Made in uk vs made in china

[hammy]

Intresting video that's just been flagged on my Facebook feed more to do with airfix but intresting never the less

 

 

Link written on phone Internet may not be a click link if in wrong place or not wanted feel free to remove

['CHARD]

Well worth watching.  Interesting to see how 'Western' the whole interview and programme style is, plus the obvious respect to the red team's Made In Britain heritage.   Hornby's MD comes across credibly too.  Time well spent.

[Ron Ron Ron]

Note the Made in India boxes in the warehouse (5mins+ in).

[GreenDiesel]

I just saw this on Facebook. 

 

I'd been speculating (for some time now, even in an old RM Web thread) that manufacturing might start returning to the UK (and to Canada & the USA, etc.) especially if transporting goods became too complicated/costly & if overseas labour costs became too expensive.

 

I need to watch the video again but it sounds promising.  I'd be willing to pay slightly more if British RTR products were made in the UK, etc.

 

Rob

[micklner]

already in Hornby 2014 thread

[Fenman]

...  I'd be willing to pay slightly more if British RTR products were made in the UK, etc.

 

Fascinating - and thanks for posting (I'd missed it in the Hornby thread).

 

Roger Canham was impressive, I thought, but his most telling point, for me, was that 50% of the total cost of manufacturing a model railway item is labour. That fact means we can do some sums, to test roughly what the difference in cost might be of Chinese versus UK manufacture.

 

Assuming current Chinese hourly manufacturing wage rates are $2-2.50 (call it $2.50, or about £1.50 an hour). UK minimum wage (and skilled manufacturing wages will of course be higher) is currently £6.31 - or about four times higher than the Chinese cost.

 

So (and I know this is really crude), if a Hornby loco has an RRP of £100, let's assume the actual cost is £50, and therefor labour is currently £25.

 

Multiply that current Chinese labour cost by 4 to get the UK labour cost, and the cost of labour in your loco now becomes £100.

 

Add back the £25 of other manufacturing costs (I know, I know - shipping will be less; but then UK land taxes and other regulatory costs are likely to be higher), and you get to £125.

 

Then multiply that by two to get the RRP and...

 

Hey poncho: your £100 Chinese-manufactured loco has just become a £250 UK-manufactured loco.

 

Blimey. Is that the "slightly more" you had in mind, for returning manufacturing to the UK?!

 

Paul

[GreenDiesel]

already in Hornby 2014 thread

Sorry, should have checked first.

[GreenDiesel]

Fascinating - and thanks for posting (I'd missed it in the Hornby thread).

 

Roger Canham was impressive, I thought, but his most telling point, for me, was that 50% of the total cost of manufacturing a model railway item is labour. That fact means we can do some sums, to test roughly what the difference in cost might be of Chinese versus UK manufacture.

 

Assuming current Chinese hourly manufacturing wage rates are $2-2.50 (call it $2.50, or about £1.50 an hour). UK minimum wage (and skilled manufacturing wages will of course be higher) is currently £6.31 - or about four times higher than the Chinese cost.

 

So (and I know this is really crude), if a Hornby loco has an RRP of £100, let's assume the actual cost is £50, and therefor labour is currently £25.

 

Multiply that current Chinese labour cost by 4 to get the UK labour cost, and the cost of labour in your loco now becomes £100.

 

Add back the £25 of other manufacturing costs (I know, I know - shipping will be less; but then UK land taxes and other regulatory costs are likely to be higher), and you get to £125.

 

Then multiply that by two to get the RRP and...

 

Hey poncho: your £100 Chinese-manufactured loco has just become a £250 UK-manufactured loco.

 

Blimey. Is that the "slightly more" you had in mind, for returning manufacturing to the UK?!

 

Paul

Yes, I realize that our labour costs are much higher in the west and that "slightly more" could mean a LOT more. It will be interesting to see how this plays out. I believe Hornby locos were made in the UK before 2000, but I also know that standards and detail have also improved great since then.

[jjb1970]

Prior to the 2008 implosion there was speculation of a gradual return of certain manufacturing due to expected rises in shipping costs on top of the slow equalization of wages. One of the things that has promoted outsourcing is that shipping costs are really almost trivial to move bulk freight from Asia to Europe or the USA but leading up to 2008 the increasing cost of marine fuel was expected to really inflate these costs to the point where it made returning some production viable. After the crash the high fuel prices were offset by ruthless cost competition as shippers tried to keep load factors up and avoid going under, which was made possible by the financial services sector bending over backwards and more to avoid shipping lines going into liquidation. Whether that was good or bad is debatable, the banks avoided a carnage in the industry but the continued existence of so many zombie companies has hammered those who were in a position to ride out the storm and at some point there will need to be some sort of shake down. The banks were in a catch 22 position, if they'd pushed the ship owners because the average world fleet age is so low all that'd happen is they'd take possession of 100's or nearly new ships that nobody wants with dire implications for their own balance sheets writing down billions worth of technical assets so they saw it as preferable to put them on life support in the hope things would pick up.

