As a mold maker serving the automotive market, our goals are the same as our OEM and Tier 1 customers, namely to produce quality parts at the best piece-part cost over the life of the program. However, all too often the decision to source a mold from North America or China often rests on initial acquisition costs alone, and we believe this is a short-sighted approach.
So, why do molds get sourced to China?
Direct labor costs remain extremely low in China, for one thing. While Chinese mold makers earn good salaries in China, they remain a small fraction of the wages we typically pay experienced and more productive North American mold makers. Any adjustments in salary structure are totally offset by the government's policy of continuing to peg the value of the renminbi at an artificially low level relative to the U.S. dollar, all part of a concerted effort by the Chinese government to successfully compete for manufacturing vs. North American firms. This drives Chinese competitiveness.
The effect of outsourcing to Asia on the mold making industry, primarily to China, really can't be understated. David Palmer, chairman of our Canadian Association of Mold Makers, was quoted last year in an article in Canadian Plastics magazine noting, “An estimated 150,000 tooling jobs have been lost in North America since 2000 due to offshoring.”
My firm first began looking at China a little more than a decade ago, and we chose to develop relationships with a number of higher quality mold builders, with a lot of effort and no small amount of pain along the way. It's worked for us, and the fact of the matter is we need to be able to source molds in China when our customers require it of us.
While there seems to be a reshoring trend for plastic molded parts in other industries, automotive tooling projects are a different situation altogether. In fact, the number of quotation requests we see requesting “China or L.C.C.” (low cost country) remains constant, or is even growing slightly.
However, to source a mold in China involves managing and dealing with the potential compromises that are an everyday fact of life in the Chinese market.
Mold design usually takes longer than it does here. But while mold construction is significantly faster in the Chinese shops we work with, we just about always find that upon inspection, we need at least some rework to be done. In both of these areas, design and build, we can trace the additional time needed due to manpower issues and practices.
The simple fact is that the value of a competent individual employee isn't recognized in China the same way it is here. Turnover is rampant and our Chinese partners spend significant time and energy training and retraining a transient workforce. Our experience tells us that it's rare to find a senior Chinese mold maker in the workforce with more than five years of work experience. The North American mold makers we compete with, like us, all boast senior, highly skilled workforces, with experience levels of three to five times that of what we normally find in China.
Complex supply chain issues are also an everyday occurrence, and if we don't specify all materials in total detail, there will typically be problems. We tightly control all material inventory and obtain certifications at every step of the way so that cheaper materials are not substituted. We
audit the certifications and we conduct metallurgy tests. Material substitution is more common of a problem than you would think.
The approach to design is different as well. We, like our North American competition, design for functionality and ease of maintenance while in-service for the long term, which may be a period of five years or more. However, a typical Chinese mold is not designed up front for ease of service, and is typically built for a production environment characterized by lower volumes, combined with shorter in-service requirements.
The bottom line is it is difficult and time consuming to service that mold here in North America. Additionally, China molders don't guarantee their work and, in all candor, why would they? They know the aggravation, cost and timing to send a mold back from North America to be fixed in their shop isn't worth the bother.
We, like other North American mold builders who work in China, guarantee our work. We conduct one or more trials in China before we accept the mold, and we still re-inspect and conduct an additional trial here before we ship to the customer.
The biggest problem of all, though, is that automotive Tier 1 companies and their Tier 2 molders continue to classify mold makers as suppliers of commodities. Their approach to sourcing splits initial mold cost and the cost to service that mold during production operations into two distinct and separate categories that are not analyzed in concert with one another. They focus on counting their savings on mold acquisition instead of focusing on the finished piece part cost over the life of the program.
The North American mold making community has a strong, vested interest in the success of their product throughout the entire product life cycle, and that, more than anything else, explains the real difference between the cost of a mold built here and one sourced to China.
Darcy King is president and CEO of Unique Tool & Gauge Inc. in Windsor, Ontario.