HO Scale limited runs

NW Modeling List nw-modeling-list at nwhs.org
Tue Jan 18 17:50:46 EST 2011

Limited runs on models are driven by a few factors, production capacity in China being the first and main issue. Over the past few years there has been a consolidation in production facilities to the point where there are only one or two plants that produce all of our plastic trains, amongst other plastic toys.

Basically the manufacturers are given a slot for production and then they acquire orders to fill that time slot, henceforth "Limited Runs." If the slot allows for 10,000 pcs, that's the extent of production, If pre-orders fall short, the mfgr can short the order and drive up the cost, or take the order in full and have extras in their warehouse. If pre-orders run over the alloted run time, China typically won't do extras. When this is the case, the mfgr will either ship to the distributor or LHS on either allocation, where everyone gets shorted the same percentage or they ship on first come, first served basis.

Second, it is the belief of the Chinese that they own the die that they cut, even if Athearn, Walthers or whomever has "paid" for it in full. When a mfgr like Bowser supplies the dies, it's a different story. In years past, mfgrs would get many years of production out of high quality steel dies. This is no longer the case. The Chinese have been know to use lower quality steel or other softer metals / alloys such as aluminum, leading to wearing out faster, as well as having "accidents" where new dies need to get cut. Mfgrs will often have to include "new" tooling costs into the prices we pay.

Another issue with the production plant is the exchange rate at the time of shipment. Mfgrs have to be careful with this issue in making sure that the established price is based on the exchange rate at either the time of order or at the time of shipment. If the Yen goes up in the year to year and a half production time, the mfgr has an increased monetary cost that they either eat or pass on to us. Some of the higher MSRP's we see today are based on an anticipated inflation cost that may not occur, or may not have been covered enough.

Mfgrs have also wised up with their marketing as well. Just look at ExactRail. They make an announcement, typically on Thursdays and it is completely sold out the following Tuesday. They make no announcements in advance to show protoype info or a list of roadnames and road numbers. This has gotten them in trouble a few times, and it has gotten them the nickname of In-ExactRail. See various forum threads on the first and subsequesnt runs of Southern Waffle Boxes and the Erie Western Evans Grain car.

Mfgrs do prey on the gotta have it first and gotta have it now mentality of a lot of folks in the hobby. If they can make an extra few bucks on claiming something as a limited run they will. Keep in mind that they are for profit companies, they are in business to make money. This also allows for them to have the capital to continue making new models.

Though typically built in Japan and Korea, brass mfgrs have had to deal with similar limited production issues for years. I recently tried to get a couple of extra brass locomotives added to an order of units that were sold out, and I couldn't, even though they haven't gone into production yet.

Hope this helps.

Russ Goodwin
Buford, GA

To: nw-modeling-list at nwhs.org
Subject: RE: HO Scale limited runs
Date: Tue, 18 Jan 2011 15:43:30 -0500
From: nw-modeling-list at nwhs.org

Re: HO Scale limited runs I think the reality is that the model companies realized that the world changed and that to make a profit, they had to change the way they marketed and sold their products. It was common for modelers to not buy the initial run of products but wait until the discounters offered a lower price a year or two later. That action cuts into the manufacturer’s margin as it drives the overall market price (not cost) down on specific items and items in general. For instance, everyone knew that LifeLike would eventually mark down their remaining inventory and sell it through their discounting arm. They were competing against themselves in essence. (Dumb.) One of the reasons that the PRR owned so much stock in other railroads and coal fields in the 1880-90’s and early 1900’s was to control the freight rates; railroads were undercutting each other to move coal so much that the profit margin was negligible for the railroad. By being on the board of a railroad, the PRR men wouldn’t allow poor or risky business practices that would be ultimately bad for all railroads. With the model makers making limited runs, they can take control of the pricing again. By limiting the production, they can reduce or eliminate the discounting efforts of the distributors or dealers to compete between themselves. This keeps the prices up and the resulting margins for the manufacturer. For most distributors, this is a good thing. For a ‘basement bomber’ whose business depends on having a lower price than anyone else, he will find it difficult to get inventory or get inventory at a price that makes it possible to him to discount effectively. This is a normal business cycle. Mass production requires extensive distribution systems to get the thousands of items to thousands of buyers. Periodically, the manufacturer has to ‘clean up’ his distribution system and distribution business model to get his costs and pricing back into a desirable ratio. The market has changed, too. Most of the buyers today do not want to build anything, paint anything or decal anything. You can observe this at any model/toy train show. The scratch building parts don’t sell, decals don’t sell in any volume and complex kits go unsold. Gary RolihCincinnati
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