The mold making industry is going gangbusters, and now is the time for smaller shops to strengthen their operations, advises a study commissioned for the auto industry focused Original Equipment Suppliers Association.
"With the bubble we are in now, smaller shops need to position themselves for the future," said Laurie Harbour, president and CEO of Harbour Results Inc., the Southfield, Mich., market research firm that complied the study.
The OESA-commissioned study, called the Q2 2017 Automotive Tooling Barometer, is the latest version of a quarterly study of tooling suppliers to North American automakers. The second quarter survey included 61 respondents, 72 percent of which were mold shops and the rest die makers. Shops with sales between $5 million and more than $40 million were represented.
Smaller mold shops should develop relationships with primary shops, the study advises. Primary shops as defined by the study are large firms with the resources to take on project management for automotive OEMs and Tier 1 and Tier 2 companies. Secondary shops, typically with annual sales of less than $10 million, are often called to do work for primary shops when primary shops have overbooked their capacity.
Secondary mold shops need to plan their sales to fit what they do best, seeking higher margins and developing niches, according to the study.
Advice for primary shops includes establishing a strong tooling supply base with secondary shops and then to help those shops develop into stronger suppliers. The big mold makers should focus on becoming preferred suppliers to OEMs and large Tier 1 firms. They need to drive efficiency in their shops and make capital investments to keep them competitive, the study advises.
Laurie Harbour said several years ago, auto OEMs typically worked with hundreds of tool shops as they pushed to get the best price for tooling. About three years ago that landscape began changing.
"Now OEMs need to work with 50 to 100 of the best shops to keep competitive," she explained.
Many large mold makers have developed special niches to compete, and their size means they can take on whole tooling packages for as many as 50 parts for OEMs. They can provide a higher level of project management because they have a lot of resources. Harbour said there are only about 25 primary shops able to do all that.