Hornby hits the buffers over botched IT upgrades

Microsoft-based ERP project blamed for supply-chain hiatus at Hornby

Model train maker Hornby has attributed a £4.5m loss in its latest six-monthly results to a botched IT upgrade, which contributed to a fall in sales from £24.2m to £22.3m compared to 2014.

While remaining relatively tight-lipped in its statement today, it blamed a combination of factors, including an upgrade to stock management systems covering the UK and Europe, while at the same time recruiting new managers. The combination meant that Hornby struggled to get its products into shops at the same time as production problems at its factories in China.

While the supply-chain problems affected sales of the company's products in the normally slow summer months, they are also a time when companies with strong seasonal sales are gearing up for Christmas. The company claims, however, that the problems have been solved, and that plans for a reorganisation of its European operations have been brought forward.

"Our new ERP system is now embedded in the UK operation and following significant disruption in the first two months, the business is performing well in the important Christmas and New Year period," claimed CEO Richard Ames.

Ames was appointed in 2014 with a brief that included trouble-shooting the company's relationships with its manufacturing partners in China, as well as updating the company's supply chain management and other core systems.

"During the year, the team have worked hard to balance the need to deliver a satisfactory current trading performance against applying the necessary time and energy to the strands of work around the business transformation," claimed Ames in the company's 2015 annual report, published in March 2015.

He continued: "It strikes me that delivering just one of these strands in a given year would be a significant undertaking for most businesses, be that the logistics outsourcing, new ERP [enterprise resource planning] system implementation or indeed office relocation."

The report continues: "Throughout 2014-15, the company has been developing a new ERP system designed to go live in the UK during the summer of 2015, before being rolled out to the wider group in 2016. The new system will be based on the Microsoft AX platform and a dedicated team has spent the year rewriting and upgrading company processes to enable a significant upgrade to the Company's finance, sales, logistics, and data capabilities."

The news follows a profits warning in November, which highlighted the problems with the new logistics and distribution management system, and that these had caused "significant disruption" to the company's trading, especially in Europe where it warned that sales would be "materially lower" than the company had expected.

In addition to the iconic train sets, Hornby also produces model cars under the Corgi brand name, Scalextric model motor racing products and Airfix model kits.