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1 posts from January 2006

January 05, 2006

Virtual MoldMaking - What Goes Around.....

The new year brings with it an irresistable urge to look back to the last one, as inspiration for change, and also to remark..."So THAT'S what went wrong!"

Since I've been involved with injection molding and the moldmaking that keeps the process going since, well, forever, seeing the decline of the West and the rise of Pacific rim moldmaking has always been an irritant to me. Way back in the 70's (so long ago that the time has it's own nostalgia series on TV now) starting out as a fairly naive tooling acquisition/mold designer type for a custom injection house, all I heard from East Coast moldshop owners was that the trade was dying out because nobody wanted to be an apprentice moldmaker when driving a truck for UPS paid better and nobody made truck drivers do any math. And of course there were "ENEMY AGENTS" working for Portuguese toolmakers combing the countryside, trying to steal all the customers away. Sound familiar? Back then the next biggest enemy was the gang of traitors in the Fortune 500 Companies who were sending their engineering teams to Italy and Portugal to supervise moldbuilding programs there that were saving the parent Companies 25% to 35% on their tooling costs, but losing them 10% or so on productivity from lesser quality molds. Of course that 35% plus, 10% minus equation sounded pretty good to the folks that ran my Company then, so guess who suddenly needed a passport and a Portuguese-English dictionary?

Back then, the offshore moldmaking revolution was being led by the folks at Rubbermaid, who had upwards of 500 molds a year running through Portuguese shops, and their own team of engineers living full time in Nazare', ( a town I'm sure the manaement did not know to be a beach resort comparable to the French Riviera) just to make sure the work was done right. (Tough duty, that, year round assignment to a place with 500 miles of beach, a climate like Florida at its best, hundreds of moldshop owners constantly trying to be your best buddies, and a cost of living less than half what it was in Ohio)

Now, of course the new "holiday locations" for top line moldmaking supervision types are mainland China, some spots in Singapore and India, and a few choice locations in Russia, Poland, Bulgaria, etc.

An interesting transition has occurred, in that everyone now is trying to figure out a way to get the molds built in all these new garden spots, and at the same time AVOID having to actually go there to supervise and assure what is ordered is what gets delivered. None of the veterans of the Portugal/Italy/Spain mold sourcing days is likely to jump at the chance to spend a year or so TDY to India, or Guangdong, except maybe at gunpoint. Been to most of these places, and I can testify that there is Absolutely no reason to visit any of them unless somebody is paying you to do it.

And to add to the fun, most big Companies are now falling into the "We can use the Internet, Teleconferencing, etc. to get this done." mode, because even with the cheapest of cheap mold shops working for them, there is STILL some accounting type trying to cut back on "unnecessary travel expenses" like sending a gaggle of engineers out to China for the mold tests before approving shipment of this week's completed molds.

This is where the fun begins. Just as it was in the beginning, when everyone was rushing to build molds offshore to save on costs, only a few companies are doing it right, and the resulting failures of the rest of them are turning some folks back to USA mold shops again. Probably as few as 10% of companies buying molds overseas recognize that doing that business requires a systematic approach that keeps total control of the project in the hands of their own engineering department, if the activity is going to be successful. The other 90% take it on faith that what they order is going to be what they get, as if a $300,000.00 to $500,000.00 moldmaking program can be handled the same way that one orders a case of paper clips from Staples.

USA MOLDMAKERS, THIS IS OPPORTUNITY KNOCKING!!!!! Having been doing the balancing act on behalf of clients trying to get the best moldmaking VALUE for their tooling dollars, I can tell you that this year can be the start of a great resurgence for USA shops, if their management teams get to be just a tiny bit more clever in their approach to the problem of "cheap" offshore molds.

Every one of us is aware of at least a few true horror stories concerning overseas tooling. If someone were to compile this information, and hire a good forensic accountant to play with the numbers, it should be possible to prove to a prospective client that offshore tooling acquisition might not be the smart move for them. We all know there are some market segments where USA moldmakers have never lost a dime's worth of business to overseas tooling. We've seen a few instances where careful clients with large volume needs have built duplicate molds, one or more in the US, and one or more in offshore shops, and then have run a "Total Project Cost Analysis" to be sure they had the right plan in place. Some have stayed with US molds after the whole project cost exam showed  ADVANTAGE, USA on high performance high volume tooling, where experience and precision brought better overall results from US tools, even at severely higher initial prices.

Now is the time to draw the comparisons between those market segments and the niche each USA shop is currently serving, to show that the long-term effect of "saving" on a cheap tool built in a 3rd, 4th, or 5th world country may not be a savings at all.

