MOLD MAKERS REV UP IN CUTTHROAT MARKET

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On an office wall at Creative Die Mold Corp. in Glendale Heights, Ill., hangs a sign with a cautionary message in the high-stakes mold-making and design industry:

``Those who say it can't be done are being passed by those doing it.''

Many tooling shops are now doing it with a vengeance. In the name of competition, they have invested millions in the past few years to buy high-speed computer numerically controlled machining centers, reconfigure their production processes, build state-of-the-art plants and give their staffs more responsibility.

They have also racheted up customer involvement — from sending mold design drafts over the Internet to helping conceive a new product years before the first tool is cut.

Welcome to the juiced-up world of tooling, where the only constant is constant change. Customer pressures for more complex molds, better service and faster delivery have turned up the burners on an industry formerly dotted with mom-and-pop job shops.

Yet with growth comes a potential price. The industry could be poised for a shakeout, where those with the deepest pockets are shown the money and those not embracing change are shown the door.

``It's happening in the industry,'' said Vincent Lomax, vice president of Tech Mold Inc., a $15.5 million maker of precision thermoplastic molds based in Tempe, Ariz.

``Customers are demanding increasingly higher-quality products. It takes a lot of small companies out of the picture who don't have the capital to buy the latest equipment,'' Lomax said.

Growth was a necessity at Creative Die Mold, which recently completed a $2 million plant expansion. Among the purchases at the 27,000-square-foot site were two high-speed CNC milling machines, including an Okeda carbon cutter operating at spindle speeds of 25,000 revolutions per minute and cutting 140 inches per minute; two CNC electric discharge machines; and a plant air-purification system.

The 19-year-old company changed because of customer pressure for quicker delivery times, said President James Glatzcak. The plant, which makes injection and compression molds for thin-wall electronic parts, now can produce a tool in eight to 10 weeks. A few years ago, it took twice that long.

``It can't be done the old way anymore,'' Glatzcak said. ``If you want to compete on the global market, you don't have a choice but to make a major investment in equipment. Literally, our customers have forced us to do that, and it's for the best.''

The need for heavy investment has sparked debate over how much is enough. Typically, the tooling industry has been dominated by small, family-owned firms. While no accurate figures are available, a typical tooling company employs about 20 and has sales of around $2 million.

Today, a few larger companies dot the landscape in North America. They include Caco Pacific Corp. of Covina, Calif., which records annual sales of between $25 million and $30 million at a 75,000-square-foot facility; MGS Enterprises Inc. in Menomonee Falls, Wis., which had 1996 sales of $35 million; Tech Mold; and Minco Tool & Mold Inc., a Dayton, Ohio, company that also does thermoplastic injection molding.

Until now, there has not been a flurry of mergers and acquisitions to aid in company growth. And some do not see it coming. The industry is too fragmented for consolidations to make sense, said Ronald Pleasant of Pleasant Precision Inc., a Kenton, Ohio, mold maker that recorded $7 million in sales last year.

``You talk to 10 mold makers and each one does something very different,'' Pleasant said in a March 14 interview at the annual SPI Molders & Moldmakers Conference in La Quinta, Calif. ``Because we focus on specialized niche areas, it would be difficult and expensive to join two companies together. Their skills normally don't cross over well.''

Most tooling shops also might not provide the profits expected of a larger, acquisitive company, said Joe Kavalauskas, vice president of Minco Tool. With prices being squeezed in a capital-intensive industry, margins might be cut from too thin a mold.

``It'll probably always be an entrepreneurial pursuit,'' Kavalauskas said. ``People have to eat and sleep it and make it their life to be successful.''

Still, that does not mean firms will not have to sink money into it. Industry experts have forecast that the larger, capital-rich companies will capture an even larger cut of the business, with some smaller firms fading from the picture. The driving force is the demand for more complex tools turned out more quickly. No longer does the industry accept molds in 30 weeks, said Bill Backus, vice president of the Die/Mold Division of Makino Inc., an equipment supplier in Mason, Ohio.

``What happened is that consumer demand for products has forced suppliers to shorten lead times considerably,'' Backus said. ``That puts tremendous pressure on toolmakers to improve machining time by five, 10, 15 or 20 times their productivity rate. In some cases, manufacturing times go from 30 hours to four to five hours per project.''

Makino sells a line of horizontal and vertical CNC equipment with high spindle speeds of 8,000-30,000 revolutions per minute or more, and capable of cutting 300 inches per minute, depending on the application. Added to the mix are highly precise EDM graphite milling machines and equipment that allows unattended operation. The price for the high-speed equipment from Makino and other firms can range from about $175,000 to more than $1 million per machine.

``Mold makers don't come running to us for new equipment because they like technology,'' he said. ``They do it because they want to survive.''

Another trend is the use of standard mold bases, components and mold-action devices to eliminate labor-intensive custom designing and machining, said Larry Navarre, business development manager for D-M-E Co., a mold base and component supplier in Madison Heights, Mich.

``Mold makers are asking us to deliver standard mold bases in a matter of days while they finalize detail work up to the last minute,'' Navarre said.

Working with higher temperatures for precision molds requires some tools to add more cooling lanes, said Glenn Starkey, president of Progressive Components Inc., a mold-component supplier in Wauconda, Ill. Shops must work with temperatures of more than 350 F, compared to half that a few years ago, he said.

Toolmakers also have geared up to meet customers' needs for greater service. Century Die Co. in Fremont, Ohio, works with end users on the Internet by exchanging electronic data files containing blow mold blueprints.

``Our customers are looking to put a mold in quickly and run,'' said sales manager Bruce Bille.

The firm expanded its building by 12,000 square feet last year.

Becoming a full-service company is a prerequisite for success, said Roger Klouda, president of MSI Mold Builders Inc. in Cedar Rapids, Iowa. The tooling shop, which specializes in large, single-cavity and gas-assist injection molds, starts working with molders and OEMs in the product concept stage. As long as two years before a tool is cut, MSI engineers help plan rough concepts.

While the cost to MSI in travel and billable time can be $10,000-$30,000 per product, the planning process can smooth the wrinkles early before a tool is made.

``Sometimes, the project never moves from concept to tooling, and we can't recoup the costs,'' said Klouda. ``But the opportunity to get involved with our customers far outweighs the risks.''

Another way companies are coping with growth is by giving workers more responsibility. Tech Mold gave a recent seminar on the new management style it adopted over the past five years.

The key is holding what the company calls town meetings with its workers at least once a week to discuss any issue in a freewheeling environment. In addition, each department functions as a minidemocracy, with team leaders taking a departmental vote before implementing procedural changes.

``Getting the input of each department has made a dramatic improvement in our efficiency,'' said Tech Mold general manager Len Graham.

But becoming more productive creates other challenges. Hale Molds Inc. in Rochester Hills, Mich., runs its machining centers 24 hours a day. At night, the machines run unattended.

``We've got to love what we do because the effort we put out is so great,'' said Hale Mold President Mark Krajniak. ``You keep the foot on the accelerator or you won't be in business too long.''

It is an industry that might be growing exponentially. Still, Lomax at Tech Mold said mold making is part of a bigger picture.

``The whole world is changing and mold making is just part of it,'' Lomax said. ``We've had more changes in the last five years than in the last hundred. We have to find a way to embrace technology or we won't be around for the next 100.''