Outsource, outsource, outsource. The automotive industry has come a long way on the outsourcing path since its early days, when Henry Ford's factories started with iron ore and ended up with finished automobiles.
The newest twist on the outsourcing trend involves firms that supply tooling for plastic parts. It's an odd combination. Tooling companies are considered big in their industry if they tally $30 million in annual sales. Now they're taking a very significant role serving automakers with sales in the billions of dollars.
As Joseph Pryweller revealed in his Jan. 4 front-page story, some toolmakers are investing in prototyping shops, design studios, auxiliary equipment and assembly operations.
Observers say the biggest tooling firms need to add new services in order to grow. First of all, their customers are demanding it. It's an important part of automakers' strategy to reduce costs.
Second, big North American toolmakers need to broaden their menu with more services — and faster delivery — rather than try to compete with overseas firms on price alone.
The trend is risky. What happens when the auto industry slumps? If a part designed by a toolmaker causes a catastrophic failure, can the toolmaker afford the recalls and liability claims?
The industry still is full of old-school toolmaking shops, founded by entrepreneurs who got their start as apprentices at larger mold-making firms. Certainly they won't all disappear. Many will find a profitable niche, perhaps doing overflow work from their larger, one-stop-shopping competitors.
But a period of consolidation in the mold-making industry is on the way. And the automotive industry's push for more value-added services will hasten the trend.