job shop business plan

Machine Shop Business Plan Template

Written by Dave Lavinsky

Machine Shop Business Plan

Over the past 20+ years, we have helped over 500 entrepreneurs and business owners create business plans to start and grow their machine shops.

If you’re unfamiliar with creating a machine shop business plan, you may think creating one will be a time-consuming and frustrating process. For most entrepreneurs it is, but for you, it won’t be since we’re here to help. We have the experience, resources, and knowledge to help you create a great business plan.

In this article, you will learn some background information on why business planning is important. Then, you will learn how to write a machine shop business plan step-by-step so you can create your plan today.

Download our Ultimate Business Plan Template here >

What Is a Business Plan?

A business plan provides a snapshot of your machine shop as it stands today, and lays out your growth plan for the next five years. It explains your business goals and your strategies for reaching them. It also includes market research to support your plans.

Why You Need a Business Plan

If you’re looking to start a machine shop or grow your existing machine shop company, you need a business plan. A business plan will help you raise funding, if needed, and plan out the growth of your machine shop to improve your chances of success. Your machine shop business plan is a living document that should be updated annually as your company grows and changes.

Sources of Funding for Machine Shop Businesses

With regards to funding, the main sources of funding for a machine shop are personal savings, credit cards, bank loans, and angel investors. When it comes to bank loans, banks will want to review your business plan and gain confidence that you will be able to repay your loan and interest. To acquire this confidence, the loan officer will not only want to ensure that your financials are reasonable, but they will also want to see a professional plan. Such a plan will give them the confidence that you can successfully and professionally operate a business. Personal savings and bank loans are the most common funding paths for machine shop companies.

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How to write a business plan for a machine shop.

If you want to start a machine shop or expand your current one, you need a business plan. The guide below details the necessary information for how to write each essential component of your machine shop business plan.

Executive Summary

Your executive summary provides an introduction to your business plan, but it is normally the last section you write because it provides a summary of each key section of your plan.

The goal of your executive summary is to quickly engage the reader. Explain to them the kind of machine shop you are running and the status. For example, are you a startup, do you have a machine shop that you would like to grow, or are you operating a chain of machine shops?

Next, provide an overview of each of the subsequent sections of your plan.

• Give a brief overview of the machine shop industry.
• Discuss the type of machine shop you are operating.
• Detail your direct competitors. Give an overview of your target customers.
• Provide a snapshot of your marketing strategy. Identify the key members of your team.
• Offer an overview of your financial plan.

Company Overview

In your company overview, you will detail the type of machine shop you are operating.

For example, you might specialize in one of the following types of machine shops:

• Computer numeric Control (CNC) Milling Machines: Used in a wide array of products including automotive, aerospace, and medical devices, electronics, and agriculture.
• CNC Pocket Milling: Type of milling often used in aerospace and shipbuilding.
• Lathe Machines: Used in woodworking, metalworking, and glassworking to produce items such as gun barrels, candlesticks, screws, table legs, baseball bats, musical instruments, etc.
• Drill Press: Typically used for woodworking.
• Welding Machines: Many industries rely on welding machines including automotive, construction, and aerospace.

In addition to explaining the type of machine shop you will operate, the company overview needs to provide background on the business.

Include answers to questions such as:

• When and why did you start the business?
• What milestones have you achieved to date? Milestones could include the number of customers served, the number of projects completed, reaching $X amount in revenue, etc.
• Your legal business Are you incorporated as an S-Corp? An LLC? A sole proprietorship? Explain your legal structure here.

Industry Analysis

In your industry or market analysis, you need to provide an overview of the machine shop industry.

While this may seem unnecessary, it serves multiple purposes.

First, researching the machine shop industry educates you. It helps you understand the market in which you are operating.

Secondly, market research can improve your marketing strategy, particularly if your analysis identifies market trends.

The third reason is to prove to readers that you are an expert in your industry. By conducting the research and presenting it in your plan, you achieve just that.

The following questions should be answered in the industry analysis section of your machine shop business plan:

• How big is the machine shop industry (in dollars)?
• Is the market declining or increasing?
• Who are the key competitors in the market?
• Who are the key suppliers in the market?
• What trends are affecting the industry?
• What is the industry’s growth forecast over the next 5 – 10 years?
• What is the relevant market size? That is, how big is the potential target market for your machine shop? You can extrapolate such a figure by assessing the size of the market in the entire country and then applying that figure to your local population.

Customer Analysis

The customer analysis section of your machine shop business plan must detail the customers you serve and/or expect to serve.

The following are examples of customer segments: individuals, schools, families, and corporations.

As you can imagine, the customer segment(s) you choose will have a great impact on the type of machine shop you operate. Clearly, individuals would respond to different marketing promotions than corporations, for example.

Try to break out your target customers in terms of their demographic and psychographic profiles. With regards to demographics, including a discussion of the ages, genders, locations, and income levels of the potential customers you seek to serve.

Psychographic profiles explain the wants and needs of your target customers. The more you can recognize and define these needs, the better you will do in attracting and retaining your customers.

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Competitive Analysis

Your competitive analysis should identify the indirect and direct competitors your business faces and then focus on the latter.

Direct competitors are other machine shops.

Indirect competitors are other options that customers have to purchase from that aren’t directly competing with your product or service. This includes other types of machine shops and inhouse machining. These competitors need to be referenced as well.

For each such competitor, provide an overview of their business and document their strengths and weaknesses. Unless you once worked at your competitors’ businesses, it will be impossible to know everything about them. But you should be able to find out key things about them such as

• What types of customers do they serve?
• What type of machine shop are they?
• What is their pricing (premium, low, etc.)?
• What are they good at?
• What are their weaknesses?

With regards to the last two questions, think about your answers from the customers’ perspective. And don’t be afraid to ask your competitors’ customers what they like most and least about them.

The final part of your competitive analysis section is to document your areas of competitive advantage. For example:

• Will you make it easier for customers to access your product or service?
• Will you offer products or services that your competition doesn’t?
• Will you provide better customer service?
• Will you offer better pricing?

Think about ways you will outperform your competition and document them in this section of your plan.  

Marketing Plan

Traditionally, a marketing plan includes the four P’s: Product, Price, Place, and Promotion. For a machine shop business plan, your marketing strategy should include the following:

Product : In the product section, you should reiterate the type of machine shop company that you documented in your company overview. Then, detail the specific products or services you will be offering. For example, will you provide milling, drilling, grinding, or welding services?

Price : Document the prices you will offer and how they compare to your competitors. Essentially in the product and price sub-sections of your plan, you are presenting the products and/or services you offer and their prices.

Place : Place refers to the site of your machine shop company. Document where your company is situated and mention how the site will impact your success. For example, is your machine shop located in an industrial district, a business district, a standalone warehouse, or purely online? Discuss how your site might be the ideal location for your customers.

Promotions : The final part of your machine shop marketing plan is where you will document how you will drive potential customers to your location(s). The following are some promotional methods you might consider:

• Advertise in local papers, radio stations and/or magazines
• Reach out to websites
• Distribute flyers
• Engage in email marketing
• Advertise on social media platforms
• Improve the SEO (search engine optimization) on your website for targeted keywords

Operations Plan

While the earlier sections of your business plan explained your goals, your operations plan describes how you will meet them. Your operations plan should have two distinct sections as follows.

Everyday short-term processes include all of the tasks involved in running your machine shop, including answering calls, scheduling employees, billing customers and collecting payments, etc.

Long-term goals are the milestones you hope to achieve. These could include the dates when you expect to acquire your Xth customer, or when you hope to reach $X in revenue. It could also be when you expect to expand your machine shop to a new city.  

Management Team

To demonstrate your machine shop’s potential to succeed, a strong management team is essential. Highlight your key players’ backgrounds, emphasizing those skills and experiences that prove their ability to grow a company.

Ideally, you and/or your team members have direct experience in managing machine shops. If so, highlight this experience and expertise. But also highlight any experience that you think will help your business succeed.

If your team is lacking, consider assembling an advisory board. An advisory board would include 2 to 8 individuals who would act as mentors to your business. They would help answer questions and provide strategic guidance. If needed, look for advisory board members with experience in managing a machine shop or successfully running a small machining operation.  

Financial Plan

Your financial plan should include your 5-year financial statement broken out both monthly or quarterly for the first year and then annually. Your financial statements include your income statement, balance sheet, and cash flow statements.

Income Statement

An income statement is more commonly called a Profit and Loss statement or P&L. It shows your revenue and then subtracts your costs to show whether you turned a profit or not.

In developing your income statement, you need to devise assumptions. For example, will you produce 20 of a particular product each day? Will you offer customers discounts for repeat business? And will sales grow by 2% or 10% per year? As you can imagine, your choice of assumptions will greatly impact the financial forecasts for your business. As much as possible, conduct research to try to root your assumptions in reality.

Balance Sheets

Balance sheets show your assets and liabilities. While balance sheets can include much information, try to simplify them to the key items you need to know about. For instance, if you spend $50,000 on building out your machine shop, this will not give you immediate profits. Rather it is an asset that will hopefully help you generate profits for years to come. Likewise, if a lender writes you a check for $50,000, you don’t need to pay it back immediately. Rather, that is a liability you will pay back over time.

Cash Flow Statement

Your cash flow statement will help determine how much money you need to start or grow your business, and ensure you never run out of money. What most entrepreneurs and business owners don’t realize is that you can turn a profit but run out of money and go bankrupt.

When creating your Income Statement and Balance Sheets be sure to include several of the key costs needed in starting or growing a machine shop:

• Cost of equipment and office supplies
• Payroll or salaries paid to staff
• Business insurance
• Other start-up expenses (if you’re a new business) like legal expenses, permits, computer software, and equipment

Attach your full financial projections in the appendix of your plan along with any supporting documents that make your plan more compelling. For example, you might include your office location lease or a list of machinery and equipment you own.  

Writing a business plan for your machine shop is a worthwhile endeavor. If you follow the template above, by the time you are done, you will truly be an expert. You will understand the machine shop industry, your competition, and your customers. You will develop a marketing strategy and will understand what it takes to launch and grow a successful machine shop.  

Machine Shop Business Plan Template FAQs

What is the easiest way to complete my machine shop business plan.

Growthink's Ultimate Business Plan Template allows you to quickly and easily write your machine shop business plan.

How Do You Start a Machine Shop?

Starting a machine shop business is easy with these 14 steps:

• Choose the Name for Your Machine Shop
• Create Your Machine Shop Business Plan
• Choose the Legal Structure for Your Machine Shop
• Secure Startup Funding for Your Machine Shop (If Needed)
• Secure a Location for Your Business
• Register Your Machine Shop with the IRS
• Open a Business Bank Account
• Get a Business Credit Card
• Get the Required Business Licenses and Permits
• Get Business Insurance for Your Machine Shop
• Buy or Lease the Right Machine Shop Equipment
• Develop Your Machine Shop Marketing Materials
• Purchase and Setup the Software Needed to Run Your Machine Shop
• Open for Business

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Job Shop Manufacturing: The Detailed Guide

A specific type of store or small business known as a "job shop" creates unique products. In job shop manufacturing, small quantities of the products or objects are made. ‌‌

The company that wants the store to produce its goods asks the shop to make some specialty items. The product is manufactured by special all-purpose equipment in the shop.‌‌

In today's guide, we'll delve into extensive detail on job shop manufacturing. Let’s take a look at the table of content:‌‌

What is Manufacturing Process?

Different types of manufacturing process, job shop manufacturing definition, 5 characteristics of job shop manufacturing, important features of job shop manufacturing, industries that employ job shop manufacturing, when is job shop production used, example of job shop manufacturing, advantages of job shop manufacturing, disadvantages of job shop manufacturing, job shop vs. chop shop, how deskera can assist you.

• Final Takeaways ‌‌

Let's begin!

Manufacturing is the process of turning raw materials into a finished product. People's labor, machines, other tools, and frequently a biological or chemical process are used to accomplish this. ‌‌

Manufacturing the constituent parts that are integrated to make a range of commodities is a possibility, as is large-scale manufacturing. It includes aircraft, home appliances, automobiles , and more.

Following we have discussed 6 main types of production system. Let’s take a look:‌‌

1. Continuous Manufacturing

A method of manufacturing that can generate a constant flow of products.‌‌

The completed product is quite uniform.‌‌

Materials and goods are produced in endless, continuous flows rather than in discrete batches or units.‌‌

Continuous flow technology enables high volume, around-the-clock operation with expensive, specialized automation.‌‌

2. Batch Manufacturing

A processing technique suitable for varied commodities and volumes.‌‌

For a single batch, the product diversity is fixed and constrained. a bakery or pharmacy, for instance.‌‌

A few of the facility's many products get regular and significant demand.‌‌

This type of production system should be employed when there are wide types of products in wide volumes.‌‌

3. Repetitive Manufacturing

Repetitive manufacturing is appropriate when creating repeating output at a fixed production pace. In this manufacturing method, specialized production lines work nonstop on the same product or component throughout the year. ‌‌

You can modify operation speeds to satisfy client requests for producing more or less goods because setup and changeover time are so short.‌‌

4. Discrete Manufacturing

Discrete manufacturing employs an assembly or production line. It is much more varied than repeated manufacturing, although allowing for more frequent changeover and variation. ‌‌

A company can offer several product styles, sizes, or customizations with discrete manufacturing. Although doing so frequently lengthens production time due to any additional setup or removal that may be necessary.‌‌

5. 3-D Modeling

Many in the industry now recognize 3D printing as the sixth production technique. In order to build three-dimensional objects layer by layer from a digital model, 3D printing, which was developed in the 1980s, substitutes a variety of composites and materials, including plastics and metals, for manual labor or mechanization.‌‌

6. Job Shop Manufacturing

Job shops are appropriate for manufacturing small quantities of a wide range of products, each of which has a unique bespoke design and requires a particular set of processing steps or routing through the production process.‌‌

A restaurant, a company that makes furniture, or a company that creates prototypes are a few examples.‌‌

As stated earlier we’ll cover the last type of production, which is the job shop manufacturing process.

A Job Shop is referred to as a type of manufacturing process that can handle small orders for made-to-order (MTO). Here the products are produced in small batches (of varying quantities) to maximize flexibility.‌‌

This often includes products with custom designs & maintenance, small fabrication orders, and repair services. ‌‌

The operating periods and sequences of products may differ significantly in job shop production. The goods are released one time in batches, often known as "jobs."‌‌

Job shop manufacturing processes are distinguished by specific workflows, work centers, job prioritization, and job-related information.‌‌

General-purpose machines are extensively employed in job shop factories. It helps to enable the manufacture of a variety of goods in small lot sizes or quantities. This is because they have a wide range of capabilities and can carry out a wide range of activities.‌‌

Job shop owners have the option of selling their goods directly to customers, doing business with wholesalers, or producing components for other businesses. ‌‌

When completing customer orders, businesses that use job shop production frequently use just-in-time (JIT) workflow.‌‌

Here's the definition of just-in-time inventory. Take a look:

Note: According to Wikipedia, "continuous flow manufacturers. It includes food manufacturing, textile manufacturing , steel, and manual labor" are the reverse of job shops. ‌‌

Let’s now discuss the characteristics of a job shop. ‌‌

Following we’ve discussed four characteristics of job shop manufacturing. Let’s learn:‌‌

In the workshop, similar tools or jobs are organized together. For instance, a process plan would place all the drill presses in one area and all the grinding machines in another. ‌‌

The goal of the plan is to lower expenses and improve material management and work-in-progress (WIP) inventories. Job shops use general purpose equipment rather than specialized, dedicated product-specific equipment. ‌‌

In order to allow job shops the ability to swiftly switch setups on multiple machines, digital numerically controlled gear is widely used. Because economies of scale are often not a competitive advantage for job shops, businesses must compete on grounds other than pricing. ‌‌

In terms of product quality, delivery efficiency, customization, and the introduction of new items, they compete.‌‌

When a job shop receives an order, the part being worked on is moved according to a set of protocols between the various regions. Not all of the machinery in the factory will be used for every task. Jobs may be processed many times at the same computer and frequently follow an unpredictable routing. ‌‌

In addition, this design is used in places like department stores and hospitals, where certain areas are designated for a particular commodity (men's apparel) or service.‌‌

3. Employees

Highly competent craftspeople who can operate a number of machinery classes are frequently employed by workshops. These workers get paid more because they are more skilled. Because of their high degree of ability, job shop employees need less supervision. ‌‌

Employees may be paid via an incentive plan or a set hourly rate. Setting prices for customer orders and submitting bids for jobs are duties of management. Information processing is the primary activity in a job shop.‌‌

4. Information

Information is the most crucial element of a workshop. To specify the particular work to be done, estimate a cost, submit a job bid, and process an order through the shop, information is needed. Before the task is released to the floor, a quote is provided, followed by the preparation of a job sheet and blueprint. ‌‌

Workers fill out job sheets and timecards once they are on the factory floor in order to update records for future project quotes when deviations are present and to determine labor expenses.‌‌

While it is typically easier to bid on jobs that the shop has already completed, new jobs demand appropriate overhead assignment as well as proper costing of labor, materials, and equipment. ‌‌

Every job is monitored using a ticket that travels around the shop, noting time and activity. Because it produces one-of-a-kind, personalized things, the company competes on quality and customer service rather than price. ‌‌

Due to customers bringing in the materials and components to be worked on, the job shop has minimal to no raw material stocks. While jobs are being completed, the job shop holds work-in-process inventory. ‌‌

However, there is no finished goods inventory in this made-to-order setting because the client often expects prompt delivery and is awaiting the order.‌‌

Some shops, like many small businesses, do well with cash flow management. They might work on tiny jobs in order to complete them by the end of the month so they can bill clients for the service.‌‌

5. Scheduling

A job's route, processing requirements, and priority are what make it up. When deciding how and when to plan work, the diversity of things in a job shop is an important factor to take into account. ‌‌

Depending on how a job arrives, it might not be completed to avoid costly machine setups and replacements. Tasks may also be scheduled according to their processing times, from shortest to longest.‌‌

It can be difficult to estimate capacity in a job shop because it depends on a variety of variables. It includes lot sizes, job complexity, mix of previously scheduled jobs, effective scheduling techniques, the number of machines and their condition, the quantity and quality of labor input, and any process improvements.

Following we have discussed the characteristics of Job Shop Manufacturing. Let’s learn:‌‌

1. Customers frequently submit numerous small-batch orders (jobs) with unpredictable process requirements at unpredictable times.

2. A job's quantities, material requirements, routings, priorities, target lead times, and margin may all change.

3. An order may specify the manufacturing of a collection of related components or a variety of components, the development of subassemblies from those subassemblies, and the final assembly.

4. While competing for the same resources, many jobs may be operating simultaneously through the system along their own routings.

5. Processing a work might entail some external operations.

6. Production tasks might be carried out in a particular order or according to predetermined priority relations.

7. The operations and relations might vary from job to job.

8. The setup and cycle times of every operation can change based on the task.

9. How quickly operations are setup may also depend on the sequencing of the jobs.

10. A single resource or a large number of resources, such workers and machines, may be required for an operation.

11. Workers and multipurpose machines could be considered resources.

12. Resources may be subject to individual calendars (working hours) and calendar exclusions.

13. One or more alternative resources may or may not be shared in order to reduce the amount of time needed for a protracted operation.

14. The system allows for the transfer of materials for a project either as a single batch or in small transfer batches.

A job shop may produce a wider range of goods than a production line. This can do so sequentially and one after the other. Job shops can be found in the following industries:‌‌

• Make-to-order (MTO) production units

• Engineer-to-order (ETO) production units

• Custom manufacturing units

• High-mix, low-volume production units

• Order-driven production units

• High-variety production units‌‌

Job shops, in particular, include many different types of companies, such as:‌‌

• Fabrication shops,
• Commercial Printing Shop
• Bespoke woodworking companies,
• Forge shops,
• Machine shops,
• Mold shops,
• Tool & die shops,
• Furniture makers,
• Repair companies,
• Particular service companies, etc. ‌‌

Production management in job shops like fabrication units is typically akin to the management of multiple, concurrent projects that share a lot of common resources. However, they have a limited amount of capacity.

The job shop production method is applied when:

• Large inventory of materials, tools, and components
• High variety of products with volume
• Planning is necessary for the priority of each order as well as the sequencing of each product capacity for each work center.
• Utilization of general-purpose equipment and facilities
• Highly skilled individuals that see each task as a challenge

Many different manufacturers use job shop manufacturing, and in our example, we'll look at how it's used within our business.

Customers can personalize products or design elements. Due to the special setup required, job shop manufacturing enables manufacturers to customize each individual item.

The customer can select the type of finish they want for their components or goods in addition to choosing from a variety of materials.

