Model prices and costs of bringing manufacturing back to the UK?

[Coldgunner]

I was pondering this and kinda want someone with more know-how to explain whether this is a thing that would work or not.

 

So I was looking at model railway products from the major manufacturers. My personal issue with many products currently is pricing. Many of them primarily manufacture items in China, and have done for around 30 years or more.

 

A normal OO gauge pacific seems to be touching the £250 mark. I was trying to weigh up the cost of an item against whether its now cost effective to bring manufacturing 'home'? I understand that wages in western europe are significantly higher, but is there a possible tradeoff in ease of communication with suppliers? That's not to devalue the Chinese production, as its fine. But I think one issue the current situation has affected is after-sales support. Would a £250 pacific still be £250 if manufactured in the UK? Would this help the export market?

 

What I'm getting at is this. With wages starting to rise in China, lead times to production possibly being longer and trickier after-sales support and repairs, is it cost effective to move manufacturing back 'in-house'? Is there scope for hybrid production, some items in house and some items offshore perhaps?

[Bernard Lamb]

The critical factor is probably not cost. Rather a qestion of where are you going to find people with the required skills. 

Bernard

[298]

It depends if you think the main driver is the cost, or the ethical advantage of manufacturing at home. For the former all you need to do as a manufacturer is sell directly, whereas the latter is more of an issue because there isn't a supply of skilled labour in an the UK willing to work for an acceptable price. The number of separate items on a new locomotive makes them virtually kitbuilt, and not like the Margate or Poole days when all an assembly line worker had to do was push buffers into place (although hand lining and decals were obviously more skilled). 

I think China fully recognises it's importance in this and manufacturers factory videos show good working conditions, it's really not worth dropping that to chase cheaper labour in India or Africa to go through the pain of having to retain any form of quality control, only end up in the same situation as living standards there improve in the same was and wages increase.

 

The shorter supply route might be a consideration but in the overall timescale of a models development it shouldn't be an issue. At the end of the day though it's still an luxury item with older releases widely available secondhand...

[Phil Parker]

The price topic has been done to death many times. Several manufacturers have explained that the largest chunk of this is labour to put the model together - and moving this to a country with much higher wages and other overheads isn't going to change things in the way you hope. And many RMwebbers have told them that they are wrong.

 

8 hours ago, Coldgunner said:

Would a £250 pacific still be £250 if manufactured in the UK?

 

It's more likely to be £450.

 

You'll also need to find a load of people with the skills, or who can be trained to have those skills. Rapido has looked at this (Jason has covered it on many videos) and can't do this in Canada, and the UK won't be any different.

 

Finally, model trains in 2022 aren't the same as they were when we last made them in the late 1990s. Levels of complexity and detail have gone up considerably so you can't compare like with like.

 

8 hours ago, Coldgunner said:

Is there scope for hybrid production, some items in house and some items offshore perhaps?

 

This is what Dapol do already. Very simple items are made in the UK, but that vast majority are produced overseas.

[jjb1970]

Most things are possible if you have enough money or customers willing to pay. And there's the problem, when people are wincing at prices already, increasing them by perhaps 100% is unlikely to find many takers. I am sure many would pay some premium for a model made in the UK but I highly doubt many would pay anything like enough of a premium to come anywhere near closing the cost gap for the manufacturer. Paying an extra £20 is one thing, but an extra £200? Good luck with that. And that is before going anywhere near the minefield of what does 'made in x'  mean. In most cases the key parameters are value and assembly. So if perhaps more than 50% of cost and assembly is in X you can say 'made in x'. This allows companies to buy knockdown kits, do a little assembly and QA work then charge a huge premium for the kudos of the made in X tag (cough.....'swiss made' watches.....cough).

[Wheatley]

The skills exist in the UK, we make all sorts of hand assembled complex stuff (cars, aeroplanes) but usually high end because they don't exist at the hourly rate mass toy manufacturing would be prepared to pay. Some Airfix production is UK based (the Quick Build range, not sure about others) so Hornby Group is prepared to look at it, but that's a case of putting sprues in boxes, not assembling anything. A gents shirt is quite a complex thing to make but half the mums at my school in the 1970s worked for SR Gents or Corah turning them out by the thousand for Marks & Spencers. 

 

Peco bullhead points are hand-assembled in the UK, they cost roughly twice as much as the slightly less complex flat bottom Code 75 range where the moulding machine does a lot of the precision work. So I think Phil's £450 loco is probably a conservative estimate.  

