How Toyota buys molds
By Clare Goldsberry
Published: June 8th, 2011
Published: June 8th, 2011
Being a supplier to Toyota is a coveted position, and the Japanese car company is dedicated to helping ensure that its U.S. mold suppliers for the company's U.S. manufacturing operations provide the best molds at a globally competitive price.
Toyota Motor Engineering & Manufacturing North America Inc. (Erlanger, KY) has a better way to deal with tool and mold suppliers. Recently I was invited to attend a Tooling and Mold Suppliers training seminar that helps these suppliers understand the Toyota way, and what they need to do to be a good supplier to Toyota and it's Tier Ones. It was refreshing to experience an automotive OEM willing to actually help their suppliers be successful! It's a business model that the Detroit automakers could emulate.
Through its Purchasing Tooling Cost Analysis Group (PTCAG), Toyota has determined the cost of molds based on the types of molds and the various components used, in all regions around the world. The purpose of this is to make sure that the company is paying the "right" price for the mold, not necessarily the "cheapest" price or the "highest" price.
More than a decade ago, when Jeffrey Lucas joined Toyota as Project Assistant Manager for TEMA's Purchasing - Tooling at the Toyota Operation Center in Erlanger, KY, Toyota wanted to know if they were paying too much for their molds. At the time, Lucas noted that Toyota believed it was paying about 20% too much. In reality, when Lucas began delving into the matter, they were paying much more than that 20%. Thus was born the PTCAG.
Prior to coming to Toyota, Lucas spent two years in China sourcing tooling for Dell Computer, and knows molds and moldmaking. A job offer from Toyota brought Lucas back to the U.S. where he has been working to improve Toyota's mold-buying process and creating better relationships between moldmakers and the Tier One suppliers who work with those moldmakers.
"Tier One suppliers should have the same relationship with their tool builders as Toyota has with the Tier One suppliers," Lucas said to a group in attendance at the seminar that Lucas conducts several times a year. Toyota makes sure its Tier One suppliers not only pay the appropriate price for the mold as determined by the company's extensive global costing analysis, but that they pay the moldmaker on time. "It's my job to see that the moldmaker gets paid and gets paid the appropriate price," Lucas explained.
Toyota's goal is to have its suppliers be globally competitive and through the PTCAG, and thus "flatten the playing field," Lucas explained to the group. "Toyota's target is to procure tooling at a globally competitive cost."
Because Toyota has all of the cost benchmarks in place, the company knows what the appropriate price should be for molds coming from various regions of the world. For example, the labor rate Toyota uses for tool builders in the U.S. is $60 an hour, which is much higher than for a mold coming from China.
However, Lucas told the group that if they are getting a mold built in China, there had better be a good reason for that. Toyota's "build it where you sell it" philosophy is one key element to global cost competitiveness, and the company is fairly rigid about that philosophy. Currently, Toyota's vehicles built in North America have 75% North American content and they are trying to increase that all the time. Only Chrysler's North American content is more at 80%, Lucas told the group. The Detroit Three has only 35% North American content, said Lucas.
Keys to being a good mold supplier for Toyota include:
- Open communications! Provide the Tier One with factual information so they know they're paying the appropriate amount for the tool.
- Metrics are key! How did you get that number? At Toyota, the Tier One molders buy the tools and deal with the moldmakers. "Buy the tool you need - the right tool at the right price. We'll help you deal with the mold builders to determine that," said Lucas. "We'll help you build y our own analysis tool to help you analyze your quotes." Out of 800 mold manufacturers that Toyota deals with, only two have built an analysis tool. "The U.S. auto OEMs - the Detroit Three - want lower prices but have no idea how to get you there as suppliers," Lucas commented. "They choose the Easy Button - put all the quotes together and pick the lowest one. At Toyota, we want innovative, competitive moldmakers. We want only quality tool builders with reputable companies, not under-cutters. Buying the business is an unnecessary and unacceptable practice with Toyota."
- Understand your true costs so Toyota can justify your tool. Know your rate, but keep it competitive with the benchmarked rate for your region. "Confirm the data before you send the quote - that's why you need to know your true costs!" Lucas stressed. "Mold makers provide the data to the molder who will then provide the data to Toyota."
- Use collaboration - don't try to do it all yourself. If you can sub-contract with a company that can do certain portions of the tool build and save on costs, then use other companies that can help you keep costs down.
- Don't over-engineer your molds. Are your standards too high? There may be opportunities to provide greater engineered value in a mold that will help Toyota reduce overall costs to manufacture. However, not every mold needs to be optimized to that level. It's opportunity vs. rigidity. "China can't optimize mold and component designs - they build to the print," said Lucas. "While we want your engineering expertise in the molds you design and build, we also encourage you to implement costs savings on your end such as buying standard components when you can."