Customers can pick whether they want their components or products painted or even engraved in addition to the other choices available.

Preparing Materials through Cutting

Once the order is placed and the supplies have arrived, the sheet metal is cut to the specifications in compliance with the customer's order.

One of our knowledgeable operators will cut the material into the required form at the particular workstation we have set aside for that purpose. specifically, strips or discs made of metal. Therefore, workstations are ideal for avoiding backlogs and delays.

Rolling & Welding (Dependent on component)

If the sheet metal had been cut into strips, the ends would first be joined by welding after the strips had been rolled.

First Inspection and Tooling

The sheet metal discs or welded components are inspected in accordance with ISO 9001: 2015 standards, as is the case with all processes. The tooling is then selected based on the requirements of the customer order.

Metal Spinning

The metal spinning process begins once the materials have been prepped and cut. In this instance, welded metal discs or metal strips are formed over a tool. To the customer's specifications, the component is finished and shaped.

Finishing and Secondary Fabrications

The component will undergo a polishing process after its shape is finalized. The cleaning procedure includes the procedures of deburring and polishing. If more secondary fabrications are required, we'll drill holes before anodizing or painting, for example.

Final Assessment and Delivery

The items undergo one more inspection before being packaged and shipped.

When workstations are divided in this fashion, it is simple to move the components to the subsequent operation. The availability of personalization options would further suggest that the things are not in the same order.

Job shop production is the best manufacturing process for any modern organization. Even the majority of firms can go back to its roots.

This is not to say that this process is perfect. Thus, let's discuss its shortcomings so that you are aware of them and can be ready for them.

Following we’ve discussed the benefits of job shop manufacturing. Let’s discuss:

1. Increased Flexibility

You can manufacture and produce a much wider variety of items. It is because the machines aren't made specifically to make one type of product.

2. Improved Supervision

• In job shop production, the departments are in charge of organizing the machines into functional groups. Each department's manager has more extensive knowledge to ensure more productive days.

3. Operators Pick up Cutting-Edge Knowledge and Abilities

Almost every operator can concentrate on one machine and study this department.  It is because machines are organized by department. This could boost each department's activity and manufacturing efficiency.

4. Highly Qualified Individuals

For this type of manufacturing process to be successful, you will need employees that are highly skilled in the particular trade of your company.

In other words, you can let workers finish their jobs since their level of experience will ensure that they deliver a high-quality finished product on time.

5. Better Equipment Utilization

When using the job shop method, every piece of equipment is used as fully as is practical. Large machines and expensive machinery are therefore not as necessary.‌‌

6. Product Monitoring on the Ground

The products move while going through their own stages, making it simple to watch their growth.‌‌

7. Lower Spending

Simply buy the appropriate tools, put them in the best locations for your items to move through throughout manufacturing, and you're good to go. ‌‌

Simply make further orders to finish the merchandise and satisfy customer demand. Installation of a new workstation shouldn't disrupt the ongoing procedure.‌‌

8. Better Utilization of Resources

Focusing on each product will allow you to efficiently use all of your resources to complete orders.‌‌

9. Customizable Product Designs

• The workshop production method allows customers to customize their orders. As a result, each product is unique, and the buyer can participate in the manufacturing process.

There are always drawbacks to take into account with positives. The drawbacks of job shop manufacturing are listed below.‌‌

1. Heavy Production Costs

Manufacturing in a job shop is more expensive. It is because managing materials and moving parts from one department to another is so expensive.‌‌

2. Costly Material Management

In manufacturing, managing the materials can be expensive and challenging. Materials must be exchanged, which could be confusing, if one machine is not prepared to take on a task or the machine worker is not accessible.‌‌

3. High Flow of Materials

Because job shop manufacturing is carried out by departments, the pieces must be transferred to the subsequent department for completion. Due to the necessity of transferring components around the whole facility before an activity is finished, job shop manufacturing has a high material flow.‌‌

4. Longer Lead Times for Production

Each part of the batch must be completed before the item can move on to the next stage of production. If one component is running late, the entire batch will as well, resulting in a long lead time and low production rates.‌‌

5. High Degree of Work

Your workload could be heavy if you have a lot of orders. However, the opposite is equally undesirable. Low to no orders suggest insufficient utilization of the resources. However, there is a chance that both will be stressful.‌‌

The negative aspects of a job shop could be frightening. Although there is a possibility that you will encounter these issues, there are things you can take to avoid them.‌‌

Simplify Job Shop Production System

It makes sense to simplify the system in order to make it easier to control job shop output. It is preferable to try to simplify things as much as you can, despite any practical limitations. ‌‌

Simplifying things might not always be free. The job shop production system can be streamlined using the following two methods.‌‌

I. Analysis of the process flow, identification of component families, design of cells for various part families, and cellular manufacturing‌‌

II. Sufficiently boost resource capacities‌‌

The first method can undoubtedly lessen the complexity previously described if resources can be distributed to different cells as needed. It can be highly beneficial for companies that produce parts.‌‌

However, this tactic might have some limitations in fabrication in project-oriented job shops. The administration of job shop production can be significantly simplified if resource capacities can be raised as needed.‌‌

Keeping a lot of unused resource capacity might increase the overall cost of production, making simplification through capacity improvement uneconomical for some small job shops. Some of the simplification methods used today fall short in this area.‌‌

For instance,

a) The lean manufacturing approach, which incorporates takt time, line balancing, VSM for each product, heijunka, and best practices, is insufficient for handling multiple, diverse activities at once.‌‌

b) The theory of constraints (TOC) recommends capacity planning as a single constraint with full subordination to simplify the system. But the vast majority of job shops reject it, probably because they do not think it is cost-effective.‌‌

The ability of the shop to produce in a variety of ways should not be sacrificed in the name of simplification of complex, high-variety manufacturing, despite how strongly desired this is.

It is important to distinguish this expression from "chop shop," which while sounding similar, has a very distinct connotation.

A company that disassembles vehicles, even stolen ones, is known as a chop shop. After that, it either sells them as components or puts the pieces together to make cars that are then sold. Many stolen cars are sold by them.

Vehicles are routinely exported and are prepared in chop shops.

Deskera MRP allows you to closely monitor the manufacturing process. From the bill of materials to the production planning features, the solution helps you stay on top of your game and keep your company's competitive edge.‌                                    

Deskera ERP and MRP system can help you:

• Manage production plans
• Maintain Bill of Materials
• Generate detailed reports
• Create a custom dashboard

Deskera ERP is a comprehensive system that allows you to maintain inventory, manage suppliers, and track supply chain activity in real-time, as well as streamline a variety of other corporate operations.

Deskera Books enables you to manage your accounts and finances more effectively. Maintain sound accounting practices by automating accounting operations such as billing, invoicing, and payment processing.

Deskera CRM is a strong solution that manages your sales and assists you in closing agreements quickly. It not only allows you to do critical duties such as lead generation via email, but it also provides you with a comprehensive view of your sales funnel.

Deskera People is a simple tool for taking control of your human resource management functions. The technology not only speeds up payroll processing but also allows you to manage all other activities such as overtime, benefits, bonuses, training programs, and much more. This is your chance to grow your business, increase earnings, and improve the efficiency of the entire production process.

Final Takeaways

We've arrived at the last section of this guide. Let's have a look at some of the most important points to remember:‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌

• A Job Shop is referred to as a type of manufacturing process that can handle small orders for made-to-order (MTO). Here the products are produced in small batches (of varying quantities) to maximize flexibility.
• Job shop manufacturing processes are distinguished by specific workflows, work centers, job prioritization, and job-related information.
• Customers frequently submit numerous small-batch orders (jobs) with unpredictable process requirements at unpredictable times.

Related Articles ‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌

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Sustainability and Green Practices in Contract Manufacturing

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Job shop manufacturing: a manufacturer’s best friend

Every day is Christmas in Santa’s workshop. Well, surely that’s Father Christmas’ approach to management to get his workforce to meet those massive quotas. All ready for that one day of the year. He must operate his not-for-profit business this way since the items are so diverse it’d be impossible for him to incorporate assembly lines.

So, how the heck does Santa do it?

If you don’t know how he does it, don’t worry, you’re not a cotton-headed ninny muggins. Let us tell you all about the world of the  job shop manufacturing process.

What is job shop manufacturing?

Job shop manufacturing characterizes itself as a shop with tools, machines, and facilities with similar functions or performances. The separated workstations perform different tasks during a product’s manufacturing process. The final products are produced in small batches (of varying quantities). Customers customize their orders to meet their specific needs.

This means a business will produce a small volume of products that are not standardized.

The level of personalization offered by the job shop process means shop floors have a unique setup and process steps. Products produced by a company may not go in the same direction. Meaning items will move differently to the next process and may even return to the same workstation several times.

All this depends on the product’s manufacturing requirements.

Job shop manufacturers can sell their wares directly to customers, via a wholesaler, or produce parts for other businesses. Businesses that use job shop production often employ just-in-time (JIT) workflow to fulfill customer orders.

Now that we know what is job shop production let’s look at an example.

Manufacturing vs. production

While these terms are often used interchangeably, there is a distinct difference between the two.

• Manufacturing — The process of turning raw materials into finished products
• Production — All the activities associated with the creation of goods

The manufacturing process begins with raw materials and ends with finished products. On the other hand, the production process encompasses all the activities necessary to create a product, from start to finish. This includes everything from sourcing and procuring raw materials to packaging and shipping the finished product.

To lear more about the differences, you can check out the following article — Production vs. manufacturing: what’s the difference?

A job shop production example

The fruits of a diverse selection of items were produced in a job shop manufacturing environment. There is a huge list of businesses that use this process. However, for our job shop manufacturing example, we’re going to look into the world of producing eyeglasses.

Framed by Karl is a business that makes and sells customizable eyeglasses made from wood. Let’s look at the exact steps involved.

At Framed by Karl, glasses are customized by the customer. Job shop production allows manufacturers to personalize each individual item because of their unique setup.

The customer chooses from a range of stock frames to have their own personalized glasses. During this stage, they also have the option to select the particular type of wood they want to have. The company will collect the customer’s measurements for the item’s blueprint so production can begin.

Along with different variations for customers, they can decide if they would like hinges before placing the order.

P reparation of material and cutting

Once the order is made, the raw materials get prepared from the company’s inventory. Then begins the cutting of the material as per the requirements of the customer’s order.

An employee carefully cuts the material into the desired shape. This workstation will be specific to this step of the manufacturing process. In job shop manufacturing workstations are divided to avoid clutter and backlogs.

Once the materials are cut and prepped, they enter the shaping process. The wood is bent and placed inside a tool, putting pressure on the frames to achieve the desired shape. After an ‘X’ amount of time, the frame holds its rough final form.

V arnishing

Once the frame is ready, the product goes through varnishing. One coat of varnish will be applied, then removed after 30 minutes to avoid warping the wood. This process takes place several times across multiple days. It is not unusual in job shop manufacturing for products to go through a process several times.

F inal product

The frames will go through their final stages of polishing before completion. The final touches are applied, bringing the item to completion after going through the relevant processes of the job shop manufacturing.

This meticulous approach to work allows for complete customization of a customer’s order. Having the workstations separated this way enables the product to be easily transported to the following process. Although, having the options for personalized items means the items won’t go through the same order.

The complicated workflow of job shop manufacturing looks like this:

As you can imagine, or even experience yourself, this type of workflow can be very sporadic. Meaning that job shop manufacturing comes with its own unique advantages and disadvantages.

Pro tip: Are you a scaling business manufacturer who wants to overhaul their productivity? Check out our must-have guide to answering the question of  what is manufacturing .

7 advantages of job shop production

The characteristics of job shop production system mean it has many advantages, let’s see what these are in a bit more detail.

1 . Customize product design

Job shop production process allows customers to personalize their orders. This makes items unique and allows the customer to participate in the process.

2 . Easily adaptable to change

The workstations and machines being divided means if the shop floor needs to be rearranged or the process changes, this can be quickly and easily done, unlike other manufacturing processes which require a reconfiguration of the entire company layout.

3 . Better use of resources

All your resources can be efficiently utilized to fulfill orders by being able to focus on each product.

4 . Flexibility

The erratic nature of the workflow means you have the option to prioritize certain operations.

5 . Floor-level monitoring of products

The movement of the products going through their individual processes means you can easily track their development.

6 . Highly skilled workers

For this type of manufacturing process to work correctly, you will need employees that are highly skilled in the specialized craft of your business. This means you can leave workers to continue their tasks, and their skill level will ensure that they deliver a quality product in a timely manner.

7 . Lower Investment

You buy the relevant tools and machines, you store them in the most effective places for your products to pass through during manufacturing, and that’s it — you’re set up. If you need more things to meet customer demand and finish products, you just purchase more. The installation of any new workstations shouldn’t disrupt the current workflow.

Job shop manufacturing is the perfect process for any modern manufacturer. Most businesses even find their roots in it. However, that isn’t to say that this process isn’t without its flaws, so let’s review these to ensure you’re aware of them and can take the necessary steps in advance.

5 d isadvantages of job shop production

As with everything, there rarely ever are silver bullets that fix all your ailments without any adverse side effects. The same goes for job shop production. While there are many clear advantages, there are also some disadvantages that you should consider before deciding if this type of manufacturing is right for your company.

1 . Difficult to schedule

The randomness and inconsistency of orders can often lead to a backlog, which is accepted among many job shop manufacturers. You might have only a few orders come in one day and a whole load the next day, meaning that a schedule may need to change to meet orders constantly.

2 . Difficult to organize

Because items pass through different processes, it can be challenging to organize your production flow. Some orders can be relatively straightforward, while others can have a massive bill of materials (BOM) which will be costly for your resources.

3 . Material handling costs

Transporting, storing, and damage to goods are just a few costs that affect your business while using job shop manufacturing. In lean manufacturing , this is known as muda (waste), and it’s categorized as an action that doesn’t add value to the customer’s sale.

A very simple example would be ‘transport’. Moving the item around the shop floor costs resources but doesn’t add value.

4 . High production lead time

Because items are customizable, you have to wait until you receive the customer’s order. Then you’ll have to generate a manufacturing order before beginning production.

5 . High levels of work

The workload can be intensive if you receive a high amount of orders. Though, the opposite is also a disadvantage too. Low to no orders mean resources aren’t being fully utilized. Nevertheless, both can be stressful to experience.

The disadvantages of a job shop perhaps appear daunting. Even though you can run the risk of encountering these types of issues, there are steps you can take to avoid these.

How can scaling manufacturers use job shop manufacturing?

As previously mentioned, one of the most significant issues a business owner finds with this process is that it’s challenging to organize. Some managers get around this by tracking their key performance indicators (KPIs). These KPIs can be their lead time, machine utilization & capacity, worker assignment, and inventory.

How you decide to monitor your business’s progress is down to you. Though, you should be aware of the responsibilities that will fall on you as an owner or manager, which will help you ease any of the disadvantages mentioned.

M anufacturing lead time

One of the major disadvantages of running a job shop is the long lead time. However, if you take the time to calculate your  manufacturing lead time , you can avoid keeping your customers waiting and keep them happy.

P roduction scheduling

Your  production scheduling needs to be on point. Not only should it be pitch-perfect, but it should also be dynamic. Your schedule needs to fully utilize your resources in a workshop that has already been designed to maximize efficiency.

One way of achieving a smooth production schedule is by managing your job shop manufacturing layout. Your shop floor workstations and inventory should be positioned in places for convenience. You can do this by arranging your orders into  runners, repeaters, and strangers :

• Runners — Items that have a low turnaround and make up for most of your orders
• Repeaters — Products that come through regularly as runners but not at a similar frequency
• Strangers — Products that aren’t ordered as much as runners or repeaters

Arranging your workshop with the complexity of your orders into consideration means you can prioritize orders as soon as they come in. Runners first, repeaters second, and strangers last.

This approach can help you avoid cluttering your shop floor and to minimize your backlog.

Another step you can take is to have the most used tools and materials near or on the shop floor to speed up production.

S upply chain management

This will also fall under production scheduling, and your manufacturing lead time will affect your supply chain management.

Avoid hiccups by mastering supply management to get all the necessary materials and your products shipped for on-time deliveries.

The high mix and low volume of products mean manufacturing times change with each order. An item with low direct labor hours but a big BOM will take up most of your time with supply management as you gather the materials for construction.

Having no forecast means the time available depends on your quote to the customer and the production time starts immediately once receiving the order.

Upgrade to Katana's job shop manufacturing software

Simplify job shop manufacturing with a manufacturing erp.

“Most managers react to the confusion in their job shops in one of two ways. Either they turn to outside vendors for the latest in automation technologies and production control software — an expensive response that seldom delivers the promised benefits — or they throw up their hands.” — Article from Harvard Business Review , 1989.

This was obviously written a lifetime ago, but there’s still some truth in there. Most ERP systems are developed in mind for large corporations with thousand plus employees.

However, times have changed, and cloud inventory software like Katana is here to do much more than just handle your inventory. Katana offers you the chance to monitor your business from one easy-to-read platform. You can get an overview of the manufacturing order’s progress from the overhead view, all color-coded to make the information more accessible.

Let’s see what Katana’s manufacturing inventory software has to offer.

A utonomous inventory management

There’s nothing worse than having to input your recent inventory movements manually. No, wait, there is. To make those updates, realize there’s a mistake and then manually correct those errors. Katana eliminates that annoyance by automatically updating and saving inventory movement as soon as you commit material into production. The same goes if you want to allocate the material elsewhere or make new products.

Katana offers a ton of seamless integrations which means you can connect all your favorite business tools. Making your sales, inventory management , and accounting even more streamlined and accessible from a central place.

F loor-level management

You’re able to prioritize tasks, track employees’ progress and monitor production times. Checking on material availability will help you decide if you need to make orders, which means you’ll be able to calculate your product’s manufacturing lead time easily.

S calability

Choosing a system that can scale with their business is crucial for small manufacturers. Many small manufacturers start with a bunch of Excel spreadsheets, but as the business grows, these sheets quickly become a chaotic mess. It’s time to ditch Excel and allow your business to grow.

Whether you’re just starting up or are already deep into the world of manufacturing your unique products, mastering job shop manufacturing is key to your business’s survival and growth.

With the information provided above, you should be able to identify other businesses that use this process and figure out the steps you need to take to make your business a success.

However, if you’d really like to excel, invest in enterprise manufacturing software and apply it to your job shop manufacturing process to take your business to the next level.

Until next time, happy manufacturing.

• Manufacturing guide
• 1.1. Production vs manufacturing
• 1.2. Production scheduling software
• 1.3. Production tracking software
• 2.1. How to manufacture a product
• 2.2. Manufacturing best practices
• 2.3. A guide to creating a manufacturing business plan
• 2.4. Manufacturer e-commerce
• 2.5. Marketing for manufacturers
• 2.6. Manufacturing business processes
• 2.7. Food manufacturing
• 2.8. Small business manufacturing software
• 3.1. Job shop manufacturing
• 3.2. Production quality control checklist
• 4.1. Just-in-time (JIT) manufacturing
• 4.2. Tips to reduce manufacturing waste
• 4.3. Manufacturing KPIs
• 5. Light manufacturing
• 6. Advanced manufacturing
• 7. IoT in manufacturing
• 8.1. Manufacturing execution system (MES)
• 9.1. Manufacturing overhead formula
• 9.2. Manufacturing inventory software
• 10. Good manufacturing practices (GMP)
• 11.1. MRP in supply chain management
• 11.2. Best MRP software
• 12.1. Best ERP software for manufacturing

More on manufacturing

CNC Machine Shop Business Plan [Sample Template]

By: Author Tony Martins Ajaero

Home » Business Plans » Construction & Engineering

Are you about starting a CNC machine company? If YES, here is a detailed sample CNC machine shop business plan template & FREE feasibility report.

If you are looking for a profitable engineering business whose products can be used by players in the production industry, then one of your options is to open a CNC machine shop company. Starting a CNC machines shop company is relatively capital intensive because of the expensive lathe machines, milling machines, grinders, drill presses and other machines and equipment needed to run the business.

It also requires serious planning and hard work but the fact remains that it is indeed a profitable business to go into. Below is a sample CNC machine shop business plan template that will help you successfully launch your own business.

A Sample CNC Machine Shop Business Plan Template

1. industry overview.

A machine shop is a room, building, or company where machining, a form of subtractive manufacturing, is done. In a machine shop, machinists use machine tools and cutting tools to make parts, usually of metal or plastic (but sometimes of other materials such as glass or wood).

A machine shop can be a small business (such as a job shop) or a portion of a factory, whether a toolroom or a production area for manufacturing. The parts produced can be the end product of the factory, to be sold to customers in the machine industry, the car industry, the aircraft industry, or others. In other cases, companies in those fields have their own machine shops.

