Offshore mold purchasing made easy.
When it comes to buying injection molds, it is a small world after all. Since the 1950s, when export-capable tooling suppliers began sprouting up in those parts of Europe and Asia with low labor costs, mold buyers wanting to save some money started to look overseas. More often than not, they got what they paid for - molds short on durability and quality.
You can still find plenty of cut-rate tool shops overseas, but in recent years good moldmakers have flourished abroad, too. To compete with American moldmakers, even the best of these offshore suppliers offer high-quality molds that cost up to 35% less than domestically built equivalents.
Moldmakers in Portugal, Ireland, Taiwan, and other countries with a commitment to moldmaking now build not only for the low end of the tooling market but also for the most [TABULAR DATA OMITTED] demanding U.S. mold buyers. Leading automotive, electronics, business-equipment, appliance, and consumer-products companies - along with the custom molders that serve them - have been lured overseas by the prospect of tooling that costs less yet still meets their needs. "The best moldmakers overseas are not ridiculously cheap, but you can save money on almost any job, and sometimes get faster lead times," reports Wayne Tomko, sales manager of S&L Plastics Inc., a custom molder that runs molds built around the block and around the world from its Nazareth, Pa., plant.
With both good and bad toolmakers dispersed among a growing number of nations, sourcing tools overseas doesn't differ in many respects from sourcing a tool locally. Whatever the mold's country of origin, you'll have to verify that the moldmaker can meet your quality and delivery-time requirements. Buying a tool overseas, however, can exacerbate any rough spots in your procurement process, especially those related to project management and preserving your quality standards. Fortunately for all you globe-trotting mold buyers, you can avoid procurement pitfalls by understanding the true costs and quality levels of offshore molds and then following a few simple buying tactics.
How much can you save?
In terms of initial price, there is little doubt that you can save a considerable amount with offshore molds. To be sure, purchase price doesn't count for everything, and savvy mold buyers will focus on the total cost, which encompasses the costs of quality and of project management. All else being equal, however, it is price that entices many mold buyers overseas in the first place.
When Lexmark's Plastics Technology Center (PTC) in Lexington, Ky., placed an order for 27 molds with a collection of seven Portuguese moldmakers over a two-year period, the tooling prices totaled 20-35% less than they would have cost in the U.S., according to PTC team leader Steve Spanoudis. Other experienced mold buyers have reported similar levels of savings.
A study of global tooling costs last year cited average overseas prices far lower than those in the U.S. (see table). Authored by Dan Elliott, then a procurement engineer for Hewlett-Packard, and by Dan Furlano, a technical manager at GE Plastics, this benchmark study solicited quotes from 19 moldmakers in the U.S., Asia, and Europe. All the moldmakers, which the authors kept anonymous, worked from the same mold specifications for an inkjet-printer enclosure. "These were all high-quality tool shops," says Furlano, meaning that all had been qualified as potential suppliers to Hewlett-Packard.
While cost savings abroad may in some cases stem from differences in mold materials and construction methods, the bulk of the price differential springs from lower labor costs. The PTC project, for example, employed U.S. and European components and construction materials, not low-cost alternatives, but still saved a bundle. Likewise, the GE/Hewlett-Packard benchmark study provided all the participating moldmakers with the same specifications on construction method, steel hardness, and surface treatment.
Elliott and Furlano found that labor costs, and thus overall mold prices, tend to be similar in Europe and Asia, so long as high-wage Germany is excluded from Europe's average. Tony Lang, general manager of the Irish Moldmaking Corp., a moldmakers' consortium in Shannon, Ireland, pegs typical wages for Irish moldmakers at $14-18/hr, far less than U.S. wages, which can top $25/hr.
Taiwan's labor costs, to take an example from Asia, are consistently one-third below those of U.S. toolmakers, estimates Richard Sanders, president of Pacmold, a Hayworth, Calif., company that owns two mold production facilities in Taiwan. Labor costs are even lower in mainland China and Korea, adds Sanders, who has partnerships with moldmakers in Shanghai and Seoul.
How fast can they deliver?
Like low prices, the prospect of short lead times can induce domestic mold buyers to look overseas, particularly if they compete in markets with rapid product cycles. In recent years, Asian moldmakers have earned a reputation for quick deliveries, a reputation that is borne out by Elliott's and Furlano's study. Defining lead time in terms of its two biggest components - design and construction - the study found average lead times to be only 15.1 weeks among the Asian toolmakers. U.S. lead times came in second at 21.7 weeks, while Europe averaged 23.2 weeks.
