What does Lionel's "Built to Order" mean?

Guys,

 

Peruse the shipping schedule at your earliest convenience. Interestingly, there's a good bit of engines not marked BTO in the catalog that are marked BTO now.

 

Of course, it is the Lionel shipping schedule, and mistakes have been made before, as we all know!

Interesting... and if accurate, that's gonna cause major confusion.    Very bad move on Lionel's part to make a switch this close to the supposed BTO pre-order deadline.  The schedule has enough credibility problems with delivery dates... and now it's gonna try and provide ORDERING INFORMATION about products too??? 

 

In all seriousness though... I do recall a version of the shipping schedule around 4/25 that had the word DELTA in front of lots of locomotives.  Somebody here inquired about that, but I don't remember seeing any "official" response explaining what was meant by DELTA.  But perhaps it was referring to new locomotives to be categorized as BTO??? 

 

FWIW, the latest schedule has SD70MAC, ES44, and E8 locomotives now listed as BTO but not indicated as such in the catalog.  (The E9's were reportedly produced in low quantities, so perhaps the E8's are following suit as BTO items?)

 

The Pilot cab-forward steamer is also listed as BTO (but not in the catalog), which shouldn't be that big of a surprise since Lionel can't seem to give away the pilot locomotives they've produced to date.

 

Definitely a space worth watching closely.

 

David

 

 

OK, you got me, Rocky Mountaineer. I apologize for making what was taken as a broad swipe.

 

But I still don't think it's a gimmick as much as it is just simple business on the part of Lionel. As mentioned, 3rd Rail has been doing this. And both Atlas and MTH have cancelled a good many items, most likely for lack of orders. I can understand Lionel not wanting to get stuck with expensive to produce items that they are forced to blow out. If this is what Lionel needs to do to keep financially well off, then we should accept it. Hey, if Lionel makes something I don't like or is too expensive, I just don't buy it. If someone else does, good. If no one does, well that sends Lionel a signal not to offer it again in the relative future.

 

But now one could also raise the same questions over the recent Lionel NACAR sets, which appear to be blow outs. The last bunch of them also ended up as big blow outs. So why Lionel did them again, I don't know. But given their NASCAR affiliation and that the items are basic production products, they don't have any recent development or tooling costs. Plus probably Lionel figures, if the reduced cost enticed people to buy someone their first train set, hopefully they'll be back for more items.

 

And to David45691, I apologize for taking you out of context. Now, I am not familiar with the Snoopy Red Barron Pylon, from 2012. I saw it in the catalog, but didn't know it was cancelled. Given the popularity of the Peanuts stuff, I wonder if it wasn't a licensing glich that caused the cancelllation. All licensed items have to be approved, and sometimes they are cataloged before approved. Like the K-Line Kodak items that didn't have approval from Kodak.

 

I've also noticed with the Lionel and other Peanuts stuff, Snoopy is portrayed with Woodstock on the dog house. Seems they have let the Red Barron stuff to the past. I don't know if that's the reason here, but it's been a long time since I've seen anything with Snoopy and the Red Barron. And all the other Lionel Peanuts items are either Christmas or Halloween items that seem pretty kid friendly.

 

From what I have seen so far this year, what Lionel is doing with BTO makes sense. This year at Lionel's red carpet event I did not see all of the blow outs on the better engines as I saw at last years event. Yes there were a few but not like I saw and bought at last year event.

 

As I listened to Mike talk at one of the York seminars a couple of weeks ago most of what he said made sense to me. They see the blow-outs as hurting their business in a few ways, which I totally agreed with.

 

But Mike pointed out that the AC-12's & H24-66 TrainMasters are not BTO. And he noted that the response to these engines has been really good. He added that he believes these engines maybe in short supply and that there may not be enough of them to fill all of their orders for them.

 

Mike said that everything in the 2014 catalog will be out this year and that the only items that might get pushed back a little into next year maybe some of the Big Boys but that everything will be done by the first 2 weeks of January by the latest. And that he maybe spinning some time in China to get everything done this year.   

I know nothing about selling toy trains, but I do consult in manufacturing and distribution and provide analysis/guidance around production numbers and market conditions.

 

Lionel's approach here is, from my perspective, one that MANY companies would LOVE to have.  You have a customer base that's willing to wait for a product, you've provided a window for preorders and collected them well ahead of manufacturing, and you can now build to that number.  You can even cancel production altogether if preorders are low!  High-dollar or niche items are a risk in any industry, and mitigating a large portion of that risk would be a dream come true for most companies.

 

From every angle I can see, this approach is a win for everyone involved.  Even for those of us who prefer locomotives for ~$100 from RTR breakups, we don't have to worry about Lionel taking a beating on over-manufactured high-end items that end up affecting the production of products WE want.