CNC machine shop business is a subset of the Machine Shop Services industry and businesses in this industry cuts raw materials into specific shapes and sizes using a variety of tools such as lathes, milling machines, grinders and drill presses.

Almost all forms of metal product fabrication involve machining, and industry operators may also machine plastic and composite materials. In the U.S., the industry generates over $44 billion annually from more than 19,685 registered and licensed machine shops (CNC machine shops inclusive).

The industry is responsible for the employment of over 248,609 people. Experts project the machine shop industry to grow at a – 0.1 percent annual rate between 2014 and 2019. It is important to state that no machine shop can boast of having a lion market share of the market in the industry in the united states of America.

A recent report published by IBISWorld shows that the Machine Shop Services industry has remained largely unchanged after posting two years of revenue declines and three years of revenue increases over the five years to 2019. Revenue has decreased marginally at an annualized rate of 0.1 percent to an estimated $43.8 billion in 2019.

Although nearly all of this industry’s downstream markets have expanded over the past five years and are currently operating with improved market conditions, falling metals prices between 2013 and 2016 contributed to lower revenue in that period.

Rising metals prices after 2017 is propelling industry growth, with revenue expected to rise 0.1 percent in 2019. Technological advancement in machining is largely driven by the defense and aerospace markets. It is important to point out that a machine shop can be a capital intensive business, because the purchase of equipment can require large investments.

A machine shop can also be labor-intensive, especially if it is specialized in repairing machinery on a job production basis, but production machining (both batch production and mass production) is much more automated than it was before the development of CNC, programmable logic control (PLC), microcomputers, and robotics.

It no longer requires masses of workers, although the jobs that remain tend to require high talent and skill. Training and experience in a machine shop can both be scarce and valuable. Some of the factors that encourage aspiring entrepreneurs and investors to start a CNC machine shop is the fact that the market for its products is growing rapidly in the United States and it is not seasonal.

That makes it easier for entrepreneurs who are interested in the business to come into the industry at any time they desire; the entry barriers might be high but that any serious-minded entrepreneur can comfortably raise the startup capital even if it means collecting loans from the bank.

The machine shop services industry is a highly profitable industry and it is open for any aspiring entrepreneur to come in and establish his or her business as long as you are able to obtain the required license and permits; you can choose to start on a small scale producing and supplying at a cottage level or you can choose to start on a large scale with distribution network spread across key cities all around the United States of America.

2. Executive Summary

Jack Anderson® CNC Machine Shop, Inc. is a licensed computer numerical control (CNC) machine production company that will be involved in cutting raw materials into specific shapes and sizes using a variety of tools such as lathes, milling machines, grinders and drill presses.

We will engage in almost all forms of metal product fabrication. We have been able to lease a production facility that is a perfect fit as it relates to the production facility we want to build, and the facility is centrally located in North Platte – Nebraska. Jack Anderson® CNC Machine Shop, Inc. will produce and supply these component parts to end users at affordable prices.

There is growing interest when it comes to the production of machine component parts and new enterprises are springing up, which is why we spent time and resources to conduct our feasibility studies and market survey so as to offer much more than our competitors will be offering.

We have robust distribution network; strong online presence and our distributors are armed with the various payment options available in the United States.

Beyond the fabrication and supply of standard machine parts/components to production companies in the United States, our customer care is going to be second to none in the whole of North Platte – Nebraska and our deliveries will be timely and reliable.

We know that our customers are the reason why we are in business which is why we will go the extra mile to get them satisfied when they patronize our products. Jack Anderson® CNC Machine Shop, Inc. will ensure that all our customers are given first class treatment whenever they order machine components from us.

We have a CRM software that will enable us manage a one on one relationship with our customers no matter how large their numbers may grow to. We will ensure that we get our customers involved when making some business decisions that directly affect them.

Jack Anderson® CNC Machine Shop, Inc. will at all times demonstrate her commitment to sustainability, both individually and as a firm, by actively participating in our communities and integrating sustainable business practices wherever possible.

We will ensure that we hold ourselves accountable to the highest standards by meeting our client’s needs precisely and completely.

Jack Anderson® CNC Machine Shop, Inc. is owned by Jack Anderson. Anderson has a B.Tech. in Mechanical Production Engineering and with over 25 years of hands on experience in the mechanical engineering production industry, working for some of the leading brand in the United States.

3. Our Products and Services

Jack Anderson® CNC Machine Shop, Inc. will ensure that we go all the way to be involved in the production and distribution of quality machine components. We are in the industry to make profits and we will ensure that we do all that is permitted by the law in the United States to achieve our business aims and objectives.

In essence, we will engage in;

• Manual and computer numerical control (CNC) milling services
• Turning services to produce cylindrical components
• Drilling and boring services
• Sawing services
• Broaching services to enlarge existing holes
• Fastening services using automatic screw machines
• Grinding and planning services

4. Our Mission and Vision Statement

• Our vision is to be listed amongst the top 5 Computer Numerical Control (CNC) machine shops in the whole of the United States of America.
• Our mission is to establish a computer numerical control (CNC) machine shop that will distribute quality machine parts at affordable prices to retailers, and industries in North Platte and other cities in and around Nebraska where we intend marketing our products and services.

Our Business Structure

Our intention of starting a Computer Numerical Control (CNC) machine shop  is to build a standard Computer Numerical Control (CNC) machine shop whose products will be distributed all across the United States of America and the globe.

We will ensure that we put the right structures in place that will support the kind of growth that we have in mind while setting up the business. We want to put modalities in place that will guide us in hiring people that are qualified, honest, customer centric and are ready to work to help us build a prosperous business that will benefit all the stake holders.

As a matter of fact, profit-sharing arrangement will be made available to all our senior management staff and it will be based on their performance for a period of ten years or more. In view of that, we have decided to hire qualified and competent hands to occupy the following positions that will be made available at Jack Anderson® CNC Machine Shop, Inc.;

• Chief Executive Officer (Owner)
• Production Manager
• Human Resources and Admin Manager

Machine Operators

Sales and Marketing Manager

• Accountants/Cashiers
• Customer Services Executive
• Drivers/Distributors

5. Job Roles and Responsibilities

Chief Executive Officer – CEO:

• Increases management’s effectiveness by recruiting, selecting, orienting, training, coaching, counseling, and disciplining managers; communicating values, strategies, and objectives; assigning accountabilities; planning, monitoring, and appraising job results
• Creates, communicates, and implements the organization’s vision, mission, and overall direction – i.e. leading the development and implementation of the overall organization’s strategy.
• Responsible for fixing prices and signing business deals
• Responsible for providing direction for the business
• Responsible for signing checks and documents on behalf of the company
• Evaluates the success of the organization
• Reports to the board

Admin and HR Manager

• Responsible for overseeing the smooth running of HR and administrative tasks for the organization
• Maintains office supplies by checking stocks; placing and expediting orders; evaluating new products.
• Ensures operation of equipment by completing preventive maintenance requirements; calling for repairs.
• Defines job positions for recruitment and managing interviewing process
• Carries out induction of new team members
• Accountable for training, evaluation and assessment of employees
• Responsible for arranging travel, meetings and appointments
• Oversees the smooth running of the daily office activities.

Production Plant Manager

• Responsible for overseeing the smooth running of the Computer Numerical Control (CNC) machine shop
• Part of the team that determines the quantity and quality of machine component parts that are to be produced
• Maps out strategies that will lead to efficiency amongst workers in the plant
• Responsible for training, evaluation and assessment of plant workers
• Ensures that the steady flow of both raw materials to the plant and easy flow of finished products through wholesale distributors to the market
• Ensures that the plant meets the expected safety and health standard at all times.
• Responsible for using space and mechanical handling equipment efficiently and making sure quality, budgetary targets and environmental objectives are met
• In charge of coordinating automated and computerized systems where necessary
• In charge of overseeing the maintenance of vehicles, machinery and equipment.
• Ensures that proper records of machine components are kept and warehouse does not run out of products
• Ensures that the production facility is in tip top shape and machine component parts products are properly arranged and easy to locate
• Controls supply inventory
• Handle manual and computer numerical control (CNC) milling services
• Handle turning services to produce cylindrical components
• In charge of drilling and boring services
• Handle sawing services
• Handle broaching services to enlarge existing holes
• Handle fastening services using automatic screw machines
• Handle grinding and planning services
• Manages external research and coordinate all the internal sources of information to retain the organizations’ best customers and attract new ones
• Models demographic information and analyze the volumes of transactional data generated by customer purchases
• Identifies, prioritizes, and reaches out to new partners, and business opportunities et al
• Identifies development opportunities; follows up on development leads and contacts
• Responsible for supervising implementation, advocate for the customer’s needs, and communicate with clients
• Documents all customer contact and information
• Represents the company in strategic meetings
• Helps to increase sales and growth for the company

Accountant/Cashier:

• Responsible for preparing financial reports, budgets, and financial statements for the organization
• Provides managements with financial analyses, development budgets, and accounting reports
• Responsible for financial forecasting and risks analysis.
• Performs cash management, general ledger accounting, and financial reporting
• Responsible for developing and managing financial systems and policies
• Responsible for administering payrolls
• Ensures compliance with taxation legislation
• Handles all financial transactions for the organization
• Serves as internal auditor for the organization

Client Service Executive

• Ensures that all contacts with clients (e-mail, walk-In center, SMS or phone) provides the client with a personalized customer service experience of the highest level
• Through interaction with customers on the phone, uses every opportunity to build client’s interest in the company’s products and services
• Manages administrative duties assigned by the human resources and admin manager in an effective and timely manner
• Consistently stays abreast of any new information on the organizations’ products, promotional campaigns etc. to ensure accurate and helpful information is supplied to customers when they make enquiries

Distribution Truck Drivers

• Assists in loading and unloading machine component parts and raw materials
• Keeps a record of vehicle inspections and make sure the truck is equipped with safety equipment
• Assists the transport and logistics manager in planning their route according to a distribution schedule.
• Local-delivery drivers may be required to sell products or services to stores and businesses on their route, obtain signatures from recipients and collect cash.
• Inspects vehicles for mechanical items and safety issues and perform preventative maintenance
• Complies with truck driving rules and regulations (size, weight, route designations, parking, break periods etc.) as well as with company policies and procedures
• Collects and verifies delivery instructions
• Reports defects, accidents or violations

6. SWOT Analysis

Our goal of starting out in North Platte and service industries only within North Platte – Nebraska is to test run the business for a period of 3 to 5 years to know if we will invest more money, expand the business and then start supplying our machine component parts all around the state of Nebraska, other cities across the United States and the world.

We are quite aware that there are several Computer Numerical Control (CNC) machine shops and contractors all over North Platte and even in the same location where we intend locating ours, which is why we are following the due process of establishing a business.

We know that if a proper SWOT analysis is conducted for our business, we will be able to position our business to maximize our strength, leverage on the opportunities that will be available to us, mitigate our risks and be equipped to confront our threats.

Jack Anderson® CNC Machine Shop, Inc. employed the services of an expert HR and Business Analyst with bias in retailing and distribution to help us conduct a thorough SWOT analysis and to help us create a Business model that will help us achieve our business goals and objectives.

This is the summary of the SWOT analysis that was conducted for Jack Anderson® CNC Machine Shop, Inc.;

Our location, the business model we will be operating on, well – equipped CNC machine shop, reliable machine component parts, varieties of payment options, quality and our excellent customer service culture will definitely count as a strong strength for Jack Anderson® CNC Machine Shop, Inc.

So, also our management team members are people who have what it takes to grow a business from startup to profitability within a record time.

A major weakness that may count against us is the fact that we are a new Computer Numerical Control (CNC) machine shop and we don’t have the financial capacity to compete with leaders in the industry especially as it relates to leveraging on economy of scales.

• Opportunities:

The industrial production index is a composite measure of output from the economy’s manufacturing, mining and utilities sectors. Higher industrial production increases demand for manufactured metal, machined products and machining services. The industrial production index is expected to increase in 2019, representing a potential opportunity for the industry.

The prime rate to our business is the interest rate charged by banks to their most creditworthy and largest corporate customers. A higher prime rate will make it more expensive for companies to fund expansionary activities. Downstream markets will experience challenges as the prime rate is expected to rise in 2019, presenting a potential threat to the industry.

7. MARKET ANALYSIS

• Market Trends

If you are a close observer of Computer Numerical Control (CNC) industry, you will agree that CNC machining is still going strong within the world of manufacturing, showing precipitous growth even amidst the slew of competing technologies and new entrants.

Even so, CNC machining is a wide ocean with many varying interests and trends within it. With so many sub-technologies, it can be hard to keep track of what the latest shifts are so here’s our handy guide for the recent developments in 2019.

A trend that emerges shows that as a result of increased adoption in india, China, Japan and other nations in the region, Asia Pacific is leading the charge. Another factor is that major manufacturers such as Okuma Corporation, Yamazaki Mazak Corporation, and DMG Mori Co., Ltd. are all based in these countries.

As a result, Asia Pacific is probably going to remain a lucrative market, and is poised to remain a leader over the next six years. A large factor that contributes to this growth is government initiatives and investment keeping the market competitive. Asia Pacific stands at USD 22.33 billion in 2018 and is expected to grow further.

So also, Europe is expected to grow as it is considered a major market for advanced technologies. Current roadblocks to beating Asia Pacific in this regard are high barriers of entry and lower investment in the market. On the other hand, the US market is currently saturated with machines.

One of the growth areas within the US has been that of the energy sector, attributing to high demands for alternative new energy sources due to fears of obsolescence of the conventional energy systems. That said, the US is definitely the highest ranking in terms of global Multi-tasking machine tools market.

Growing use of multi-tasking machines in the aerospace industry and high labor cost are the main contributors to this trend.

8. Our Target Market

The machine shop services industry has a wide range of customers; a good number of manufacturing companies, automotive companies, aerospace companies and the likes make use of machine component parts and the services offered in a machine shop.

In view of that, we have positioned our Computer Numerical Control (CNC) machine shop to service businesses in North Platte – Nebraska. We have conducted our market research and we have ideas of what our target market would be expecting from us. We are in business to retail (distribute) machine component parts to the following businesses;

• Machine production companies
• Automobile production industry
• The aircraft industry
• Production companies
• Others related production companies that make use of component fabricated parts.

Our Competitive Advantage

Jack Anderson® CNC Machine Shop, Inc. is launching a standard Computer Numerical Control (CNC) machine shop that will indeed become the preferred choice for companies that make use of fabricated machine component parts.

Our competitive advantage revolves around our ability to attract local support and patronage, easy compliance with government regulations, ability to quickly adopt new technology, ability to raise financing and our ability to follow international best practices.

Lastly, our employees will be well taken care of, and their welfare package will be among the best within our category in the industry meaning that they will be more than willing to build the business with us and help deliver our set goals and objectives.

We will also give good working conditions and commissions to freelance sales agents that we will recruit from time to time.

9. SALES AND MARKETING STRATEGY

• Sources of Income

Jack Anderson® CNC Machine Shop, Inc. is in business to attract clients to purchase our fabricated machine parts. We are in the machine shop services industry to maximize profits and we are going to ensure that we achieve our business goals and objectives.

In essence, our source of income will be;

10. Sales Forecast

One thing is certain when it comes to Computer Numerical Control (CNC) machine shop, if your business is centrally positioned coupled with effective and reliable machine fabricators and good distribution network, you will always attract customers.

Jack Anderson® CNC Machine Shop, Inc. is well positioned to take on the available market in North Platte – Nebraska and we are quite optimistic that we will meet our set target of generating enough income/profits from the first six months of operation and grow the business and our clientele base.

We have been able to examine the machine shop services industry, we have analyzed our chances in the industry and we have been able to come up with the following sales forecast.

Below are the sales projections for Jack Anderson® CNC Machine Shop, Inc., it is based on the location of our business, and other factors as it relates to Computer Numerical Control (CNC) machine shop products startups in the United States;

• First Fiscal Year (FY1): $335,000
• Second Fiscal Year (FY2): $650,000
• Third Fiscal Year (FY3): $1.1 million

N.B : This projection was done based on what is obtainable in the industry and with the assumption that there won’t be any major economic meltdown and there won’t be any major competitor offering same products, distribution services and customer care services as we do within same location. Please note that the above projection might be lower and at the same time it might be higher.

• Marketing Strategy and Sales Strategy

Before choosing a location to launch Jack Anderson® CNC Machine Shop, Inc., we conducted a thorough market survey and feasibility studies in order for us to penetrate the available market and become the preferred choice in and around North Platte – Nebraska.

We hired experts who have good understanding of the Computer Numerical Control (CNC) machine shop line of business to help us develop marketing strategies that will help us achieve our business goal of winning a larger percentage of the available market in North Platte – Nebraska.

In summary, Jack Anderson® CNC Machine Shop, Inc. will adopt the following sales and marketing approach to win customers over;

• Introduce our business by sending introductory letters alongside our brochure to factories, and all the industries that make use of fabricated machine parts and key stake holders in and around North Platte – Nebraska
• Ensure that we have fabricated machine component parts/products at all times.
• Make use of attractive hand bills to create awareness business
• Position our signage/flexi banners at strategic places around North Platte – Nebraska

11. Publicity and Advertising Strategy

Even though our Computer Numerical Control (CNC) machine shop is well structured and located, we will still go ahead to intensify publicity for the business.

Jack Anderson® CNC Machine Shop, Inc. has a long-term plan of opening distribution channels all around the state of Nebraska and other cities in the United States of America which is why we will deliberately build our brand to be well accepted in North Platte before venturing out.

Here are the platforms we intend leveraging on to promote and advertise Jack Anderson® CNC Machine Shop, Inc.;

• Place adverts on community – based newspapers, radio and TV stations
• Encourage the use of word of mouth publicity from our loyal customers
• Leverage on the internet and social media platforms like; YouTube, Instagram, Facebook, Twitter, LinkedIn, Snapchat, Google+ and other platforms to promote our business.
• Ensure that our we position our banners and billboards in strategic positions all around North Platte – Nebraska
• Distribute our fliers and handbills in target areas in and around our neighborhood
• Advertise our Computer Numerical Control (CNC) machine shop in our official website and employ strategies that will help us pull traffic to the site
• Brand all our official cars and distribution trucks and ensure that all our staff wear our branded shirt or cap at regular intervals.

12. Our Pricing Strategy

Our pricing system is going to be based on what is obtainable in the Computer Numerical Control (CNC) machine shop line of business. Be that as it may, we have put plans in place to offer discounts once in a while and also to reward our loyal customers especially when they refer clients to us.

• Payment Options

The payment policy adopted by Jack Anderson® CNC Machine Shop, Inc. is all inclusive because we are quite aware that different customers prefer different payment options as it suits them but at the same time, we will ensure that we abide by the financial rules and regulation of the United States of America.

Here are the payment options that Jack Anderson® CNC Machine Shop, Inc. will make available to her clients;

• Payment via bank transfer
• Payment via credit cards
• Payment via POS machines
• Payment via online bank transfer
• Payment via check
• Payment via bank draft

In view of the above, we have chosen banking platforms that will enable our clients make payment for our fabricated machine component products purchase without any stress on their part.

13. Startup Expenditure (Budget)

From our findings, we were able to come up with the areas we will spend our resources on and this is what it would cost us to set up Jack Anderson® CNC Machine Shop, Inc. in the United States;

• The total fee for registering the business in the United States of America – $750.
• Legal expenses for obtaining licenses and permits as well as the accounting services (software, P.O.S machines and other software) – $3,300.
• Marketing promotion expenses in the amount of $3,500 and as well as flyer printing (2,000 flyers at $0.04 per copy) for the total amount of $3,580.
• The cost for hiring business consultant – $2,500.
• The cost for insurance (general liability, workers’ compensation and property casualty) coverage at a total premium – $2,400.
• The cost for payment of rent for 12 months at $1.76 per square feet tank facility cum mini depot in the total amount of $250,000.
• The total cost for production facility remodeling – $100,000.
• Other start-up expenses including stationery ($500) and phone and utility deposits ($2,500).
• Operational cost for the first 3 months (salaries of employees, payments of bills et al) – $150,000
• The cost for Start-up inventory – $300,000
• The cost for store equipment (cash register, security, ventilation, signage) – $13,750
• The cost of purchase and installation of CCTVs – $5,000
• The cost for the purchase of furniture and gadgets (Computers, Printers, Telephone, TVs, Sound System, tables and chairs et al) – $4,000.
• The cost of launching a website – $600
• Miscellaneous – $10,000

We would need an estimate of $1.2 million to successfully set up our Computer Numerical Control (CNC) machine shop in North Platte – Nebraska.

