Hornby cuts model shops' allocations of items due summer 2022

[Dunsignalling]

The root of the problem seems to be that Hornby either place their orders with the factories ahead of taking orders from their dealers, or do it so quickly thereafter, that their view of dealer demand is incomplete.

 

Either way, it's a systemic failure that will almost inevitably recur, unless Hornby revises the timing of their announcements viz-a-viz orders placed by dealers and with producers.

 

In essence, getting dealer orders in with enough time to crunch the numbers before booking manufacturing slots, allowing production to be more accurately matched to demand. 

 

I'm ever more convinced that Hornby's determination to cling to annual "big bang" announcements closely co-ordinated to the annual catalogue issue has become disadvantageous to all concerned, themselves included.

 

All-new items that appear in the catalogue in January, are hardly ever released in time for Christmas the same year. Maybe it's time to stop pretending that things can still work the way they did before they transferred production out of their own hands, to facilities owned and managed by others, on the other side of the planet.

 

John   

 

 

Edited July 26, 2022 by Dunsignalling

[mdvle]

5 hours ago, Roddy Angus said:

The problem with distributing stock from the Hornby on-line store, which would only be possible if it was not a separate entity, is how do you distribute any "surplus" stock?  Say the online shop has 200 of a certain model, how many shops are supplied by Hornby, probably at least 200?  Do you then give one or two shops all the spare stock, because they asked first, or do you give each shop one model each?  Entering into some sort of bidding contest for the spare models would just lead to chaos.

 

You can either give every shop 1, or allocated based on the ratios of the order.

 

But the key point is that while 3rd party retailers all had allocations cut Hornby.com didn't - and that is a deliberate decision made by someone at Hornby and that is what is causing much of this controversy.

 

[mdvle]

2 minutes ago, Dunsignalling said:

The root of the problem seems to be that Hornby either place their orders with the factories ahead of taking orders from their dealers, or do it so quickly thereafter, that their view of dealer demand is incomplete.

 

It is readily apparent that Hornby are allocating production numbers prior to their big bang announcement - and the problem isn't that but rather that they are accepting more orders for item X than they have ordered from China.  That is simple incompetence.

 

Note that Bachmann is doing the same thing now - their policy of only announcing product every 3 months once it has been made and is in the shipping process is the same thing (just spread over 4 announcements a year).  Yet Bachmann don't screw up their order numbers so badly and they don't allow dealers to order more product than has been made.

 

So the problem isn't when the orders are placed with China - their are pros and cons to the 2 main options - but rather in Hornby's sales department.

[John Isherwood]

Bottom line - Hornby wants all of the cream for itself, but can't bring itself to go wholly direct sales, as it wants retailers to buy the low profit / slow moving stock so that it can recover the value quicker than holding it in its own warehouse.

 

Having your cake and eating it, it's called !!!

 

CJI.

[Dunsignalling]

7 minutes ago, mdvle said:

 

It is readily apparent that Hornby are allocating production numbers prior to their big bang announcement - and the problem isn't that but rather that they are accepting more orders for item X than they have ordered from China.  That is simple incompetence.

 

Note that Bachmann is doing the same thing now - their policy of only announcing product every 3 months once it has been made and is in the shipping process is the same thing (just spread over 4 announcements a year).  Yet Bachmann don't screw up their order numbers so badly and they don't allow dealers to order more product than has been made.

 

So the problem isn't when the orders are placed with China - their are pros and cons to the 2 main options - but rather in Hornby's sales department.

The way to avoid frustration, or the one I am coming around to, is to ignore all-new releases from Hornby unless they are items of copper-bottomed obsession, and wait for whatever names/numbers come along in Year Two. 

 

There's plenty expected from everybody else to keep me happy, and my suppliers in business, in the meantime....

 

John

Edited July 26, 2022 by Dunsignalling

[Dunsignalling]

17 minutes ago, cctransuk said:

Bottom line - Hornby wants all of the cream for itself, but can't bring itself to go wholly direct sales, as it wants retailers to buy the low profit / slow moving stock so that it can recover the value quicker than holding it in its own warehouse.

 

Having your cake and eating it, it's called !!!

 

CJI.

Hornby "can't bring itself to do so" because, as things stand, they lack the capacity, and probably the competence, to handle the volumes required to do it. Neither are they likely to have the capital needed to make it happen quickly.

 

Their strategy (IMO) is to build-up to it gradually so as to spread the necessary investment over a number of years, then bin the dealer network, when they are ready.

 

Woe betide those retailers who don't see the writing on the wall and jump into the arms of Hornby's rivals, before they are pushed.

 

John  

Edited July 26, 2022 by Dunsignalling

[CUCKOO LINE]

What I find strange for a public listed company there is little information on who is responsible for what and none of the directors seem to have any responsibility for marketing strategy.

