The skinny: buying tools from China

Unless you’ve been asleep for 20 years, you’re aware that tens of thousands of plastic injection molds are imported into the U.S. from China every year. Virtually none were imported from China in 1986. Injection molds are the perfect product for export from low-labor-cost areas to high-labor-cost areas.

Let’s examine the economics of this shift, and then look at some suggestions for toolmakers and plastics processors buying tools in China.

Dollars and Cents

The economics of shipping products across oceans is driven by (a) the volume of a container, and (b) the labor content of a product. The more labor content you can pack into a container, the more powerful the economics of shipping across the sea. An injection mold has just three cost components: materials, labor, and machine cost (the investment in the machinery producing the mold). Every injection mold is different, and the proportions of cost contributed by these three components vary, but usually labor is the largest cost component.

Now consider the size of an injection mold. Again, size can vary tremendously, from palm size to flatbed size, but molds are pretty small compared to their value. A $50,000 mold can rest on a workbench; you can’t say that about the plastic parts the mold produces. This combination of high labor content plus high value for size makes injection molds a near-perfect product to ship. The higher the labor cost and overall value of a mold, the better the economics of making that mold in China and shipping it to countries with higher wage rates.

Dollars and sense

Almost every processor or toolmaker has to consider the purchase of tools in China to satisfy his customer’s desire for low-cost tooling. It is easy to see this as negative, but there may be a positive side to it. Processors able to win more programs by using lower-cost, offshore sources can increase their molding business, where margins are generally better than tooling. Toolmakers able to offer customers both domestic and offshore tooling options may end up making more money overall and preserving the health of their domestic tooling businesses. So if purchasing molds from Chinese tool shops is necessary, here are a few suggestions on how to go about it:

• Develop several acceptable tooling options; quote tools with three to four shops. Two is too few to get the best pricing. Any more than four is too much work for you.

• Before awarding any tools to a shop in China, visit the shop and see for yourself the quality of the tools they produce and the equipment they use. Don’t trust the photos and materials you see on websites; reality can be much different. Ask your host to open up some tools similar to the ones you would have produced, and see the quality of the work for yourself.

• Make a list of the criteria required by you for a tooling supplier. Assess tool shops objectively on these criteria. English communication skills are very important. There are many other possible criteria including equipment, quality procedures, cost, turnaround time, size, location, and more.

• Protection of intellectual property can be critical. In some cases, intellectual property is not a concern because there is not anything particularly unique in the part or in the tool construction.

However, in other cases, intellectual property is a major concern. Among the ways you can deal with this concern are:

1. Investigate if the Chinese toolmaker has a long record of working with foreign companies. Can it provide references of companies worked with for many years? Are you able to speak with these references?

2. Sign a confidentiality agreement early in your discussions.

3. Investigate the supplier’s internal document control systems and ask for specific examples. Make sure that they fully understand the information protection process and will integrate it into every step of the operation.

4. Choose tool shops that only make tooling—no molding or assembly. In that way, the chances that they compete against your parts would be slim.

Further suggestions for success:

• Use only shops that have significant experience in export tools. There often is a big difference between a tool made for use in China and one made for use in North America or Europe.

• Ask what the tool shop provides with the tool when it is shipped. It should provide current 2D and 3D files that match the tool exactly, any paper prints that exist, EDM electrodes, and a molding setup sheet with all relevant parameters set during tool sampling.

• Be very clear on the workmanship standards required for your tools. Take nothing for granted. List every workmanship detail required.

• Once a tool is awarded, be relentless in following tooling progress throughout the tool build. Work it hard! Good program management on your end is critical. Leave nothing to chance. Get weekly written updates.

• Keep things simple and crystal clear in communication of part data. Ideally, send one, consistent 3D file, with no revisions up to first article sampling. Then, if revisions are required, communicate them clearly and document them thoroughly. Distance and language multiply the opportunities for mistakes if a lot of data are flying back and forth.

• If at all possible, be with the toolmaker in China for first shots and tool qualification work. For large programs (multiple tools, > $200,000 in cost), you should have three visits—one for tool design review, one intermediate visit, and one at sampling. Build the cost of these trips into the final tooling cost you charge your customer. A one-week trip including coach airfare, hotels, trains, food, and such may cost about $2500. It’s not cheap, but there is no substitute for actually being there.

If you do not have the time and resources to devote to procuring tools in China, there are program management and tool procurement services available that can help. Go to a company with a U.S. office that specializes in injection tools, not a general sourcing company or trading company. You won’t get proper technical support from a plain vanilla sourcing company.

About the author: Carlton Harris is president of Asia Tool Source LLC, or ATS. ATS (Drexel Hill, PA) provides injection mold tooling procurement and program management services in Asia, and also assists North American companies in establishing operations in China. He is the former president of ATP Engineered Rubber and Plastics Group, a $60 million custom tooling and injection molding company, and in that capacity established two U.S/China joint ventures. Harris can be reached at charris@asiatoolsource.com.