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October 24, 2002

4 Min Read
Assessing the real cost of a tool build

Upfront costs for a tool aren’t the only expense a  buyer incurs. One moldmaker breaks down the actual costs to educate his clientele.

Nearly 30 years ago in Berlin, while studying engineering at night and working at a mold and die shop during the day, Helmut Mueller got his first glimpse of the American dream from an unlikely source: the Sears catalog. “I looked at [the catalog] and saw how much money you can earn and what you can buy,” Mueller explains. The catalog, its wares, and the promise of a high standard of living lured Mueller to the United States and Chicago where he once again found work in the tool and die trade. He eventually opened his own shop—Helm Tool Co. Inc. (Elk Grove Village, IL), which celebrated its 25th anniversary in September.

Over the last 25 years, times have changed, Mueller says. Sears no longer prints its direct-mail catalog, and if it did, the bulk of goods featured on its pages would be made overseas from start to finish, with many of the plastic components molded in foreign-made tools. Mueller has seen these changes firsthand in his own business and in that of other domestic moldmakers. As former president of the Chicago Chapter of the American Mold Builders Assn. (AMBA), he has attended meetings where toolmakers discuss their struggles to find an answer to the question of foreign competition. He watched as 68 mold shops went out of business in the Chicago area last year alone.

But rather than bemoan the state of domestic moldmaking while waiting for the U.S. government to possibly act on behalf of the industry, Mueller has taken proactive steps and altered his sales pitch to directly challenge what is widely perceived as foreign shops’ greatest advantage over their ailing American competition: cost.

Looking at the Whole Picture
After performing costly repairs on a number of foreign-made tools brought in by customers who were sold on low price, Mueller decided to add up the entire cost of a mold throughout its life—not just the initial sticker price. He calls this figure the total cost of ownership, and feels that in many cases it shows that foreign tools can have hidden costs, which make their actual price comparable to, if not greater than, U.S. molds (see Table 1 below). Mueller says many OEMs and molders have experienced the scenario laid out in his hypothetical mold purchase, but few have taken the time to break it down dollar-for-dollar.

 tool_domVSoversea.gif

Table 1.
Hypothetical one-year comparison
of domestic vs. overseas tool

“A lot of people know some of those things that I’ve written down,” Mueller explains, “but no one has really spelled it out because many who order [molds] don’t have this in-depth knowledge, and they need to be better informed. If they buy something, they need to understand what costs occur over the life of the tool, on top of the cheap, upfront price.”

Total cost of ownership addresses five areas: tool price, startup cost, lost production, productivity, and maintenance. Based on his experience, he generated the hypothetical scenario represented by Table 1, which compares the total cost to produce and run a domestic-made tool to a foreign-made tool.

Tool price is the upfront cost paid to a moldmaker, which, in the case of many foreign shops, can be significantly lower than a domestic price. Startup costs include any modifications that need to be made to a tool before production runs. Lost production accounts for sales missed during an extended startup. Productivity relates to how the tool’s overall quality and design affect cycle times and production. Maintenance costs address adjustments due to poor design or inadequate steel or hardness.

Mueller has incorporated total cost of ownership into sales calls to point out the advantages domestic shops can offer, but he says U.S. molds can still be a tough sell.

Know What You’re Buying
With new customers, Mueller relies on one pitch. “[Total cost of ownership] is the only way I can get work from new customers, if they understand what they are buying or not buying. When they jeopardize production by saving on the tool, they end up paying a much higher price.”

Still, given their labor costs and a general lack of environmental or worker safety standards, Mueller admits that it’s sometimes impossible to compete with foreign shops on the basis of cost.

In spite of this, Mueller hopes that taking a broader look at all the costs involved in a tool might help American toolmakers undermine a growing perception about price. “I think the biggest challenge is in the attitude of the companies and the people,” Mueller explains. “In many cases they don’t see that you get what you pay for. Years of experience and well-trained workers allow us to build tools that compensate for the higher upfront cost through better reliability and productivity.”

Contact information
Helm Tool Co. Inc.
Elk Grove Village, IL
Helmut Mueller
(847) 364-0855; www.helmtool.com

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