One question I have begun asking myself is in order for a manufacturer to justify the need to tool a new run of locomotive, or for a new run of rolling stock or other product related to model railroading how many preorders of units of said product are needed to go ahead with tooling?I learned about this when I started following Rapido Trains Incs newsletters, Q&As and other videos. In one newsletter in which they talked about the CN & CP ten wheeler 4-6-0 steam locomotives, the ones next in line after the Royal Hudson in their icons of steam line. Jason Shron, the president of Rapido said in last Rapido Q&A said that they where conered at the lack of preorders for the CN H6, which where half of the preorders for the CP D10 ten wheelers. I am guessing this is because we want to see a sample of the D10 and how a smaller HO Rapido steam loco operates, do they will know how the H6 will as well.They also at one point showed conerned abouit the preorder numbers for Rapidos HO scale Rohr Turbo liner, and how one scheme being the demonstrator only had about eight preorders. I am glad the Rohr Turboliner is a go and the head of the project, Jordon can see his dream come true of seeing this Turboliner being made in HO scale for the first time.I dont know if my question is something manufacturers can answer due to legal confidentiality laws, but I am hopping for an estimate.Edit Note as of Friday July 27th, 2020 - I am a bit overwhelmed with all the replies on this thread I started. I will need time to read through them all to reply to some. Thank you for commenting none the less, I do appriciate it.
You need to amortize the production costs into the run, so the number will vary from one model to another.
Setting price point is all internal to each company.
If you know a Big Boy will sell 250,000 units, the tooling cost can be spread out among many models. If you know a B&O EM-1 will only sell 100,000 units, the cost per model will be higher.
The maufacturer needs to set the price point high enough to cover these costs, but not so high to limit sales.
In short, there is no way to answer the question.
-Kevin
Living the dream.
It is indeed a trade secret. Jason is more open than most about roughly where they're at on preorders. Not sure he posts exact numbers though?
The numbers will also vary widely even if they were discussed. A loco is a much higher ticket item than a freight car. Simple is cheaper than complex. Items that can be produced in multiple versions make a mold more able to produce future variants while some molds might produce an item that is essentially one variant to remain accurate.
Your question is a bit like asking how far you can push a string. Depnds on the string.
EDIT: I'm pretty sure Kevin's numbers were just picked at random as examples. It's more likely that a popular model like a Big Boy is closer to 2,500 in a run than 250,000. I suspect most runs of locos are likely well under 10,000 units. It's a point that worth making, because while there are economies of scale in manufacturing, in this hobby it's nowehere near large enough to expect lower pricing just because a unit is popular and sells well. These aren't Walkmans (do kids even know what that is?) or microwaves.
Mike Lehman
Urbana, IL
Some brass runs are below 1000 units. In order to stay in business, those prices per unit have to be pretty steep. Not just profit, but re-investment and new capitalization.
For a first run, I would think most suppliers would want at least 8000 units sold. Thereafter, without having to pay for tooling, they might be satisfied with about half that many.
It's just my guess. Those numbers might be too much too small.
mlehman It is indeed a trade secret. Jason is more open than most about roughly where they're at on preorders. Not sure he posts exact numbers though?
In manufacturing engineering (and I am sure in other disciplines too, although I am speaking just from my own training) there is a process called a break-even anaylsis. Its the methodology of deciding on what form of manufacturing can be used, how many units can sell on market, cost of labor, shipping, and lifetime of use for the manufacturing process before replacement. I am sure the exact calculations used by each manufacturer are indeed a trade secret, but its pretty easy to imagine that to make an injection molded product requires x-amount of unit sales before the product is profitable. Again, different manufactuing methods have different break even anaylsis. A 3D Printer and a wood laser cutter are both relatively cheap, but they churn out a lower number of items per hour of operation than an injection molding machine would, and that needs to be factored. That is why a 3D printed design is so great for one off products and rare prototypes, they can be ordered 'on-demand' and produced in one off batches. Brass due to its lower rate of produciton can also make smaller batches of rarer prototypes, but expect the cost to be higher just to reach the break even point. Injection molding will churn out thousands of pieces in relatively fast time, but has a much higher initial investment into tooling that requires a larger audience to justify purchasing the model.
When the Hudsons arrived at the Rapido warehouse they showed a photo of them all. There were four Hudsons per carton, so I did a count of the pallets and cartons and guessed there were 2400 Hudsons. I am probably way off.