[The Stationmaster]

31 minutes ago, Dunsignalling said:

Hornby "can't bring itself to do so" because, as things stand, they lack the capacity, and probably the competence, to handle the volumes required to do it. Neither are they likely to have the capital needed to make it happen quickly.

 

Their strategy (IMO) is to build-up to it gradually so as to spread the necessary investment over a number of years, then bin the dealer network, when they are ready.

 

Woe betide those retailers who don't see the writing on the wall and jump into the arms of Hornby's rivals, before they are pushed.

 

John  

But across their various brands that isn't the case.  Their own figures show that direct sales of model railway items (as a percentage of total sales for a particular brand) are way behind some of their other brands.  The model railway range is probably a good deal wider and  larger than some of their other brands but they are clearly able to handle noticeable percentages of sales via a direct route.

 

The chart below shows Hornby's own figures for their various routes to retail sale for a succession of similar half year periods - with in H1 2021 Corgi selling more than twice as big a percentage via direct sales as Hornby.   So they aren't exactly inexperienced in selling direct which suggests that they at least have suitable software in place to handle direct sales even if the scale of the operation might not be up to handling greater quantities (which it might well be for all we know?).

 

You will see that after a not unexpected increase in 202 the growth of that year was not sustained in the model railway or Humbrol areas while all the others continued to grow or at least not slip back.

 

 

Source - Hornby Half Year Report 30.11.21 Published on the Stock Exchange RNS news section

[BMS]

Surely they did not accept pre-orders of 36 times the quamtity they were ordering from the actual manufacturer?

It is interesting that Hatttons, the "bad boys" of the Hornby past, seem to be getting a large amount of the over- produced items.

Having purchased new Rovex, Triang etc etc over the years I am now restricting what I buy direct from them at least.

 

[Dunsignalling]

7 minutes ago, BMS said:

Surely they did not accept pre-orders of 36 times the quamtity they were ordering from the actual manufacturer?

It is interesting that Hatttons, the "bad boys" of the Hornby past, seem to be getting a large amount of the over- produced items.

Having purchased new Rovex, Triang etc etc over the years I am now restricting what I buy direct from them at least.

 

Though most of the Hornby stuff popping up of late in the "New releases" section of Hatton's website seems to arrive in fairly small quantities of each rather than the van-loads of former times.... 

 

Hatton's has a long history of saving Hornby from itself.....

 

John

Edited July 26, 2022 by Dunsignalling

[Drifter]

4 hours ago, The Stationmaster said:

But across their various brands that isn't the case.  Their own figures show that direct sales of model railway items (as a percentage of total sales for a particular brand) are way behind some of their other brands.  The model railway range is probably a good deal wider and  larger than some of their other brands but they are clearly able to handle noticeable percentages of sales via a direct route.

 

The chart below shows Hornby's own figures for their various routes to retail sale for a succession of similar half year periods - with in H1 2021 Corgi selling more than twice as big a percentage via direct sales as Hornby.   So they aren't exactly inexperienced in selling direct which suggests that they at least have suitable software in place to handle direct sales even if the scale of the operation might not be up to handling greater quantities (which it might well be for all we know?).

 

You will see that after a not unexpected increase in 202 the growth of that year was not sustained in the model railway or Humbrol areas while all the others continued to grow or at least not slip back.

 

 

Source - Hornby Half Year Report 30.11.21 Published on the Stock Exchange RNS news section

Direct Premiums? Amazon? Anyone shed any light?
 

So Hornby had a bit an improvement in 2020 and 2021 with their Direct Sales. My LMS was shut for very large periods during this time. A lot of us were confined to our homes and no choice but to use web sales to keep us occupied as we were denied the ability to visit non essential shops. 
 

Sales manager being made the scapegoat, who was supervising him? The Buck stops at the Top. 
If Hornby oversold did they cut their allocation to Direct Sales or did the scapegoat get that right?

 

l find the email from Hornby leaves an even nastier taste.
 

l wonder if any Hornby retailers have had this explanation sent to them as to why their allocations were cut?

[mdvle]

6 hours ago, The Stationmaster said:

But across their various brands that isn't the case.  Their own figures show that direct sales of model railway items (as a percentage of total sales for a particular brand) are way behind some of their other brands.

 

Very interesting chart, thanks for posting it.

 

It tells me Hornby management is asking for trouble in pissing off their retailer "partners" given that those partners are keeping Hornby alive.

 

With direct sales numbers that low Hornby has no realistic chance of going direct only anytime in the next decade at a guess.

 

While the nature of the model train hobby is such that it can be difficult to avoid a company if they make the model of a prototype you want/need the same can't be necessarily said for paint - hobby shops could potentially send a message by pushing competitor paints and the little hobby paints really aren't conductive to online buying...

