Having technology sharing arrangements with major players, Manufacturers in this mechanical engineering assignment should develop research and development activities internally and possibly with external partners. Undertaking technical research and development, strong research and development capabilities are required in the machine tool industry. Access to multi skilled and flexible workforce, the frequent requirements to tailor products to satisfy customer specifications necessitate a high level of employee skills and ingenuity. Economies of scope, industry players should seek to reduce the adverse effects of a downturn in sales from particular customer industries by seeking to diversify the client base. Establishment of export markets, a strong export market capability is necessary in order to develop a critical mass of sales.
Purchases represent the largest component of mechanical engineering assignment costs. Purchases are expected to decline over the five years through 2013-14, due to a decline in steel prices. This has been the result of an oversupply issue brought about by the sudden loss of demand during the financial crisis in 2008-09. Currently purchases of input materials are estimated to cost businesses 50.7% of their total revenue.
Wages are expected to account for 22.3% of mechanical engineering assignment revenue in 2013-14. Wage expense represents the second largest component of industry revenue. Workers are employed to manufacture, engineer and design new products. Wages are expected to decrease as a portion of revenue over the five years through 2013-14. This is in part attributed to the rationing and consolidation taken on by the industry participants.
Depreciation costs are relatively high in the industry, with the industry exhibiting a high level of capital intensity. Depreciation expenses increased over the last five years as firms invested in new capital equipment. Depreciation is currently at 5.1% of industry revenue and is forecast to increase over the coming years, as investment put off during the economic slowdown is carried out and new technology comes onto the market.
Other key costs incurred by mechanical engineering assignment participants include research and development, transportation, interest expenses, amortisation, legal, advertising, and repairs and maintenance. These costs combined are expected to account for an estimated 11.0% of revenue in 2013-14. Research and development costs are expected to increase in the next five years as products become more specialised.