Brent
"All of the world's problems are the result of the difference between how we think and how the world works."
BATMANguessed there were 2400 Hudsons. I am probably way off. Add Quote to your Post
Maybe not, but it is a secret.
I do know the number of each miniature that Reaper Miniatures initially made in their "Bones" line of injection molded models made in China. The number was MUCH LOWER than what I would have guessed for the break-even point.
And they made a profit!
I have no way of knowing, but I would guess the up-front costs of injection plastic molding have come down.
LastspikemikeA single HO locomotive in its own box might cost $25 just to get it from Ontario to me. It cost basically zero per unit to get from China to Vancouver by container ship.
Years ago, industrialized countries agreed to subsidize shipping costs from under-industrialized countries. In effect, U.S. and Canadian taxpayers subsidize Chinese companies' shipping costs. This is part of the Universal Postal Union.
The U.S. tried to end this last year, but as far as I know, we still are doing it. However, rates are supposedly being adjusted to correct this.
It costs more to mail a package from one U.S. city to another U.S. city than it costs a Chinese company to mail the same package from China to that city.
York1 John
York1It costs more to mail a package from one U.S. city to another U.S. city than it costs a Chinese company to mail the same package from China to that city.
A few years ago I sold two small models on eBay. One went to Georgia, and the other to Norway.
It was less postage to ship the model to Norway.
York1Years ago, industrialized countries agreed to subsidize shipping costs from under-industrialized countries. In effect, U.S. and Canadian taxpayers subsidize Chinese companies' shipping costs. This is part of the Universal Postal Union.
It served its purpose and now through ongoing negotiations is being changed one country at a time, albiet slowly as it is tied to so many factors.
Canada Post runs the postal systems of about 30 third world countries and that just shows what kind of complications have to be dealt with. It is a most complicated issue that falls within the pervues of foreign aid and/or trade. This is only one example of the intracacies of the situation. The Canadian Federal Government through Canada Post runs some foreign Post Offices as foreign aid as there is just no way a third world can run a profitable Post office.
I spent 36 years in world logistics and we often moved things by mail depending on what country(s) was involved. Cost were never a constant.
Twenty years ago I was talking to a manufacturer's rep at a hobby train show about production in China. It cost his company $4 to send a kit produced in the USA to China for assembly and packaging, and return.
Interesting OP. I have been waiting for Intermountain to rerun ATSF stock cars for years. Those molds are already made, all Intermountain has to do is produce the cars. Their web site says they are accepting reservations for several runs of cars; but my dealer emailed me Friday saying that Intermountain has cancelled the runs, not enough demand.
A few facts without getting too specific about numbers I do know......
As mentioned above, there is the break even number, the minimum to support the tooling and setup costs at a price considered marketable.
Then there is the maximum economy of scale number, the number at which production does not get any cheaper.
That would be the ideal volume per run if there is suitable demand for the product.
Starting in the late 80's, the cost of injection molding tooling has declined to an amazingly low level - but our models have gotten much more complex.
When LifeLike, Bachmann and Atlas began this off shore production of high detail, high quality plastic models 30 years ago, LifeLike and Bachmann in particular had deep pockets and invested in lots of inventory.
They were working on the old business model like Athearn and others had for years, and they had very large margins based on the exchange rate, cost to produce, and their willingness to buy at that "maximum economy of scale" volume.
That worked well for a while, they could afford to sit on that money and wait for stuff to sell.
Walthers did similar stuff, more with rolling stock and structure kits.
That was 30 years ago......now there are 30 years worth of new prototypes for people to want, in addition to those older prototypes that some are still interested in.
So even if the number of modelers has stayed the same or increased some, the demand for any one model is very likely much smaller than it was when the first Spectrum K4 or 2-8-0, or LifeLike GP7 hit the market.
And costs have risen in China faster than the rate of inflation, eating into those high margins of those early days.
Those high margins allowed them the luxury of sitting on lots of inventory.
From what I know, what I saw in person, and what I was told, in the early 90's a typical "run" of a Proto2000 loco was in the five figures, and sometimes pretty well into the five fiqures. And they came with and extensive stock of parts.
The expectation seems to have been that a "run" was actually the projected 3-5 year demand for the item. They may have been optimistic.......
Today it is way different, and many of the customers are way different.......in ways I don't always understand.......
I'm sure production runs are smaller now........