 

I'm already balking at the idea of having to pay £200 for a loco which would have cost £100-£120 a couple of years ago, and that's for something which would be a signature piece for the line I'm modelling, not a 'nice to have' (Hornby 2MT). At £400 I wouldn't even be looking.  

Edited October 11, 2022 by Wheatley

[RedgateModels]

10 minutes ago, Wheatley said:

The skills exist in the UK, we make all sorts of hand assembled complex stuff (cars, aeroplanes) but usually high end because they don't exist at the hourly rate mass toy manufacturing would be prepared to pay.

 

Agreed, #1 son works for a high end aerospace component manufacturer. He started on approx £13.50 p/h as a trainee CNC Operative

[LBRJ]

28 minutes ago, RedgateModels said:

 

Agreed, #1 son works for a high end aerospace component manufacturer. He started on approx £13.50 p/h as a trainee CNC Operative

This is the issue as it were; people with "trade skills" or even just some degree of manual dexterity are currently very much in demand.

An old (as in way past retirement age) mate of mine does bespoke woodwork / joinery as a "paid hobby" - It must be a very well paid hobby  because he often offers me £100 for half a days work as a glorified labourer.

 

[Dungrange]

11 hours ago, Coldgunner said:

I was trying to weigh up the cost of an item against whether its now cost effective to bring manufacturing 'home'?

 

Not likely.  Most of these musings are by people who hear about rising costs in China but don't really appreciate how poorly paid many people in such countries are.

 

11 hours ago, Coldgunner said:

I understand that wages in western Europe are significantly higher.

 

Yes: they are.  The minimum wage in China is highest in Beijing, where in 2022 the Chinese can now earn at least £3 per hour.  I know that Rapido use a factory in Guangxi, where the minimum wage appears to be closer to £2.20 per hour.

 

https://www.statista.com/statistics/233886/minimum-wage-per-hour-in-china-by-city-and-province/#:~:text=In 2022%2C the highest minimum,and 15.2 yuan per hour.

 

The UK minimum wage is around three or four times higher and those in the UK who have the necessary skills will certainly not work for minimum wage.

 

11 hours ago, Coldgunner said:

Would a £250 pacific still be £250 if manufactured in the UK?

 

Obviously not.  I think @Phil Parker's estimate of £450 is a little on the optimistic side.  Labour costs make up a significant proportion of the overall cost, so if you bring production 'home' then you will be looking at a four fold increase in price for the labour content.  Yes, there will be a reduction in shipping costs and perhaps better communication between the UK research and design team and the manufacturing site, but nowhere near enough to offset the drastic increase in labour costs.

 

11 hours ago, Coldgunner said:

With wages starting to rise in China, lead times to production possibly being longer and trickier after-sales support and repairs, is it cost effective to move manufacturing back 'in-house'?

 

Yes, wages are rising in China faster than they are in the UK.  Like us the Chinese want a better standard of living, and whilst maybe 20 years ago they were willing to to produce toys for us for just 50 pence per hour, they are no longer willing to do so.  However, even with current wage growth in China it will probably be decades before their wages reach anything like the wage rates that people in the UK enjoy.

 

If reducing the cost is to be the main driver, then production would have to move from China to another country where we as Western Consumers can exploit another group of people by forcing them to work long hours for pennies, just so we can afford to buy a new locomotive (a luxury item) every other week.  That's not really an ethical way of thinking.  Only once the world is a 'fairer' place (ie no-one is being exploited by us) will it be better to bring production 'home'.  I think it's fair to say that will never happen.

 

12 hours ago, Coldgunner said:

Is there scope for hybrid production, some items in house and some items offshore perhaps?

 

That is possible and it has been highlighted companies like Dapol already do that.  The cheap, easy to assemble stuff can be done here, the more complex labour intensive models are assembled in locations where the labour is cheaper.  That therefore means that your £250 locomotive needs to be assembled in China so that you can get it at that price.  If someone like Hornby were to consider UK production, it would have to be the low spec Railroad models (the ubiquitous 0-4-0 that appears in so many train sets) that were produced here, with all super-detailed production in China.  That won't help reduce the costs that you are complaining about.

[johndon]

12 hours ago, Coldgunner said:

Would a £250 pacific still be £250 if manufactured in the UK? 

 

 

I seem to recall Accurascale saying that a £260 sound fitted Deltic would cost close to £900 if made in the UK...

[Coldgunner]

Thank you everyone for your replies so far, I feel like I've learned a lot more behind the business of model railway manufacturing.