That brings about the other side of the coin.  Everyone remember the other buzz word, "allocated"?

 

Dealer A could order 25 of something, but he may be allocated 15 of the item(due to short supply), so may have to tell 10 of his customers that even though they pre-ordered the item, they may not get one.  This is the "we hedged our bets and made an estimate, but oops, we estimated below actual customer interest" scenario. 

 

How many times would many of us let  that happen before we decide pre-ordering is not for us?

 

{edit:  After reading Marty's post below I realize it could be interpreted that I am suggesting BTO is the same as allocation.  That is not what I meant to imply.  I was referring to the scenario paulp brought to my mind when he mentioned MR's comments on 2 items that are not listed under the BTO business model, but enough may not be made to satisfy demand - which may or may not turn out to be true}

 

-Dave

Not sure, but I think "built to order" means you get to select your favorite factory defect.

 

Pete

Interesting to note that Lionel must have  found a vendor that would build piece work.  Usually there is a cut-off number that is profitable to a manufacture.  Building to order probably mean cost per piece increase.   IMO. 

I think we tend to forget that we are talking toys, not refrigerators or some other necessity. If it were something other than a toy, would this marketing ploy work?

Would you preorder a dishwasher, with a history of delays, quality issues, or simply find it has been cancelled? Especially in these days of instant gratification?

To my mind , Lionel is in the catbird seat and because we are not talking dishwashers, so we consumers have a loyalty you don't see anywhere else and have a level of toleration you can't find elsewhere. Maybe a captive audience. Where else can you go? MTH is doing the same thing and will probably follow suit in this.You cant blame Lionel or the others for doing whats best in their favor. I think Bachman is the smarter of the bunch..the old keep it simple stupid approach. They dont need a  convoluted approach that gets more entangled every year.I suspect they have the deepest pockets to a point. In the end, I dont think what they do matters..its like shooting ducks in a barrel for them and where this ends nobody knows. I certainly have not lost sleep over it.

 

I suspect there are several Lionel dealers like us that will go ahead and order some stock of the BTO models without an end customer pre-order. Those of you that want to see it before you buy it might just need to drive to Indianapolis. Lol. 

 

I think for some another aspect of increased cost strikes me as ironic. Remember as a kid when you wanted this or that, wearing a hole through a display case with your eyeballs? And guess what..you did not have the dimes or whatever to get it. 

For more than not this whole thing seems to have come full circle. Thanks heavens none of whats out there appeals to me.(except that Bachman 40 tonner) No preorder involved. I have to save some dimes..no big deal. 

The profit margin is a lot higher on initial sales than on overstock "blow outs." Many blow outs are at cost or even at a LOSS, so Lionel really isn't reaping much of anything.

I am absolutely amazed that Guggenheim doesn't come to OGR to find management personnel or a new CEO..   All of the business knowledge is right here!

 

 

Some people on OGR sure seem to have a need to pounce on anything that discusses a business model.

 

 

 

Build to order? That lets me out. I only buy on the used, surplus ,overstock and heavily discounted market. If I can't get a 40% or more discount the money stays in my wallet. These are just cheap Chinese made toys and not worth very much to me. I'd rather spend money on a luxury or classic car.

At York Mike Reagan stated that the number made would be the number ordered by dealers/distributors PLUS the number he needed for parts.  I'm sure they have some algorithm to determine how many extras to order and that would be applied to the BTO items as well.

So, I take it that Build-To-Order is not some custom shop process where I can spec the details and paint scheme of my model. Too bad. That could help satisfy the folks that won't buy something because it has dynamic brakes or isn't available for in their favorite road's livery.

 

Is there a minimum amount of orders needed to build a BOT item? If only 50 are ordered will 50 be built?

Here's a list of what's marked BTO in the current shipping schedule.  56 items.

 

Includes Hi-Cube Boxcar set, E8s SD70s and ES44s which ARE NOT marked as BTO in the catalog

 