[GWR-fan]

In the not so distant past there was an American company,  Aristocraft who historically made all manner of toys,  however, recently they concentrated on 1/29 scale model railroads.  Prior commencing a production run of a predetermined total,  every single part had to be ready so that the run could proceed smoothly.  If a run was 1000 items then every part needed to make those items had to be available and onhand.  It was not simply a matter of extending a production run to make a few more if demand was there as additional parts were not available.   

 

That however, does not excuse the total lack of Hornby management for many years to estimate the potential demand for a new item and cater production to suit that demand.  It was either feast or famine.  With Aristocraft the items were made and then placed in a container awaiting payment prior shipping.  Does Hornby need to make upfront payments prior the production run,  thus  possibly limiting the size of the run if finance is unavailable for additional items?

[john new]

On 26/07/2022 at 05:50, teaky said:

Thank you for sharing your correspondence 64F.  Hornby certainly deserve some credit for answering most of the points you raised.

 

I read Hornby's words regarding stock via their direct channel as exactly what you said at the end of the sentence quoted above.  Unfortunately, they have failed to explain the key point raised in the very first post of this thread: "Of the 37 they had on order, they have been allocated just 1 (one), but they are still available to order (full price) from Hornby's website."  It is bad enough to be cutting allocations so drastically but without using their own stock to partly mitigate the problem they give the impression of forcing the retailers to shoulder the burden rather making an effort to absorb as much of the financial hit themselves as they can.

 

Whilst I have sympathy for the supply problems caused by events not under Hornby's control, I remain unconvinced though regarding Hornby's ethics.  I have several pre-orders with retailers and they will stay as they are.  If I do not receive these orders because allocations have been cut then I will do without rather than order direct.  They probably don't give a monkey's about my opinion but there it is.

 

But it was and is under their direct long-term control, the basic decision to out source production. It went to third parties based thousands of miles away in China, which obviously makes things more difficult, but they choose to stop making their own product therefore lost that flexibility. The shift might have been technologically or financially justified, but as we are now seeing when a company/organisation chooses to outsource it loses some of the control it had with “in-house” processes. That applies to any industry or organisation, not just Hornby.

[40F]

Does anybody know WHO is actually running Hornby ? My guess is a bean counter who does not understand the hobby. The reply given to 64F is standard corporation gobblygook with an element of truth. Hornby have shot themselves in both feet. 

[CUCKOO LINE]

25 minutes ago, 40F said:

Does anybody know WHO is actually running Hornby ? My guess is a bean counter who does not understand the hobby. The reply given to 64F is standard corporation gobblygook with an element of truth. Hornby have shot themselves in both feet. 

As I said in an earlier post I can,t obviously see a director with any responsibility for marketing and marketing policy !

[Andy Hayter]

25 minutes ago, CUCKOO LINE said:

As I said in an earlier post I can,t obviously see a director with any responsibility for marketing and marketing policy !

 

As a point of interest I went to a well known UK company and looked at its board make up.  Please point out the marketing director

 

https://www.tescoplc.com/about/board-board-committees-and-executive-committee/board/#:~:text=Our Board comprises the Chairman%2C Group Chief Executive%2C,Chief Financial Officer Melissa Bethell Independent Non-executive Director

 

It really is not that unusual (and incidentally this was the first search I did.)

 

As for other pints made about Hornby extending its production runs, I strongly suspect that pople do not understand what is the likely process for producing a model.

 

Given the relatively short time period between announcement and delivery of the model (Remember the Bachmann days of 5+years!) contracts for production will already have been conducted before the model is produced.  This will include volume of production.   The opportunity for increasing that number might be small to zero.  In the days of working with Sanda Kan, Hornby would have had that flexibility.  Now with production spread around a number of producers, it may be that the options are to reduce one popular model in order to produce more of another - for example the hush-hush and the Coronation coach sets.

 

What does seem clear however is that Hornby must know quite early after announcement whether they can fulfil the demand or not.  If they cannot then they are duty bound to inform their trade network asap.  A duty they have failed in carrying out.  

[Legend]

1 hour ago, 40F said:

Does anybody know WHO is actually running Hornby ? My guess is a bean counter who does not understand the hobby. The reply given to 64F is standard corporation gobblygook with an element of truth. Hornby have shot themselves in both feet. 

 

As a "bean counter" I can tell you that he would most definitely ensure that they had a proper ordering system and would be doing his best to maximise income  by fulfilling all orders . He would also be advising they have a more robust supply chain . This is basic business . You really don't need to understand the hobby  for these basic functions . They are the same no matter what you selling 

[spamcan61]

16 minutes ago, Andy Hayter said:

 

 

Given the relatively short time period between announcement and delivery of the model (Remember the Bachmann days of 5+years!) contracts for production will already have been conducted before the model is produced.  This will include volume of production.   The opportunity for increasing that number might be small to zero. 