[jjb1970]

The big killer is probably that model train are neither high value artisan products which command premium prices (at least for OO and HO RTR mainstream, low run brass and large scales are different) or high volume standardized products made in sufficient volume to support automated manufacture. Either of those cases can work anywhere with the right development and resources. Model trains are, however a cost sensitive product made in relatively small batches and with very demanding customers. You can reduce costs significantly with user fit parts but at the risk of sounding cynical I suspect those unhappy about prices would be unhappy about spending a few hours fitting parts. Tomix of Japan offer their HO models in two versions, standard and prestige. The base models are identical but where the standard line models come with a mountain of mainly plastic parts to fit the prestige series are almost factory finished with detail parts in wire, ethed metal and such like (correctly painted). I say almost as both the standard and prestige series come with number sheets and the user has to number them. It's a clever idea as it offers a choice between lower price or convenience and a slightly higher standard of finish thanks to the use of metal in prestige models. However, the price difference is not small, prestige models are pretty much twice the price. Interestingly, the prestige models seem to be the ones with highest demand.

[jjb1970]

Another interesting point about Tomix is that their HO models are made in the Republic of Korea. That is not a low wage economy, however the Koreans do have a lot of expertise manufacturing very high specification model trains and Tomix HO is anything but cheap, even their standard HO models would be considered pricey for OO.

[Free At Last]

I remember reading in a Bachmann interview over price increases they were talking about the extra costs of small details and an example was given of sprung buffers. They said it costs about £2 to add them at the factory in China which then translated to a £15 increase in Rrp at the retailer in the Uk.

Where does the extra cost come from? Why isn't a £150 model with static buffers £152 with sprung buffers.

Edited October 11, 2022 by Free At Last

[The White Rabbit]

25 minutes ago, Free At Last said:

I remember reading in a Bachmann interview over price increases they were talking about the extra costs of small details and an example was given of sprung buffers. They said it costs about £2 to add them at the factory in China which then translated to a £15 increase in Rrp at the retailer in the Uk.

Where does the extra cost come from? Why isn't a £150 model with static buffers £152 with sprung buffers.

 

The mark-up for adding sprung buffers will be viewed the same as all the other costs of doing business. Why should they treat the costs of adding buffers - or any other details - differently? 

 

If we say that for every £1 Bachmann spend in China, an extra £6.50 appears on the sale price (and let's ignore the discounting of RRPs for the moment) then that £6.50 will include the model shop's margin, Bachmann's fixed costs (staff, warehousing, power, rent, insurance, IT, professional fees, banking, accounting etc.) and Bachmann's variable costs (transport, materials etc.). It's all part of the 'hidden' costs of operating a business. If Bachmann chose to, yes they could absorb the extra costs of sprung buffers - then people start asking why can't they absorb the costs of this that and the other? Soon, no more Bachmann. 

[jjb1970]

The other thing which is often ignored in threads like this one is that manufacturers can charge whatever they like and are under no obligation to work on a BoM+labour type pricing model. If a product costs £1 to make but the market will pay £1000 then you can't really blame manufacturers for making money. And there are other costs invoved, one which is often forgotten is marketing and promotion, and costs of maintaining high quality dealer networks for some categories, designer apparel, hand bags, watches, cola etc can have monumental margins on cost to produce both because the market will support them and because they may be cheap to make but they're very expensive to sell.

One of the things I respect about Bachmann is that they are what they are, they don't pretend to be anything other than that, a subsidiary of a Chinese manufacturer which makes British outline because it is profitable for them to do so. If people like their product they can buy it, if not then don't buy it. They will make their decision on whether the UK market is worth continuing with based on whether it is worth their while. Some may disagree but I like that straightforwardness. And for all that, they support their retailers.

[Michael Hodgson]

6 hours ago, Phil Parker said:

The price topic has been done to death many times. Several manufacturers have explained that the largest chunk of this is labour to put the model together - and moving this to a country with much higher wages and other overheads isn't going to change things in the way you hope. And many RMwebbers have told them that they are wrong.

The solution to that is robotics.  You remove the need for highly skilled work on repetitve assembly operations.  OK, so the economics of that don't yet work in our industry - but the motor industry with its much higher volumes has done it and reduced QC reject rates.  I think it's just a question of time before robot technology progresses far enough to make sense for what we want.  Just as electronics prices have dropped by orders of magnitude, I anticipate the same will apply to RTR model manufacturing.  The question is whether we will still be around to see it happen - and whether the generation that does see it will be interested in model raiways!

