventy-one percent report having accounts of varying sizes/from varied end-use markets. Just 23 percent say their customer roster consists of a small number of large core accounts. Only 17 percent glean the majority of their work from a single end-use market.
Characterizing the business climate
As of June 2001, the business outlook appeared challenging, but not without a few bright spots. Fifty percent of responding die shops said business has been steady over the past three years, and another 29 percent noted business had grown during this period. Share of market reports also brought some good news, with 56 percent seeing increases over the past three years, and 35 percent holding steady. Annual growth also favored the positive, with 52 percent citing an increase, and 38 percent holding steady.
Not surprisingly, profit margins emerged as the darkest part of die shops' economic picture. Over the past three years, 46 percent of shops have seen a decline in margins, though 38 percent say they have held steady, and 17 percent report an increase. Labor is far and away the operating cost with greatest impact on diemakers' profits, cited by 46 percent.
The economic slowdown that dominated 2001 was most often characterized as moderately affecting die shops. Many respondents said the slowdown only amplified a downturn that was already afoot in the diemaking sector. "The current downturn in business actually began a little over two years ago," elaborated one respondent.
A closer look at the impact of the national economic slowdown revealed virtually no effect on manufacturing, with 92 percent citing no plans for production shutdowns or mandatory employee vacations. More than two-thirds said no layoffs have resulted from current conditions, and over half are preceding with planned marketing initiatives despite the downturn. Equipment purchases seem to be bearing the brunt of the slowdown, with more than half of responding die shops reporting a cut or a complete halt in technology investments.
Companies Mentioned:
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