That is the root of the problem IMHO, if they announced the models and took retailer orders before production qtys. were set a lot of this mess would be avoided. OK there could then be a 2-3 year wait before the product turns up, which would lead to much whinging in some quarters, but at least there should be a reasonable match between supply and demand. 

[Dunsignalling]

39 minutes ago, Andy Hayter said:

 

What does seem clear however is that Hornby must know quite early after announcement whether they can fulfil the demand or not.  If they cannot then they are duty bound to inform their trade network asap.  A duty they have failed in carrying out.

  

Your final paragraph describes the situation perfectly.

 

However, what is the cause? Systems failure? Incompetence? Something more calculated?

 

The thought occurs that, having allocated future funding to Hornby goods that, some months down the road, turn out to be illusory, smaller retailers are inhibited from ordering greater quantities from Hornby's competitors before they close their order books.

 

John

Edited July 27, 2022 by Dunsignalling

[jjb1970]

I had a colleague many years ago who liked to say that if people or organisations can't get the basics right there's no point trying to do the more difficult stuff. Hornby really do need to sort out their ordering systems. 

Their supply chain seems reasonably functional, unlike a few years ago they have product to sell and a good flow of items. If production numbers are wrong that's a problem at Hornby's end rather than with manufacturers.

Understanding what the market wants and estimating production numbers needs knowledge of the hobby, but setting up a functional ordering system, managing a supply chain and working with a retail network aren't don't. A lot of it is basic general management. I think DJM demonstrated that having a model enthusiast in charge is no guarantee of sound management.

[Dunsignalling]

4 minutes ago, spamcan61 said:

That is the root of the problem IMHO, if they announced the models and took retailer orders before production qtys. were set a lot of this mess would be avoided. OK there could then be a 2-3 year wait before the product turns up, which would lead to much whinging in some quarters, but at least there should be a reasonable match between supply and demand. 

A longer timescale in delivery of models would be immeasurably more desirable than the sort of fiasco that has occurred here.

 

I suspect, though that Hornby are running scared that if they gave longer notice of new releases, competitors would jump to duplicate, something that nobody in their right minds would do deliberately.

 

Judging everyone else by their own standards? 

 

John

[AY Mod]

1 hour ago, CUCKOO LINE said:

As I said in an earlier post I can,t obviously see a director with any responsibility for marketing and marketing policy !

 

Simon Kohler's role is Marketing and Development Director, he is not a board member but is a shareholder.

[jjb1970]

I do have sympathy for Hornby on the matter of when to announce items. If they announce early they will be criticized for the time needed to bring new items to market and probably accused of making land grabs to foil competitors. If they announce late they face the potential issue of getting production numbers either too low and disappointing people or too high and ending up offering fire sale discounts as well as competitors announcing the same items. On balance I much prefer announcing new items when they are ready. If the new Bachmann 37's sell out overnight I am sure the second run will be out long before the time we'd have waited if they'd announced early.

[The Stationmaster]

1 hour ago, Andy Hayter said:

Snipped

 

What does seem clear however is that Hornby must know quite early after announcement whether they can fulfil the demand or not.  If they cannot then they are duty bound to inform their trade network asap.  A duty they have failed in carrying out.  

I would think that in many cases they know before announcement how many they have  ordered of whatever particular model or livery variant.  Looking at lead times in the industry and the intended availability dates quoted in the Hornby catalogue/online they must have some production slots, especially for more complex models such as locos, booked before announcement even though they have not even received livery samples in most cases and EPs in more than a few.

 

But any factory orders established at that stage they must surely have in position by end December the financial planning for factory orders yet to be placed for models intended to be delivered in the following 12 months.  if they haven't done that how will they prepare their budgets?  You can I think also reckon that anything listed for Q1 and Q2 delivery will be in the current financial year's budget so numbers ordered from the factory will definitely be known before retailers' orders are taken.

 

Q3 and Q4 items will more likely (definitely for the latter) involve production expenditure in their next financial year but again surely a lot of the planning for that will have been ready by end December because how else could release dates be arrived at?  And planning in this context also means they know how much they will spend on production so can only be derived starting from the number of models they have ordered or plan to order.

 

The only likely flexibility available looks as if it might be applied to planned Q3 and Q4 releases and it might be possible to revise numbers after trade orders are taken in January but it needs a responsive and well controlled ordering system to do that.  But if they have pre-booked factory capacity over an extended term - say to secure the best possible deal(?) - then that might remove such flexibility.  But contrary to that it seems from past events that seemingly rapid production of Year 2 runs might well mean some flexibility exists where the tooling is available - but are they at the cost of capacity for something else?