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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.

Clare Goldsberry

June 8, 2011

5 Min Read
How Toyota buys molds

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:

  1. Open communications! Provide the Tier One with factual information so they know they're paying the appropriate amount for the tool.

  2. 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."

  3. 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."

  4. 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.

  5. 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."

  6. 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."

  7. 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."

  8. 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!

About the Author(s)

Clare Goldsberry

Until she retired in September 2021, Clare Goldsberry reported on the plastics industry for more than 30 years. In addition to the 10,000+ articles she has written, by her own estimation, she is the author of several books, including The Business of Injection Molding: How to succeed as a custom molder and Purchasing Injection Molds: A buyers guide. Goldsberry is a member of the Plastics Pioneers Association. She reflected on her long career in "Time to Say Good-Bye."

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