"It's rash to buy on speed alone," Furlano cautions. But for those cases when speed counts above all, he and Elliott note that you can compress lead times through concurrent tooling construction and product design. Overlapping the design and construction tasks requires a shop to divide a tool into discrete pieces, working on the design-dependent pieces last. You can find shops all over the world that build this way, but Furlano and Elliott find concurrent engineering, construction, and product design to be most pervasive in Asian tool shops. "Asian toolmakers have a different philosophy. They design primarily for manufacturability, so they tend to break the mold into more sections than U.S. toolmakers," explains Furlano, who worked as a toolmaker before joining GE.
Breaking the molds into more pieces not only supports concurrent engineering, it may also allow more people to work on a tool at one time, shortening lead times still further. based on an analysis of the toolmakers' quotes, Furlano and Elliott estimate that the Asian shops in their study would assign the most people to work on a tool simultaneously. They calculate that the Asian toolmakers averaged over three persons per week while their U.S. and European counterparts averaged just over two persons per week.
Concurrent engineering also enhances a toolmaker's ability to deal with engineering changes. "It is common for U.S. and European sources to adjust the tool delivery when product changes are made. On the other hand, Asian toolmakers are more responsive to changes in part design and do not adjust delivery as readily," Elliott and Furlano report.
While the GE/H-P benchmark study defined lead time in terms of manufacturing time, don't forget that getting the mold from there to here can add time, too. "Shipping by air is fast, but it can be too expensive for some projects," says Jim Hernandez, a project manager at Pacmold. "Shipping by sea isn't as costly, but it can take three weeks for a ship to cross the Pacific ocean. You have to take that into account when calculating lead times."
How good is their quality?
Low prices and short lead times can both turn out to be illusions unless you get a tool that meets your quality standards. And make no mistake: The costs of placing a tool with an inept toolmaker will be magnified by geographical and cultural distance. As Tomko of S&L Plastics puts it, "If the mold doesn't run, I don't make any money, no matter how little the tool cost." Tomko knows what he's talking about: He once bought what he calls "the nicest tool I've ever seen" from an overseas builder, but he has also inherited "total junk" from an Asian source.
Preserving your quality standards can be a challenge because mold-building philosophies and construction materials differ from region to region. It's these differences that make apples-to-apples quality comparisons with U.S. moldmakers difficult until you have the tool up and running, notes Furlano. "Mold quality is a very soft concept," he says.
Thanks to the well-established global operations of U.S. and European suppliers of mold steels, mold components, and hot-runner hardware, Portuguese and Irish toolmakers have easy access to the same high-quality moldmaking materials as their U.S. counterparts. The PTC's 27-mold project specified U.S. tool steels and mold components from familiar vendors such as D-M-E and Hasco. "Every mold is built to a standard that would be accepted without question in the U.S.," says PTC's Spanoudis.
Asia may be a different story, say Elliott and Furlano. "Asian moldmakers commonly construct molds from soft PDS1 and PDS3 steels with hardness values ranging from Rc 12 to 28," they report. To get an Asian tool steel similar to the familiar P20, mold buyers need to specify PDS5 or NAC80 steels. For tools that need to run a long time, buyers can specify harder steels, such as ASSAB 718 HH, a modified P-20 steel with a hardness between Rc 35 and 40.
Elliott and Furlano also contend that hardening of steels has caused problems in Asia. "The tempering process may not fully be understood there," they claim. Pacmold's Hernandez agrees to some extent: "It's true they don't work as effectively with the hardest steels in Asia." He says Pacmold's Asian shops are capable of working with fully hardened H13 steel at up to 52 Rc, but they "mostly shy away from the hardest steels."
Differences in philosophy of mold construction enter the quality picture, too. Hernandez believes the Asian reluctance to work in the hardest steels is related primarily to their concurrent design and construction philosophy. "With the hardest steels, once you've made the tool it's hard to rework it to accommodate design changes," he says. Furlano maintains that Asian toolmakers' lead-time reduction strategies can have negative implications for quality: "A tool designed for manufacturability isn't always the same as a tool designed for quality."
Because quality can be hard to judge upfront, and because sending a mold back for rework abroad is an expensive option of last resort, make sure your moldmaker can conduct mold-sampling trials before you take delivery of the tool. Most can, but it will cost you extra (see table).
Some offshore suppliers take mold sampling a step further by offering extensive part-testing and measurement capabilities. Tecmolde, a Portuguese mold-engineering company that counts Delphi Automotive as one of its many U.S. customers, owns the same kind of coordinate-measuring machines that Delphi uses, notes Tecmolde president Antonio Santos. The moldmaker sends Delphi not only test parts from a new mold, but also the exact CMM program used to measure those parts. Until all that work is done and a tool's process capability is established, Delphi doesn't pay for the tool.