One thing that'd help is lower energy prices, the shale gas revolution and low(-ish) cost energy in the USA has been encouraging some in-sourcing, energy costs in the UK may end up being as big a barrier as labour costs for energy intensive industries, things like carbon emissions costs etc.

[The Stationmaster]

Fascinating - and thanks for posting (I'd missed it in the Hornby thread).

 

Roger Canham was impressive, I thought, but his most telling point, for me, was that 50% of the total cost of manufacturing a model railway item is labour. That fact means we can do some sums, to test roughly what the difference in cost might be of Chinese versus UK manufacture.

 

Assuming current Chinese hourly manufacturing wage rates are $2-2.50 (call it $2.50, or about £1.50 an hour). UK minimum wage (and skilled manufacturing wages will of course be higher) is currently £6.31 - or about four times higher than the Chinese cost.

 

So (and I know this is really crude), if a Hornby loco has an RRP of £100, let's assume the actual cost is £50, and therefor labour is currently £25.

 

Multiply that current Chinese labour cost by 4 to get the UK labour cost, and the cost of labour in your loco now becomes £100.

 

Add back the £25 of other manufacturing costs (I know, I know - shipping will be less; but then UK land taxes and other regulatory costs are likely to be higher), and you get to £125.

 

Then multiply that by two to get the RRP and...

 

Hey poncho: your £100 Chinese-manufactured loco has just become a £250 UK-manufactured loco.

 

Blimey. Is that the "slightly more" you had in mind, for returning manufacturing to the UK?!

 

Paul

Quite agree but I wonder about your numbers Paul - Hornby's trade discount (currently, it seems, likely to be changed/changing) was probably about 30-40%, a past Hattons retail price will give a pretty good guide as they work on extremely tight margins.  So immediately the £100 loco in the shop becomes a £ 60-70ish out of Margate.  Hornby's gross margin across all products (so not just railways) is c.40% so the cost on arrival at Margate including shipping and incidentals could probably be as low £30 and probably no more than £40.  So the labour cost is roughly £15-20, which in fact sounds pretty high when compared with Rapido's labour cost for items involving far more hand assembly of many more detail components - Rapido quoted a shade under $13 (Canadian) for assembly work on a coach which requires 7.5 hours of labour although those figures are just over a year old and have probably risen by about 20%, the Canadian Dollar is currently worth 57p.  

 

So in fact labour as an element in the final retail price is fairly small but Chinese labour costs are rising on average at about 20% per annum although the rate of growth, and actual cost per hour, is considerably less in some provinces.

 

But the retail price is far removed in reality from the cost of labour - true it is an important element and it becomes more important as it rises but it is only one element in a complex mixture.  But your point is still valid, moving production to Britain would increase the cost of the assembly labour input alone by at least a factor of four which at best pushes the manufacturer cost of the loco to a minimum of £60, i.e. double the cost of production in China.  But then we also need to consider the cost of development labour and toolmaking which would also be much greater in Britain (assuming the necessary skilled people could be found to do the job) and the development cost already forms a significant element of the retail price with short run models.  There's a saving on shipping but an increase in printing and packaging as printing is more expensive here than in China - and so it goes on, even if you get a grant to build your factory and train workers (assuming you can find any).

 

So overall I agree absolutely - returning model railway manufacture of this sort to Britain wili result in at least the doubling of the retail price and probably even more than that.  And I truly think that we are unlikely to see it happen unless other reasons drive it (and the prices will still rise of course). 

[Fenman]

Quite agree but I wonder about your numbers Paul - Hornby's trade discount (currently, it seems, likely to be changed/changing) was probably about 30-40%, a past Hattons retail price will give a pretty good guide as they work on extremely tight margins. So immediately the £100 loco in the shop becomes a £ 60-70ish out of Margate. Hornby's gross margin across all products (so not just railways) is c.40% so the cost on arrival at Margate including shipping and incidentals could probably be as low £30 and probably no more than £40. So the labour cost is roughly £15-20, which in fact sounds pretty high when compared with Rapido's labour cost for items involving far more hand assembly of many more detail components - Rapido quoted a shade under $13 (Canadian) for assembly work on a coach which requires 7.5 hours of labour although those figures are just over a year old and have probably risen by about 20%, the Canadian Dollar is currently worth 57p.

 

...

 

So overall I agree absolutely - returning model railway manufacture of this sort to Britain wili result in at least the doubling of the retail price and probably even more than that. And I truly think that we are unlikely to see it happen unless other reasons drive it (and the prices will still rise of course).

Thank you, Mike, for injecting some much-needed reality into my "back of a fag packet" guesstimates.

 

Paul

[Barry O]

The price can be contained by removing as much of the labour content as you can (design clever). Where we, in the UK, make best use of CNC machines is where we can deliver very good quality items at a competitive price.

 

The way things are going the Chinese labour prices will continue to rise, design for manufacture will prevail and we may yet see us making model railways in the UK. 

 

I wait and see but the quality from China seems to be going down, the delivery times are moving sharply to the right and labour costs are going up...  

