Source molds from Asia and protect your IP? It can be done

Conventional wisdom says it’s tough in the North American mold manufacturing business these days, particularly with so much competition from Asia. But some toolmakers have found a way to offer the “China price” and keep control over quality.

X-Cell Tool & Mold Inc. of Erie, PA, has been in business for 14 years—since 1996. At one time the company employed up to 35 people. “In 2002 we got hit pretty hard when the connector industry went to Asia,” explains Ron Novel, president of X-Cell. “We went into the medical market and today about 80% of our work is medical. We have our ISO 9001-2000 certification and are working to complete the change to 9001-2008 for June 2010 and implementing ISO 13485 medical certification for 2011.”

Currently, X-Cell has two full-time mold designers and 20 employees total, but Asia is never far from their minds. That’s because the company decided that it’s better to join them than to fight them. Novel notes that he’s been to Singapore, Malaysia, and China, and Brian Berchtold, X-Cell’s mold sourcing coordinator, lived in China for a number of years when he was setting up a China division for a U.S. mold shop. Later he had his own company helping U.S. firms find China solutions to their manufacturing.

“Having lived in China for a number of years, and setting up a company for a small U.S. tool shop that was insistent on keeping everything a ‘secret’ in terms of dealing with suppliers, I believe that making your suppliers a part of your business is the crucial link to success in getting work done there,” says Berchtold.

Jack Jaeger, program manager for X-Cell, explains the company’s process. “We don’t buy whole molds from China, but we provide the mold engineering here in the U.S. We know that some customers may be concerned about intellectual property, so we won’t source all the components with one supplier. That way no one can put everything together and build our customer’s product,” he says. “Some customers are not concerned about that issue so we’ll single source for them. But virtually all molds come back to the U.S. for molding.”

Once X-Cell places the components it needs built overseas, the supplier has to provide X-Cell with material certifications as well as full inspect reports on each component it manufactures so X-Cell can assure its customers of the integrity of the mold. Once the components made in China arrive at X-Cell, the company does its own inspection to ensure the Chinese supplier is supplying them with accurate information and to verify the numbers. For full molds, all fitting is completed at X-Cell and all tooling is qualified before being released to the customer.

The thing that makes these relationships possible, notes Berchtold, “is the partnership—the relationship that we build with all our Asian suppliers, and even those here in the U.S.” X-Cell works on the “internal customer” concept. “Our Asian suppliers are brought in as part of the X-Cell team and educated to meet our requirements and expectations on projects,” Berchtold says. “We also need to learn from our suppliers—learn their capabilities and how they do things—and that requires an ongoing tweaking and fine-tuning of the process. Treating our Asian suppliers as an internal customer, we get to know them really well—know what they can do and what they have trouble doing. That way we don’t send them work that they can’t do as well as other suppliers can.”

For example, Berchtold says that one of the company’s suppliers can’t do 0.004-inch wire EDM work. “We know that, and will omit any features requiring that type of tolerance, choosing to do that portion in-house,” he adds.

Communication is a key factor in the success of building a mold in China, notes Berchtold. “It’s dealing with the communications aspect that takes a fair amount of time,” he says. “Our suppliers are given the same information as we’re working with here, but conveying that information so that everyone is on the same page and understands what needs to be done can be time-consuming. However, between the Internet, telephone conversations, and webinar conferences, it’s a pretty seamless process.”

Shipping can create hiccups for X-Cell in getting the product from China, because the company is at the mercy of the shipping companies and customs, which can cause delays, Berchtold adds. “We’ve made the shipping suppliers part of our internal team as well,” he says, “and we’re generally notified early on about any delays.”

As far as costs go, Jaeger says that on average, by the time they include shipping, do the polishing and plating and assembly of the mold, the saving is around 20%-30%. “It’s not as cheap as having the whole tool built there, but close. If it’s just CNC work in a manufacturing cell, there’s not much savings. The savings comes in manual labor and man hours,” he notes. “But the advantage is that we get a better product in the end because we have a lot more control. We have our hands on it to inspect it and fit it.”

The molds are then qualified in one of X-Cell’s two Nissei injection presses—a 120-ton horizontal and a 70-ton vertical.

Jaeger says that, as a 30-year mold engineer, the manual work he sees from X-Cell’s Chinese suppliers is “impeccable” and “you’d have a hard time telling where the product was built.”

Novel says it all boils down to “relationships we’ve fostered and how we work with them.” Still, X-Cell’s management team is fully aware of the issues surrounding the theft of intellectual property. “IP is still a big issue and it’s one that’s very serious, but one that can be avoided through working the way we work at X-Cell,” explains Novel. “It creates more work to do it the way we do, but the advantage is that we proactively protect our customers’ IP.”

X-Cell won’t place a multimold project with one Chinese supplier and let them do it all. “That’s risky,” notes Novel. “I’ve seen it time and again—a company places multiple molds with one company, and then fight through the qualification process only to see their IP destroyed and their products produced in China. Companies want to go there to save money, but put themselves at risk many times by the way they do it. Even placing them all in the same area will put you at risk. Our process is constantly evolving and the IP issue is always a concern, but we know how to navigate it.”

Creating a partnership
Many mold shops have expanded their business to include Chinese partners, and those who’ve done their homework and pre-qualified the suppliers seem to have success with this business model.

Bob Corey, tooling engineering manager for Mastercraft Cos. in Phoenix, AZ, notes that things have changed over the past few years with respect to purchasing molds from China. For one, pricing doesn’t seem to be as big an issue. “I’m getting a little pushback, but not like I was getting three or four years ago,” says Corey. “Some of the prices people were demanding then, even China wouldn’t do it for that. Today, China’s prices are going up.”

Some of the offshore companies that Mastercraft was trying to qualify—or did qualify—to build tools for its customers are out of business because their quality wasn’t any good. “A couple of the shops we qualified did a really poor job for us and we paid dearly for that decision,” says Corey. “Let’s face it, some of the China shops are so inexpensive that we can’t trust the quality. We still have some bottom feeders when it comes to tooling purchasing. One company had top-of-the-line products but doesn’t want to spend money on the tooling. So we try to find offshore sources for those guys.”

JMMS Inc., a mold manufacturer in Easley, SC, also embraced the China partnership model for its manufacturing as far back as the mid-1990s. “Unlike a previous strategic threat from Portugal, whose government had heavily subsidized private moldmaking companies, Chinese companies overcame challenges that had slowed Portuguese market penetration,” said David Bowers II, CEO of JMMS. “Erratic quality, logistics, a lack of local service, and no recourse when problems arose—none of these mattered. The lower costs of the Chinese trumped everything.”

Bowers said it was a major decision to partner with Chinese toolmakers, instead of fighting a losing battle based on low prices. “I went to China in 2004 to meet with prospective partners, visit their plants, and look at their work,” he says. “Combining the new capacity in our South Carolina plant with Chinese partners has helped to drive our evolution from toolmaker to tool manufacturer. We’ve also invested heavily in design and concurrent engineering capabilities on the front end and built a dedicated maintenance operation on the back end. While we weren’t alone in this—in fact, the trend started in larger shops—as far as we know we were unique among small moldmaking operations.” —Clare Goldsberry