Model Railroading > How many preorders does it take?

How many preorders does it take before a manufacturer decides to produce something? Some manufacturers leave the ordering deadlines open ended until they get enough orders. Others set arbitrary deadlines and then silently cancel the project if they don't get enough orders. And yet others show both "preorder" and "sold out" at the same time.

So how many orders does it take before they decide to produce a model locomotive or car?



Edited 1 time(s). Last edit at 04/06/20 13:59 by DevalDragon.

I think it varies with how much will it cost to produce the model and how many units will you need to sell to just break even.

Many manufacturers are normally tight-lipped about that "number".  I'll be watching to see what your question brings.

I've always understood it to be the pre-orders just help the manufacturer determine how many to make, not whether to begin making it or not.  Once a model has been announced, the manufacturer has already committed to tooling,  a timeframe, and a committment to make the model.    On very rare occassions, they will cancel the project all together (usually just a roadname or two)  if they don't get enough pre-orders.   But that again is a very rare situation and usually roadname related not model related.     The normal routine is a pre-set committment to produce a model.   The pre-orders are just to help determine the quantity that will be made.

 

Each company has it's own method for determining the pre-order requirement.  Some used it to determine the amount to produce and only product to that number.  Others will used it to determine if the announced model will be produced. Some companies use the data for both.  After all, it does not make any sense to produce a product that will not even sell to the Minimum Order Quantity and have the product sit on the shelves.   This only shows the importance of pre-orders even if sight un-seen if one really wants the product as no one is carrying any inventory any more.  Carrying any inventory of any non-staple item means tying up capital funds for what may be years on end.  Everything these days are short run, limited run items so there isn't any excess inventory at any part of the supply chain.

Darin Umlauft
A WC, SOO and GBW fan in Slinger, WI
 

Fizzboy7 Wrote:
-------------------------------------------------------
> I've always understood it to be the pre-orders
> just help the manufacturer determine how many to
> make, not whether to begin making it or not. 
> Once a model has been announced, the manufacturer
> has already committed to tooling,  a timeframe,
> and a committment to make the model.    On very
> rare occassions, they will cancel the project all
> together (usually just a roadname or two)  if
> they don't get enough pre-orders.   But that
> again is a very rare situation and usually
> roadname related not model related.     The
> normal routine is a pre-set committment to produce
> a model.   The pre-orders are just to help
> determine the quantity that will be made.
>
>  

It varies depending of the manufacturer, but generally 2K-3K units are needed to reach critical mass.  In order to help reach that threshold, they use variations of the model.  So, when ScaleTrains ran their first run of Tunnel Motors, they offered the standard nose as well as the Snoot (123") nose versions.  The manufacturer considers them a single run, even though they are different versions of the same basic engine.

That 2K-3K unit figure assumes the tooling is done by the manufacturer.  Of course, the research (paint color, paint schemes, fonts, etc.) and drawings will need to be provided.

One interesting approach is a group of guys at an RPM meet decided to Crowd Fund a project.  They had 17 variations of an ATSF 40' boxcar.  They got orders for $250K and were good to go.  Of course, the folks that were leading it had connections in China and had done projects like this before.  

So if pre-orders give manufacturers an idea of how many to make, then when there is a great demand for a model, like the Walthers SP SD9E, why don't they increase production?  Seems like Walthers could be announcing new runs with new numbers of the SD9E's every six months and still be selling out.

tmotor Wrote:
-------------------------------------------------------
>snip
>
> One interesting approach is a group of guys at an
> RPM meet decided to Crowd Fund a project.  They
> had 17 variations of an ATSF 40' boxcar.  They
> got orders for $250K and were good to go.  Of
> course, the folks that were leading it had
> connections in China and had done projects like
> this before.  

If you're talking about the Prototype Junction group, they didn't even raise 10% of the required $250K and the project is, at the very least, on indefinite hold. Or are you referring to another effort? Prototype Junction was looking at 11 different variations of Pratt truss boxcars, including four Santa Fe variants. For a project of that size what you need up front are several investors with large chunks of money, not lots of customers with nickels and dimes. I'm sure the principals were trying not to dilute their equity in the company, but when you run into the inevitable delays and cost overruns a few investors will be a lot more understanding than a multitude of disappointed customers. And less likely to make their disappointment public and damage your reputation.

Tom M.

Because of lead and production times.  Once the preorder window is closed, and the order is placed with the factory, the factory then sources the needed raw materials (plastic, motors, PCBs, decoders, speakers, etc.) for the run, based on those preorder numbers, and there are lead times in making sure you get what you need.  That, and there are schedules that have to be kept, since there are typically multiple projects in play at any given time, and only so much factory time and production slots.  It's not necessarily an easy task to say "hey, make an extra 500 of these things that are currently in production" since you'd have to allocate more raw materials, as well as disrupt the production schedule of something that's slotted to begin right after that run's scheduled completion date.  

wingomann Wrote:
-------------------------------------------------------
> So if pre-orders give manufacturers an idea of how
> many to make, then when there is a great demand
> for a model, like the Walthers SP SD9E, why don't
> they increase production?  Seems like Walthers
> could be announcing new runs with new numbers of
> the SD9E's every six months and still be selling
> out.

Yes, the SP SD9E was woefully under produced, but Walthers went with their pre-order system which allows people to pre-order from them and get what they need guaranteed.  The ironic thing is that same pre-order system ends up with less popular road names easily available for quite some time after release.  So basically if you need a popular road, like SP scarlet/gray you'll have to pre-order and pay full price where the less popular roads linger on.  Quite a few on the bay still.

Cheers,Jim