Choose good partners
Whether you buy a tool down the road or halfway around the world, finding the right partner will prevent many procurement headaches. S&L's Tomko says, "The key is building a relationship with a good supplier who understands exactly what you want." But picking a supplier isn't always easy. "There's a lot more to finding a reliable supplier overseas than getting off a plane and looking in the phone book," says Pacmold's Sanders. One way to make sure your moldmaker can deliver is to start small. Experienced overseas buyers like Tomko will test a potential supplier by first placing a small, relatively simple order. Tomko says he learned this strategy "from the school of hard knocks." Now that S&L has found reliable offshore suppliers in Portugal and Asia (via Pacmold), Tomko feels comfortable placing even multi-tool projects overseas.
Oftentimes your overseas contact will be an agent or broker. At one end of the spectrum, they can be full-service tooling shops that have project-management capabilities and relationships with appropriate subcontractors. At the other end are agents or brokers without their own facilities. Of this latter class of agent, the best have evolved into full-service engineering companies.
Portugal's Tecmolde, to take one example, has no production facilities of its own. But over its 30-year history, it has matured into an engineering company with its own product-design firm, part-sampling capabilities (on Mannesmann Demag machines from 90 to 550 tons), in-house part-testing lab, and a CAD department outfitted with Unigraphics and Pro/Engineer software.
Handling up to 500 tools a year, Tecmolde subcontracts molds to nearly 70 different Portuguese toolmakers of varying capabilities - anywhere from a small "garage-size" operation to some of the largest tool shops anywhere in the world. Tecmolde has all the resources it needs at its fingertips, since its home base of Marinha Grande is home to over 200 moldmaking shops (see sidebar).
According to Santos, good engineering companies can offer several advantages to overseas buyers. First, they can save money by efficiently matching job requirements with toolmakers' capabilities. "Some price advantages come from picking the right shop for the right job," he says, explaining that a job with mediocre quality requirements does not call for the most able and expensive toolmakers.
Second, they can take some of the project-management burden off the mold buyer. The best engineering companies can handle orders that would easily overwhelm a single toolmaker. Santos says Tecmolde has completed massive projects involving up to 150 tools. Finally, a good engineering company will also know what jobs to turn down: Tecmolde has taken a pass on some optical and other high-precision molds, reports Santos.
On the other end of the broker spectrum is what Pacmold's Sanders describes as a "guy with a briefcase, a phone, and a fax." Experienced mold buyers and quality moldmakers advise one to steer clear of agents who cannot bring some engineering expertise to the table. Simply having local contacts is not enough to serve a mold buyer properly.
Go see for yourself
Going with an overseas tooling supplier will compromise your ability to be a hands-on project manager. Even after you qualify a toolmaker and place a mold order, you'll want to monitor the project's progress and manage engineering changes. While many molders successfully carry out these project-management tasks from afar, geographical and cultural distance will magnify any problems.
Some big companies have even had to send engineers overseas for the duration of particularly large projects - a tactic that may not be an option for smaller molders. If you can't address a problem via fax or modem, you could very well find yourself on a plane ride to Asia.
To go or not to go? It's one of the first questions that molders confront when placing a mold order overseas. If you buy a foreign-made tool, it's best to assume that you will have to make at least one initial visit, and you may want to make more than one. Elliott and Furlano recommend three visits: at the job's start, midway through the project, and again during mold testing.
They estimate that average travel costs for foreign-sourced tooling add up to $15,000, compared with about $5000 for domestic tooling. Stated as a percentage of total project cost, travel represents roughly 10% additional cost for foreign-built tooling and 2% for domestic orders. Travel costs aside, they note that managing an offshore project will take more time, owing to the longer duration of overseas trips. Plan on spending a week or more overseas versus one or two days for a domestic visit.
Other experienced buyers of offshore tooling report that they always visit at least the lead tooling shops - as opposed to subcontractors - where the mold will be built. Some have learned that lesson the hard way. Tomko once had to make an extended visit to a less-than-capable Taiwanese supplier that was falling behind on his mold order. Now after more than a dozen years buying tools here and abroad, Tomko doesn't feel the need to visit his preferred tooling shops every time he places an order.
Reputable mold suppliers will be happy to have you visit, and those contacted for this article encourage buyer's to do so at least once. "When we bring on a new customer, we encourage visits to alleviate any fears they might have," says Pacmold's Hernandez.
Do they speak your CAD language?
Language differences - and perhaps cultural ones - can factor into overseas project management. Tomko has seen miscommunication cause moldmakers to build tools with the wrong dimensional tolerances. "I've had shops in Asia not understand enough English to interpret my prints and plus-or-minus tolerances," he says.
Today, e-mailed CAD/CAM files are the common means of communication for the tool-buying world. But electronic communication is not without glitches. In theory, modern CAD systems do a good job of file translation, allowing CAD models to be transferred between different systems. The reality, as many mold buyers know, is that CAD translations aren't exactly problem-free. Fixing translation errors will at least take time. At worst, it may require the kind of human interaction that's not easy when you are communicating across several time zones and in more than one language. For these reasons, Pacmold does all its CAD-file translations here in the U.S.