- Know your core competencies. "Tool builders need to be chosen for their core competencies," stated Lucas. "That's why it's important to know your core competencies."
- Benchmark your costs and track your moldmakers' hours. "We know you're fully capable of meeting China's price," Lucas said. "China is now the sixth low-cost country - five others are less, so U.S. moldmakers can definitely be competitive with China."
- Tell your story. How did you make cost improvements to the mold? Convince Toyota why your mold price is justified based on your innovation and engineering designs.
"I want to help suppliers in North America become globally competitive," concluded Lucas.
Finally, an automotive OEM that gets it!
I dont think the mold
I dont think the mold industry is that simple.
The price of mold depends on your request, diffierent requests need diffierent procedure to produce which will cause the diffierent costs.
Mold components need to fit each other, how do you make sure your suppilers are use the same stands when they manufacturing the components. The precision will decided the lead time of assembling a mold, our customer never allow our company use outresource expect standard components.
Everyone knows one thing, cost down then quality down. Some handmaster in this field in China can earn much more then $600 per month. Of course they worth it, they can accomplish the most complex molds. So the low cost means they use the green-hand to finish their work.
Nobody will tell you the story to down the cost I think that very stupid because that means livelihood.
In the end, I agree with you we need innovation, I also want this industry will thrive in future.
Although good in theory,
Although good in theory, building molds all over the world for 25+ years I've found quality and pricing all depends on your need I've never compromised either. You need to first find good quality Mold Makers in what ever country you are planning to build molds, you then need to access the type of mold you need (open and shut,molds with slides and or lifters, etc.).Doing this should allow you to build molds with the needed quality and best price. I've found that projects with 25 to 35 molds, I've built more then half in the states because of US mold builders are finding ways to be more competative then in the past.
Mike
jmmoldsupply@comcast.net
There are excellent points
There are excellent points raised in this article that require thoughtful 'hansai' to compare and contrast the differences between Toyota and other domestic OEM's.
Lucas is correct that the value stream to bring a product design to life should go beyond the Tier I supplier to the moldmaker. Mold construction sources (who add infinitely more to the process than the conversion of steel into a mold tool!) deserve to be compensated fairly through a financial scheme and project management approach that frequently burdens the least financially capable supplier in the process to finance project capital for 12 months or longer. In the case of large, forged castings the cost of material is significant and should be considered for dropped shipment early in the process with the OEM absorbing the cost of material and reducing the lead time to produce through a collaborative effort between tool steel supplier, mold construction source. One might also consider this in the case of expensive, long lead hot runner systems and related content.
As the paper points out, OEM's must throughly understand the technical value stream and adopt a complimentary business process that minimizes the corrupting influence of variation and waste during product commercialization. The paper points out this function resides within the Purchasing Tooling Cost Analysis Group, tasked with the goal to improve Toyota's mold-buying process and create better relationships between moldmakers and Tier I suppliers. This attitude towards supplier development is improving throughout the industry and is not unique to Toyota.
Regarding the issue of over-engineered mold and associated standards; its clear that some OEM's have prescribed tooling solutions to improve quality, eliminating Class A parting lines for example, in an attempt to exceed customer expectations for fit and finish. Yes - no doubt, it costs more to produce this level of mold tool but perhaps it's a conscious decision, not over-engineering which has been appropriately considered. There should be no disagreement with Toyota's commitment to understand its processes and associated cost to deliver appropriate customer value. However, they are not the only OEM who wants to help North American suppliers compete globally.
Goldberry's smart-ass line at the end of the article is dead wrong - we get it.
I am very impressed by this
I am very impressed by this article. Particularly as I manufacture 15 new tools in China for the new Rav4. When in fact I quoted these tools at a NA price, only to be given a target price that was much lower, and in fact 'directed' by Toyota to be sourced at an LCC location. How can they say they want their supply chain to thrive when they force this pricing down our throat? Don't be fooled by any OEM's fancy talk and promises....their bottom line is the same and starts with the bean counters at the top.
And by the way, I manufacture over 100 tool per year offshore, so I know the price difference between the NA and China Market firsthand.
JH
Given the cost challenge
Given the cost challenge --
"Toyota .. knows what the appropriate price should be for molds coming from various regions of the world." and "The purpose of this is to make sure that the company is paying the "right" price for the mold."
How do suppliers submit a quote without price protection (a hedge) built in to protect against a resin cost increase after winning the bid? Do they just build a good margin in the bid, hope to win, and then hope (volatile) resins costs don't squeeze their profit margin?
Very risky, if that's the approach. And unnecessary.
