It is a great follow up. Here it is.
One other problem/ misunderstanding that I’ve seen from lots of US customers (and had myself at the beginning of my China journey) were the differences in business practices in China vs USA regarding molds and tools.
In many industries in the USA (automotive, many household goods, toys, etc) plastic molds and steel stamping dies are considered the property of the CUSTOMER — even though the development and operation are pretty much exclusive to the supplier. In these situations, normal business practices in the USA include:
- The supplier quotes tooling costs separately, and the customer pays them in full, usually once the first fully compliant sample is provided.
- The supplier usually puts little or no markup on the tooling.
- There are fairly well understood standards for design and build of the tooling… so that in the case of problems, the tool can be moved to another molder/ stamper and used there.
- While the molder/stamper isn’t happy when the customer moves tooling, it’s generally accepted and happens without major incident. (I’ve done this personally in the USA when a supplier goes bankrupt. In those cases, the supplier people often breathe a sigh of relief when the customer takes the tooling away.)
- And, suppliers accept that the tool DESIGN belongs to the customer. They’re unlikely to try to run (and sell) parts on their own account. Not to say this never happens … but if it does it will be carefully hidden.
Contrarily, in China NONE of these customs can be assumed.
- Even if a tooling cost is quoted, it often has no resemblance to the actual cost. In my situations, it usually seems to be low, not covering the full cost.
- There aren’t clear standards for the mold construction. So, the tool life may vary; one mold might be good for 50,000 pieces while another is good for 1,000,000.
- Even when you have specified that you as customer paid for the tooling and own it, the supplier may not agree when the time comes to claim the tooling and take it away. (I’ve only been in these situations a few times, and have never succeeded in getting the tools. I’ve heard of it happening but I’ve never seen it in China.)
- Even if you get possession of the tool, the new supplier is unlikely to be willing to use it. And, from what I’ve seen of the variation in quality and design, they’re probably right! If you have had enough problems with the supplier to need to pull the tooling, the tools themselves are likely part of the root cause.
- Some suppliers — again, regardless of contracts — will run copies of the product and sell them in other markets. Or maybe even in YOUR market.
So, I warn my clients that while yes, they may need to invest in tooling… they SHOULDN’T really believe that they “own” it, regardless of what the contract says. They should make their product financial decisions assuming that the tooling will be lost if they need to move the sourcing.
A second key goal is that it’s to the customer’s benefit to carefully specify the standards for the tooling. How many pieces do you need for tool life? Ideally the customer will have an knowledgable expert review the tool design before the tool is built to ensure that it will do the job. Unfortunately, experts like this aren’t cheap, or easy to find.
I’d love to hear from anyone here in China about their experience… especially if they think that I’m wrong! There may be ways to prevent these traps that I haven’t figured out.