[Phil Parker]

1 minute ago, Michael Hodgson said:

The solution to that is robotics.  You remove the need for highly skilled work on repetitve assembly operations.  OK, so the economics of that don't yet work in our industry - but the motor industry with its much higher volumes has done it and reduced QC reject rates.  I think it's just a question of time before robot technology progresses far enough to make sense for what we want.  Just as electronics prices have dropped by orders of magnitude, I anticipate the same will apply to RTR model manufacturing.  The question is whether we will still be around to see it happen - and whether the generation that does see it will be interested in model raiways!

 

Except that the assembly we require is far more complex than soldering chips in a PCB. Imagine trying to automate fitting the handrails on a loco, or all the fiddly bits on a buffer beam. Even the car industry uses humans for this sort of work and they will spend more on coffee than the entire budget of our industry. That, and they have runs far in excess of the 500-2000 that we expect. Maybe years ago when locos were much simpler, but the future is highly detailed models.

[Michael Hodgson]

That's only because robot technology isn't yet up to it.  Greater precision will need even more specialist machine, which will in all probability be designed and built by other machines.

 

Time will tell. 

[Wheatley]

3 hours ago, Free At Last said:

I remember reading in a Bachmann interview over price increases they were talking about the extra costs of small details and an example was given of sprung buffers. They said it costs about £2 to add them at the factory in China which then translated to a £15 increase in Rrp at the retailer in the Uk

I do wonder if half the problem is that the tail is wagging the dog on specification, half the bling on a modern RTR item is unnecessary. Higher spec means higher prices which mean more demand for higher specs to justify the higher prices against the competitor's lower spec model, which drives up prices ...

 

I'm not talking about a good quality motor, all wheel pick up and a decent chip (sound or otherwise), those undoubtedly improve the performance of the models in real terms but, for example:

 

Opening cab doors

Working radiator fans

Cab lights

Full underframe detail - dragbox, framing, buffer springs etc which can only be seen if the model is upside down (and which is then partly obscured by plonking a massive NEM coupler socket on it)

Working cab roof vents

Sprung buffers (as opposed to separately fitted metal heads. 

 

Is there any point in a 16.5mm model with hook and bar couplings having sprung buffers other than the ability to poke them and go "hey look its got sprung buffers " ? The only people who actually need them are the scale coupling/gauge end of the hobby and they're usually more than capable of fitting their own. 

Edited October 11, 2022 by Wheatley

[simonmcp]

As @Phil Parker said, robots can only do so much. I remember a program about a pottery manufacturer, they were trying to get a robot to decorate the plates. A seemingly simple task. The number of rejects, and smashed plates, was much higher than the skilled lady workers.

 

IT is also true that some manufacturing has been brought back to the UK, but that was in textiles.

 

In a very limited way 3d printing is being used to manufacture very simple (in terms of number of components) items which are being made in the UK. Yes I do know that a university managed to 3d print a games controller so advances are being made, but the machines to make them are costed in the millions. Given time it may happen, there are Full colour 3d printers around now, but again they are very expensive.

[Phil Parker]

10 minutes ago, Wheatley said:

I do wonder if half the problem is that the tail is wagging the dog on specification, half the bling on a modern RTR item is unnecessary. Higher spec means higher prices which mean more demand for higher specs to justify the higher prices against the competitor's lower spec model, which drives up prices ...

 

If people don't want all the "bling", why is it that the full-fat versions of Bachmann's Class 47 sell out first?

 

Or why you regularily read on this very forum, people talking about replacing fleets of not very old locos with the latest version?

[Wheatley]

Oh I've no doubt they sell, but RTR is increasingly becoming a high spec high(er) cost niche market. It clearly works as a business model though otherwise they wouldn't be doing it. 

[Dave John]

Hmm, the way things are going it might well end up with us lot sitting in a UK factory assembling model trains for an increasingly affluent Chinese market. 

[Andy Hayter]

For those that doubt the UK vs China price comparisons, we do actually have some good comparison data.

 

Roco produce locomotives in the EU - Hungary and Romania - where minimum wages are around 50-75% UK minimum wages.  Here is a Pacific:

https://www.roco.cc/rde/produkte/lokomotiven/dampflokomotiven/78249-dampflokomotive-br-184-db.html

 

Around £420 at current exchange rates for a DCC model in a slightly smaller scale.  Now upgrade to UK assembly labour costs.

 

Additionally, while assembled and largely made in Europe, where do these bits come from?

Motors - Far East?

DCC Chips and components - Far East?  even if the final assembly of the whole is in Europe - which I doubt.

Wheels -  ??