Generating Funds/Startup Capital for Jack Anderson® CNC Machine Shop, Inc.

Jack Anderson® CNC Machine Shop, Inc. is a private business that is solely owned and financed by Jack Anderson. He decided to restrict the sourcing of the startup capital to 3 major sources.

• Generate part of the startup capital from personal savings
• Source for soft loans from family members and friends
• Apply for loan from my Bank

N.B: We have been able to generate about $500,000 (Personal savings $450,000 and soft loan from family members $50,000) and we are at the final stages of obtaining a loan facility of $700,000 from our bank. All the papers and document have been signed and submitted, the loan has been approved and any moment from now our account will be credited with the amount.

14. Sustainability and Expansion Strategy

Part of the plans we have in place to sustain Jack Anderson® CNC Machine Shop, Inc. is to ensure that we continue to deliver quality products, services, improvise on how to do things faster and cheaper.

From our findings, another factor that kills new business is financial leakages. In order to plug financial leakages, the management of Jack Anderson® CNC Machine Shop, Inc. will adopt the use of payment machine and accounting software to run the business.

We are quite aware that our customers are key component to the growth and survival of our business hence we are going to continuously engage them to give us ideas on how to serve them better. We will not waste time in adopting new technology, best practices and diversifying our services once the need arises.

Our key sustainability and expansion strategy as a business is to ensure that we only hire competent and technically sound employees, create a conducive working environment and  give employee benefits to all our staff. We know that if we implement our business strategies, we will grow our CNC machine shop business beyond North Platte – Nebraska to other states in the U.S in record time.

Check List/Milestone

• Business Name Availability Check: Completed
• Business Registration: Completed
• Opening of Corporate Bank Accounts: Completed
• Securing Point of Sales (POS) Machines: Completed
• Opening Mobile Money Accounts: Completed
• Opening Online Payment Platforms: Completed
• Application and Obtaining Tax Payer’s ID: In Progress
• Application for business license and permit: Completed
• Purchase of Insurance for the Business: Completed
• Leasing of production facility and construction of production plant: In Progress
• Conducting Feasibility Studies: Completed
• Generating capital from family members: Completed
• Applications for Loan from the bank : In Progress
• Writing of Business Plan: Completed
• Drafting of Employee’s Handbook: Completed
• Drafting of Contract Documents and other relevant Legal Documents: In Progress
• Design of The Company’s Logo: Completed
• Printing of Promotional Materials: In Progress
• Recruitment of employees: In Progress
• Purchase of the needed machines, technology, furniture, reservoirs, computers, electronic appliances, office appliances and CCTV : In progress
• Purchase of distribution trucks: Completed
• Creating Official Website for the Company: In Progress
• Creating Awareness for the business both online and around the community : In Progress
• Health and Safety and Fire Safety Arrangement (License): Secured
• Establishing business relationship with fabricated machine component distributors all across the United States of America: In Progress

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Building the Blueprint: A Guide to 2024 Budget Planning for Job Shop Manufacturers

Job shop manufacturers face many different challenges in running their businesses every day. The degree to which owners and senior leadership teams are able, equipped, and willing to address those challenges makes all the difference.

It all starts with budget planning: often something that is the difference between surviving and thriving but sometimes overlooked—after all, running a shop can mean you wear many hats, making it difficult to carve out time to build thoughtful, strategic plans.

Having been deeply embedded in this industry for over 25 years, I’ve witnessed first-hand the impact of meticulous financial planning on shops small, large, and every size in between. Thoughtful budget planning provides a compass that steers your business toward growth, profitability, and operational efficiency.

So why now? The months between September and November are the best time to start budget planning; this unique period offers the advantage of analyzing this year’s data while still having time to forwardly project. More informed decision-making will help you create a budget that aligns with your long-term business plans.

As we look to the year ahead, here’s how you can build a budget today that helps your shop maintain and gain profitability throughout 2024:

1. Scrutinize Your Costs

Fixed and variable costs will give you a comprehensive understanding of factors such as labor, expenses, and the nuances of volatile components like materials and tooling. This understanding isn’t just a prerequisite; it’s the only way you can build a competitive and profitable pricing strategy .

It’s worth noting that many shops often fail to consider the full extent of labor costs. While they may account for an employee’s hourly wage, they might overlook hidden or indirect labor costs. For instance, have you considered the time employees spend on breaks? Are you accounting for the utilization of machinery and equipment fully?

Variable costs, such as tooling and materials, should be marked up and factored into your quotes upfront, treating them as more predictable and consistent expenses. The ultimate goal is to answer the question, “What does your business really cost you per hour?” If your profit margin is less than 10%, it might be an indication that you aren’t capturing all your costs.

2. Understand Market Cycles

Market cycles play a pivotal role in budget planning, meaning you should project sales and marketing strategies six months ahead.

In the current economic landscape, where some segments of the industry are facing strong pull-back while others are thriving, it’s crucial to proactively safeguard your business. If you’re one of the businesses facing a pull-back, make sure to do a few of these key things:

• Assess whether you are taking steps to position your business in more stable markets.
• Cultivate loyal customers.
• Foster innovation.
• Engage in robust business planning.
• Stay informed about current economic conditions to avoid being caught off guard.

3. Look at the Geopolitical Landscape

The geopolitical landscape and legislative developments are crucial factors in your budget, especially since we’ll be in an election year. What bills are being passed? How much funding is being allocated to space work? While many industries require astute resource allocation, other sectors have naturally occurring shifts: right now, gas and oil are at an all-time high, but that’s expected to taper down in 4 to 5 years.

If you’re reliant on government contracts, be aware of the potential for a government shutdown in October. Assess your debt-to-equity ratio in light of changing interest rates.

Learn about one shop’s journey from long hours and meager earnings to productivity, efficiency, and a healthy bottom line.

Beyond the Obvious: Overlooked Components in Budgeting

When it comes to budget planning, certain critical elements often go overlooked:

Collaboration Collaboration is the cornerstone of successful budget planning, particularly for small to mid-sized businesses. Forming a team that includes diverse perspectives—from the owner to financial experts, operations leaders, and sales representatives—lays a strong foundation for your plan. If you’re navigating this process solo, seek guidance from mentors or coaches to gain valuable insights and perspectives.

Accountability Building accountability into your budget plan is crucial for making it achievable. In order to do so, consider the following mindset shifts:

• A budget isn’t a fixed entity; it’s a dynamic plan.
• Regular evaluations are not just a luxury; they’re a means to keep your goals in focus.
• Preparing for unforeseen situations doesn’t mean you’re pessimistic; it highlights your ability to adapt to changing market dynamics.
• Remember: a plan is a valuable tool only if you review and hold yourself accountable to your goals consistently.

See how a platform like Paperless Parts is built to help you get deep insights into your business by capturing key performance metrics like win rates, quote volume, throughput, and more.

Best Practices for Long-Term Profitability

Although budget planning for job shop manufacturers may occur during a specific window of time, a profitable year demands continuous effort.

Gain a firm grip on your costs. Understanding the “why” behind your prices is everything; it’s how you eliminate waste and deploy pricing strategies rooted in reality. It also helps you delegate (“many hands make light work”). Analyzing your costs enables you to eliminate unproductive efforts so you can uncover hidden sources of profitability. Gaining these insights starts with building a solid quoting mechanism that’s quoting real numbers.

Standardize your processes. Standardized processes pave the path to efficient scalability, particularly during periods of growth. Have you standardized your estimating process? Are your prices and job profitability predictable? What are the parameters to determine whether you’ll quote or no-quote a job? Are you discounting or applying add-ons in a consistent, trackable way?

Continuously innovate. “You have to spend money to make money” is often true in job shop manufacturing. Being committed to innovating and embracing technological advancements is how you’ll continually drive efficiency, profitability, and growth in your shop.

Focus on culture. Having a strong culture is ultimately financially beneficial, as you’ll reduce turnover rates and associated hiring costs. You’ll also position your company as an attractive employer in your industry and area. Ask yourself:

• Do your employees feel valued and connected to a larger mission?
• Have you implemented programs for personal and professional growth?
• Do you hire individuals based on characteristics and train them for success?
• Do you have a formal onboarding process?
• What are your turnover rates? What’s your average employee tenure?

Failure to Plan = Planning for Failure

When it comes to budget planning for job shop manufacturers, the process can either propel you to make ten years’ progress in one year or consign you to make only one year’s progress in ten years. The path you choose today will significantly shape your trajectory for years to come. Taking the time to plan thoughtfully, collaborate effectively, and stay accountable to your goals will leave you better equipped to navigate challenges and seize opportunities that lie ahead in 2024 and beyond.

Want to double your shop’s value? Attend EBITDA’s two-day workshop to help advanced manufacturers build their 2024 business plan.

REGISTER TODAY

Principal at EBITDA Growth Systems and a scaling small business owner, Dave Capkovitz is passionate about helping manufacturing businesses grow in sales, profitability, teamwork, accountability, and efficiency. His expertise is the result of more than 25 years of extensive, real-world experience in manufacturing and business management. Dave started out as a tool and die maker in 1996 and went on to found eight start-up manufacturing and service companies with four successful exits to date. When it comes to growing businesses, he has a successful track record of achieving growth rates from 90%–300% in 12 to 60 months. Dave is continually honing his skills as a profitability expert and leveraging his experience to enhance the lives and businesses of manufacturing leaders.

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How to Win More Job Shop Business in 2022

After two years of wild swings in both demand and raw material supply, most job shop owners are looking forward to a more normal year in 2022. The promise of calmer waters ahead has many of them thinking about how to grow their business and find new customers. 

The good news is that consumer demand is strong, a new federal infrastructure plan is ramping up, and many industries are forecasting strong sales in 2022, making now a perfect time to find new partners or win new business from existing ones.

While many of the general sales and marketing ideas out in the world will work for job shop owners to some extent, here are five of the best tips we’ve found that are specific to the unique needs of job shops.

1. Be Specific About What Kind of Business Works Best for You

There’s a huge temptation to approach the search for new customers with an “all jobs are good jobs” mindset. As we all know: Beggars can’t be choosers. 

But that’s really only true if you’re trying to keep a business afloat. If you have a strong base of customers and what you’re really looking for is growth, taking a job that ties up machine and operator capacity, but doesn’t offer much upside, may actually do more harm than good in the long run. 

There are lots of reasons a job could be a good one for your shop: a high profit margin, a tight fit with your team’s unique skills, an entry into a desirable industry, etc. The important thing is to understand what value each new job brings and lean into that. 

If you’re taking a low margin job so you can break into a new industry, be sure to get a customer quote about how happy they are so you can use it in your marketing. If the job is a great fit for your team’s skills, get a picture of the part — assuming the work isn’t classified, of course — so that your sales team can show prospects how talented your shop is. 

Whatever the job is, be thoughtful about why you’re taking it and remember that you can get more out of it than just money.

2. Think about Trigger Events

Take the time to put yourself in your ideal customer’s shoes and think hard about what might need to happen in their business that would force them to look for someone to take on some of their work. 

Things like machine breakage are hard to predict, of course, but increased demand from your customer’s customers isn’t nearly as random. For example, if your ideal customers are aerospace suppliers and Southwest Airlines orders 114 new planes from Boeing, chances are they’re going to see some of that trickle down in the form of increased demand for their products. At the very least, it’s a good reason to reach out and touch base with them.

Other triggers can be seasonal, related to changes in federal regulations, a result of a big merger, etc. Exactly what to look for will depend on the industry you’re trying to sell into, but every industry has big trends you can use to your advantage if you’re ready to act quickly.

3. Be Where Your Customers Are

Once you’ve established the kinds of jobs you want and the kind of customers that have an excess of those jobs, it’s time to fish where the fish are.

Industry associations and networking organizations have lost some of the importance they had in previous generations, but they’re still a great way to meet potential customers, especially in certain industries like precision machining . Reputations take time to build, but showing up, engaging with customers, and showing that you care about their industry is a powerful way to be top-of-mind when they have a need your shop can fulfill. 

In terms of digital marketing, this means being active on ThomasNet as well as LinkedIn. You don’t need to buy ads there, but do have a complete profile and be part of the community by posting and interacting with others’ posts. 3D hubs like Xometry are growing in popularity as well if your shop does additive manufacturing.

The key to social media is being, well, social. Simply making an account and expecting leads to come rolling is the way a lot of people do it, and the next person it works for will be the first. If you went to a networking event and hid in the bathroom the whole time, you wouldn’t expect to meet a lot of people, so don’t do the digital equivalent either. 

4. Don't Focus on the People in Procurement

Willie Sutton, the famous bank robber and original member of the FBI’s Most Wanted list, was once asked why he robbed banks, to which he reportedly answered “ because that’s where the money is .” Far too many people take this approach when it comes to sales and marketing when they should be looking for an inside champion.

Procurement departments are often given checklists by the people who will use the product, detailing what to look for, what questions to ask, and sometimes even a general price range to expect. This isn’t to say that they don’t care about other factors, but knowing the intimate details of thousands of parts is asking too much of one person. 

So, instead of hoping you fit a predetermined checklist, reach out to someone like a mechanical engineering supervisor or production manager that will actually use your product, that knows the details of the production inside and out, and that really cares about what makes you better than your competition and arm them with those details.

Not only are they going to be better able to see why they should go with you instead of someone else, even if they need to go through procurement, they’ll be able to draw up the specs in such a way that your shop is the clear winner.

5. Develop a Strong Outbound Sales Program

Now that you have a good sense of the jobs you want and the kind of people that have them, take their key characteristics and look for other businesses that fit the same pattern and let them know you’re eager to serve them. 

There’s no shortcut here: Research companies, email the key people you’ve identified with your offer, and keep doing it as long as it takes. Show images of your work, provide testimonials from your best customers to stand out from the crowd — this is where having a familiar name from networking can be a huge help as well — and be ready to answer questions on short notice. 

There is simply no replacement for good outbound sales. This doesn’t mean being spammy or using abrasive sales techniques, it means targeting the right people at the companies you can serve best. It will take some time for the program to pay dividends, but the hustle will be worth it when you’re growing and getting the kinds of jobs that make work satisfying and rewarding. 

There is business to be won in 2022, but it isn’t likely to just fall into your lap. The shops that look back on 2022 as a year their business really took off will be the ones that make a focused plan and execute on it relentlessly. Starting on that plan now gives your shop the best chance of being among the winners this time next year.

THE ULTIMATE GUIDE TO

Visual job shop scheduling .

How to improve on-time deliveries, increase throughput and stop the constant fire-fighting with visual job shop scheduling.

Let's get started.

Are you new to job shop scheduling maybe you're in need of a refresher. either way, the ultimate guide to visual job shop scheduling provides everything you need to know to run your shop smoother—all in one place, fill out the form on the right hand side, and we will email you an exclusive copy of the guide (with bonus content) to take offline., ready to deep dive into visual job shop scheduling continue your journey below., what to expect from this guide, table of contents, 1. introduction, cutting a gordian knot and putting theory into practical actions, what is job shop scheduling, 2. everything you need to know about job shop scheduling, why is it so important, a secret sauce to production scheduling success, best practices, examples and case studies, 3. turning the theory into practice, signs that you need proper job shop scheduling, how to kick-start it (with visual scheduling), build your scheduling team, establish routines, 4. software tools for job shop scheduling, requirements for proper job shop scheduling, a buying guide, 5. parting words, whom this guide is for.

This is a hands-on resource for all owners of job shops who struggle with keeping delivery times, lack transparency of what is happening on the shop floor, suffer from constant fire-fighting and sense that they should solve " that scheduling thing ".

It is also meant to help operations managers and production planners working in a job sho p who are tasked with running the shop smoother by introducing proper scheduling techniques.

Last, but not least - it for everybody who is just curious about visual job shop scheduling.

Enjoy reading this guide ;-)

Introduction

The backbone of most Western economies is mid-sized organizations. Especially in Europe and Northern America, SMB manufacturing companies have been playing a crucial role over the past decades. You can state that the smaller the manufacturing company is, the higher the likelihood that it is any sort of a job shop.

When we speak about a job shop, we mean a manufacturing company that produces small batches of a variety of custom products. They are also referred to as high-mix, low-volume manufacturer. Job shops are usually businesses that perform custom parts for other businesses. Typically, each product produced requires a unique set-up and sequencing of process steps.

Due to the nature of being a customer-driven make-to-order business with a high variety and low batch sizes (and hence less repeatability), many jobs describe themselves as “being in constant chaos and permanent fire-fighting”.

Scheduling is a proven strategy to master this chaos and to stop this fire-fighting.

Due to being in a constant fire-fighting, many job shop owners not only lack the time to digest all this academic research. Even worse: the academic research regularly lacks practical advice and hands-on methods to apply.

This guide is meant to cut this Gordian knot.

It is meant to provide insights gained from academic studies … in a manner that is consumable for people running a shop, and being in constant fire-fighting.

It is also meant to guide how shop owners can turn the theory into practical, day-to-day actions.

So, let’s get on the same page. Let’s make sure that you and we have the same understanding of what job shop scheduling is .

This all starts with having the same view on what a job shop is, and what makes a job shop specific compared to other types of manufacturing companies.

Characteristics of a job shop

• The high-mix element of a job shop : Job shops typically produce dedicated customer orders. As orders are custom (and often last minute), it is hard to impossible to plan the production well ahead of time using historical sales data or order forecasts.
• The low-volume element of a job shop : Batch sizes are small, and the flow of each job through the workstations varies with each customer order. Consequently, workers must constantly adjust to new workflows and machine setups have to be altered regularly. The effects are a lack of routines and standardization. This makes it challenging to assess capacity and quality levels.

Overall, a job shop can be characterized as a high-mix, low-volume manufacturer facing a highly volatile, ever-changing, and, not uncommonly, chaotic environment.

Scheduling job shops

1. How can a job shop manufacturer introduce a structured plan while what job shops lack most is a structure?

2. How can one properly account for sudden and frequent changes?

3. How can one optimize and improve operations when forms of routines and forecasts are rare?

And these challenges are just the tip of the iceberg. However, when being aware of some important insights, understanding the underlying concepts and models, and applying some helpful tools, chances are high that job shops can master this challenge.

Those who master this challenge are most likely to run smoother and to prosper more than job shops that do not schedule but just react to what is happening.

This is why you came to this guide, and this is why we encourage you to continue readings.

A simplistic, and yet abstract view on the job shop schedule’s constraints

The job shop scheduling problem also can be seen as a sequencing problem. If you want to solve it, you have to deal with a few constraints. Here is a minimum set of these:

• A workstation, e.g. a machine, can only handle one job at a time.
• A new task (job) on a workstation can only be started if (a) the previous task on the same machine is finished and (b) if at least a partial quantity of the previous task of the same job is finished.
• There is a definitive routing to each job. Scheduling has to deal with these constraints when sequencing jobs and when assigning tasks to resources.

The ultimate goal is to meet delivery times while making the best use of the available resources.

Scheduling example

Here is an example of just this sequencing challenge. It is based on the assumption of a stable environment. Hence, the other challenges outlined above (frequent change) are not yet part of this example. Let’s assume we have three job productions to allocate to three machines (e.g.: job III first requires 4 hours of machine 2 and afterward 3 hours of machine 3. Further, the job should be completed after 8 hours).

The first scenario below represents a non-ideal solution to the problem. The scheduler first allocated every task of job I, then every task for job II and finally every task of job III without changing previously made allocations. As a result, job II and job III cannot be delivered on time.

Now, let’s look at a better solution. Every time a new job order comes in, the scheduler adjusts the current schedule with keeping delivery dates in mind. Here is how to best solve the puzzle:

Now you might rightfully say that you could've easily solved the above on a whiteboard, with Excel etc.

However, here is what is really typical for a job shop.

• You not just schedule machines. You have people. They have different skills, and they are flexible. They somehow determine the capacity of your machines. Imagine that you would have to add staff into the above equation. Makes it much harder. Correct?
• A job shop is super volatile. Job shops have to puzzle the above (including their people as resources) multiple times a day.

This is job shop scheduling: order prioritization, order sequencing, machine scheduling, resource scheduling ... multiple times a day.

Everything you need to know about job shop scheduling

Why is job shop scheduling important.

In essence, scheduling is a process of matching supply and demand.

In that particular case, it matches the demand for a manufacturer’s capacities resulting from the customer orders with the available capacity (i.e. the supply of capacity). When done properly, delivery times are met and resources are used effectively.

• It lacks transparency on what is happening on the shop floor.
• Hence, it does not know which job is where, and when it will be completed.
• Most likely, delivery commitments are wrong and cannot be met.
• Constant fire-fighting results in steadily changing the “schedule”. This creates more chaos, and resources are no longer used in an ideal way.
• There might be even cases that job shops reject customer inquiries as they think they are running at full capacity, but in fact, are not.