I just know this, I have most of the trains I want for my next version of the ATLANTIC CENTRAL. And I am not stuck on the idea that every model needs to be some high end rivet counter model.
So if someone makes something new of interest, I may pick up a few, if not, ok.
Just one of the advantages of having been at this for 54 years.....
Sheldon
Most Manufacturers today Only build Enough to cover orders. The new BTO Is the new mantra Of manufacturing Nobody wants to be stuck with inventory. If it sells out The better it is for the manufacturer or importer. The days of stocking nventory for 3-5 years is Long over .
Look at what scale trains does They do exactly What I mentioned above if There's more demand for an item they do 1⁄2 3rd run.
Dave
DAVID FORTNEY Most Manufacturers today Only build Enough to cover orders. The new BTO Is the new mantra Of manufacturing Nobody wants to be stuck with inventory. If it sells out The better it is for the manufacturer or importer. The days of stocking nventory for 3-5 years is Long over . Look at what scale trains does They do exactly What I mentioned above if There's more demand for an item they do 1⁄2 3rd run. Dave
Clearly true, but trust me, it is bad for the hobby.
Lastspikemike ATLANTIC CENTRAL DAVID FORTNEY Most Manufacturers today Only build Enough to cover orders. The new BTO Is the new mantra Of manufacturing Nobody wants to be stuck with inventory. If it sells out The better it is for the manufacturer or importer. The days of stocking nventory for 3-5 years is Long over . Look at what scale trains does They do exactly What I mentioned above if There's more demand for an item they do 1⁄2 3rd run. Dave Clearly true, but trust me, it is bad for the hobby. Sheldon Good for the hobby. Without this pre-order system nothing interesting would get made. All manufacturing is changing to build to order. Houses are mostly built to order now. It fits really well with computerized manufacture of components for assembly. Car makers build only what is sold, mainly for dealer stock in North America but in other markets you order what you want and it gets put into the production line. Everybody saves money if all that is made is already sold.
ATLANTIC CENTRAL DAVID FORTNEY Most Manufacturers today Only build Enough to cover orders. The new BTO Is the new mantra Of manufacturing Nobody wants to be stuck with inventory. If it sells out The better it is for the manufacturer or importer. The days of stocking nventory for 3-5 years is Long over . Look at what scale trains does They do exactly What I mentioned above if There's more demand for an item they do 1⁄2 3rd run. Dave Clearly true, but trust me, it is bad for the hobby. Sheldon
Good for the hobby. Without this pre-order system nothing interesting would get made.
All manufacturing is changing to build to order. Houses are mostly built to order now. It fits really well with computerized manufacture of components for assembly. Car makers build only what is sold, mainly for dealer stock in North America but in other markets you order what you want and it gets put into the production line.
Everybody saves money if all that is made is already sold.
I am not questioning how or why it has evolved to this.
But as the grumpy old men sit around and talk about the hobby dieing, and a handful of them ask "how can we get new people interested?", I would submit this one simple fact.
Be it online or in a store, the fact that a beginner cannot easily buy a locomotive and a matching set of passenger cars all at the same time in the same place, is a discouragement to new people.
There are people on this forum who laugh at me because I run Athearn passenger cars and I am happy with Athearn blue box cars mixed in with my uber detailed Kadee, Intermountain, (fill in your favorite brand of high end RTR).
But I won't live long enough to see everything I want made in high detail RTR, and I won't live long enough (even though I have the skills) to scratch build/detail all of them to that level.
I am going to build and play with the layout NOW, not when the pre order shows up.........all 1000 freight cars, 300 passenger cars, 130 locomotives, 1400 feet of track, filling 1500 sq ft worth.
I worked in the train store, I got people started in this hobby, and waiting a year for some model is not the way to attract new people.
I don't have an answer to this problem.
BUT as I said, I'm glad I have most of what I need and want to build the next ATLANTIC CENTRAL.
Nothing interesting will be made? I don't own a model of a BigBoy, or a NYC Hudson, or a PRR K4.
I own a bunch of boring Mikados, Mountains, Consolidations, and Pacifics like most railroads did. And I did not pre order any of them.
I have said this before, I will say it again. Knowing what I know, if I had to start over from scratch in this hobby, based on product availablity alone, I simply would not.
the most important cost of a run is the new tooling, and the number of these ...
if it sends the costs up astronomically, then the new run is dead in the water due to this costs being added on to the end user ..
Houses mostly built to order? Maybe where you are, not around here.
