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Monthly archive for November 2010

Manufacturing Capacity Utilization is on a Steady 40 Year Decline. Will This Recovery Buck the Trend?

“Geoff Forester photograph, courtesy of the New Hampshire Community Loan Fund”.

In looking at manufacturing capacity utilization trends over the past forty years, a sobering realization emerges. As expected, capacity drops during a recession. But for each recession, the ensuing recovery brings manufacturing to a capacity level lower or no greater than the peak preceding the recession. This trend continues, recession after recession. From a high of 89% back in January of 1967, capacity utilization is now at about 75%. In the last ten years, the highest it’s been is about 82%, in November of 2007. At the bottom of the current recession, capacity was about 68%, the lowest in the past forty years.

A very high capacity utilization rate can fuel inflation and lead to late orders and lack of agility; it is not necessarily a good thing.  Surprisingly, a low utilization rate can be beneficial. Companies can be more responsive and agile to demand because they have the excess capacity available. However, this works only if you recognize the opportunity and have the means to put the capacity to use – cash for growth and skilled labor to run the capacity. For many small manufacturers, both are currently in short supply.

It will be interesting to see if US manufacturing can use the current low utilization rate to increase market share and improve agility. If it can, it will be bucking the trend of the last forty years. Such a reversal of the past would indicate that manufacturers are wisely looking at their market opportunities  and manufacturing abilities, not just blindly playing a numbers game of cost reduction and capacity abandonment.

From the Field – Manufacturing is Ready to Roll

“Geoff Forester photograph, courtesy of the New Hampshire Community Loan Fund”.

Graphicast participated in two trade shows last week, one in Marlborough, MA and the other outside of Toronto. That this was the first time we attended two shows at the same time is, in itself, an indication of the activity level in manufacturing. The view from the show floor was an even better indicator of the market. Both shows were very crowded, even over the lunch period, and the interest level was very high. This was not a week for just getting out of the office. Our reading is that manufacturing in New England and southern Ontario is coming back quickly, and with lots of energy. There is definitely interest in on-shoring production that had been sent overseas, and lots of new products ready to hit the market. We are following up on leads this week and will have all our sales people out of the office making calls; another sign of interest and a reboundin market. 

We’re also seeing this rebounding  in shipments. Our September shipments were the highest in two years. The only downside is the volatility of the activity. The trend is up year to year, but on a month to month basis we seem to be in the three forward, one backward mode.

Taking Innovative Casting Technology to Your Bottom Line™

Graphicast Inc.

PO Box 430 36 Knight Street,
Jaffrey, NH 03452
phone: 603-532-4481
fax: 603-532-4261