Is there seasonality to the custom parts business?

Is there seasonality to the custom parts business? Absolutely! Here are some of the common trends I have seen in over 30 years of making parts. Note that the impact of seasonality flattens as the volumes increase from prototype to short run to longer run production orders. And of course, every year rhythms a little differently. Let’s run through the calendar.

For the first quarter, the first couple weeks in January are slow as buyers (I will refer to both the people and companies who buy custom parts as “buyers”) figure out their plan for the year. Not many quotes and orders. The pace picks slowly up in the last couple weeks in January and first two weeks in February. Then it typically explodes with huge increases in quotes and orders starting in the last two weeks in February and continuing through the first two weeks of March with quote volume dropping the last couple weeks while orders still filter in. Why does this happen? My guess is that buyers want to start off the year by hitting Q1 sales numbers and realize later in the first quarter they must act now to hit the Q1 goals.

The second quarter is typically the slowest quarter with buyers settling into their routine – first quarter numbers were hopefully met and now they focus on grinding out the year’s activities. There will be one busy stretch of three weeks or so somewhere in the quarter and there will be one very slow stretch of three weeks or so as well – a period where the quoting activity is just dead. The other weeks just plod along. Short run shops can struggle in Q2 while production shops typically have enough orders to get through.

The third quarter starts slow. July is often the lowest revenue month of the year with everyone on vacation – school is out across the country – Fourth of July week is a ghost town. Quoting is slow and often the light Quarter Two backlog is close to being depleted. A great month to encourage your team members to take vacation themselves or even shut the plant down for a week or two if your customer base allows it! Starting at the end of July and definitely the first two weeks of August, quoting increases significantly. My hunch is that buyers realize that end of summer (Labor Day) completion goals are upon them – there is not much more time left so they double down to get parts in and product shipped. This is particularly true for prototypes and short runs. September can start weak as buyers figure out the demand for the rest of the year and then it is on! The last two weeks of September are blazing. I have heard that 40+% of industrial revenue is shipped in Q4 and buyers don’t want to be caught short.

For the fourth quarter, the heavy quoting and order intake continues the first two to three weeks of October. Then the quoting and orders slow down but the backlog is pretty much set for the rest of the year. The full week before Thanksgiving ramps up a little. December is interesting as it depends upon how the rest of the year went. Buyers want to hit bonuses. If the year was lighter/ slower, December can be busy as they are pushing to hit numbers. If the year was strong, they have hit their numbers and the tendency is for a slower December as there is no rush to ship more. A better next year bonus strategy is to wait until the next year to ship revenue.

By month, October is usually the highest revenue month with March and August tied for second. September is a close fourth.  July and one of the Q2 months will typically be the lowest revenue months with all the others bunched around one another.

Do you and your shop see the same seasonality? Please comment - I am particularly curious on hearing from larger revenue shops as well as Defense and Aerospace focused suppliers who may not see the same seasonality effect.