Avoiding these risks makes job shop scheduling so important.

On the flip side of the risks of having no proper scheduling system in place are the benefits of having one. We will shed more light on this later, but here is already an overview of them:

• Transparency establishes both control and precision. Once you know all dependencies and have a clear understanding of what is happening, you can take control. Having control turns your behavior from reactive to proactive-
• Make reliable delivery time commitments . This is another side effect of transparency. If you know and understand what is going on, you can make much more reliable delivery time commitments to your clients.
• Fight bottlenecks and disruption. Tracking every step of the production and having all the information available in one place opens up the opportunity to identify disruptions and bottlenecks well ahead of time.
• Identify new opportunities. This is the positive flip-side of the above. With proper scheduling, you not only spot bottlenecks earlier. You also better understand where you have idle times that could be used to take additional jobs in.
• Have real-time shopfloor insights. Once you have a schedule, you should undertake some efforts to maintain it and keep it current with shopfloor data. If you do so, you gain real-transparency and immediate alerts in case that something goes unplanned.
• Create meaningful what-if scenarios . Proper scheduling software allows you to add new jobs, to model machine downtime, and rapidly see the impact of small changes on other processes, resources, material, personnel, and other capacities.

A secret sauce to scheduling success

However, if you want to achieve scheduling success, just a tool will not do the job.

You should go for a tool that adds a little, but a highly valuable element to scheduling.

And this is visual scheduling.

Click here if you want to learn all basics of visual job shop scheduling.

The secret sauce revealed: visualization (and why it is so important)

Communicating by using gestures, signs or images is the most effective approach of sharing knowledge as the human brain processes information through images.

In fact, around 50 percent of our brain is busy with visual processing.

This insight cannot be ignored when it comes to understanding the success factors of job shop scheduling.

What you get from visualization

• Simplicity. If your schedule is visual, it is easy to understand. If it is easy to understand, it is easy to maintain and to update. That way, simplicity drives efficiency.
• Understanding. With once glance, you see the current status of your jobs, resource utilization levels, delays, and machine capacities. A visual schedule provides the information needed to successfully manage the shop rather than being in a constant firefighting mode.
• Scenario planning. Change the priority of a job, and see the impact. Undo. Then squeeze in another job. See which jobs turn late due to this action. Undo. Add an extra shift. See the impact, plan scenarios, and make informed decisions.
• Spot bottlenecks. You are not a flow shop. You are a job shop. Your bottlenecks keep on changing depending on the type of jobs you currently work on. A visual schedule helps you to spot bottlenecks (even if they change) so that you can take countermeasures (such as extra shifts or subcontracting) in due course.
• Better forecasting, more reliable commitments. With a visual schedule, you get the bigger picture of your production. Combine the benefits of 1 to 4 and you have all ingredients to make more realistic delivery time commitments.

Visual job shop scheduling – defined

Visual job shop scheduling uniquely combines the best of both worlds. It brings together

• the ease of a visual, Gantt chart based drag & drop scheduler
• with the sophistication of automatic scheduling.

As such, it predominantly provides transparency and lets the scheduler understand the complex scheduling mechanisms that happen behind the scenes.

That way, visual job shop scheduling puts the user into the forefront of everything, and the scheduler and planner into the driver’s seat.

Job shop scheduling best practices

We have hundreds of customers, who over the years have scheduled hundreds of thousands of jobs with just plan it. As a consequence, over time we scheduled millions of tasks (always taking into account any given condition and restriction).

This job shop scheduling usage data is an invaluable source of insight for us and helped us to derive both job shop best practices and machine shop best practices.  

When it comes to job shop scheduling best practices, we learned that it is useful to differentiate the phase of selecting a job shop scheduling tool and the phase of actually using it. Here is a detailed blog post exactly on this. It provides you with seven tips on how to achieve your scheduling goals in a high-mix, low-volume shop.  

Consequently, we present our job shop scheduling best practices along those two dimensions:

1) Best practices when you search for a job shop scheduling tool

Before we drill into the individual best practices, here is the one golden advice that we like to give (and it had been said by Voltaire back in the days).

Perfect is the enemy of good.

Do not search for a perfect tool. Resist the temptation (which might even kill you). Go for an appropriate tool. Let’s break this down into three best practices to apply when selecting a job shop scheduling tool.

Best practice #1: Do not look for a tool that promises optimization.

You are a job shop. The only constant you have is constant change. Hence, your data will never be precise and exact.

Now, let’s think about what “optimization” means. Optimizations require algorithms. Algorithms require clear and stable rules, and they require exact data. Otherwise, you achieve garbage-in, garbage-out.

With going for optimization, you go on the route to fail. Go for something that is made to cope with constant change in your job (and not for something that is silently based on the assumption of stability).

Best practice #2: Look for an effective solution.

As most job shops face more than 1,000 tasks to schedule at a time, a project-centric planning board that just provides some manual drag and drop won't be appropriate either. The typical combination of the volume of tasks and the velocity of jobs makes pure manual scheduling very hard.

Watch out for a tool that provides effective automatic scheduling. Automatic means: there must be some logic happening in the background, but no optimization.

This logic must be tuned to deal with a high-mix, low-volume business. And it should be made to help you with what matters most: improving on-time deliveries.

Best practice #3: Make scheduling visual.

We had this before . Job shop scheduling should be visual job shop scheduling. This is not just a best practice, it is a must. No more words to say.

2) Best practices when you use a job shop scheduling tool

We have seen it so many times: Companies undertake an enormous effort into selecting a job shop scheduling tool. We wish they would do as well when it comes to using it. Hence, we have a piece of golden advice for usage as well. This time, we do not need to quote somebody else.

Job shop scheduling is hard work. You need executive sponsorship, clear responsibilities and routines, routines, and even more routines.

Best practice #4: Get executive sponsorship.

If your CEO and/or the owner of your high-mix, low-volume shop is not behind your attempt to implement proper scheduling – just forget it.

Introducing scheduling is not a one-time investment into buying some software tools. Much more important: it requires ongoing time to work with the software.

Make sure, you have the backing of your manager … and also make sure that your software provides you with some KPIs and statistics to prove the value it delivers.

Best practice #5: Scheduling is teamwork. Define responsibilities.

Yes, scheduling is teamwork. Of course, it requires somebody to build, manage, and run the schedule. Typically, this is the production planner or the operations manager.

However, a great schedule (and this is something you also should look for when investigating scheduling tools) also can get easily updated. This update does not just mean to add new jobs. This is part of the planner’s job.

Updating the schedule means also adding actual data from the shop-floor and hence adjusting the schedule in real-time. Providing actual data from the shop-floor no longer is the planner’s job. This is something the operators or foremen should be held accountable for.

Best practice #6: Build scheduling routines.

Scheduling is no magic pill that you take, and all your griefs vanish instantaneously. Scheduling is an ongoing process. Here is the metaphor that we keep on using:

Scheduling is like a dishwasher. The machine will help you to achieve your target much more productive than the manual option. But you rely on routines to operate it. There must be someone responsible to gather the dirty dishes. Another one is responsible to fill the machine. Then there must be one to select the program and to start it. Finally, the clean dishes need to be put to its origin. Then the same procedure starts again and again.

So, let’s go an get your dishwasher making the ugly work for you. It is up to you to define routines to make that happen.

If you manage to establish routines, which are permanently lived and which become a "natural" part of the daily business, then you will meet your scheduling targets using any appropriate scheduling tool.

Benefits of job shop scheduling

Visual job shop scheduling provides high-mix, low-volume manufacturers with a plethora of benefits. We regularly interview our customers what they get from using our software, and they shared with us six tangible job shop scheduling benefits .

Here is a summary of these benefits. Follow the link just provided ( https://www.just-plan-it.com/smb-production-scheduling-blog/six-job-shop-scheduling-benefits ) if you want to take a deeper dive.

Benefit #1: Transparency

And by the way: understand is the important word here. Transparency enables understanding.

Once you fully understand your schedule, the dependencies, and potential threats, you can easily take countermeasures, and get control of what is happening in your shop.

Benefit #2: Increase on-time deliveries

With proper scheduling, new jobs are added to your existing schedule automatically – taking into account finite capacities, your shop calendar, and potential machine downtimes. In the second a new job hits the visual job shop scheduling software, you see the realistic delivery date.

This is what you can communicate with your client. Important is: this is a realistic date.

With this ability to give realistic delivery time commitments, your OTD will skyrocket.

Benefit #3: Cut lead times

How does visual job shop scheduling help?

The answer is transparency. Precisely: visual scheduling lets you easily identify bottlenecks.

This is not trivial as bottlenecks – due to the nature of job shops – keep on changing.

However, once identified, you can apply countermeasures (such as subcontracting) and eliminate bottlenecks, which in your case most likely are just temporary.

With eliminating bottlenecks, you can cut lead times.

Benefit #4: Increase your throughput

If you manage to cut down lead times and if you keep your capacity at the same levels, you manage to get done more in the same amount of time.

Another way of phrasing it: by cutting lead times, you can increase your throughput.

Benefit 5: Increase your revenue by taking more orders in

If you combine these four benefits, chances are high that this will fuel revenue growth. Here is why:

• Visual scheduling achieves transparency of what is happening.
• Thanks to this transparency, you can make more reliable delivery time commitments and hence increase your OTD.
• Thanks to this transparency, you can identify bottlenecks faster and cut lead times.
• As a result, you can increase your throughput.

In essence, we observe that our customers – as a result of 1 to 4 – feel comfortable taking more orders in. Orders that they would have declined before as they lacked transparency and were in a constant firefight.

Benefit 6: Less distraction, more focus, less stress

Visual job shop scheduling gives you control over what is happening on your shop-floor. You have less fire-fighting, you get fewer distractions from unplanned incidents resulting in big chaos and hence you have less stress.

Job shop scheduling examples and case studies

Here are two job shop scheduling case studies – of customers that successfully applied the recipes shared in this ultimate guide.

30-40% productivity increase in 1st week

The fist example is from Paneltech from the UK, and you can read the full Paneltech case study here.

Before using just plan it

Before using just plan it, Paneltech tried various systems. They ranged from simple spreadsheets to very expensive advanced scheduling software. However, they were not made for make-to-order manufacturers and hence “always had a point of failure” as Ross Larner, Operations Director and Co-Owner, remembers.

The challenge was that people didn’t trust the system and hence did not follow a plan. Constant fire-fighting was the norm and Paneltech needed to set a plan in place that would be stable, which they could trust and which would stop the lack of productivity.

Ross Larner:

“The even bigger, wider issue was that we couldn’t give the customer a firm date on when a job would be done. Or, even worse, whether it wouldn’t be done on time at all.”

Tangible benefits

In the first month of working with just plan it, Paneltech could run the shop without any overtime. “But nevertheless we delivered all jobs in time. This alone saved us 5,000 Pounds on our payroll”, as Ross remembers.

With just plan it Paneltech has transparency on what is happening on the shop-floor, and is able to make firm delivery time commitments. As everybody works with the same actionable schedule, the amount of fire-fighting and interruptions has significantly decreased.

Ross summarizes:

“We had a 30 to 40% increase in productivity in week one. The return on investment was within 1 or 2 months. As everybody trusts the software, I get less interruptions. This is actually giving me more time to focus on other things to take my business forward to the next level.”

25% increase in on-time deliveries

The second example is from CIOvita in South Africa, and you can read the full CIOvita case study here.

Ciovita has been successfully using the apparel-specific ERP system iSync for all financial and administrative processes. However, production scheduling always happened outside the ERP system. For that purpose, Ciovita built a homegrown system with Microsoft Excel relying on a lot of exports and re-imports.

Andrew Gold, CEO of Ciovita concludes:

“This worked for a while, but did not scale with the company’s growth. It was not visual and most importantly, it was not dynamic. In addition to this, a spreadsheet program like Excel misses any drag & drop functionality.”

Tangible benefits:

With the transparency provided just plan it, Ciovita managed to get a better alignment towards production goals. In addition to this, just plan it enables faster and better scheduling decisions resulting in increased on-time deliveries.

Andrew Gold summarizes:

“just plan it helped us most in making sure we deliver on time. We have seen a 25% increase in on-time orders. Most important is: Each department can see the impact their efforts have to keep a job on track.”

Turning the theory into practice

By now, you should have learned

• What job shop scheduling is
• Why it is important
• Why it should be visual
• Which techniques and methods you can apply
• What best practices others use
• And what you can gain of it

Now, it is time to put the theory into practice. What follows is concrete advice, checklists, and to-do lists.

You get concrete action items to apply if you do not just want to be a job shop scheduling theorist, but somebody who successfully applies scheduling to manage and prosper the own shop.

Signs that your job shop needs proper scheduling

Hey, are you still unsure that you REALLY want to get going with job shop scheduling? Here are three signs that your shop truly needs proper scheduling .

Regard this as a checklist: if at least one of these signs is valid for your shop, do not waste more time. Become concrete. Get it going.

Sign #1: Your schedule consumes more time than it generates benefits

If this is achieved, you gain a lot – as I outlined in the benefits section of this guide in all details. However, there is also a hidden cost associated with scheduling (and I not referring to the cost of purchasing a scheduling tool).

This hidden cost is the cost of updating and maintaining your schedule. With a growing business, incoming orders rise, more and different machines are added, various resources have to be handled and production lines tend to be more complex. All of this happening in an ever-changing and volatile environment as usual for job shops.

At the point where you are more involved with updating your schedule than actually benefiting from it, you should think about a change.

Sign #2: Your planning tool does not give you all information at one glance

The more successful you are with your shop, the more complex becomes your decision-making. The more complex your decision-making, the more important it gets to have the following information at your fingertips:

• The utilization level of every resource and machine
• The current orders that are in danger of running late
• The impact of any changes to your job shop set-up

If your scheduling tool does not provide you with that information instantly, you should think about a change.

Sign #3: Your scheduling tool is too static to deal with short-term incidents

How quickly can you provide a reliable delivery time if your top customer surprisingly calls and asks if you can squeeze in a rush order?

How quickly can you understand the impact of unplanned machine downtime on your schedule?

How quickly can you reschedule if your subcontractor informs you about a later shipment of the required material?

If your schedule is too static to provide you with answers instantaneously, the likelihood is high that you answer short-term incidents with gut-feel decisions. The result is a schedule that is no longer in-line with reality, of which the result is fire-fighting.

If this sounds familiar, you should think about a change.

Summing this up, here is your checklist with signs that you need a proper job shop scheduling:  Does your schedule consume more time than it generates benefits?  Does your planning tool give you all information needed at one glance?  Is your scheduling tool too static to deal with short-term incidents?

A checklist for you

Summing this up, here is your checklist with signs that you need a proper job shop scheduling:

• Does your schedule consume more time than it generates benefits?
• Does your planning tool give you all information needed at one glance?
• Is your scheduling tool too static to deal with short-term incidents?

How to kick-start job shop scheduling

We’ve identified five steps to kick-start job shop scheduling and the link brings you to an extensive blog post about those. Here is the condensed version:

Step 1: Define your scheduling goals

To say it with Bill Copeland:

“The trouble with not having a goal is that you can spend your life running up and down the field and never score.”

It makes no sense to start investing into visual job shop scheduling (or any other solution) without knowing what you want to achieve. Take these concrete actions to define your scheduling goals.

• Action 1: Brainstorm ideas and write them down

I suggest that you first brainstorm general areas of improvement that you want to achieve with implementing production scheduling.

The trick is: write down a (long) list of ideas and them in 1st person. They should be your goals. Nobody will do it for you. Your goals, your investment, your gain.

• Action 2: Prioritize your ideas

You won’t be able to achieve everything at once. Prioritize, and make sure you focus.

The trick is: make a ranking list, no priority classed.. This avoids that you add seventeen ideas into the priority 1 class, and then the remaining three into the priority 2 class.

• Action 3: Turn your ideas into SMART goals

Now, make your (most likely: vague) goals very clear. Make them smart:

• M easurable
• A ttainable
• T ime-Bound

Step 2: Derive major scheduling requirements from your smart goals

Knowing your goals is not enough. You need to translate your goals into requirements for a scheduling system. Typically, one goal translates into multiple requirements.

Here is an example:

• Goal: I want to deliver 90%+ of my jobs in time within the next 9 months.
• I need a system that allows to quickly see promised delivery dates and production finish dates next to each other
• If my promised delivery date will be missed, I need to quickly see by how far the critical jobs will miss their delivery date
• If my promised delivery date will be missed, I need to quickly understand my options in terms of countermeasures

Step 3: Talk to scheduling software vendors

My strongest recommendation is that you resist the temptation to try scheduling software on your own. There are solutions out there that pretend that they are super easy. They give you a free trial, or even a free account (with limited functionality). However, job shop scheduling is not trivial (hence this long ultimate guide to it). Do not waste your time playing around with “scheduling tools”.

It is a sign of strength to ask for help.

This also enables you to challenge vendors, and to make sure that they not just have fancy websites, but that they are capable of delivering what they promise. Here is the quick link to get us into a meeting with you . 

Let us know what your goals and your requirements are. Then you can decide if there is a fit. This is a faster path to success.

Step 4: Gather and structure your data (that is relevant for scheduling)

Action 1: Gather relevant data about your resources (internal supply)

• Task 1: List your resources

Resources constitute the capacity that fulfills the operations of your production process. This includes all machines, working stations, or workers available. List them all.

• Task 2: Group your resources

If there are similar resources, group them. “Similar resources” typically are those resources that can do similar tasks. This gives your list of resources a better structure. This structure might look as follows:

• CNC machine 1
• CNC machine 2
• CNC machine 3
• Task 3: Add your standard resource calendar

You typically have a standard calendar or different standard calendars. Let’s say parts of your shop work one shift Monday to Friday, others two shifts each day of the week. This is what is meant here with a standard resource calendar.

Action 2: Gather relevant data about your jobs (internal demand)

• Task 1: Define a job by its metadata

Defining a job by its metadata sounds complicated, but it isn’t. Here is what you should do.

• List your jobs (e.g. write down the job numbers)
• The earliest start date (if you have one)
• The due date (e.g. the date that you need to finish the job so that you deliver in time)

That is all that is needed for scheduling!

• Task 2: Define a job by its tasks

Now for every job write down the tasks that you need to do to get this job down. Also, write them down in the sequence of order that you need to do them.

For every task, you need to have the following information:

• Give the task a task number (so that you can identify it)
• Specify the successor of the task via the task number
• Specify how long it takes to finish the task (keep it simple and ignore a potential differentiation between setup time, runtime, etc.)
• Specify either the resource group or the resource that is needed to get the task done

That’s all. It will be some work.

However, having the data structured properly truly makes it easier for you to get started with job shop scheduling. And by the way: we have an Excel template that helps you with this data preparation work. Download the Excel scheduling template here .

Step 5: Make use of an on-boarding service

As said earlier: job shop scheduling isn’t easy.

If you consider using a software solution to help you master this challenge, software alone will not do the job. Any software that is promoted to you as “easy and no support needed” is a toy that might be good looking, but most likely is not problem-solving.

If you want to succeed with job shop scheduling, look for software and best practices. Look for software and experts that help you succeed with the software (and achieve the scheduling goals that you developed that nicely).

We condensed our expertise, our best practices, and our scheduling insights into our on-boarding services. It is a service that we deliver to every client. This service is individual, on the spot, tailored to your goals, and affordable.

Make use of it.

Your 5 steps to kickstart job shop scheduling - a summary

Although you might be the production planner in your company (or you are the owner and hired a production planner to make this happen), scheduling is no one-man show. Scheduling is teamwork.

Ideally, your scheduling team consists of three roles. We identified them as absolutely crucial to effectively run a scheduling tool. This can be read in more details from a blog post that differentiates scheduling success factors for introducing and for using scheduling software .

1st role to staff in your scheduling team: executive management

Scheduling is no magic pill. It is both: an initial investment and an ongoing investment

Hence, you – for sure – need the backing of your executive management. Ideally, one of your executives is directly involved in the revolving scheduling process. Our experience from working with hundreds of job shops tells us that this the most overlooked success factor.

If this is not possible, an executive member still needs to be in the scheduling core team and receive regular analytics and KPIs on the impact that the new scheduling tool has on the shop.

2nd role to staff in your scheduling team: (chief) scheduler

Well, this sounds trivial. However, we have seen cases in which scheduling was given as a task to an admin worker or even an intern. This does not work.

Your scheduling teams requires a person who is in charge of scheduling. This person must be granted a relevant amount of her time for scheduling.

