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What’s the True Cost of Buying A ‘Low-Cost’ Mold In China?

Categories: Ahead NewsStars: 3Stars Visit: - Release time: 2016-01-27 16:45:00
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What’s the True Cost of Buying A ‘Low-Cost’ Mold In China? --- Aheadmold

Have quality and value somehow gone out of style? As a mold maker serving the automotive industry, we’re tasked to design and build our molds to work consistently at high levels of quality, lowest cycle-time, and maximum cost-effectiveness over the total length of a program, which is often several years. Our goals are the same as our OEM and tier 1 customers: produce high-quality parts at the best piece-part cost. But all too often the decision whether to source a mold from North America or China often rests on initial acquisition costs alone, and we believe this is a shortsighted approach.
Why do molds get sourced from China? For one thing, direct-labor costs remain extremely low in China. While Chinese mold makers earn good salaries in China, that remains a small fraction of the wages we typically pay experienced and more productive North American mold makers. And any upward adjustments in salary structure have been offset by the Chinese government’s policy of pegging the value of the renminbi currency unit at an artificially low level relative to the U.S. dollar, all part of a concerted effort by the Chinese government to compete for manufacturing business against North American firms.
After a greater than 10% rise in value during the 2011-2013 period, the renminbi has remained relatively stable in the area of 6.2 renminbi to the dollar for the past two years. Even with the recent slump in the renminbi’s value, the current level remains about the same as before. This is part of what continues to drive Chinese competitiveness. According to some observers, the recent acceptance of the renminbi by the International Monetary Fund (IMF) as a global reserve currency (along with the dollar, euro, British pound, and Japanese yen) will limit the Chinese government’s ability to manipulate its currency’s trading value. However, recent economic instability in China is keeping that value low.
The effect of outsourcing to Asia—primarily to China—on the mold making industry really can’t be understated. David Palmer, Chairman of the Canadian Association of Mold makers was recently quoted in Canadian Plastics magazine: “As the automotive sector transplanted manufacturing to overseas locations, die and mold makers were left reeling, particularly in small, family-owned shops with five to 100 workers. An estimated 150,000 tooling jobs have been lost in North America since 2000 due to off shoring.”

However, to source a mold in China or elsewhere in Asia involves managing and dealing with the potential compromises that are an everyday fact of life in the Chinese market.
In China, the high-quality materials North American mold makers use as a matter of course are either subject to a value-added tax, or are typically not readily available. Complex supply-chain issues are an everyday occurrence, as the world-class materials we specify and utilize might take up to a month by boat to reach China from European suppliers.
If we don’t specify all the materials in complete detail, there will typically be problems. A Chinese equivalent to P-20 steel costs a great deal less than the mold steels that normally specify. However, the quality will be different and in all likelihood will not be up to par. As a consequence, need to control tightly all material inventories and obtain certifications at every step of the way, so that cheaper materials are not substituted. Material substitution is more common a problem than you would think.

Article come from China injection tools manufacturer - AHEADMOLD, website is WWW.AHEADMOLD.COM.

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E-mail:tina@aheadmold.com

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