Ecommerce businesses come in all shapes and sizes. Some find success via retail arbitrage, and others through private labeling products. The most ambitious Sellers create a brand new product to bring to market or alter an already existing product to improve its quality or add value. Unless their goal is to maintain a small, made to order shop like many Etsy sellers, they’ll need the help of a factory to mass-produce their goods. With a brand-new product comes custom moulding and tooling to create a product. While you can find a factory to create nearly every type of product, they’ll require special equipment to create the exact item you’re looking for.
Moulding and Tooling – Sisters, Not Twins
Moulding and Tooling are the same in that these are the forms that are used to create physical goods. However, the difference lies in the materials that are being shaped around or in the form. Let’s use the example of Hanukkah cookie cutters. If you want to have metal cutters made, your product will be manufactured using tooling to shape the cookie cutters. If you want to have plastic cookie cutters made, those are created using an injection mould.
Moulding in manufacturing is the process of using a fixed form, usually metal, as a receptacle for liquid materials. In the example of the cookie cutters, your manufacturer would pour liquid plastic into a metal container that has been shaped to your design and specifications. Tooling is the process of creating a stationary form that solid but flexible materials are shaped around. If you’ve ever seen an episode of How It’s Made featuring car parts or tin cans, you’ve seen tooling being used.
Example of Tooling
Example of Moulding
Remember that just because a product seems simple, it doesn’t necessarily mean that it’s easy to make. Products with several components or pieces may require several moulds. More complex products may require a large mould with multiple cavities for the various pieces.
Also, moulds are custom made for the materials they’ll be manufacturing. For example, a mould designed to create products made of polypropylene (often referred to as “PP”) will likely not be able to manufacture the same product using acrylonitrile butadiene styrene (often referred to as “ABS”) plastic.
Samples? Like at Costco?
Unlike at your favorite bulk store, manufactured product samples are typically not free. (Though they may be consumable depending on your product) Ordering and inspecting samples is a vital step in the purchasing process and should never be skipped. Samples apply to products made in an ODM (original design manufacturing) factory.
If you’re starting a private label business, you’ll order samples. Let’s say you want to private label a line of tumblers. You can order as many samples as you want, and this is actually recommended. If the tumblers come in different colors, sizes, or with different styles of lids, order them all. You’ll have the opportunity to test the product, make sure it meets your quality standards and ensure you’re adequately marketing your item.
Samples Versus Prototypes
Similar to samples, a prototype is the physical embodiment of your product. Let’s refer back to the Hanukkah cookie-cutter example. If you’re ordering from a factory that already makes Hanukkah themed cookie cutters and you want to inspect the quality of the product, you’d order a product sample. You’ll receive this via an ODM (original design manufacturing) factory. The product dimensions, materials, and specifications have all been predetermined. Your role in this would be private labeling and selling the product through your preferred eCommerce platform.
A prototype is a tangible good created via new or unique product specifications. These are manufactured by OEM (original equipment manufacturing) factories. Remember, factories are not designer firms (though some may assist with design). You will need to hire a product design company to draw up the blueprints and specifications for your product. This may include computer-aided design (CAD) files or 2D engineering drawings. They’ll often refer to these as “CAD files” or “STP files”. Send these off to your factory to create your first prototype. The prototyping process may take 5 or 6 tries to get your product exactly right. This is an expensive process as prototypes, like samples, are not free.
Some factories require that you come to them with a prototype in hand because they don’t have an R&D department. Others may have a robust R&D department and be willing to work with you when you have some engineering drawings in hand. Prior to creating any moulds, they may use an in-house 3D printer to create the prototypes or outsource the printing to a partnered company.
It’s important to note that 3D printed prototypes are a very expensive up-front cost, but ultimately should be seen as a research and development investment for the product you expect will be a hot-seller. These often require several iterations which means you also need to remember the final product’s unit price is likely going to change with each iteration.
Hire a local engineering company to create a physical prototype for you. This can be sent off to your factory as an example of what you want them to create and can help minimize the number of iterations.
Who Foots the Bill?
As the Buyer, it’s your responsibility to pay for the work that is done on these custom components. Of course, many Buyers will offset the cost of moulding and tooling by increasing their product sale price. So in theory, the final purchaser will be paying for the moulding and tooling, but the Buyer is fronting the money for these expenses. The total cost of creating a custom product from idea to physical item varies in the size and complexity of the product. Taking into consideration the time and effort that goes into creating custom moulds and tools, and the cost of multiple prototype iterations, the price tag can be upwards of tens of thousands of dollars.
To put it into perspective, a mould for the Hanukkah cookie cutters which is a fairly simple product may cost between USD$1,000-$5,000 depending on the level of detail in the cookie cutter and the finish you want it to have. This cost is only for the mould, so it’s important to remember that you’ll need capital for the order itself and additional funds for a re-order.
In very few instances you may need to iterate on the mould to improve the product. This will likely also come at a cost and in the worst cases, may require additional moulds or a new mould entirely.
Payment terms may vary, but they’ll usually be either 100% upfront, or split 50% upfront and 50% upon completion of the mould and acceptance of a “golden sample”. Moulding and tooling also do not last forever. They gradually degrade with every production run, so it’s vital to ask the manufacturer how many units they believe the mould will be able to produce.
Moulding and tooling fees are non-refundable, even if the product is not to your preference at the end.
Impact on Your Purchasing Timeline
The process of creating custom moulding and tooling for new products can take anywhere from 12-18 months. This doesn’t include the production of the item itself. The creation of a custom product from concept to the completion of production can take anywhere from 24 to 30 months.
The prototyping phase can take as little as 2-3 weeks, or last several months until you get it absolutely perfect. Remember that any changes you have to prototypes are likely going to affect your mould and unit costs.
Using the Hanukkah cookie-cutter example, once you have the prototype complete and the manufacturer can start making the mould, it may take 3-12 weeks to complete the mould for this single product. This process typically includes:
- Creating the initial mould
- Buffing out the kinks
- Producing a small-batch
- Assessing what needs to be improved
- Fixing up the mould
- Producing a sample
- Shipping the sample to you
- Receiving feedback on improvements
- Continuing to iterate until they produce the final sample that you’ve accepted for production quality standards.
In more complex products that require several moulds, you may be looking at 6-12 months if the manufacturer that’s making the moulds is also developing the design of the product with you. This is a daunting process for overseas manufacturers because it requires a lot of meetings, iterations, and comes with an opportunity cost of what else they could be working on vs. working on developing your product with you.
You’ll want to talk to your manufacturer about best-case scenario vs. worst-case scenario timelines. Add buffers into the worst-case scenario timelines if you’re speaking to prospective buyers of your product and accounting for a product launch.
About The Author
Lisa Kinskey is the Marketing Assistant of Noviland, Inc., a rapidly growing sourcing & purchasing solution making sourcing from overseas factories simpler. Lisa has a background in sales, marketing, and event planning, and currently resides in Duluth, Georgia.