It is important that the (chief) scheduler gets formally appointed from the executive team, and acts as the first contact for the management for all scheduling questions. This person needs to have a good standing within the organization and a sufficient budget to successfully operate his scheduling tasks.

3rd to staff in your scheduling team: (chief) operator or foreman

A schedule is worth nothing if it does not get executed. A production schedule gets executed on the shop-floor and the person responsible for this are the machine operators or the foreman.

When you run a schedule, it is not just important to schedule new jobs. The schedule also must reflect what is happening on the shop-floor, and it must quickly adapt to any short-term incidents that take place.

However, to achieve this, a good scheduling tool must be fed with shop-floor data. It shouldn’t be the task of the (chief) scheduler to always hunt for this data. However, a (chief) operator should be appointed to be held responsible for regularly providing current data from the shop-floor to the scheduler.

Establishing scheduling routines

There are two things to keep in mind:

• Scheduling is no magic pill that you take once and that then cures your pain.
• Instead, scheduling is a process. A process that requires actions. Moreover, it is an ever-repeating process that requires repeated actions. Read this blog post to learn more about the general nature of the scheduling process .

To achieve proper scheduling, you need to run a process of

• Updating your schedule (e.g. with new jobs, with shop-floor information, with new insights)
• Understanding your schedule (e.g. see the impact of these changes on the overall schedule)
• Creating a new schedule
• Reporting on the new schedule
• Executing the schedule

You will need to run this process daily.

Job shop scheduling software can help you with this process, but it will not take away the overall work. To some degree, you can compare scheduling software with a dishwasher:

A dishwasher helps you to achieve your target (cleaning the dishes) in a much more productive way than the manual option (I heard couples stating that they – for sure – would be divorced if they would not have a dishwasher). However, you can only benefit from these productivity (and “life improvement”) gains if you establish a routine to operate the machine. There must be someone responsible to gather the dirty dishes. Another one is responsible to fill the machine. Then there must be one to select the program and to start it. Finally, the clean dishes need to be put back into the cupboard where they belong. Then the same procedure starts again and again.

Now, that you have your scheduling team in pace, you likewise need to determine

• Responsibilities for standard scheduling tasks
• Timings as to when these tasks should be completed

Here are checklists and examples of how this could look like:

Tasks & timings for the executive management

• Ongoing: Allocate daily time for the production planner to work on the schedule (rather than to chase information or do some non-scheduling related fire drills)
• Ongoing: Make the foremen accountable for providing shop-floor data in due course
• In larger intervals: Give a clear direction in terms of scheduling goals (do not expect to get 100% on-time deliveries, if you push the team hard to achieve a 100% machine utilization)

Tasks & timings for the (chief) scheduler

• Daily (at least): update the schedule with the information obtained from the shop-floor
• Daily: Understand the new data and situation and build a new schedule that meets the established goals best
• Daily: Communicate the new schedule to the foremen and (chief) operator
• Weekly: report on key performance indicators regarding the shopfloor operations (to the executive management)

Tasks & timings for the (chief) operator or foreman

• At least once a day (better more regularly): provide shop-floor information and insights to the (chief) scheduler
• Make sure the schedule is executed as planned

If you do not establish routines and/or if you lack the discipline to execute these routines, any job shop scheduling software will be like an unused dishwasher: A waste of money, and a wasted chance to capitalize on some stunning productivity gains.

Software tools for job shop scheduling

Requirements for a proper job shop scheduling software.

If you made it to this chapter, you are most likely convinced of the advantages of visual job shop scheduling. Certainly, to implement visual scheduling, a proper job shop scheduling software is necessary. If you are thinking about using such software for your job shop, keep reading.

Here are six requirements for a proper job shop scheduling software.

1. Rapid start with cloud technology

Time is money. A proper job shop scheduling software should not require days or weeks to be set up: cloud computing solutions guarantee an easy set-up and reduce the implementation effort to a minimum (please note that it still should require a certain amount of training and enablement … as job shop scheduling is not an easy task).

Additionally, cloud-based software is updated automatically and is therefore always up-to-date. If you like to take a deeper dive into this topic, please read 6 reasons for running job shop scheduling software in the cloud .

2. Interoperability

A new scheduling software should be able to integrate your current data and connect to other software programs that are currently used in a job shop. Only then, maximum productivity throughout the whole business is ensured.

State-of-the-art cloud-based production scheduling solutions come with a production scheduling API to easily achieve this kind of interoperability.

This allows you to establish a seamless flow of information from your ERP or business management system to your scheduling software, to your shop-floor, to your analytics and BI tools … and back.

3. Intuitive and clear planning parameters

The software should be able to incorporate all the necessary information about the job and the task details, resource capacities, and key constraints.

However, due to the “chaotic” nature of a high-mix, low-volume job shop it should not be based on a too sophisticated mathematical optimization algorithm. Such an algorithm would require too much time for getting set up and for getting trained – without the underlying assumptions being stable.

4. Focus on visualization

The software should create a schedule that is represented visually.

Again, a Gantt chart system offers a comprehensive and intuitive illustration of the schedule. The scheduler must gain an overview of the schedule at one glance and must spot conflicts, such as bottlenecks or late orders, instantly. Different views (i.e. job view, resource view, etc.) ensure a deep understanding of the job shop data.

5. Intuitive handling

The focal point of the schedule should be the user.

Easy-to-understand handling ensures that the scheduler can make changes, such as changing the priority of a job or adding a resource, with minimal effort.

Again, using the software should save time, hence increase efficiency, instead of bothering with unnecessary sophistication.

6. Incorporate real-time data

Ideally, the software can combine planning data with current shop-floor data. Due to the highly volatile environment of a job shop, the schedule will never be executed correctly.

By updating the schedule with real-time data, e.g. if and when a job has been started or has been finished, the schedule can be moved closer to reality.

If you are a job shop and want to schedule with software, here is what we recommend you to look for:

• Search for a standard software
• This software should have a scheduling engine that is specific for make-to-order manufacturing
• The scheduling approach should be visual, and not “APS”-style (with heavy-duty algorithms)
• The scheduling software should be provided to you as a cloud-based solution

Of course, there are alternatives available to each of these four recommendations. The decision tree shows you why they might not be the best fit for you.

Once you applied these four criteria, you should have a concrete shortlist of proper job shop scheduling software solutions.

We finally recommend that you engage with a vendor who not just ships software, but also provides tips & tricks, best practices, references, and a wealth of job shop scheduling experience.

Parting Words

Here is what you need to remember.

Job shop scheduling can gain you a competitive edge.

Move away from outdated tools such as spreadsheets, whiteboards, as well also dump scheduling modules that are part of your ERP system, or good looking Gantt charts that are not made for job shops (neither for manufacturing).

Move away from outdated thinking and mindsets . Scheduling is not a magic pill, but an ongoing process that requires discipline and routines.

Move away from outdated technology . Windows-based, locally installed applications have served us well – in the past century. Modern applications run in the cloud, are always current, and can get accessed from everywhere, anytime.

But it is you who needs to be committed about. It is you who needs to make the first step.

If you decide to make your first step with us, you won’t be alone.

We will hand-hold you during your first steps – until you are the job shop scheduling master for your shop.

Come with us.

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How to write a business plan for a tailor shop?

Writing a business plan for a tailor shop can be an intimidating task, especially for those just starting.

This in-depth guide is designed to help entrepreneurs like you understand how to create a comprehensive business plan so that you can approach the exercise with method and confidence.

We'll cover: why writing a tailor shop business plan is so important - both when starting up, and when running and growing the business - what information you need to include in your plan, how it should be structured, and what tools you can use to get the job done efficiently.

Let's get started!

In this guide:

Why write a business plan for a tailor shop?

• What information is needed to create a business plan for a tailor shop?
• What goes in the financial forecast for a tailor shop?
• What goes in the written part of a tailor shop business plan?
• What tool can I use to write my tailor shop business plan?

Understanding the document's scope and goals will help you easily grasp its structure and content. Before diving into the specifics of the plan, let's take a moment to explore the key reasons why having a tailor shop business plan is so crucial.

To have a clear roadmap to grow the business

Small businesses rarely experience a constant and predictable environment. Economic cycles go up and down, while the business landscape is mutating constantly with new regulations, technologies, competitors, and consumer behaviours emerging when we least expect it.

In this dynamic context, it's essential to have a clear roadmap for your tailor shop. Otherwise, you are navigating in the dark which is dangerous given that - as a business owner - your capital is at risk.

That's why crafting a well-thought-out business plan is crucial to ensure the long-term success and sustainability of your venture.

To create an effective business plan, you'll need to take a step-by-step approach. First, you'll have to assess your current position (if you're already in business), and then identify where you'd like your tailor shop to be in the next three to five years.

Once you have a clear destination for your tailor shop, you'll focus on three key areas:

• Resources: you'll determine the human, equipment, and capital resources needed to reach your goals successfully.
• Speed: you'll establish the optimal pace at which your business needs to grow if it is to meet its objectives within the desired timeframe.
• Risks: you'll identify and address potential risks you might encounter along the way.

By going through this process regularly, you'll be able to make informed decisions about resource allocation, paving the way for the long-term success of your business.

To anticipate future cash flows

Regularly comparing your actual financial performance to the projections in the financial forecast of your tailor shop's business plan gives you the ability to monitor your business's financial health and make necessary adjustments as needed.

This practice allows you to detect potential financial issues, such as unexpected cash shortfalls before they escalate into major problems. Giving you time to find additional financing or put in place corrective measures.

Additionally, it helps you identify growth opportunities, like excess cash flow that could be allocated to launch new products and services or expand into new markets.

Staying on track with these regular comparisons enables you to make well-informed decisions about the amount of financing your business might require, or the excess cash flow you can expect to generate from your main business activities.

To secure financing

A detailed business plan becomes a crucial tool when seeking financing from banks or investors for your tailor shop.

Investing and lending to small businesses are very risky activities given how fragile they are. Therefore, financiers have to take extra precautions before putting their capital at risk.

At a minimum, financiers will want to ensure that you have a clear roadmap and a solid understanding of your future cash flows (like we just explained above). But they will also want to ensure that your business plan fits the risk/reward profile they seek.

This will off-course vary from bank to bank and investor to investor, but as a rule of thumb. Banks will want to see a conservative financial management style (low risk), and they will use the information in your business plan to assess your borrowing capacity — the level of debt they think your business can comfortably handle — and your ability to repay the loan. This evaluation will determine whether they'll provide credit to your tailor shop and the terms of the agreement.

Whereas investors will carefully analyze your business plan to gauge the potential return on their investment. Their focus lies on evidence indicating your tailor shop's potential for high growth, profitability, and consistent cash flow generation over time.

Now that you recognize the importance of creating a business plan for your tailor shop, let's explore what information is required to create a compelling plan.

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Information needed to create a business plan for a tailor shop

Drafting a tailor shop business plan requires research so that you can project sales, investments and cost accurately in your financial forecast, and convince the reader that there is a viable commercial opportunity to be seized.

Below, we'll focus on three critical pieces of information you should gather before starting to write your plan.

Carrying out market research for a tailor shop

Carrying out market research before writing a business plan for a tailor shop is essential to ensure that the financial projections are accurate and realistic.

Market research helps you gain insight into your target customer base, competitors, pricing strategies and other key factors which can have an impact on the commercial success of your business.

In particular, it is useful in forecasting revenue as it provides valuable data regarding potential customers’ spending habits and preferences.

You may discover that customers may be looking for more custom-made clothing options, such as suits tailored to their exact measurements. Additionally, customers might be interested in more modern, fashionable cuts for their clothing, as well as new fabrics and colors.

This information can then be used to create more accurate financial projections which will help investors make informed decisions about investing in your tailor shop.

Developing the sales and marketing plan for a tailor shop

As you embark on creating your tailor shop business plan, it is crucial to budget sales and marketing expenses beforehand.

A well-defined sales and marketing plan should include precise projections of the actions required to acquire and retain customers. It will also outline the necessary workforce to execute these initiatives and the budget required for promotions, advertising, and other marketing efforts.

This approach ensures that the appropriate amount of resources is allocated to these activities, aligning with the sales and growth objectives outlined in your business plan.

The staffing and capital expenditure requirements of a tailor shop

Whether you are starting or expanding a tailor shop, it is important to have a clear plan for recruitment and capital expenditures (investment in equipment and real estate) in order to ensure the success of the business.

Both the recruitment and investment plans need to be coherent with the timing and level of growth planned in your forecast, and require appropriate funding.

A tailor shop might incur staffing costs such as salaries for tailors, alterationists, and other employees, as well as costs associated with providing benefits and insurance. They might also incur equipment costs such as the purchase of sewing machines, cutting tables, and fabric-cutting tools. Additionally, they may need to budget for the costs of regular maintenance and repair of their equipment, as well as the cost of electricity and other utilities.

In order to create a realistic financial forecast, you will also need to consider the other operating expenses associated with running the business on a day-to-day basis (insurance, bookkeeping, etc.). 

Once you have all the necessary information to create a business plan for your tailor shop, it is time to start creating your financial forecast.

What goes into your tailor shop's financial forecast?

The objective of the financial forecast of your tailor shop's business plan is to show the growth, profitability, funding requirements, and cash generation potential of your business over the next 3 to 5 years.

The four key outputs of a financial forecast for a tailor shop are:

• The profit and loss (P&L) statement ,
• The projected balance sheet ,
• The cash flow forecast ,
• And the sources and uses table .

Let's look at each of these in a bit more detail.

The projected P&L statement

The projected P&L statement for a tailor shop shows how much revenue and profit your business is expected to make in the future.

A healthy tailor shop's P&L statement should show:

• Sales growing at (minimum) or above (better) inflation
• Stable (minimum) or expanding (better) profit margins
• A healthy level of net profitability

This will of course depend on the stage of your business: numbers for a startup will look different than for an established tailor shop.

The projected balance sheet of your tailor shop

Your tailor shop's forecasted balance sheet enables the reader of your plan to assess your financial structure, working capital, and investment policy.

It is composed of three types of elements: assets, liabilities and equity:

• Assets: represent what the business owns and uses to produce cash flows. It includes resources such as cash, equipment, and accounts receivable (money owed by clients).
• Liabilities: represent funds advanced to the business by lenders and other creditors. It includes items such as accounts payable (money owed to suppliers), taxes due and loans.
• Equity: is the combination of what has been invested by the business owners and the cumulative profits and losses generated by the business to date (which are called retained earnings). Equity is a proxy for the value of the owner's stake in the business.

Your tailor shop's balance sheet will usually be analyzed in conjunction with the other financial statements included in your forecast.

Two key points of focus will be:

• Your tailor shop's liquidity: does your business have sufficient cash and short-term assets to pay what it owes over the next 12 months?
• And its solvency: does your business have the capacity to repay its debt over the medium-term?

The cash flow forecast

A projected cash flow statement for a tailor shop is used to show how much cash the business is generating or consuming.

The cash flow forecast is usually organized by nature to show three key metrics:

• The operating cash flow: do the core business activities generate or consume cash?
• The investing cash flow: how much is the business investing in long-term assets (this is usually compared to the level of fixed assets on the balance sheet to assess whether the business is regularly maintaining and renewing its equipment)?
• The financing cash flow: is the business raising new financing or repaying financiers (debt repayment, dividends)?

As we discussed earlier, cash is king and keeping an eye on future cash flows an imperative for running a successful business. Therefore, you can expect the reader of your tailor shop business plan to pay close attention to your cash flow forecast.

Also, note that it is customary to provide both yearly and monthly cash flow forecasts in a business plan - so that the reader can analyze seasonal variation and ensure the tailor shop is appropriately funded.

The initial financing plan

The initial financing plan - also called a sources and uses table - is an important tool when starting a tailor shop.

It shows where the money needed to set up the business will come from (sources) and how it will be allocated (uses).

Having this table helps understand what costs are involved in setting up the tailor shop, how the risks are distributed between the shareholders and the lenders, and what will be the starting cash position (which needs to be sufficient to sustain operations until the business breaks even).

Now that the financial forecast of a tailor shop business plan is understood, let's focus on what goes into the written part of the plan.

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The written part of a tailor shop business plan

The written part of a tailor shop business plan is composed of 7 main sections:

• The executive summary
• The presentation of the company
• The products and services
• The market analysis
• The strategy
• The operations
• The financial plan

Throughout these sections, you will seek to provide the reader with the details and context needed for them to form a view on whether or not your business plan is achievable and your forecast a realistic possibility.

Let's go through the content of each section in more detail!

1. The executive summary

The executive summary, the first section of your tailor shop's business plan, serves as an inviting snapshot of your entire plan, leaving readers eager to know more about your business.

To compose an effective executive summary, start with a concise introduction of your business, covering its name, concept, location, history, and unique aspects. Share insights about the services or products you intend to offer and your target customer base.

Subsequently, provide an overview of your tailor shop's addressable market, highlighting current trends and potential growth opportunities.

Then, present a summary of critical financial figures, such as projected revenues, profits, and cash flows.

You should then include a summary of your key financial figures such as projected revenues, profits, and cash flows.

Lastly, address any funding needs in the "ask" section of your executive summary.

2. The presentation of the company

As you build your tailor shop business plan, the second section deserves attention as it delves into the structure and ownership, location, and management team of your company.

In the structure and ownership part, you'll provide valuable insights into the legal structure of the business, the identities of the owners, and their respective investments and ownership stakes. This level of transparency is vital, particularly if you're seeking financing, as it clarifies which legal entity will receive the funds and who holds the reins of the business.

Moving to the location part, you'll offer a comprehensive view of the company's premises and articulate why this specific location is strategic for the business, emphasizing factors like catchment area, accessibility, and nearby amenities.

When describing the location of your tailor shop to a third party financier, you could emphasize its central location and proximity to other businesses. You could mention that it is situated in a busy, growing area that could be attractive to potential customers. You might also highlight the fact that it is easily accessible by public transportation and that it is within walking distance of several popular attractions. Additionally, you could emphasize the fact that the local government provides incentives for businesses in the area, which could increase the appeal of investing in the tailor shop.

Lastly, you should introduce your esteemed management team. Provide a thorough explanation of each member's role, background, and extensive experience.

It's equally important to highlight any past successes the management team has achieved and underscore the duration they've been working together. This information will instil trust in potential lenders or investors, showcasing the strength and expertise of your leadership team and their ability to deliver the business plan.

3. The products and services section

The products and services section of your business plan should include a detailed description of what your company offers, who are the target customers, and what distribution channels are part of your go-to-market. 

For example, your tailor shop might offer customers custom clothing, alterations, and tailoring services. Custom clothing includes the ability to pick from a variety of fabrics, cuts, sizes, and styles, as well as the ability to customize the details of the garment. Alterations are a service that allows customers to adjust the fit of their existing clothing, while tailoring services include the ability to make adjustments to the fabric and details of a garment that is already in the customers' possession. All of these services allow customers to get clothing that is perfect for them, making them look their best and feel confident.

4. The market analysis

When you present your market analysis in your tailor shop business plan, it's crucial to include detailed information about customers' demographics and segmentation, target market, competition, barriers to entry, and any relevant regulations.

The main objective of this section is to help the reader understand the size and attractiveness of the market while demonstrating your solid understanding of the industry.

Begin with the demographics and segmentation subsection, providing an overview of the addressable market for your tailor shop, the key trends in the marketplace, and introducing different customer segments along with their preferences in terms of purchasing habits and budgets.

Next, focus on your target market, zooming in on the specific customer segments your tailor shop aims to serve and explaining how your products and services fulfil their distinct needs.

For example, your target market might include fashion-forward professionals. These individuals likely have a higher disposable income and are willing to spend more on their clothing. They will likely want to find a tailor that can provide them with quality custom pieces that will last them for years to come.

Then proceed to the competition subsection, where you introduce your main competitors and highlight what sets you apart from them.

Finally, conclude your market analysis with an overview of the key regulations applicable to your tailor shop.

5. The strategy section

When crafting the strategy section of your business plan for your tailor shop, it's important to cover several key aspects, including your competitive edge, pricing strategy, sales & marketing plan, milestones, and risks and mitigants.

In the competitive edge subsection, clearly explain what sets your company apart from competitors. This is particularly critical if you're a startup, as you'll be trying to establish your presence in the marketplace among entrenched players.

The pricing strategy subsection should demonstrate how you aim to maintain profitability while offering competitive prices to your customers.

For the sales & marketing plan, outline how you plan to reach and acquire new customers, as well as retain existing ones through loyalty programs or special offers.

In the milestones subsection, detail what your company has achieved thus far and outline your primary objectives for the coming years by including specific dates for expected progress. This ensures everyone involved has clear expectations.