6-11434		UP VISION Big Boy #4006		Built to order item. Dec, 14
6-11435		UP VISION Big Boy #4018		Built to order item. Dec, 14
6-11436		UP VISION Big Boy #4005		Built to order item. Dec, 14
6-11437		UP VISION Big Boy #4014		Built to order item. Dec, 14
6-11438		UP VISION Big Boy #4017		Built to order item. Dec, 14
6-11448		UP VISION Big Boy #4012		Built to order item. Dec, 14
6-11449		UP VISION Big Boy #4004		Built to order item. Dec, 14
6-11450		Legacy Polar Express Berk GOLD		Built to order item. Nov, 14
6-11451		Legacy Polar Express Berk Standard		Built to order item. Nov, 14
6-11452		C&O LEGACY Berkshire #2687		Built to order item. Nov, 14
6-11453		Erie LEGACY Berkshire #3321		Built to order item. Nov, 14
6-11454		NKP LEGACY Berkshire #765		Built to order item. Nov, 14
6-11455		PM LEGACY Berkshire #1225		Built to order item. Nov, 14
6-11456		PM LEGACY Berkshire #1227		Built to order item. Nov, 14
6-11469		Pilot LEGACY AC-12 Cab Forward #9999		Built to order item. Jul, 14
6-81094		Conrail SD70MAC 86' Hi-Cube Boxcar Set		Built to order item. Dec, 14
6-81134		BN LEGACY SD70MAC #9424		Built to order item. Sep, 14
6-81135		BN LEGACY SD70MAC #9431		Built to order item. Sep, 14
6-81137		BNSF LEGACY SD70MAC #9858		Built to order item. Sep, 14
6-81138		BNSF LEGACY SD70MAC #9860		Built to order item. Sep, 14
6-81141		Conrail LEGACY SD70MAC #4138		Built to order item. Sep, 14
6-81144		CSX LEGACY SD70MAC #781		Built to order item. Sep, 14
6-81147		KCS LEGACY SD70MAC #3950		Built to order item. Sep, 14
6-81148		KCS LEGACY SD70MAC #3953		Built to order item. Sep, 14
6-81151		Alaska LEGACY SD70MAC #4002		Built to order item. Sep, 14
6-81152		Alaska LEGACY SD70MAC #4005		Built to order item. Sep, 14
6-81153		CSX LEGACY SD70MAC #778		Built to order item. Sep, 14
6-81154		UP LEGACY ES44AC #7361		Built to order item. Oct, 14
6-81155		UP LEGACY ES44AC #7388		Built to order item. Oct, 14
6-81160		CSX LEGACY ES44AC #937		Built to order item. Oct, 14
6-81161		CSX LEGACY ES44AC #944		Built to order item. Oct, 14
6-81169		Iowa Interstate LEGACY ES44AC #504		Built to order item. Oct, 14
6-81170		Iowa Interstate LEGACY ES44AC #507		Built to order item. Oct, 14
6-81171		Ferromex LEGACY ES44AC #4617		Built to order item. Oct, 14
6-81172		Ferromex LEGACY ES44AC #4626		Built to order item. Oct, 14
6-81176		CN LEGACY ES44AC #2812		Built to order item. Oct, 14
6-81177		CN LEGACY ES44AC #2818		Built to order item. Oct, 14
6-81179		LEGACY Heavy Mikado Pilot		Built to order item. Sep, 14
6-81182		L&N LEGACY Heavy Mikado #1757		Built to order item. Sep, 14
6-81184		P&WV LEGACY Heavy Mikado #1152		Built to order item. Sep, 14
6-81185		CNJ LEGACY Heavy Mikado #854		Built to order item. Sep, 14
6-81186		SLSF LEGACY Heavy Mikado #4126		Built to order item. Sep, 14
6-81187		C&IM LEGACY Heavy Mikado #551		Built to order item. Sep, 14
6-81188		NYC LEGACY Heavy Mikado #9506		Built to order item. Sep, 14
6-81192		GN LEGACY Heavy Mikado #3148		Built to order item. Sep, 14
6-81219		AT&SF LEGACY E-8 AA		Built to order item. Oct, 14
6-81225		RI LEGACY E-8 AA		Built to order item. Oct, 14
6-81228		C&O LEGACY E-8 AA		Built to order item. Oct, 14
6-81231		Erie LEGACY E-8 AA		Built to order item. Oct, 14
6-81234		MKT LEGACY E-8 AA (Pwd A #131, Dmy A #134)		Built to order item. Oct, 14
6-81237		SAL LEGACY E-8 AA (Pwd A #3051, Dmy A #3055)		Built to order item. Oct, 14
6-81240		Wabash LEGACY E-8 AA (Pwd A #1007, Dmy A #1011)		Built to order item. Oct, 14
6-81243		Pilot LEGACY M1a #9999		Built to order item. Oct, 14
6-81245		PRR LEGACY M1a #6771		Built to order item. Oct, 14
6-81246		PRR LEGACY M1a #6764		Built to order item. Oct, 14
6-81247		PRR M1a Freight Set		Built to order item. Dec, 14

That should surprise none of us.  Typical CEO's and their circle of executives tend to have pretty big egos, and they know exactly what they want to do to put their "signature of change" on how the business will be run under their watch -- whether they're taking a company to new heights or driving it into the ground. 