PTC's Spanoudis says his firm arranged a test of CAD translation effectiveness to evaluate its suppliers in Portugal. PTC took a CAD file created in SDRC's IDEAS software, sent it via the Internet to its seven Portuguese mold shops, and asked them to translate the files into their own CAD packages, of which there were four different ones. All seven moldmakers handled the translation task without a hitch.
Pick overseas projects wisely
Placing the wrong tooling job overseas - one that is too demanding in terms of quality requirements and lead times - can erode any cost advantages you had hoped to gain. S&L's Tomko uses local sources and "pays top dollar" for the most intricate of S&L's tools, such as a recently purchased 128-cavity mold for a vinyl dental part.
John Thirlwell, v.p. of CacoPacific, a high-end tool maker with plants in California and France, acknowledges that good and bad mold shops can be found anywhere. "They've got them. We've got them," he says. But Thirlwell argues that the very top end of U.S. moldmakers excel in projects that would swamp the capacity and capabilities of all but a few offshore moldmakers. He points specifically to large multi-mold projects with interchangeable cavities. "Offshore moldmakers have not had much experience with that kind of project," he says. For this type of complex job, overseas molders buy their molds here, Thirlwell says. Caco itself exports 30-40% of its yearly mold output to foreign molders.
At the other extreme, placing too simple a tool overseas won't yield the same kind of cost savings as in building a more labor-intensive mold. To take advantage of cheaper offshore labor, the tool should have some combination of multiple cavities, internal features, and mold actions. If it doesn't, there's little reason to go any farther afield than your nearest neighborhood tool shop. "Anyone can build a cheap and cheerful tool," says the Irish Moldmaking Corp.'s Lang. Tecmolde's Santos offers this rule for deciding which tools to place overseas: "Simple is expensive, difficult is cheap."
RELATED ARTICLE: Where the Tools Are
While you can buy a tool just about anywhere on the globe, bargain hunters will gravitate to countries with relatively low labor costs and a commitment to making injection molds for export. Those countries are spread throughout Europe and Asia, as shown by a GE Plastics/Hewlett-Packard joint study of global tooling costs. It identifies tooling bargains in some unlikely places, such as Poland and Malaysia (see table). Dan Furlano, one of the study's authors, notes that all the toolmakers in the study were qualified to bid on the job, but he concedes that "not much is known about these countries' toolmaking capabilities." Far better known to U.S. molders are toolmakers in Portugal, Ireland, and parts of Asia.
Here's a look at two of these offshore tooling industries.
Portugal: Hundreds of mold shops
Portugal has over 300 toolmakers. The vast majority have set up shop in either one of two areas. About 250 of them call Marinha Grande home, and more than 50 are located in Oliveira de Azemeis. These toolmakers span a wide range of size and capabilities. Some are mom-and-pop shops operating out of garage-sized spaces, but Portugal also boasts some of the largest toolmakers in the world. For instance, Simoldes Acos in Oliveira de Azemeis employs over 220 people but doesn't do much business in the U.S. Iberomoldes in Marinha Grande employs about 600 workers. Plenty of mid-sized shops, with about 20-70 employees, round out the ranks of Portugal's mold industry.
Just about all of Portugal's mold production is exported. According to figures from Cefamol, the country's toolmaking trade association, Portugal exports about 90% of its molds, of which about 18% went to the U.S. in 1996. The U.S. represented a bigger share of business in the past, before Portugal joined the European community, says Joaquim Menezes, managing director of Iberomoldes and a Cefamol official. Germany and France have lately been buying more tools in Portugal. While the U.S. now takes a smaller percentage of Portugal's exports, the value of U.S. mold orders has held steady, adds Manuel Oliveira, assistant director of Cefamol.
For both large and small toolmakers, Cefamol provides a number of technical and educational resources. Centimfe, the association's technical center in Marinha Grande, offers big and small toolmakers shared technical resources, including CAD/CAM, mold-filling analysis, and top-notch CNC machining for high-speed and tight-tolerance work, as well as part testing and measurement.
Ireland: Smaller but aggressive
At roughly 40 mold shops strong, the Irish tooling industry is smaller by far than that in Portugal. But in recent years, Irish tool shops have racked up a growing list of U.S. customers, including Hasbro, Eureka Vacuum Cleaners, Baxter Healthcare, Abbott Laboratories, Hewlett-Packard, and a handful of custom molders in medical, electronics, and telecommunications markets.
The bulk of export activity was generated by the Irish Moldmaking Corp., a consortium of nine export-minded moldmakers. According to Tony Lang, the consortium's general manager, 30-40% of the group's molds go to U.S. customers.
As in Portugal, the Irish consortium shares a technical center. Called Tirac, it offers R&D as well as consulting services.
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|Date:||Apr 1, 1998|
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