Cost pressure and fierce global competition are nothing new to toolmakers. Still, the industry is constantly changing and 2018 comes with other problems than those of 2008. What does 2018 have in store for tooling and moulding?
Looking back to the beginning of 2017, not much seems to have changed. The current problems toolmakers have to face are cost pressure, global competition and the lack of skilled workers. We constantly hear about the need to automate and digitise production processes. Toolmakers need to be innovative and invest in the latest equipment to stay ahead of the competition. Manuel Oliveira, European secretariat at the International Special Tooling and Machining Association (ISTMA), sums up the situation in his home country of Portugal and Europe in general: “Clients are looking for added value solutions but also cost reduction and production strategies to reduce the time to develop new products.”
Tool and mould-making, however, has always been a sector that is used to pressure. There are small shifts in the industry, which is the reason why toolmaking today is different from toolmaking 30 years ago. Looking at the numbers, one thing is very clear: The tool, mould and die industry is experiencing steady growth. According to ISTMA, the production value of moulds and dies has been rising constantly since 2009. It is expected that this growth will continue in 2018.
Current state: 2017 was a good year for the industry
“The present situation in Portugal is quite positive in terms of sales, exports and recognition in the international market. Over the last six years, exports records were broken year after year, and our companies have heavily invested in new technologies to guarantee performance, time to market and flexible solutions required by our clients,” Oliveira explains.
The same is true for Germany. According to VDMA Werkzeugbau, the tooling division of the German Mechanical Engineering Industry Association (VDMA), German toolmakers recorded an estimated sales growth of 5% in 2017. The German industry has the advantage of a strong customer base in its domestic market. Only half of German tools leaves the country. The most important export markets for Germany in 2017 were the USA, China and Mexico. VDMA expects the best chance of growth in China this year.
The major global producers of tools, moulds and dies, according to ISTMA's Statistical Yearbook, are China, the USA and Japan with a combined production value of €44 billion (Germany comes fourth). The countries with the greatest exports all come from Asia: China exports products worth €4,093 million, the Republic of Korea €2,334 million and Japan €2,154 million. Combined, these countries represent the most important competitors to European tool and mould-makers.
While Germany can still rely on a huge number of orders from its domestic market, other countries have to deal with a different initial position. Portugal, for example, has to take more action to be recognised by a global target audience. “Over the years, Portugal has developed a consistent strategy to consolidate its presence in the international market. Acting globally, the Portuguese moulds industry has stood out among international competition, thanks to the range of high added-value solutions it offers,” Oliveira reports.
The focus on Portugal's appearance at international trade fairs and its efforts to be recognised globally are paying off. Oliveira adds: “Based on this experience and investments in state-of-the-art technology, networking and co-operation, the Portuguese moulds industry has created and participated in partnerships and projects with clients, suppliers, universities and knowledge centres. This has allowed the products and services of Portuguese companies to evolve in a qualitative manner, enabling them to find new clients while achieving a position of reference on a European level.”
Automation and digitisation: No longer just hollow words
When visiting companies, it is apparent that the pressure to invest in new technology is high. When asked what they want to achieve, many toolmakers respond with the term “automation”. The awareness that modern process optimisation and automation are key to being competitive is widespread among managing directors all over Europe.
Another topic that experiences a broader acceptance is additive manufacturing. After the hype and fantasies about 3D printing replacing traditional technologies, manufacturers have now accepted that 3D printing is indeed a valuable technology when deployed in the right processes for the right tasks. According to Prof. Thomas Seul, President of the German Tool and Mould Makers' Association (VDWF), there is a trend that additive manufacturing is becoming more and more accepted among toolmakers as a valid manufacturing technology. He is certain that development will go towards hybrid technologies. Additionally, he notes that toolmakers could consider outsourcing their production processes that require additive technologies.
Even though the pressure to invest in new technology is nothing new, Seul emphasises that toolmakers will not be able to compete if they maintain working with outdated equipment that does not deliver the much-needed efficiency. The VDWF president expects tools to become even more complex, more precise, more compartmentalised. “However, this is not a bad development. The complex tools are profitable as opposed to simple tools used for the quick production of simple parts. Toolmakers can make good money with complex tools,” Seul comments.
For small workshops, this development can nevertheless be a difficult challenge. In such cases, investing in new equipment might not be affordable. Seul sees a chance for smaller companies consolidating and co-operating. For him, specialising on specific parts of the production process or on particular products can make a huge difference. “I expect a wave of consolidations in the next few years. The time when every toolmaker kept his production a secret and didn't want to exchange with other companies is coming to an end. For small companies, there is a huge chance in co-operations with partners, if they want to survive.”
Associations take steps in reaction to shortage in skills
For Manuel Oliveira, the struggle does not end with investing in the latest equipment: “We’ve seen our companies adopting a major focus on machining technologies, robotics and automation processes, laser technologies or rapid tooling and additive manufacturing. Anyway, technology is not enough. You have to combine it with production processes, with organisational and management systems, with cost control and qualified human resources. Only this combination can bring added value and competitiveness to the international market.”
Particularly this last issue is a constant problem for European companies. Most countries do not have enough skilled staff to fill empty positions: “To find specialised and trained technicians is probably the most demanding factor to succeed. The lack of qualified human resources is recognised by every toolmaker in Europe as the main issue that has to be solved to guarantee its sustainability.”
GTMA, the UK-based Global Manufacturing Trade Association, reports that engineering is one of the most productive sectors in the UK, but a shortfall of 20,000 engineering graduates every year is damaging growth. There is also widespread misunderstanding of engineering among young people and their parents and a lack of diversity in the sector – the workforce is 91% male and 94% white, GTMA says. To tackle the skills gap, a governmental initiative has declared 2018 as the “Year of Engineering”. The campaign aims to transform the way young people see engineering and to boost numbers entering the profession.
Last year, VDMA produced its own image film to promote a career in tooling and moulding. One underlying problem of toolmaking that is addressed by this video is the fact that many young people do not understand or know what this sector actually does. Skill shortage is still a problem the whole manufacturing sector has to face. It will take more than a year to make a career in tool and mould-making attractive for young people.
Germany additionally faces another problem: “An entire generation of founders is about to retire. These retirees leaving the profession are unable to find successors. The scenarios range from a wave of consolidation to the loss of know-how through discontinuation of business or liquidation,” says Marco Schülken, Chairman of VDMA Toolmaking.
Thomas Seul explains this wave with the German reunification: “Around 1990, many companies were founded or reestablished by a generation that was around 30 or 40 at that time. This generation is now over 60. Even if we go back further in time, companies that have been founded after the Second World War are now facing the second generation retiring.” According to Seul, the younger generation has the chance to develop an open toolmaking industry, thus enabling more co-operations in the future.
What will 2018 bring? A positive look at the future
Oliveira looks at 2018 optimistically for the Portuguese industry: “We believe this growth trend in the European market will continue and companies will adopt internal strategies to follow market opportunities as in other regions of the world. Europe will continue to be by far the top market but we are working hard on the North American and Latin American markets.”
The German industry can look forward to steady business as well, the VDMA reports. “For the current year, we expect a largely stable trend in orders similar to 2017. The domestic market and exports to neighbouring European countries may possibly weaken slightly. Partially good chances for growth are likely to be found on the Chinese market. Sales growth of three percent is possible in 2018.”
For Seul, another trend is clear: “Quality is becoming more important globally.” For European toolmakers, this presents the chance of getting a reputation of manufacturing high-quality products.
How was 2017? At the beginning of last year, we made a similar report on what to expect. Did everything come true? And what has changed? Find out in our article What's ahead 2017?: