As an employee in the manufacturing industry, and somene who has travelled to China and visited several automotive manufacturing facilities, I would like to add a few comments.
1. Production Facilities
In general, in the areas of manufacturing injection moulded parts, most equipment is new, state of the art, and comes from either germany or america. Die manufacturing has always had capability, but the Chinese now have the skills and equipment to manufacture the tiny dies and tools needed to make our trains. Whilst in the 'rag trade' there are hideous sweat shops and terrible environments, factories making our models are modern, and have modern paintshops.
Process control is very strong - if you see the disciplines in their culture in the factories I have been to, and the focus on no defects, you would be amazed. Most organisations have European or American management present, as so many operations are joint ventures. This has enabled the introduction of Western style operation, but with strong Japanese dicsiplines.
2. Costs
Think about how many tools are needed to make a loco. Injection moulding tools are at least half the price to manufacture in China. Now to the whole value chain. Everything, and I mean,everything is cheaper. Consider that US$3 an hour is a high wage paid in the big companies. I have no data on wages at Kader etc, but say they get £1 an hour. At Margate, an operator probably in todays money would be on £8 per hour. But there are all the on costs we have in the Western world. So the real cost of the Margate worker would be £11. So, how many man hours does it take to make the whole of a loco? All the mouldings, painting, assembly, overheads for ordering material etc. I really don't know - say 1 hour. There's the first £10 saving.
3. Factory Overheads and Depreciation
We just said the tools cost half, therefore the amortisation per unit is half. Apart from the westerners working at the plant, everyone else is cheap. The transport to the dock is cheap, The boxes are cheap.
4. Quality
Workers are very focused on not making defects. In a lot of industries, poeple would simply be sacking after a few repetitive mistakes. On the other side, they have bonuses to meet targets. These people are hungry and work hard because they all want to own a car one day and their own apartment.
5. My Hornby Experiences
Absolutely no issues except for a noisy Cl08, which based on frequency of comment, suggests a design issue. All motors are superbly quiet, smooth and powerful. I have not seen any deterioration in performance. Paintwork is nothing short of incredible.
6. Price
We are driving up the prices - and we needed to. Imagine again when you actually get down to the costs of making all the minor variants of each model, and all the different paint masks, the training time and controls to manage the proliferation, how many of each one do they need to make to pay back their costs and make profits?
7. Margins
Whilst Gary indicated a profit of 15%, I would say based on comments in pat Hammond's books, and the abaility of shops like Hattons etc to always have 30% off, that the full margin would be 80% at retail. So a £100 loco, minus VAT is £82.5. Retail profit (gross, which they never make) takes the wholesale price down to £50. Now we start to see how the Chinese production costs become so critical. That one hours labour saving is 20% of the wholesale price. Who know how much the marketing costs are - but again, every month, every magazine, other advertising etc, reps going around to the shops in the UK - it really does all add up. So at the end of the day, if Hornby are left with a net between 5 and 10%, they have done well - because, their game is all about overall volumes.
It would be really interesting to know at the end of each year what the volumes of each model were -at wholesale and at retail.
Anyway, let's get back to the trainboard and enjoy, and be thankful Hornby (and Bachmann) have sufficient confidence to keep raising the bar and execute excellent new models.
1. Production Facilities
In general, in the areas of manufacturing injection moulded parts, most equipment is new, state of the art, and comes from either germany or america. Die manufacturing has always had capability, but the Chinese now have the skills and equipment to manufacture the tiny dies and tools needed to make our trains. Whilst in the 'rag trade' there are hideous sweat shops and terrible environments, factories making our models are modern, and have modern paintshops.
Process control is very strong - if you see the disciplines in their culture in the factories I have been to, and the focus on no defects, you would be amazed. Most organisations have European or American management present, as so many operations are joint ventures. This has enabled the introduction of Western style operation, but with strong Japanese dicsiplines.
2. Costs
Think about how many tools are needed to make a loco. Injection moulding tools are at least half the price to manufacture in China. Now to the whole value chain. Everything, and I mean,everything is cheaper. Consider that US$3 an hour is a high wage paid in the big companies. I have no data on wages at Kader etc, but say they get £1 an hour. At Margate, an operator probably in todays money would be on £8 per hour. But there are all the on costs we have in the Western world. So the real cost of the Margate worker would be £11. So, how many man hours does it take to make the whole of a loco? All the mouldings, painting, assembly, overheads for ordering material etc. I really don't know - say 1 hour. There's the first £10 saving.
3. Factory Overheads and Depreciation
We just said the tools cost half, therefore the amortisation per unit is half. Apart from the westerners working at the plant, everyone else is cheap. The transport to the dock is cheap, The boxes are cheap.
4. Quality
Workers are very focused on not making defects. In a lot of industries, poeple would simply be sacking after a few repetitive mistakes. On the other side, they have bonuses to meet targets. These people are hungry and work hard because they all want to own a car one day and their own apartment.
5. My Hornby Experiences
Absolutely no issues except for a noisy Cl08, which based on frequency of comment, suggests a design issue. All motors are superbly quiet, smooth and powerful. I have not seen any deterioration in performance. Paintwork is nothing short of incredible.
6. Price
We are driving up the prices - and we needed to. Imagine again when you actually get down to the costs of making all the minor variants of each model, and all the different paint masks, the training time and controls to manage the proliferation, how many of each one do they need to make to pay back their costs and make profits?
7. Margins
Whilst Gary indicated a profit of 15%, I would say based on comments in pat Hammond's books, and the abaility of shops like Hattons etc to always have 30% off, that the full margin would be 80% at retail. So a £100 loco, minus VAT is £82.5. Retail profit (gross, which they never make) takes the wholesale price down to £50. Now we start to see how the Chinese production costs become so critical. That one hours labour saving is 20% of the wholesale price. Who know how much the marketing costs are - but again, every month, every magazine, other advertising etc, reps going around to the shops in the UK - it really does all add up. So at the end of the day, if Hornby are left with a net between 5 and 10%, they have done well - because, their game is all about overall volumes.
It would be really interesting to know at the end of each year what the volumes of each model were -at wholesale and at retail.
Anyway, let's get back to the trainboard and enjoy, and be thankful Hornby (and Bachmann) have sufficient confidence to keep raising the bar and execute excellent new models.