 

Even with all the folks here who went goo-goo ga-ga over Jerry Calabrese's stint as Lionel CEO, he did his share of changing things just for the sake of change on his watch.  For example, was it really necessary to change the well-respected JLC-branding for the highest feature-packed locomotives and call them Vision Line?  Hardly.    Even by today's standards, JLC-products hold their own... and that branding could easily have continued into the "Vision Line era".  But the JLC brand was considered a casualty of the "not invented on my watch" syndrome.  If folks at Lionel wanted to keep their jobs, they'd tell the ranking execs how terrific their new ideas were, and just went with the flow.    If they didn't, they were quietly shown the door.  Happens in every industry... it's just human nature.

 

David

This thread sure has touched on a LOT of opinions related to how BTO will affect our buying habits.

 

Bottom line though... I still maintain it's not all that different than what's been happening behind-the-scenes for years now for high-end products.  It's just that this year, Lionel execs have called-out the process with a bit more definition, since they don't want to inventory any BTO product once the boat arrives from China.

 

Think of it like a pendulum arc.  BTO is on one end of the arc, and delivery of product simultaneous to publishing the catalog is on the other end of the arc.  When competition was at its highest among toy train importers (especially Lionel vs. MTH), importers would elect to have immediate availability of product to "surprise" the competition with an offering and not give them any time whatsoever to react. 

 

Then Chinese labor issues hit with a vengeance:  MTH steam production was virtually non-existent in the US for a couple of years, and Lionel couldn't even deliver scale rolling stock for much of 2012/2013... so we're not exactly in the heyday of Lionel vs. MTH pushing a seemingly endless amount of new product features into the marketplace.  Brand loyalties aside, lots of enthusiasts have been jumping at super bargains over the past few years -- opting to buy selectively from a glut of inventory in the marketplace that couldn't be absorbed even on a great day, rather than place huge pre-orders like years ago.  (Remember the days when Charlie Ro even had volume-purchase discounts for folks who pre-ordered/purchased above a certain $$$ threshold during a specified calendar year?)

 

As noted earlier... Atlas-O, MTH and Sunset/GGD have either been heading toward BTO or are already pretty much there for awhile now.  It was only a matter of time that Lionel figured out they pretty much always guessed wrong whenever they delivered product to the market with (or in some cases, ahead of) publication of a new catalog.  This market is just too fickle to continue taking on that risk.

 

David

BTO doesn't affect the actual minimum required number of orders to produce a model.  All it means is that they will only produce as many models as they get orders for.

 

A non-BTO model may require 200 preorders to produce.  They get 300 preorders, and decide to produce 350 units.

 

A BTO model may also require 200 preorders to produce.  They get the same 300 preorders, but they will ONLY produce 300 units.  No extra stock will be produced.

 

Stuart

 

Oh yes!  I'll take they one where crew-talk doesn't work!

BTO means more cancellations, more MTH McKeen cars, which is all I need to know

about BTO.

So I put my BTO in, really looking forward to the 765 and the 1225. I would be really bummed if they don't make them.

How will we know if we get hosed or not? 

 

 

This seems like an extremely expensive way to buy parts.  I find it hard to believe that when a manufacturer of say, couplers for a Vision Big Boy, makes 1000 couplers for actual engines, could just make 1100 and sell the additional 100 to Lionel at a reasonable cost.  It just seems absurd that Lionel would disassemble finished goods for parts.  Seems like just a negotiating point on their contract.  This also raises another question, does Lionel contract with multiple Chinese factories and do these Chinese factories sub out the parts manufacturing and only handle the assembly or do all factories make all the parts?

I think this answers the question originally posted, thank you Stuart!!

Keep in mind that blow outs generate cash flow for a company.  It is better to receive the cash that can be reinvested into new products that might produce profits, pay employees, etc.  The alternative is to keep non selling products on the shelf not doing anything.

 

David56

I think what you're suggesting is very legitimate.  But we all need to think outside the box in terms of what's feasible in today's manufacturing world.  I have no first-hand insiders knowledge in this regard... only what I know from experience as it affects me.

 

For example, two years ago when a Sony blu-ray player misbehaved (out of warranty), it was cheaper for me to buy a new one rather than have the errant one repaired... not to mention that I wasn't even 100% certain if it COULD be repaired. 

 

For many of us who grew up in simpler times, today's business practices aren't always intuitive.  But if we follow the money trail, we tend to find the answers.  Like Dorothy told her dog back in the 1930's, "I don't think we're in Kansas anymore, Toto."    Same comment could be applied to overseas manufacturing.

 

David