Outside of pursuing federal government contracts, most companies never deal with NAICS codes. However, becoming familiar with them can be useful – and it helps membership organizations like a statewide manufacturing alliance, industry association or trade group help its companies to thrive.
What is NAICS?
A NAICS code is a designation the federal government uses to describe what sort of business services or products a company offers. The acronym NAICS stands for North American Industry Classification System.
While every company gets labelled officially with only one NAICS code, according to its primary service or product, a single company could have dozens of additional NAICS Codes associated with it.
Business consultants with the commerce department of a state government can also help a company learn of new opportunities and grow if they know its correct NAICS codes.
Figuring Out the Correct NAICS Code For Your Company
These codes are 6 digits long, and each digit has a distinct meaning:
- The first 2 digits reveal the business sector that the company is in, such as Construction, for example
- The first 3 digits (2 digits + the 3rd digit) indicates the subsector
- The first 4 digits refer to the Industry Group
- The full 6 digits gets you to the specific market segment
For the most part, knowing what their Sectors are (the first 2 digits) and a handful of the full 6-digit codes are all most companies will ever need to know.
A company that has a profile on the Sustainment Technologies platform most likely will be associated with Sectors 31-33 “Manufacturing.” Within these Sectors, there are only a handful of subsectors that likely apply to anyone involved in the manufacturing ecosystem:
Subsector 332 – Fabricated Metal Product Manufacturing
This includes almost everything a machine shop would do, such as:
- 332114 – Custom Roll Forming
- 332117 – Powder Metallurgy Part Manufacturing
- 332510 – Hardware Manufacturing
- 332613 – Spring Manufacturing
- 332722 – Bolt, Nut, Screw, Rivet, & Washer Manufacturing
- And (most importantly) – 332710 – Machine Shops
Subsector 333 – Machinery Manufacturing
This subsector gets into the meat of what many manufacturers that specialize in specific equipment do. It includes:
- 333111 – Farm Machinery and Equipment Manufacturing
- 333132 – Oil & Gas Field Machinery and Equipment Manufacturing
- 333618 – Other Engine Equipment Manufacturing
Subsector 336 – Transportation Equipment Manufacturing
Like Subsector 333, the 336 subsector is very common among companies pursuing Department of Defense (DoD) contracts. It includes:
- 336112 Light Truck and Utility Vehicle Manufacturing
- 336120 Heavy Duty Truck Manufacturing
- 336212 Truck Trailer Manufacturing
- 336412 Aircraft Engine and Engine Parts Manufacturing
- 336413 Other Aircraft Parts and Auxiliary Equipment Manufacturing
- 336991 Motorcycle, Bicycle, and Parts Manufacturing
Why Use NAICS Codes
There are two primary reasons the government requires a company to identify with a NAICS code:
- Since the federal government cannot spend money without a consistent way to track it, the government assigns a NAICS code when they put out an RFP and award a contract. This NAICS code defines the specific type of companies that are eligible to pursue the contract.
- The federal government focuses on ensuring that small businesses get a fair chance at obtaining government contracts. They determine whether a company is small or not by referring to either revenue levels or employee levels related to its particular NACIS category.
Headcount determines whether or not a company is considered small in the manufacturing industry. However, each NAICS code has its own threshold level of headcount above which a company is no longer considered a small business.
Concluding Thoughts on NAICS Codes
A major benefit of using NAICS codes is that a company can elect to have more than one product or line of business associated with it. While every company has only one “primary” NAICS code, there is no limit to how many “secondary” NAICS codes and product or service descriptions a company may choose to identify itself with.
Once a machine shop’s management develops an understanding of the many types of NAICS classifications available, it may decide to pursue aircraft related work as well as to manufacture trailers, for example. This flexibility is appreciated by federal government contractors, even though the volume of different classifications can be daunting at first.