I restore historic houses, and do medium to high end remodeling for a living. The developers put a hundred cookie cutter houses for every custom home around here - even in the $500,000 price range - which is the beginning of expensive in these parts.
Clearly it is time for me to go back to sleep for another week.......
LastspikemikeWell, hardly. China as well as other countries subsidize their postal systems which only looks like countries who don't subsidize their own system any longer are now subsidizing them but that's a really odd way to look at what was actually agreed upon. Also bear in mind the whole system was invented by America.
I'm not sure I understand what you're saying.
A Chinese package is carried by the Post Office in the U.S. or Canada at a rate that is lower than the actual cost.
https://en.wikipedia.org/wiki/Universal_Postal_Union
York1 Lastspikemike Well, hardly. China as well as other countries subsidize their postal systems which only looks like countries who don't subsidize their own system any longer are now subsidizing them but that's a really odd way to look at what was actually agreed upon. Also bear in mind the whole system was invented by America. I'm not sure I understand what you're saying.
Lastspikemike Well, hardly. China as well as other countries subsidize their postal systems which only looks like countries who don't subsidize their own system any longer are now subsidizing them but that's a really odd way to look at what was actually agreed upon. Also bear in mind the whole system was invented by America.
I can't make heads nor tails out of it either.
ATLANTIC CENTRALHouses mostly built to order? <SNIP> The developers put a hundred cookie cutter houses for every custom home around here - even in the $500,000 price range - which is the beginning of expensive in these parts.
Same here. Probably less than 5% of the houses are built to order. At least 95% are "Spec Homes", one just like the other, put up either in old neighboprhoods like mine, or stuffed in 10 to an acre in new "high density" communities.
These houses sit on the market for no more than three months after they are built.
Yes, the $500,000.00 4,000 square foot house on a .085 acre lot is a real thing now, and they have no problem selling them.
People are willing to give up a convenient location, back yard, four car driveway, and city infrastructure to live in an ugly half-million dollar brand new house made out of OSB and steel studs.
SeeYou190Lastspikemike Well, hardly. China as well as other countries subsidize their postal systems which only looks like countries who don't subsidize their own system any longer are now subsidizing them but that's a really odd way to look at what was actually agreed upon. Also bear in mind the whole system was invented by America.
tin can I have been waiting for Intermountain to rerun ATSF stock cars for years. Those molds are already made, all Intermountain has to do is produce the cars. Their web site says they are accepting reservations for several runs of cars; but my dealer emailed me Friday saying that Intermountain has cancelled the runs, not enough demand.
I have been waiting for Intermountain to rerun ATSF stock cars for years. Those molds are already made, all Intermountain has to do is produce the cars. Their web site says they are accepting reservations for several runs of cars; but my dealer emailed me Friday saying that Intermountain has cancelled the runs, not enough demand.
Somehow, manufacturers equate the lack of pre-orders as a sign of disinterest. But, it seems to me that the pre-order concept is self-defeating on the part of the manufacturer. Remember the old adage, build it and they will come. If a manufacturer thinks that some item is a good idea, then build it.
From the standpoint of the modeler, it may also be a good idea, but who wants to pre-order and then wait to see if the idea even gets off the ground, maybe as long as 1 or 2 years into the future. Imagine if everything model railroading related were a pre-order. Not only locos and rolling stock but also turnouts, decoders, structures, you name it.
Rich
Alton Junction
Random_Idea_Poster_6263how many preorders of units of said product are needed to go ahead with tooling?
does anyone know what the tooling for a typical model costs?
greg - Philadelphia & Reading / Reading
LastspikemikeCheap Chinese postage subsidizes American recipients, not the Chinese sender. Not coincidentally, your current Administration has a similar and completely wrong headed view of international trade.
Please do not bring politics into any discussion in these forums.
This is where we come to get away from such things and talk about our electric trains.
Number of preorders required to produce a product varies based upon what the product is, what the potential roadnames for the product are, and is a closely guarded secret. I worked for a (still in business) manufacturer; they are my lifelong friends, and they won't even tell me. I only know generalities and am definitely not authorized to comment about anything on any forum on their behalf.
Even passing along a few little tidbits of information in the past went poorly and earned them negative phone calls from people who were ticked off. So I am most definitely not authorized to comment about anything at all, and my posts anywhere are dwindling down to nothing.