When are you people going to
When are you people going to wake up. Toyota like all corporations care about only one thing and that is corporate profits. The consumer doesnt see any savings in the product that they purchase when in fact car prices are increasing (but in my opinion have been inflated for years). They dont care about making their domestic mold makers (or anyone else) successful. To me it sounds like they are forcing their suppliers to drop their shorts and show them where their profits are and how much. They will then use this against them (just like Rubbermaid did) to effectively put them out of business. Dont fall into this trap out of desperation. I say that suppliers should boycott Toyota and any other corporations that want this level of control because it is only a matter of time before you will be on the receiving end of these tactics. BOYCOTT TOYOTA!!!!!
I think Clare made some very
I think Clare made some very good points in her article, but one issue is never addressed with these benchmark and data studies that the OEMs use for these purposes. What are the measureables and metrics used in these studies and how were they developed? This info is never shared with the supply base, so we are forced to take a leap of faith that the data is valid if we want to pursue the business. After 30 years in the business, working with tool shops across the globe, I think I can develop the same data base with metrics that I would deem critical. Why can't the OEMs share that part of the process with suppliers?
The US toolmaker is competitive, as long as the focus is on innovation and quality. I see that with the costs coming from our own China tool shop when compared with the quality shops in this country. I just returned from a trip to Brazil and saw the same thing. The prime shops there are very competitive with China when building tools for the domestic market, even before you consider the tax impact. They took the time up front to learn the requirements of the program before beginning the design and build process. Education and information is the key to any successful program.
Ron Wilhelm
Fawn Industries/ITS
Experience From a Toyota
Experience From a Toyota Molder
I worked for one of Toyota's largest molders about nine years ago. At that time, I don't remember any molds coming from China. Nearly all of them were "bought" from a tool shop in the US... but many (often the more complicated molds) were actually being "built" in Japan.
Scott, an excellent post and
Scott,
an excellent post and good response---many thanks for that.
My thanks also to you and Rod Groleau of RJG for keeping the conversation focused on the topic. People get very emotional on the topic of mold making and especially the "U.S. versus China" aspect.
This emotion is understandable as livelihoods are at stake, livelihoods have been erased, but it's certainly not an excuse to take a shot at Clare Goldsberry, who wrote this article and has spent many years in the moldmaking industry---selling molds and working in her family's own machine shop. Many of her best friends are moldmakers, she's very active in the AMBA.....few people want to see the U.S. moldmaking industry thrive more than Clare.
Matt
Start innovating, stop making
Start innovating, stop making excuses.
I can't believe the negative comments here. Like so many manufacturing segments, molders put short term profit at the top of their list. Completely ignoring the long term effects on the over all health of the industry they are in.
Being an industry leader and globally competative is part of the company culture where I work. We only buy (or make) American tools. If your company provides service, innovation and quality then you can beat China.
We currently get 3 quotes for each mold; 2 outside vendors and one from our own tooroom. The innovation and engineering skills of all 3 are tested with each part design. We pick the best TOOL, not the best price. But by working closely with the mold makers, we reduce all aspects of waste in the design and build. So they are able to provide a 6 week lead time on a very competitively priced tool.
American mold makers and molders need to stop complaining about China and find a way to make themselves the better option.
We have to be proud of what
We have to be proud of what we do
When you get a toyotas corola, do you bye it on basic manufacturing cost...
It makes no sens our industry is sick...
I think that this is a good
I think that this is a good article explaining how Toyota works with it's suppliers to keep them in business. I am a little disturbed by the responses because most are dismissive.
We in the US have to innovate and adapt to compete in the global arena. Know one said it's easy and it is Toyota's obligation to purchase molds which give the lowest total cost to their customers.
It is a suppliers obligation to develop and understand a real and sustainable competitive advantage and sell, sell, sell it. Those that choose not to, will not survive.
The only constant is change,
Rod Groleau
Chairman RJG inc.
Bunch of BS, with no real
Bunch of BS, with no real explanation and justification.
How do you put metrics on mold complexity?
Tracking moldmaker hours? Give me a break....
It would be better if you go
It would be better if you go to china not to sample the mold but try to live in the China for $600/month as there mold maker . then you come to US and try to live for same $600/month. Will you be able to buy a car, food, gas and house? If you survive with wife and kids on this money,then any US Moldmaker can beat the china price because US worker are most efficient and hard worker in the world.
cost down means qulity
cost down means qulity down---a mold maker tell me.
I follow many mold project.
Company I worked for was one
Company I worked for was one of the first US based Toyota mold suppliers (1992) and we know that demanding Globally competitive prices for best molds first hand (This is also true for other large OEMs). That is why my employer dissolved company in 2007. Shops here can't compete (price wise) with China.
you better find cooperative
you better find cooperative moldmakers that will expose their costs...good luck...
What are the other five
What are the other five countries?
Do you have a Generic
Do you have a Generic standard for mold w/O rings, Cores, Slides GF material?