[Rivercider]

Could manufacturing be done in the UK, but with labour recruited from elsewhere in the EU, with a lower wage?

 

cheers

[Neil]

I know it's hard to quantify but I wonder how much the manufacturing delays in China have cost Hornby. Could this help nudge things in favour of UK production?

[Neil]

Could manufacturing be done in the UK, but with labour recruited from elsewhere in the EU, with a lower wage?

 

cheers

 

I believe that the UK minimum wage would still apply in such case. I know that the unscrupulous can/do find ways round this, but I would hope that a company like Hornby with a reputation to protect would have a business ethic which would preclude such sharp practices.

[Rivercider]

I believe that the UK minimum wage would still apply in such case. I know that the unscrupulous can/do find ways round this, but I would hope that a company like Hornby with a reputation to protect would have a business ethic which would preclude such sharp practices.

Yes, you are obviously correct.

What I guess I was thinking was, that if you set up in the UK and offered just the minimum wage the recruits would be from outside the UK,

 

cheers

[Butler Henderson]

Another cost factor on Chinese/Indian production is that Hornby will buying the products from the supplier, ie not just the labour cost, but all other costs including the suppliers profit and the cost of the source materials. The former would not exist if they made the items themselves but the latter could vary.

[alfsboy]

I just posted off a small order for my cast 0 scale figures.it paid for a complete  decently made playable electric guitar made in China.Go figure ...............

[Ozexpatriate]

The only manufacturing Hornby has brought back to Britain (so far) is paint mixing (Humbrol) and the LEGO-like Airfix quick-build kits. Previously, Airfix and Humbrol manufacturing was in India.

 

(Most of the Airfix manufacturing still is.)

 

These decisions speak more about how difficult it is to manage manufacturing in India, more than they say anything about China.

 

I guess we can conclude that India is not yet ready to take over the manufacturing mantle from China as Chinese labour costs rise. They'll have to rise a lot more before anyone brings production back to Britain.

[Pugsley]

Yes, you are obviously correct.

What I guess I was thinking was, that if you set up in the UK and offered just the minimum wage the recruits would be from outside the UK,

More than likely.  The benefits system and our high cost economy almost guarantees that outcome.  It's not so bad to make sacrifices for a couple of years, if by doing that you earn enough money to go back home and set yourself up nicely.  It's another thing entirely if you have to live here for the rest of your life.

[Dave47549]

 

.

[cary hill]

Could manufacturing be done in the UK, but with labour recruited from elsewhere in the EU, with a lower wage?

 

cheers

 

Give the Dacians a chance I say.

[Fenman]

One thing that ALWAYS gets forgotten when the 'backofafagpacket' accounting comes into play is that for EVERY UK job binned in favour of so called cheaper foreign outsourcing is that there is one less earner/tax payer in this country. That's one less person contributing their disposable income towards the upkeep of other businesses. Hornby et al may like to consider that next time.

 

Hornby is a plc, so if they start considering things like that they'll be hustled towards bankruptcy.

 

You only have to read RMweb to see the overwhelming domination here of people who want the cheapest possible prices.

 

This may be one of those "problems of the commons", where what is good for us as a group may not be the same as what seems to be the best for us as individuals.

 

Not saying it's right or wrong - just that it seems inevitable where the market wants "low cost" above anything else.

 

Of course, theoretically all that surplus UK labour is then available for much more efficient investment on high-value-added products or services. It's just, not everyone has the skills or aptitude necessary for those types of work.

 

Paul

[Legend]

Maybe it doesn't need to be all or nothing though. A bit like they have done for Airfix it might make sense for some Hornby items, those with less labour content, to be made in Uk. Not sure what that would be, maybe track or Skaledale, even some simple rolling stock?think of the Kudos Hornby would get having part of their range made back in the UK. And they need to get their buns out the fire at the moment. Could do with some positive PR .

 

Interestingly I remember a period (late 70s) when QC was appalling. I well remember the original HST given as a Christmas present that expired on boxing day. Taking it back to Argyle Models he had all his remaining power cars out the train set packaging desperately searching for one that worked. On another occasion I was going to to be surprised by a 37 , they couldn't find one that worked in the shop , so I got a Mallard instead (1979). So bringing production back would not necessarily improve QC!

[jjb1970]

I had the same problem with my trainset at about the same time, it was the LMS Duchess mail set, a lovely little train set but it took two locomotives and three transformers to get a working set up. And for a kiddie to wake up on Christmas day to find out the train set they've been lusting after doesn't work doesn't do much for a happy Christmas day!! There really is no excuse for poor QC, if you buy a cheaper product then you should accept compromises in terms of materials, style, longevity, efficiency and a lot of other things depending upon what it is but one thing that should not alter is that what you buy should work as advertised. I've been very lucky train wise (Hornby train set notwithstanding.....) and the few bad experiences I've had have not been limited to one manufacturer but clearly a lot of legitimate complaints have been raised over Hornby and that is not good. Regardless of design clever, Railroad range etc etc the models should work and be in good condition when delivered.