Lastly, in the risks and mitigants subsection, list the main risks that could potentially impact the execution of your plan. Explain the measures you've taken to minimize these risks. This is vital for investors or lenders to feel confident in supporting your venture - try to proactively address any objection they might have.

Your tailor shop may face the risk of theft. Thieves may target the shop, especially if there are valuable items that could be taken. Your tailor shop could also face the risk of damage due to natural disasters. For example, floods, fires, or earthquakes might cause significant damage to the shop and the items stored inside.

6. The operations section

The operations of your tailor shop must be presented in detail in your business plan.

Begin by addressing your staff, specifying the main roles and your recruitment plan to support the anticipated growth. Outline the qualifications and experience needed for each role and discuss your recruitment strategies, which may involve using job boards, referrals, or headhunters.

Next, clearly state your tailor shop's operating hours, allowing the reader to gauge the adequacy of your staffing levels. Additionally, mention any considerations for varying opening times during peak seasons and your approach to handling customer queries outside regular operating hours.

The key assets and intellectual property (IP) required to run your business should also be highlighted. If you rely on licenses, trademarks, physical structures like equipment or property, or lease agreements, ensure they are well-documented in this section.

You may have key assets such as equipment or tools, and also intellectual property such as designs or patterns. The equipment may include sewing machines, fabric cutters, and other tools that are necessary to create the tailor shop's products. The intellectual property could include things like the shop's logo, a special pattern or design, or a signature style of tailoring. These assets and IP could be used to differentiate the tailor shop from its competitors, allowing it to stand out from the crowd.

Finally, provide a comprehensive list of suppliers you intend to collaborate with, along with a breakdown of their services and main commercial terms, such as price, payment terms, break clauses and contract duration. Investors often seek insight into the reasons behind your supplier choices, which may include a preference for higher-quality products or established relationships from past ventures.

7. The presentation of the financial plan

The financial plan section is where we will include the financial forecast we talked about earlier in this guide.

Now that you have a clear idea of the content of a tailor shop business plan, let's look at some of the tools you can use to create yours.

What tool should I use to write my tailor shop's business plan?

There are two main ways of creating your tailor shop business plan:

• Using specialized business planning software,
• Hiring a business plan writer.

Using an online business plan software for your tailor shop's business plan

Using online business planning software is the most efficient and modern way to create a tailor shop business plan.

There are several advantages to using specialized software:

• You can easily create your financial forecast by letting the software take care of the financial calculations for you without errors
• You are guided through the writing process by detailed instructions and examples for each part of the plan
• You can access a library of dozens of complete business plan samples and templates for inspiration
• You get a professional business plan, formatted and ready to be sent to your bank or investors
• You can easily track your actual financial performance against your financial forecast
• You can create scenarios to stress test your forecast's main assumptions
• You can easily update your forecast as time goes by to maintain visibility on future cash flows
• You have a friendly support team on standby to assist you when you are stuck

If you're interested in using this type of solution, you can try The Business Plan Shop for free by signing up here .

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The Business Plan Shop does the maths for you. Simply enter your revenues, costs and investments. Click save and our online tool builds a three-way forecast for you instantly.

Hiring a business plan writer to write your tailor shop's business plan

Outsourcing your tailor shop business plan to a business plan writer can also be a viable option.

Business plan writers are skilled in creating error-free business plans and accurate financial forecasts. Moreover, hiring a consultant can save you valuable time, allowing you to focus on day-to-day business operations.

However, it's essential to be aware that hiring business plan writers will be expensive, as you're not only paying for their time but also the software they use and their profit margin.

Based on experience, you should budget at least £1.5k ($2.0k) excluding tax for a comprehensive business plan, and more if you require changes after initial discussions with lenders or investors.

Also, exercise caution when seeking investment. Investors prefer their funds to be directed towards business growth rather than spent on consulting fees. Therefore, the amount you spend on business plan writing services and other consulting services should be insignificant compared to the amount raised.

Keep in mind that one drawback is that you usually don't own the business plan itself; you only receive the output, while the actual document is saved in the consultant's business planning software. This can make it challenging to update the document without retaining the consultant's services.

For these reasons, carefully consider outsourcing your tailor shop business plan to a business plan writer, weighing the advantages and disadvantages of seeking outside assistance.

Why not create your tailor shop's business plan using Word or Excel?

Using Microsoft Excel and Word (or their Google, Apple, or open-source equivalents) to write a tailor shop business plan is a terrible idea.

For starters, creating an accurate and error-free financial forecast on Excel (or any spreadsheet) is very technical and requires both a strong grasp of accounting principles and solid skills in financial modelling.

As a result, it is unlikely anyone will trust your numbers unless - like us at The Business Plan Shop - you hold a degree in finance and accounting and have significant financial modelling experience in your past.

The second reason is that it is inefficient. Building forecasts on spreadsheets was the only option in the 1990s and early 2000s, nowadays technology has advanced and software can do it much faster and much more accurately.

And with the rise of AI, software is also becoming smarter at helping us detect mistakes in our forecasts and helping us analyse the numbers to make better decisions.

Also, using software makes it easy to compare actuals vs. forecasts and maintain our forecasts up to date to maintain visibility on future cash flows - as we discussed earlier in this guide - whereas this is a pain to do with a spreadsheet.

That's for the forecast, but what about the written part of my tailor shop business plan?

This part is less error-prone, but here also software brings tremendous gains in productivity:

• Word processors don't include instructions and examples for each part of your business plan
• Word processors don't update your numbers automatically when they change in your forecast
• Word processors don't handle the formatting for you

Overall, while Word or Excel may be viable options for creating a tailor shop business plan for some entrepreneurs, it is by far not the best or most efficient solution.

• A business plan has 2 complementary parts: a financial forecast showcasing the expected growth, profits and cash flows of the business; and a written part which provides the context needed to judge if the forecast is realistic and relevant.
• Having an up-to-date business plan is the only way to keep visibility on your tailor shop's future cash flows.
• Using business plan software is the modern way of writing and maintaining business plans.

We hope that this practical guide gave you insights on how to write the business plan for your tailor shop. Do not hesitate to get in touch with our team if you still have questions.

Also on The Business Plan Shop

• In-depth business plan structure
• Key steps to write a business plan?
• Free business plan template

Know someone who owns or wants to start a tailor shop? Share this article with them!

Founder & CEO at The Business Plan Shop Ltd

Guillaume Le Brouster is a seasoned entrepreneur and financier.

Guillaume has been an entrepreneur for more than a decade and has first-hand experience of starting, running, and growing a successful business.

Prior to being a business owner, Guillaume worked in investment banking and private equity, where he spent most of his time creating complex financial forecasts, writing business plans, and analysing financial statements to make financing and investment decisions.

Guillaume holds a Master's Degree in Finance from ESCP Business School and a Bachelor of Science in Business & Management from Paris Dauphine University.

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• By Dan Davis
• February 13, 2024

A metal fabricating company that demonstrates the ability to manufacture specialty components for customers will stand out as an attractive candidate for acquisition. Industrial Succession Group

After years of watching HGTV, we all have a sense of what can add value to a single-family home that ultimately will hit the market. Spruce up the curb appeal. Modernize the kitchen. Hit the walls with some new paint. It’s not too complicated.

But can the same be said for a metal fabricating business? The changes aren’t as simple, but they are possible with the right plan and commitment.

Hundreds of small business owners are finding this out as they look to leave the chaos of metal fabricating and retire to a quieter lifestyle. Jules Brenner founded Industrial Succession Group (ISG) in 2020 with the intent of purchasing small manufacturing companies in Southern California from owners looking to make a transition out of the business. Brenner said the density of small to medium-sized manufacturing companies in the area and the number of company owners looking to step away from their businesses have created quite the opportunity for potential acquisitions.

ISG purchased American Sheet Metal (ASM) , Anaheim, Calif., in 2022. In the months since the purchase, ISG has helped ASM to refocus on its core market, producing metal parts for the local construction and infrastructure projects, and formalize its systems. ISG acquired Pendarvis Manufacturing , also in Anaheim, Calif., in 2023 and relaunched it as Pen Manufacturing later in the year. Pen Manufacturing fabricates metal parts for the many original equipment manufacturers in the area.

Brenner said that the full ownership transition time for ASM took about six months. With the Pen Manufacturing acquisition, ISG only needed about eight weeks for the people and systems to be put in place.

“California is one of those states where many people are moving out to other states, like Texas and Idaho, and that trend has not stopped,” Brenner explained. “Business owners move a lot slower than someone just working a job where they could tell the employer that they want to work remotely. But those business owners might be looking to get out as well. That’s where we are seeing a lot of activity.”

Meanwhile, ISG continues to look for companies, but not just any manufacturing operations. Like any other prudent investor, Brenner said his company looks for certain traits in a firm that show it can thrive with the right investments. While his firm can’t buy every promising metal fabricating company, Brenner offered some insight into what he believes makes a business stand out as a potential investment opportunity. These observations can help company owners who might be looking to leave the business to get their organizations ready for a possible sale.

1. Gross Margins

The first thing any likely buyer of a business will want to know is what companies make up the customer base. A company owner is unlikely to share that information in the initial stages of conversation, but that doesn’t mean a reasonable assessment can’t be made by looking for clues elsewhere.

For Brenner, that potential answer lies in the company’s gross margin. For instance, if the owner reports really high gross margins, Brenner said he can surmise that the company is offering highly skilled work or quick turnaround for a demanding customer, like Boeing, considering the amount of aerospace work taking place in Southern California. If the reported gross margin is not as high as expected, Brenner said he might have questions about the efficiency of manufacturing processes or the inability to adhere to industry standards.

“We typically have a good feel for industry standards because we look at a lot of metal shops in our local area. Those numbers are different in California than they are in a place like Ohio, but they still are important,” he said.

2. Customer Diversity

A shop that has two or three customers making up a large majority of its revenue is not ideal, according to Brenner. An interruption in business with one can quickly reduce the amount of cash coming into the business and put a strain on operations if cash reserves aren’t enough to cover the temporary downturn.

Of course, a small to medium-sized company with a few very large customers is not unusual. In many instances, such relationships have led to the emergence of some very successful metal manufacturing companies. Having said that, companies without a diversified customer base won’t be as attractive to a buyer as those that have worked to limit risk by having customers in a variety of manufacturing segments.

3. Company Leadership

When a customer buys a good or service from a company, someone guides that relationship. It might be the owner, an account manager, an estimator, or even a salesperson. No matter who that person might be, he or she is very important because that’s the person that the customer knows. That person is the owner of that very valuable relationship.

Brenner said that if owners are lead representatives in such customer relationships, they need to be a part of the mix even after a sale is conducted, providing a friendly face to the customer during the transition.

If owners want to embark on their retirement adventures as soon as possible, they need to have someone in place managing these relationships who will be able to continue the customer management even after the sale is completed. Unfortunately, many small companies can’t afford this type of “program manager” to guide those customers, Brenner said.

“So for that reason [when we buy a business], we try very hard to create incentive structures for owners, at minimum, to work remotely,” he said. “For example, we’re working with a person now who is moving to Idaho, but our whole company runs on the cloud. He can see shop progress and customer data. We want to have that sort of scenario so customers want to continue working with us.”

4. Segment Specialization

Although Pen Manufacturing makes parts for various OEMs, it has a very large presence in some small segments. For instance, it fabricates parts for the local wastewater industry, which is a very important segment in California, as the state wrestles with the need for water conservation in the face of changing climate conditions.

The bright side of dominating a small segment, according to Brenner, is that a business can scale as the sector grows. This might be the case with the wastewater industry, as fresh water resources continue to shrink while the demand for water from residential, commercial, and agricultural customers grows.

5. Internal Infrastructure

After the purchase of ASM, one of the first things that the new owners had to do was construct a conference room. Previously, ASM officials had to hold conversations with visiting customers in the lobby or at someone’s desk. That construction slowed the new acquisition’s transition to a new way of doing business.

Changes to the front office or shop floor can make transitions a little trickier as well, but they can be managed with the right planning and timely decision-making.

As part of its acquisition strategy, ISG focuses on companies that have annual revenues from $1 million to $10 million. That’s typically indicative of a company that has a solid business base but might have room to scale with the implementation of workflow efficiencies and the guidance of leaders with expertise in growing with current customers and cultivating new ones.

Brenner added these types of companies are attractive because they often don’t have the budget to hire people that might take on some traditional roles of company owners, like sales, estimating, and project management. At these companies, the owners literally work in the business instead of on the business because they feel the finances prevent any other scenario.

ISG believes it can deliver value to these types of companies. But this normally can’t happen if the owner is looking to turn in his own two-weeks’ notice after agreeing to sell a company. A lot of things have to be in place for a seller to find immediate freedom.

That’s why a company needs to be thinking ahead about a possible sale, Brenner said. Anything that can make the business more valuable and make a transition to new ownership easier takes time to develop. It’s not as simple as putting out the for sale sign in front of the building.

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How to Write an Auto Repair Shop Business Plan + Free PDF

Elon Glucklich

8 min. read

Updated February 16, 2024

Looking for a free, downloadable auto repair shop business plan Word doc or PDF to help you create a business plan of your own? Bplans has you covered.

You don’t need to find a sample business plan that exactly matches your business. Whether you’re starting an independent garage, a specialty shop for imports, or an auto body shop, the basics of the plan will be the same.

More than 280 million registered vehicles were on the road across the United States at the end of 2022. With a vast majority of them being used vehicles, the need for skilled auto repair technicians is higher than ever.

In this article, we’ll cover the basic elements of how to write an auto repair shop business plan, from your marketing plan to your financials. We also provide a sample auto repair shop business plan PDF for you to download and incorporate into your own plan.

What should you include in an auto repair shop business plan?

Are you writing a business plan for your auto shop because you’re seeking a loan ? Are you looking to clarify your path to creating a profitable, long-lasting business? 

Independent auto repair shops account for three-quarters of all used car repairs in the U.S., so there are numerous examples of successful business models to guide your business. 

But no two auto shops are exactly the same, so your plan will differ from others based on who you’ve identified as your target market , and what products and services you’re offering them.

Many business plans include the following sections:

• Executive summary
• Company overview and funding needs
• Market and competitive analysis
• Products and services
• Operational plan
• Business structure
• Marketing and customer acquisition strategies
• Financial planning and projections

One thing that makes an auto repair business plan different from many other service-based business plans is the sheer number of different products and services you might offer. 

For instance, besides providing auto repair services, you might also sell parts, accessories, and car care products. Each might require a different promotional strategy to maximize the number of sales you make.

You may also want to think about how you’re pricing your services and if you have specific staffing requirements or training programs.

Here’s an example of an auto repair shop business plan outline.

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The 8 elements of an effective auto repair shop business plan

1. executive summary.

The executive summary is a high-level overview of your business plan. 

It shouldn’t be more than two pages, and even though it goes at the beginning of the plan, you should write it last. That’s because the executive summary is basically a condensed version of your business plan.

Your executive summary should include a mission statement that describes the purpose of your business and what sets it apart from competitors. Maybe you can guarantee a quicker service time than other shops in your area, or you offer a unique mix of services.

Your business plan helps you focus on these key factors that will help your auto repair shop thrive, and the executive summary makes your plan more credible to anyone reading your plan.

2. Company overview and funding needs

The company overview is a short summary of your auto repair shop, including its legal structure , location, and history. 

If you aren’t seeking a loan or investment for your business, you can likely skip this section. 

If you are writing the business plan for funding, clearly state: 

• How much you need
• What you will use it for
• How it will benefit the business

For instance, you may need funds to renovate your building, buy equipment, or place advertisements.

3. Marketing plan and competitive analysis

The marketing plan focuses on analyzing the auto repair shop market in your area, both in terms of potential customers’ needs, and how other shops in the area are (or aren’t) meeting those needs.

Researching your market involves researching local demand for auto repair services. For instance, a shop in a colder climate might have customers with different car issues than a shop in a warmer area. A shop in a lower-income market might get more customers with older vehicle models than one in a high-income market.

The market analysis should also examine your competitors , noting their strengths and weaknesses and how you can differentiate your shop.

4. Products and services

This section outlines the range of services your auto repair shop will offer. You can list them as bullet points, though you should also take some time to explain why you are offering them. 

Start with your most profitable services, and work your way down. Also, separate any unique services products that differentiate your auto repair shop from competitors (you’ll need to do market research to know which services will set you apart).

A list of products and services could include:

• Engine repairs
• Transmission work
• Suspension and steering
• Brake repair
• General maintenance
• Auto part sales

You can also include specialty services like:

• Classic car restoration
• Hybrid and electric vehicle maintenance 

5. Operational Plan

The operations section details the everyday functioning of the auto repair shop. It includes the shop’s operational hours, workflow management, and customer service policies.

The idea with this section is to cover the processes that you’ll deploy in your business to make sure your shop is operating efficiently, so you can maximize the number of customers you’ll serve and revenue you’ll bring in. 

Be sure to touch on how you’ll manage inventory , work with parts suppliers, and ensure equipment maintenance protocols are being followed. Also, outline safety procedures and environmental compliance measures you’ll implement.

6. Business structure and management

This section describes the organizational structure and management of the auto repair shop. If you skipped the Company Summary and Funding Needs section, include information about your legal structure here. 

Many owners choose to incorporate their business as Limited Liability Companies (LLCs) . This option strikes a balance between protecting the business from legal liabilities while providing flexibility in how they operate their business.

The management team section provides information about the auto repair shop’s key personnel. This includes the shop owner, managers, technicians and front office support. 

Briefly explain their roles, responsibilities, qualifications, and experience. 

7. Marketing and customer acquisition strategies

This section is where you’ll outline your strategies for attracting and retaining customers. You might want to offer loyalty programs for repeat customers, discounts for customers coming to your shop for the first time, or add-on services like a free car wash.

Cover the various marketing channels you’ll use, like local advertising or online marketing. Maybe you want to create a strong website and leverage social media. Or maybe you’ll rely more on partnerships with local businesses and participation in community events. 

Focus on how you plan to build a strong reputation to attract and retain customers.

8. Financial planning and projections

Your financial plan should give detailed financial projections, including sales , expenses , and profitability . If you’re running an existing business, you can start with your previous year’s numbers. If you’re just starting out, put in your best guess.

Set a goal for yourself — maybe you want to grow revenue by 5 percent. Create a 12-month cash flow statement, income statement, and balance sheet that rises by 5 percent from the beginning of the year to the end.

Then, run your business. 

As you compare your actuals to the forecast over time, you’ll see where you need to make strategic adjustments in order to reach your goal or if you need to revise your target. 

It’s totally fine to adjust your forecast over time — forecasts are just guesses, after all.

Building a successful auto repair shop business plan: Key considerations

Understanding your target customer’s needs is crucial to writing an auto repair shop business plan that you can use effectively. 

To ensure your business plan is the foundation of a growing operation, ask yourself whether you’re taking these considerations into account.

1. Service range

Vehicle owners have varied needs. 

You should offer a broad spectrum of services that meet as many of the needs in your market as you can realistically provide, from basic maintenance to specialized repairs. Catering to more customer segments than your competitors is a good way to set your shop apart.

2. Pricing strategy

Competitive pricing is crucial. You want to attract customers with reasonable rates, while ensuring profitability by bringing in more revenue than expenses. Researching your competitors’ prices should help inform your pricing decisions.

3. Technician expertise

Skilled technicians are vital to your reputation and your bottom line. Make sure your technicians undergo regular training so that they’re up to date with the latest automotive trends and technologies. 

Take some time to research technician wages in your area, to ensure you’re paying a competitive wage that will attract qualified employees.

4. Online presence

A strong digital footprint is essential. 

Even if you plan to rely on traditional advertising and word-of-mouth sales, a website that is search engine optimized can help you generate good online reviews and attract customers in your area who are searching for auto repair services online. 

If this isn’t an area of strength for you, consider hiring a website designer .

5. Shop environment

It may not make or break your business, but providing a welcoming environment at your shop signals to customers that you’re running a credible organization—a factor that might affect whether or not they return. 

Focus on cleanliness, organization, and professional service.

Download your free auto repair shop sample business plan PDF

Download your free auto repair shop sample business plan PDF now, or explore Bplans’ collection of over 550 sample business plans for other options.

There are numerous reasons auto repair shop owners can benefit from writing a business plan — you’ll almost certainly need to write one if you need a bank loan.

But even if you’re not seeking funding, writing a business plan increases your chances for sustained growth .

See why 1.2 million entrepreneurs have written their business plans with LivePlan

Elon is a marketing specialist at Palo Alto Software, working with consultants, accountants, business instructors and others who use LivePlan at scale. He has a bachelor's degree in journalism and an MBA from the University of Oregon.

