Injection Molding & Manufacturing in China
What do a whiskey bottle, a plastic footboard, and a stainless steel watch case have in common? None of the three objects would exist without the aid of an injection molding machine, not on an industrial scale at least!
Injection molding machinery is not relevant to every importer, but if you are thinking of importing a customized product you will probably need it, or at least the supplier who will make your goods will need it. This article explains how to choose a Chinese supplier according to the machinery it owns, how to buy a molding machine and how to limit the risks associated with an operation of this kind.
What is an injection molding machine and what do I need it for?
To put it as simply as possible, it is a metal mold with a cavity where you can inject plastic, glass or liquid metal in order to obtain the product you want to import, for example a protective case for iPhone or a component that will form a more complex product.
If the supplier you have chosen does not have the right machinery to make your product, you will have to buy it. Importing from China is very similar to flying with Ryanair: the prices are great but you only get what you specifically requested, without any luxury or extras.
Also keep in mind that things can go wrong. As for the purchase of a machine, I recommend that you only pay an advance (say 30%) before having a sample of the product sent to you and checking its specifications, operation and quality.
Many importers make the mistake of sending a first payment that covers the total cost of the machinery and 30% of the production cost of the goods. In this case, if things go wrong (for example, if the machine does not work as it should) you risk losing a lot of money.
Here’s my suggestion on how to organize payments:
- 1. Payment of the deposit (30%) on the cost of the molding machine.
- 2. Payment of the balance (70%) on the cost of the machinery (to be made only after receiving satisfactory samples).
- 3. Payment of the deposit (30%) on the cost of the goods you ordered.
- 4. Payment of the balance (70%) on the cost of the goods you ordered.
Furthermore, these machines often require modifications before they can function properly and therefore be used for mass production. Forcing the supplier to advance 70% of the cost of the machinery will therefore serve as an incentive, i.e. it will force him to commit to making the machinery work properly.
Who owns the machine?
This is a complex problem because, even if you are technically the one who is buying the machine, it will be – in many cases – inside the supplier’s production line (in China). I have witnessed several situations where the supplier did not even bother to hide the fact that he was exporting the items produced using the design and machinery purchased by the importer. All this without paying without paying any kind of license or royalty.
The easiest way to avoid this problem is to store the molding machine – yes, the one you paid $30,000 for – in a warehouse controlled by you (or someone you trust) and not by the supplier. In any case, the ownership of the machinery must be clearly specified in the sales agreement that you must prepare and have the supplier sign before sending any sort of payment (excluding any preliminary samples).
I suggest you include the following clauses in the agreement:
- 1. Owner of the injection molding machinery.
- 2. Responsibility for maintenance costs.
- 3. Minimum number of units that the machine must produce.
- 4. Compensation terms (in case the machinery stops working before the minimum number of units has been produced).
Machinery tolerances
About a year ago, a new customer called me, a Polish vodka producer. The idea was to find a supplier who could buy a molding machine on behalf of my client and produce 80,000 bottles for vodka. Apparently a fairly simple plan.
The problem is that, after unsuccessfully contacting more than thirty suppliers around Shanghai, we realized that no Chinese supplier was able to meet the tolerances requested by the customer.
So I decided to take a train to Xuzhou, the headquarters of several bottle suppliers, and see the problem for myself. I spent three days visiting production lines before realizing that, indeed, the tolerances required by my customer were too precise for a Made in China injection molding machine. The Polish importer has therefore decided to rely on a French supplier, more expensive but also more precise.
The moral of the story is that not all suppliers will be able to meet the specifications you require (in this case, the precision of the molding machine). So, to avoid disastrous investments, you should always do everything possible to check the production capacity of a given supplier before signing a contract or, worse, starting production. The case in question was quite extreme as we could not find any Chinese supplier who could satisfy the customer.
Tolerance issues
Returning to the problem of tolerance, a mistake often made by importers is to “negotiate better tolerance.” Not only is this a waste of time, but also quite a risky operation. If it goes well, in fact, the supplier will tell you that it is simply not possible. If, on the other hand, it goes wrong, it will tell you “ok, we can do it” and then start production knowing full well that it cannot meet the tolerances as it is a physical limit of the machinery.
Keep in mind that for a Chinese “yes” often means “ehmmm maybe… in reality we have no idea.”
Are you sure you need a customized product?
Each custom component requires an injection molding machine that can cost you anywhere from a few hundred to a few tens of thousands of dollars. For small importers, it is therefore best to limit the number of individual components to a minimum possible and always try to use components for which the manufacturer already has the right machine.
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