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Supply Chain

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Geraldo Tegouch

on 15 May 2014

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Transcript of Supply Chain


Target market:
Children over 36 months

Current state of the company
Main Issues and Problems
Presented by:

Kristian Nikolaev Kuyumdzhiev
Geraldo Edison Tegouch
Yau Yee Hui
Chua Hui Ling

Products and Services

Hornby places emphasis on the
success through their people, focused execution and passion for their brands.
Frank Hornby
1901 - Invention of Mechanics Made Easy
1907 - Meccano Ltd
1920 - Hornby Toy Trains
1925 - Hornby Electric Toy Trains
1964 - Acquired by Lines Bros -> Tri-ang Hornby
1974 - Acquired by Dunbee Combex Marx
1980 - Hornby Hobbies Ltd
1981- Acquired by Management Buyout
29th Oct 1986 - floated on London Stock Exchange
1997 - Transfer production to China commenced
1999 - Acquired Scalextric USA
2002 - Transfer of production to China completed
2004-2006 - Entering EU market

Company Introduction
Current State of the Company
Main Issues and Problems
Recommended Solutions
Implementation Barriers
Hornby's Strategy
Hornby Group Structure
A disruption in Hornby's Supply Chain had a significant impact on business performance.
The root of the problem is Hornby's vulnerability to supplier issues
The suggested solution is to diversify the suppliers
Keeping Hornby's Supply Chain on Track
Automated Manufacturing
Expected Benefits
Implementation Barriers
Unable to meet customer's demands
Bringing Production in-house
Expected Benefits
Implementation Barriers
Supplier failed to deliver orders
Solution 3
Suppliers unable to cover their operational costs
Inefficient funds from Hornby as rate of increase of price of train models is slower than rise in labour cost in China
Expected Benefits
Implementation Barriers
Hornby's Strategy
Decreasing the labour cost

Decreasing manufacturing cost in the long run

Improved quality

Initial cost

Time consuming (R&D)

Customers may desire craftmanship

Solution 1
Reduction in lead time
More control over production
Improved quality
Set up Cost
Knowledge Transfer
Tooling Transportation
Isolation from Competitive Environment
Expected Benefits
Implementation Barriers
Solution 2
Compromise perception of quality
Might affect the authenticity of design
Time and Money Spent on Research and Design
Simplifying Product Design
Reduce the Number of Parts
Financial data
Hornby's assembly process are labour intensive
Annual revenue up to 30/09/2013 -
Mission statement:
“To be the most successful model, hobby and collectable toy company in the world”
Annual revenue up to 30/09/2012 -
Revenue down by 10.9% from 2012 to 2013
Supply chain problems
One or two key model train suppliers - high risk
Sanda Kan production facility closed down
Significant delays - weakened consumer confidence
Reduce the
Complexity of Design
(Especially for the Children's line)
Make use of the modularity
Reduce labour requirement
Changes to the supply chain:
Diversify the Group's supplier portfolio
Suppliers in India and the UK
Monitor production through local employees
Digital and multichannel distribution
Reduced supply chain vulnerability
Pool of employees with required skills expanded
Increased quality and control
More responsive supply chain
Increased prices, margins, more flexibility
Tooling, knowledge and skills are highly specific
Training required
Set up costs

Increased management complexity

Trust/Relationship issues
The Strategy
Other relevant changes:
Restructuring the senior management team
From manufacturing business towards brand and customer focused business
It can be argued that the supply chain begins on design decisions.

Design of the products can have significant impact on supply chain complexity
Product complexity can arise due to high number of components in assemblies.
Manufacturing is a labour-intensive, complex and skilled process
Southern China has developed the special skill set to produce model trains, but the demand proved too high
Long term benefits from automated manufacturing
Increased Production rate
Full transcript