Table of Contents

• What to include in your business plan
• Elements of a business plan
• Key sections
• Example and template

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Media Monarchy

Moscow metro blasts: another fsb inside job.

“ The first explosion took place on a train after it had stopped in the Lubyanka station in central Moscow , close to the headquarters of Russia’s FSB security service, a spokeswoman for the Russian emergencies ministry told AFP .”

“ The first blast at the Lubyanka metro station killed 22 people and wounded 12 . The second at Park Kulturi station left 12 dead and 7 wounded ,” reported AFP . Russian Federal Security Service chief Alexander Bortnikov has already blamed Chechen rebels for the attack, an explanation slavishly accepted by western media outlets like the BBC who are already running feature articles about the history of terrorism in Russia that completely fail to mention the FSB’s direct role in almost every major attack to have taken place over the last 10 years .

Since the explanation that two female suicide bombers with explosives strapped to their bodies were responsible for the bombing has come directly from the FSB , past history means we can only treat the official story with the utmost suspicion.

The notorious Russian FSB has a documented history of staging false flag events in order to accomplish political agendas .

update: bombs kill 12 in russia’s dagestan region from cnn : Twelve people – nine of them police officers – were killed Wednesday when two bombs exploded in Russia’s southern republic of Dagestan , officials told CNN. Another 23 people, including 11 police officers, were hospitalized with wounds from the bombings, at least one of which was carried out by a suicide bomber, according to a spokesman for the Dagestan police and Vladimir Markin, a spokesman for the Investigative Committee in the Russian prosecutor general’s office. It happened two days after female suicide bombers killed at least 39 people on the Moscow metro .

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A.I.’s Original Sin

A times investigation found that tech giants altered their own rules to train their newest artificial intelligence systems..

This transcript was created using speech recognition software. While it has been reviewed by human transcribers, it may contain errors. Please review the episode audio before quoting from this transcript and email [email protected] with any questions.

From “The New York Times,” I’m Michael Barbaro. This is “The Daily.”

[MUSIC PLAYING]

Today, a “Times” investigation shows how as the country’s biggest technology companies race to build powerful new artificial intelligence systems, they bent and broke the rules from the start.

My colleague Cade Metz on what he uncovered.

It’s Tuesday, April 16th.

Cade, when we think about all the artificial intelligence products released over the past couple of years, including, of course, these chatbots we’ve talked a lot about on the show, we so frequently talk about their future their future capabilities, their influence on society, jobs, our lives. But you recently decided to go back in time to AI’s past, to its origins to understand the decisions that were made, basically, at the birth of this technology. So why did you decide to do that?

Because if you’re thinking about the future of these chatbots, that is defined by their past. The thing you have to realize is that these chatbots learn their skills by analyzing enormous amounts of digital data.

So what my colleagues and I wanted to do with our investigation was really focus on that effort to gather more data. We wanted to look at the type of data these companies were collecting, how they were gathering it, and how they were feeding it into their systems.

And when you all undertake this line of reporting, what do you end up finding?

We found that three major players in this race OpenAI, Google, and Meta as they were locked into this competition to develop better and better artificial intelligence, they were willing to do almost anything to get their hands on this data, including ignoring, and in some cases, violating corporate rules and wading into a legal gray area as they gathered this data.

Basically, cutting corners.

Cutting corners left and right.

OK, let’s start with OpenAI, the flashiest player of all.

The most interesting thing we’ve found, is that in late 2021, as OpenAI, the startup in San Francisco that built ChatGPT, as they were pulling together the fundamental technology that would power that chatbot, they ran out of data, essentially.

They had used just about all the respectable English language text on the internet to build this system. And just let that sink in for a bit.

I mean, I’m trying to let that sink in. They basically, like a Pac-Man on a old game, just consumed almost all the English words on the internet, which is kind of unfathomable.

Wikipedia articles by the thousands, news articles, Reddit threads, digital books by the millions. We’re talking about hundreds of billions, even trillions of words.

So by the end of 2021, OpenAI had no more English language texts that they could feed into these systems, but their ambitions are such that they wanted even more.

So here, we should remember that if you’re gathering up all the English language text on the internet, a large portion of that is going to be copyrighted.

So if you’re one of these companies gathering data at that scale, you are absolutely gathering copyrighted data, as well.

Which suggests that, from the very beginning, these companies, a company like OpenAI with ChatGPT, is starting to break, bend the rules.

Yes, they are determined to build this technology thus they are willing to venture into what is a legal gray area.

So given that, what does OpenAI do once it, as you had said, runs out of English language words to mop up and feed into this system?

So they get together, and they say, all right, so what are other options here? And they say, well, what about all the audio and video on the internet? We could transcribe all the audio and video, turn it into text, and feed that into their systems.

Interesting.

So a small team at OpenAI, which included its president and co-founder Greg Brockman, built a speech-recognition technology called Whisper, which could transcribe audio files into text with high accuracy.

And then they gathered up all sorts of audio files, from across the internet, including audio books, podcasts —

— and most importantly, YouTube videos.

Hmm, of which there’s a seemingly endless supply, right? Fair to say maybe tens of millions of videos.

According to my reporting, we’re talking about at least 1,000,000 hours of YouTube videos were scraped off of that video sharing site, fed into this speech recognition system in order to produce new text for training OpenAI’s chatbot. And YouTube’s terms of service do not allow a company like OpenAI to do this. YouTube, which is owned by Google, explicitly says you are not allowed to, in internet parlance, scrape videos en masse from across YouTube and use those videos to build a new application.

That is exactly what OpenAI did. According to my reporting, employees at the company knew that it broke YouTube terms of service, but they resolved to do it anyway.

So, Cade, this makes me want to understand what’s going on over at Google, which as we have talked about in the past on the show, is itself, thinking about and developing its own artificial intelligence model and product.

Well, as OpenAI scrapes up all these YouTube videos and starts to use them to build their chatbot, according to my reporting, some employees at Google, at the very least, are aware that this is happening.

Yes, now when we went to the company about this, a Google spokesman said it did not know that OpenAI was scraping YouTube content and said the company takes legal action over this kind of thing when there’s a clear reason to do so. But according to my reporting, at least some Google employees turned a blind eye to OpenAI’s activities because Google was also using YouTube content to train its AI.

So if they raise a stink about what OpenAI is doing, they end up shining a spotlight on themselves. And they don’t want to do that.

I guess I want to understand what Google’s relationship is to YouTube. Because of course, Google owns YouTube. So what is it allowed or not allowed to do when it comes to feeding YouTube data into Google’s AI models?

It’s an important distinction. Because Google owns YouTube, it defines what can be done with that data. And Google argues that it has a right to that data, that its terms of service allow it to use that data. However, because of that copyright issue, because the copyright to those videos belong to you and I, lawyers who I’ve spoken to say, people could take Google to court and try to determine whether or not those terms of service really allow Google to do this. There’s another legal gray area here where, although Google argues that it’s OK, others may argue it’s not.

Of course, what makes this all so interesting is, you essentially have one tech company Google, keeping another tech company OpenAI’s dirty little secret about basically stealing from YouTube because it doesn’t want people to know that it too is taking from YouTube. And so these companies are essentially enabling each other as they simultaneously seem to be bending or breaking the rules.

What this shows is that there is this belief, and it has been there for years within these companies, among their researchers, that they have a right to this data because they’re on a larger mission to build a technology that they believe will transform the world.

And if you really want to understand this attitude, you can look at our reporting from inside Meta.

And so what does Meta end up doing, according to your reporting?

Well, like Google and other companies, Meta had to scramble to build artificial intelligence that could compete with OpenAI. Mark Zuckerberg is calling engineers and executives at all hours pushing them to acquire this data that is needed to improve the chatbot.

And at one point, my colleagues and I got hold of recordings of these Meta executives and engineers discussing this problem. How they could get their hands on more data where they should try to find it? And they explored all sorts of options.

They talked about licensing books, one by one, at $10 a pop and feeding those into the model.

They even discussed acquiring the book publisher Simon & Schuster and feeding its entire library into their AI model. But ultimately, they decided all that was just too cumbersome, too time consuming, and on the recordings of these meetings, you can hear executives talk about how they were willing to run roughshod over copyright law and ignore the legal concerns and go ahead and scrape the internet and feed this stuff into their models.

They acknowledged that they might be sued over this. But they talked about how OpenAI had done this before them. That they, Meta were just following what they saw as a market precedent.

Interesting, so they go from having conversations like, should we buy a publisher that has tons of copyrighted material suggesting that they’re very conscious of the kind of legal terrain and what’s right and what’s wrong. And instead say, nah, let’s just follow the OpenAI model, that blueprint and just do what we want to do, do what we think we have a right to do, which is to kind of just gobble up all this material across the internet.

It’s a snapshot of that Silicon Valley attitude that we talked about. Because they believe they are building this transformative technology, because they are in this intensely competitive situation where money and power is at stake, they are willing to go there.

But what that means is that there is, at the birth of this technology, a kind of original sin that can’t really be erased.

It can’t be erased, and people are beginning to notice. And they are beginning to sue these companies over it. These companies have to have this copyrighted data to build their systems. It is fundamental to their creation. If a lawsuit bars them from using that copyrighted data, that could bring down this technology.

We’ll be right back.

So Cade, walk us through these lawsuits that are being filed against these AI companies based on the decisions they made early on to use technology as they did and the chances that it could result in these companies not being able to get the data they so desperately say they need.

These suits are coming from a wide range of places. They’re coming from computer programmers who are concerned that their computer programs have been fed into these systems. They’re coming from book authors who have seen their books being used. They’re coming from publishing companies. They’re coming from news corporations like, “The New York Times,” incidentally, which has filed a lawsuit against OpenAI and Microsoft.

News organizations that are concerned over their news articles being used to build these systems.

And here, I think it’s important to say as a matter of transparency, Cade, that your reporting is separate from that lawsuit. That lawsuit was filed by the business side of “The New York Times” by people who are not involved in your reporting or in this “Daily” episode, just to get that out of the way.

I’m assuming that you have spoken to many lawyers about this, and I wonder if there’s some insight that you can shed on the basic legal terrain? I mean, do the companies seem to have a strong case that they have a right to this information, or do companies like the “Times,” who are suing them, seem to have a pretty strong case that, no, that decision violates their copyrighted materials.

Like so many legal questions, this is incredibly complicated. It comes down to what’s called fair use, which is a part of copyright law that determines whether companies can use copyrighted data to build new things. And there are many factors that go into this. There are good arguments on the OpenAI side. There are good arguments on “The New York Times” side.

Copyright law says that can’t take my work and reproduce it and sell it to someone. That’s not allowed. But what’s called fair use does allow companies and individuals to use copyrighted works in part. They can take snippets of it. They can take the copyrighted works and transform it into something new. That is what OpenAI and others are arguing they’re doing.

But there are other things to consider. Does that transformative work compete with the individuals and companies that supplied the data that owned the copyrights?

And here, the suit between “The New York Times” company and OpenAI is illustrative. If “The New York Times” creates articles that are then used to build a chatbot, does that chatbot end up competing with “The New York Times?” Do people end up going to that chatbot for their information, rather than going to the “Times” website and actually reading the article? That is one of the questions that will end up deciding this case and cases like it.

So what would it mean for these AI companies for some, or even all of these lawsuits to succeed?

Well, if these tech companies are required to license the copyrighted data that goes into their systems, if they’re required to pay for it, that becomes a problem for these companies. We’re talking about digital data the size of the entire internet.

Licensing all that copyrighted data is not necessarily feasible. We quote the venture capital firm Andreessen Horowitz in our story where one of their lawyers says that it does not work for these companies to license that data. It’s too expensive. It’s on too large a scale.

Hmm, it would essentially make this technology economically impractical.

Exactly, so a jury or a judge or a law ruling against OpenAI, could fundamentally change the way this technology is built. The extreme case is these companies are no longer allowed to use copyrighted material in building these chatbots. And that means they have to start from scratch. They have to rebuild everything they’ve built. So this is something that, not only imperils what they have today, it imperils what they want to build in the future.

And conversely, what happens if the courts rule in favor of these companies and say, you know what, this is fair use. You were fine to have scraped this material and to keep borrowing this material into the future free of charge?

Well, one significant roadblock drops for these companies. And they can continue to gather up all that extra data, including images and sounds and videos and build increasingly powerful systems. But the thing is, even if they can access as much copyrighted material as they want, these companies may still run into a problem.

Pretty soon they’re going to run out of digital data on the internet.

That human-created data they rely on is going to dry up. They’re using up this data faster than humans create it. One research organization estimates that by 2026, these companies will run out of viable data on the internet.

Wow. Well, in that case, what would these tech companies do? I mean, where are they going to go if they’ve already scraped YouTube, if they’ve already scraped podcasts, if they’ve already gobbled up the internet and that altogether is not sufficient?

What many people inside these companies will tell you, including Sam Altman, the chief executive of OpenAI, they’ll tell you that what they will turn to is what’s called synthetic data.

And what is that?

That Is data generated by an AI model that is then used to build a better AI model. It’s AI helping to build better AI. That is the vision, ultimately, they have for the future that they won’t need all this human generated text. They’ll just have the AI build the text that will feed future versions of AI.

So they will feed the AI systems the material that the AI systems themselves create. But is that really a workable solid plan? Is that considered high-quality data? Is that good enough?

If you do this on a large scale, you quickly run into problems. As we all know, as we’ve discussed on this podcast, these systems make mistakes. They hallucinate . They make stuff up. They show biases that they’ve learned from internet data. And if you start using the data generated by the AI to build new AI, those mistakes start to reinforce themselves.

The systems start to get trapped in these cul-de-sacs where they end up not getting better but getting worse.

What you’re really saying is, these AI machines need the unique perfection of the human creative mind.

Well, as it stands today, that is absolutely the case. But these companies have grand visions for where this will go. And they feel, and they’re already starting to experiment with this, that if you have an AI system that is sufficiently powerful, if you make a copy of it, if you have two of these AI models, one can produce new data, and the other one can judge that data.

It can curate that data as a human would. It can provide the human judgment, So. To speak. So as one model produces the data, the other one can judge it, discard the bad data, and keep the good data. And that’s how they ultimately see these systems creating viable synthetic data. But that has not happened yet, and it’s unclear whether it will work.

It feels like the real lesson of your investigation is that if you have to allegedly steal data to feed your AI model and make it economically feasible, then maybe you have a pretty broken model. And that if you need to create fake data, as a result, which as you just said, kind of undermines AI’s goal of mimicking human thinking and language, then maybe you really have a broken model.

And so that makes me wonder if the folks you talk to, the companies that we’re focused on here, ever ask themselves the question, could we do this differently? Could we create an AI model that just needs a lot less data?

They have thought about other models for decades. The thing to realize here, is that is much easier said than done. We’re talking about creating systems that can mimic the human brain. That is an incredibly ambitious task. And after struggling with that for decades, these companies have finally stumbled on something that they feel works that is a path to that incredibly ambitious goal.

And they’re going to continue to push in that direction. Yes, they’re exploring other options, but those other options aren’t working.

What works is more data and more data and more data. And because they see a path there, they’re going to continue down that path. And if there are roadblocks there, and they think they can knock them down, they’re going to knock them down.

But what if the tech companies never get enough or make enough data to get where they think they want to go, even as they’re knocking down walls along the way? That does seem like a real possibility.

If these companies can’t get their hands on more data, then these technologies, as they’re built today, stop improving.

We will see their limitations. We will see how difficult it really is to build a system that can match, let alone surpass the human brain.

These companies will be forced to look for other options, technically. And we will see the limitations of these grandiose visions that they have for the future of artificial intelligence.

OK, thank you very much. We appreciate it.

Glad to be here.

Here’s what else you need to know today. Israeli leaders spent Monday debating whether and how to retaliate against Iran’s missile and drone attack over the weekend. Herzi Halevi, Israel’s Military Chief of Staff, declared that the attack will be responded to.

In Washington, a spokesman for the US State Department, Matthew Miller reiterated American calls for restraint —

^MATTHEW MILLER^ Of course, we continue to make clear to everyone that we talked to that we want to see de-escalation that we don’t want to see a wider regional war. That’s something that’s been —

— but emphasized that a final call about retaliation was up to Israel. ^MATTHEW MILLER^ Israel is a sovereign country. They have to make their own decisions about how best to defend themselves. What we always try to do —

And the first criminal trial of a former US President officially got underway on Monday in a Manhattan courtroom. Donald Trump, on trial for allegedly falsifying documents to cover up a sex scandal involving a porn star, watched as jury selection began.

The initial pool of 96 jurors quickly dwindled. More than half of them were dismissed after indicating that they did not believe that they could be impartial. The day ended without a single juror being chosen.

Today’s episode was produced by Stella Tan, Michael Simon Johnson, Muge Zaidi, and Rikki Novetsky. It was edited by Marc Georges and Liz O. Baylen, contains original music by Diane Wong, Dan Powell, and Pat McCusker, and was engineered by Chris Wood. Our theme music is by Jim Brunberg and Ben Landsverk of Wonderly.

That’s it for “The Daily.” I’m Michael Barbaro. See you tomorrow.

• April 17, 2024   •   24:52 Are ‘Forever Chemicals’ a Forever Problem?
• April 16, 2024   •   29:29 A.I.’s Original Sin
• April 15, 2024   •   24:07 Iran’s Unprecedented Attack on Israel
• April 14, 2024   •   46:17 The Sunday Read: ‘What I Saw Working at The National Enquirer During Donald Trump’s Rise’
• April 12, 2024   •   34:23 How One Family Lost $900,000 in a Timeshare Scam
• April 11, 2024   •   28:39 The Staggering Success of Trump’s Trial Delay Tactics
• April 10, 2024   •   22:49 Trump’s Abortion Dilemma
• April 9, 2024   •   30:48 How Tesla Planted the Seeds for Its Own Potential Downfall
• April 8, 2024   •   30:28 The Eclipse Chaser
• April 7, 2024 The Sunday Read: ‘What Deathbed Visions Teach Us About Living’
• April 5, 2024   •   29:11 An Engineering Experiment to Cool the Earth
• April 4, 2024   •   32:37 Israel’s Deadly Airstrike on the World Central Kitchen

Hosted by Michael Barbaro

Featuring Cade Metz

Produced by Stella Tan ,  Michael Simon Johnson ,  Mooj Zadie and Rikki Novetsky

Edited by Marc Georges and Liz O. Baylen

Original music by Diane Wong ,  Dan Powell and Pat McCusker

Engineered by Chris Wood

Listen and follow The Daily Apple Podcasts | Spotify | Amazon Music

A Times investigation shows how the country’s biggest technology companies, as they raced to build powerful new artificial intelligence systems, bent and broke the rules from the start.

Cade Metz, a technology reporter for The Times, explains what he uncovered.

On today’s episode

Cade Metz , a technology reporter for The New York Times.

Background reading

How tech giants cut corners to harvest data for A.I.

What to know about tech companies using A.I. to teach their own A.I.

There are a lot of ways to listen to The Daily. Here’s how.

We aim to make transcripts available the next workday after an episode’s publication. You can find them at the top of the page.

The Daily is made by Rachel Quester, Lynsea Garrison, Clare Toeniskoetter, Paige Cowett, Michael Simon Johnson, Brad Fisher, Chris Wood, Jessica Cheung, Stella Tan, Alexandra Leigh Young, Lisa Chow, Eric Krupke, Marc Georges, Luke Vander Ploeg, M.J. Davis Lin, Dan Powell, Sydney Harper, Mike Benoist, Liz O. Baylen, Asthaa Chaturvedi, Rachelle Bonja, Diana Nguyen, Marion Lozano, Corey Schreppel, Rob Szypko, Elisheba Ittoop, Mooj Zadie, Patricia Willens, Rowan Niemisto, Jody Becker, Rikki Novetsky, John Ketchum, Nina Feldman, Will Reid, Carlos Prieto, Ben Calhoun, Susan Lee, Lexie Diao, Mary Wilson, Alex Stern, Dan Farrell, Sophia Lanman, Shannon Lin, Diane Wong, Devon Taylor, Alyssa Moxley, Summer Thomad, Olivia Natt, Daniel Ramirez and Brendan Klinkenberg.

Our theme music is by Jim Brunberg and Ben Landsverk of Wonderly. Special thanks to Sam Dolnick, Paula Szuchman, Lisa Tobin, Larissa Anderson, Julia Simon, Sofia Milan, Mahima Chablani, Elizabeth Davis-Moorer, Jeffrey Miranda, Renan Borelli, Maddy Masiello, Isabella Anderson and Nina Lassam.

Cade Metz writes about artificial intelligence, driverless cars, robotics, virtual reality and other emerging areas of technology. More about Cade Metz

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