Going offshore again?Going offshore again?

Editor's note: Consultant Bill Tobin of WJT Assoc. is a regular contributor to IMM and offers these opinions about the risks and benefits of going offshore for mold builds. 

A friend of mine called me and asked, "Who do you know offshore who is an inexpensive, good, fast toolmaker who can deliver a quality product for us to run?" Wow! That's a tall order. He went on to explain that even though he'd off-loaded much of his automotive work, he was still losing jobs to molders with connections in India, Pakistan, Hong Kong, Italy, and the Middle East. 

In the late '80s and '90s it was hip to go offshore because labor was cheap. Inexpensive labor gets you inexpensive tools, right? Not always. While there are excellent moldmakers in other countries, finding a substandard shop is not hard to do. Too many people get fooled by simply looking at the numbers and fail to see the big picture. Remember, the goal is to get a high-quality tool that will produce parts in the proper volume to the stated specifications for the life of the product. I gave my friend a few names of some good shops, but I also gave him some warnings: 

• Reputation is everything. Most people who source jobs offshore do so by picking up a few business cards at NPE, pulling a name out of a magazine, or by getting taken to lunch by a sales rep. If you do come up with a name, e-mail the potential tooling source and ask for other U.S. clients you can talk to (candidly) to determine if what you want is something they can deliver. 

• Price is nothing. I have clients in the Middle East. Wages there are very low, even in the skilled trades. But what is interesting is that wages are so low it doesn't make economic sense to purchase state-of-the-art CNC equipment. Building molds the way U.S. toolmakers did in the 1950s is still widely practiced. If you're looking in this region for a shop that is 24/7, lights-out, and CNC-capable with the equivalent of millions of U.S. dollars invested in automation, it will be a rare find. 

In southern Europe there is the concept of lifetime employment. Moldmakers have responded by keeping the employee head count very low, staying highly automated, and running equipment 24/7. Fully automated shops with new high-tech equipment are common. Unfortunately, these shops already have customers. Both of you risk a sight-unseen relationship in the initial stages of doing business. 

Also, keep this in mind if you are sourcing a tool from Europe: Virtually all of the continent goes on vacation for the month of August. If your tool is being constructed, tried out, or completed between the end of July and the beginning of September, it just won't happen. 

• Communication issues. For the moment let's forget the time zone difference between you and your tooling source (as long as you don't mind telephone calls in the middle of the night). The first thing you have to do is send the moldmaker the product design. This design must be error free or you'll be left struggling to coordinate file cleanup with someone who may or may not speak English. 

Think also about your purchase order. U.S. contract law doesn't apply outside the borders. What happens if they take your money but don't deliver what you want? An international letter of credit must be established between corresponding banks so neither of you gets cheated. While English is a common language throughout most of the world, are you sure you know how to translate "self-lubricating gib" into Hindi? While the other guy may speak English, think for a minute if you honestly believe your e-mails are as clear as you think they are. 

You'll also need tooling specifications. Never ask for a "Class 'A' tool." You'll get a boat anchor with an "A" stamped on it. Your tooling specifications must be in the language of the country in which you are doing business. This means you need a tool and die person who speaks the language so that the technogarble terms translate accurately. 

• Reporting difficulties. I had a buyer once who told me that buying molds was easy. He placed the PO and then two weeks before the scheduled completion he started phoning the tool shop for a firm delivery date. We all wish it were that easy. How will you handle weekly reports? Videotape, streaming video over the Internet, spreadsheets, faxes, or verbal communication? There should be an eyeball-to-eyeball meeting, or perhaps three: the kickoff meeting, the midcourse followup, and the qualification run. 

Who is paying for all these trips? A hop across the pond in either direction is costly, time consuming, induces jet lag, and is usually not worth it for one job. But, money is money. You'd never place a tool with a new source in the U.S. without visiting the shop, and you'd never leave the job unattended throughout the entire program without a quick checkup. These vendor visits cannot be viewed as a romp through Bangkok, a side trip to the Pyramids, or an opportunity to bring your spouse along to visit some of the showrooms of Milan. While all these cities have excellent tool shops, you must keep business as business or you'll end up going out of business. 

• Shipping problems. FOB Toledo, Spain to Toledo, OH usually means airfreight. It doesn't take a genius to understand that freight rates are based on weight and that steel is really heavy. 

Two other problems exist with international freight: getting customs folks in the country of origin to release your tool; and getting U.S. Customs folks to let it in. So far the U.S. hasn't put a tariff on a mold that could have been made in the U.S. but was made elsewhere. Other countries have tariffs to level the playing field. Only time will tell if this holds up. 

• Acceptable parts. Good moldbuilders worldwide take pride in their work and will warranty it. But all the adjustments to make good parts must be made in their shop. The solution to this is to have a normal tryout, air freight the parts to your client, hope for acceptance, and then have the next few months of production done offshore. This ensures there aren't quirks that weren't revealed during tryouts. (Again, freight issues are involved.) 

• Is this mold steel? While this sounds dumb, horror stories abound. I've heard of texture houses and repair shops working on molds built in Hong Kong and discovering that the steel came from a Chinese foundry where what was represented as "tool steel" was probably recycled I-beams with a few engine blocks thrown in for flavoring. The only way to solve this problem is to buy the mold components in North America and ship them to your tooling source. Asking the moldbuilder for certified steel will usually get you a photocopy of a certification, but it might not be yours. 

• Can you spell maintenance? It's usually too expensive and time consuming to send the mold back to the moldbuilder to perform minor maintenance, major maintenance, or engineering changes. So now who will play with you? The guy down the street you burned by not giving him the original job? Think about it. 

Making Money 
The injection molding business has two mandates: You take care of the people who take care of you; and both client and customer must make a reasonable profit to survive. It's hard, however, to keep up with competition that quotes mold builds all over the world and then gets the production contract in these "lean" times. 

Going offshore for molds is an attractive prospect for many molders, but it's not like sourcing a mold from the shop down the street. The risks and costs can be substantial if you're not careful. And there's no need to go it alone. Talk to your clients. Ask them who should pay for the trips and the freight associated with an offshore mold build. Your customer likely will answer that he won't pay and that you should. If this is the case, seriously consider letting the business go. If the customer will pay, pack your socks and toothbrush. 

If you lose the job, or just let it go, keep an open dialog with the client who didn't award you the business. Keep your tooling sources. The market can support cheap disposable tools for cheap disposable parts. But high-quality precision parts require a better standard of tools over the production life of the part. 

In time the client will return and you can re-establish your relationship with your tooling sources. If need be, mail your customer a copy of this article. Remail it when his parts have so much flash it looks like they are being whittled out of sheet ABS. Every few years the industry needs a weeding out of the guys who give away machine time and buy substandard tools. It is a storm we all must weather.