How many USA buyers ever factor in the cost of delivery, the expense that the 25 day wait for the boat to arrive may cause, repair and rework costs on a poorly built mold, or the potential for a project being a total loss if the delivered mold is not correct or fails altogether after a short run?

When somone comes to my Company to act as their "control" over an offshore project, I'm going to be telling them up front that we will need to either do the design work here, or at least retain design approval under our control, our folks will have to check and approve steel and components purchases, control fabrication sequence and schedules, verify the selected shops' equipment machining accuracy, and have someone physically inspect in-progress tooling on-site at least 3 times during the build, including observation of a 100 cycle minimum test for approval of any production mold. Even doing all of that, there is STILL the chance that bad steel, imprecise machining and fitting, or other such hidden defects can sneak in and ruin the success of the project. This applies when a good shop is selected, the work is supervised properly, and the completed mold gets delivered to the end buyer in the US without any minor problems, like the boat with the mold on it sinking in the South China sea while enroute.

Now there is a new, much more threatening scenario that ought to help USA toolmakers, just making its presence known in corporate America over the last few months:

What should come as a great breath of fresh air to our side of the big pond, is the recent appearance of a multitude of what I call "Virtual Mouldmakers" on the Internet, who are accidentally helping US moldmaking shops by taking major advantage of the cheapest of the cheap buyers out there.

Here is what we have seen happen a few times just at the end of the last year: Your basic buying "expert" does a Google search for "Injection Molds" or " Moldmakers in China" and gets probably 1,000 hits. Somewhere in the search, the "expert" buyer will find a large number of very fine looking websites for Chiina moldmakers, and will have his project quoted by a few of them.

Terms will be quoted at probably 40% advance, 40% at sample date, balance on shipping. All sorts of references will be given, and of course the website will have a virtual factory tour, an impressive facilities list, etc. and an invitation to come out to visit, etc. The mold price will be very attractive, and all the documents, delivered by courier, will be equally impressive.

Once the mold order is placed, weekly progress reports with mold photos, etc. will be presented, and the project will proceed just as planned. Upon payment of the 40% second payment for the mold. the entire moldmaking operation will vanish into thin air, and the buyer will have a fine collection of CGI images of a mold that was never built, and had never even been planned to be built. This exact scenario has been played out at least half a dozen times in the last few months, and nobody has yet been caught or prosecuted, since none of the Company information presented has proven to be real, except in cyberspace. What we have here is a set of folks who have all the computer tools at hand to present a great front, even to supplying mold designs, tons of shop and facilities pictures lifted from other legitimate moldmaker sites, very good CGI fakes of mold photos, and a very slick process for extracting cash from unsuspecting buyers who do not have the time or budget(or plain common sense) to get on a plane and go verify the supplier IN PERSON.

Back again to the systematic approach to mold acquisition programs. If you cannot allocate the funds and time to do proper due diligence, buying molds from offshore sources is risky, and now that these new scam artists have succeeded a few times, we can expect many more to appear magically at any moment. Bad for our industry? Not at all. Once word gets around, what buyer in his right mind, with a small to medium sized project that would be perhaps $20,000.00 cheaper at the cheapest China shop, will risk a blind buy overseas, once he knows of any of these instances where another buyer got taken by a scam?

How many will go out and hire folks like my company to do all the reality testing needed to be sure they won't get burnt too? After all, experienced consulting groups that know the game do not work for free, and those inspection trips run about $3500.00 a pop, if the inspection site is in China.

Now in addition to all the other add-ons to costs that buyers have tended to overlook or ignore, there is the chance of "Mister Mold Buyer Expert Guru Guy" getting totally ripped off, and having to deal with the consequences of that kind of disaster. Any guess as to the new direction that the capital expenditure coin-flip might be heading, if the buyer's entire future might be on the block?

Here's a nice new turn of events for USA shops to capitalize on.......molds bought and built here can be watched and controlled here, and Mister Buyer will not get fired when the mold HE BOUGHT SOMEWHERE OVERSEAS AT A SHOP THAT NOBODY EVER HEARD OF BEFORE TO SAVE A FEW BUCKS goes from reality to CGI dreamland in a virtual shop halfway around the world that was never even ACTUALLY there to begin with......................

Cheap and greedy buyers with no supplier loyalty, combined with clever and entirely criminal "virtual" suppliers, and the buyer that went for tooling on the cheap gets himself fired or worse................... What a delightful combination!

Anyone else hear opportunity knocking?

Happy New Year!


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