The number of pre-orders varies based upon the tooling cost. One project only got made because the Chinese made a sweetheart deal to do the tooling themselves. Because this is now almost ancient history I can probably get away with sharing that the fairly recent plastic Alco C-430 would never have seen the light of day if the tooling were designed in America. With 16 prototype units, and none owned by PRR/UP/SP/ATSF the potential sales numbers were far too low despite a plethora of second- and third-hand owners. The project only became viable because a Chinese builder offered to do the tooling for that one project. Otherwise it would never have happened at all despite some people (including but not limited to me) asking for it for 25 years prior to production.
Normally that manufacturer does a lot of the engineering themselves here in America, including almost all 3D cadd drawings, and including (with railroad permission) climbing all over surviving prototype examples to measure and photograph details, and use of 3D scans wherever possible. In many cases they even mold the plastic parts here to assure dimensional stability. That is how they provide the best quality that they can.
After many years, it is known that certain roadnames still have nearly rabid fanbases who will buy just about any decent product with that roadname on it. Who the roadnames are significantly affects potential product sales. Certain other roads are known to be very poor sellers (even if the model is very correctly done, virtually perfect in every way).
Big Alcos that only existed near the very end of PRR in prototype life no longer sell like they once did but still sell enough to get made. Reading sells far out of proportion to its size.
Speaking in general terms, you probably have to sell a minimum of 2000 to 3000 models in just the first product run to make a plastic diesel even possible, and you need enough roadnames for multiple runs to pay off the tooling cost. Engineering costs are NOT fully tracked because the small importers don't have time to invoice every 15 minutes of an hour spent. They do engineering in between waiting on customers, working with dealers, and a myriad of other daily tasks. So engineering charges are often just not tracked accurately and they don't want to know how many hours went into the drawings for this and that because it would get depressing.
According to my new friends over on Facebook, to make a new brass engine now--anything--even the smallest steam switcher--you must be willing to make and sell at least 100 units at $2000 each. Making a little 0-6-0 switcher and offering it painted, dcc'd, lighted, etc. does not get any cheaper than making a Big Boy, other than you have only one set of drivers. The costs do not come down; you still have all the production operations involved. For this reason the manufacturers tend to make really big engines, because there are not 100 buyers out there for most of the small steamers, even if any past model was poorly done. There just aren't 100 people left for most small steam engines to ever get made again, if even done in the first place. (Not my opinion, but folks over on facebook with much larger train collections than me).
John
beside tooling, may be worth considering all the labor the goes into each model and why they're made in china and not he u.s.
richhotrainThe pre-order concept is a sign of decay in the model railroading hobby.
I sort of understand those that don't like pre-orders.
On the other hand, after 30 years the rot is either not as pervasive as believed or people have mostly moved on. Anything that requires a warehouse to hold it costs money and would mostly be full of rather average stuff that few lust over, but which might be needed along the way.
The fancy RTR rolling stock models seem to offer a plethora of choices in locos and cars. It's all the not-pre-ordered stuff in the hobby that we tend to find ourselves needing extra patience to find on the market now.
I agree completely, Rich. I really believe in the "if you stock it, they will buy it" concept. But the Walmartization of retail has everyone clamoring for the lowest price. Inventory is supposed to turnover multiple times in a year; out with the old, in with the new. The problem in model railroading is that there are no longer model railroad staples. Everything is limited run. If I was starting out, and wanted to buy six Santa Fe CF7s; I would have to go to ebay to find them. No distributor has them, and certainly not a hobby shop.
The Santa Fe stock cars sell like hotcakes on ebay. My model railroad supplier of choice does not take advance reservations; maybe they pre-order enough, but it is frustrating when production on a popular model is delayed or put off because there aren't enough pre-orders. BLI has been promising a true Santa Fe 2-8-2 for years; another model that will sell regardless of pre-orders.
BLI now has the pre-orders for the ATSF 2-8-2 to move forward and is planning a new announcement of it to generate more sales. Model due "early 2021" so I was told on recent inquiry.
"If you stock it, they will buy it" does not work anymore. Too often buyers go into the local store, see an engine they want, and then go out online and buy it for $50 or $100 cheaper someplace else, and if it hasn't sold out from the importer within 3 weeks of arrival in the U.S., it becomes "dead inventory" that then becomes very difficult to sell (and may even get stripped for parts).
I don't do that. If I see the engine I want in the local store, and all is well that it looks like I want, I'm buying it from them. However, I'm likely a dinosaur at 52.