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Reducing costs while preserving safety - can it be done?

Discussion in 'Heritage Railways & Centres in the UK' started by geekfindergeneral, Sep 23, 2013.

  1. simon

    simon Resident of Nat Pres

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    This is a bit of a tangent from the overall thread. Except that perhaps the desire to have large locos at galas should be looked at in the generality. Do they really attract the crowd? Did anyone moan that the duchess didn't run on Sunday?

    From my visit to the SVR on Sunday a large section of the passengers seemed to be Mr & Mrs Normal and their children. What research do lines carry out as to who visits and why? Does the SVR, to take your specific point from another thread, know the profile of its "missing" visitors, i.e those who used to visit but no longer do so?
     
  2. gios

    gios Member

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    Reducing cost can really only be achieved by reducing paid staff, or maybe managing them more efficiently. Everything else is the essence of a Heritage railway. All the different options so far proposed have merit, but cash flow through the bank will always trump merit. Where this cash comes from does not matter so much, as long as there is a regular, predictable supply ! Increasing revenue would provide an excellent base line. The Bluebell have shown the way with their EG extension - hopefully a long term increase in passenger numbers. No, I am not advocating more extensions, but give one example of how increasing revenue has been successful. It maybe requires a little brain power and time, but numbers can certainly be increased. This base revenue can of course be supplemented by the various sources of which we are all aware, there is scope for major rethinks in these areas. My personal view would be that these 'other sources' do not include strings attached public funded largess - but that is only a personal view.

    I think the views expressed indicate just how difficult it is to come to a consensus, luckily for me its someone else's headache.
     
  3. threelinkdave

    threelinkdave Well-Known Member

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    Simon - it was this post I was refering to so was on topic
     
  4. martin butler

    martin butler Part of the furniture

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    The problem is that most costs to do with preserved railways are fixed costs, PW, Operating costs and paid staff, So to reduce costs you have to look at these , PW can you afford to reduce the cost of your perminent way, unless you want to have even more expensive problems later, no, you can only have TSR's for so long, Operating, the coal and oil bill will probally be the next highest cost, but any manager worth their title, would have got the best deal possible already, so the only saving is to run fewer trains, and cut the number of coaches, most staff are most likily non paid anyway.
    Pail staff, can your railway run without them? managers, do you really need them? well with the HSE regulations i would say yes, but some roles could be shared, in some cases you might have 3 managers when prehaps 1 could do the job, so back office, there might be some scope for savings, but by and large railways already run on a shoestring .
     
  5. Corbs

    Corbs Well-Known Member

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    But what about reducing the cost of things discussed above (Overhauls, Haulage etc.) by pooling resources or building a skilled workforce inside the industry?
     
  6. simon

    simon Resident of Nat Pres

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    I meant my post was going slightly off topic, not yours.
     
  7. Ruston906

    Ruston906 Member

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    Do we need to look abroad for the best way to operate the Hartz mountain strikes me from visits as a well run operation. I guess because off running in the large part a fleet of relatively modern steam locos for the tourists. Also running small diesel units for public transport it may get money from local government.
    The solution maybe to run a lot more with dmus during the week low season reducing track and infrastructure wear at lower prices reducing the wear on a smaller fleet of locos and maybe construction of more museums like a KWVR to show of the none running locos.
     
  8. geekfindergeneral

    geekfindergeneral Member

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    One of the joys and perils of social media is the lack of any kind of Chairmanship in debate. When it works well (1000 + hits in 24 hours that we have seen here is working pretty well) a lot of ideas get floated very quickly that may not otherwise see the light of day. The downside of the unstructured approach is that taking anything forward beyond a talking shop and converting it into actual action is much harder than in a formal business meeting. So here comes my best stab at getting some focus – something we could take to HRA as a serious suggestion.

    The question of nationalisation (above) is out of time and in the wrong country, but a return to the Big Four for some purposes could have legs if combined with the other suggestion for more pooled resources. Certainly the big standard gauge heritage railways on former Southern territory have more business affairs in common than not – and a big enough market that they are not falling over each other for custom. I suspect the same is true of those railways and centres on former GWR land. I think things may be harder for the ex-LMS and LNER premises, but life was always tougher for them and they never made any money. A willing merger of Bluebell, KESR, MHR, pooled management, the best Directors and Managers from each, stronger finances, a shared workshop group with a specialism in Thermic Syphons and green paint, and even some joined up marketing. Summer still comes sooner in the south -especially when it comes to making money. It won’t happen, if only because ego and tribalism will get in the way but it is not ridiculous. There is already a pretty strong cultural/social link among the Companies and their people. Merging just formalises what at an informal level already exists, and removes duplication.

    The case for a revived GWR is probably even stronger – the brand is indestructable and more fondly remembered than Southern. It has a very competent workshop with a speciality in GWR engines, another (at Kidderminster) that is good with Collett and Hawksworth coaches, two steam running sheds within fairly easy reach of London, a spiffy(ish) museum at Swindon (Vatican City for the Gee Dub men) and a fabulous collection of branch lines from Worcestershire to Cornwall. The co-location of these places might even give us the sensible transport costs that Corbs has rightly called for.

    I think, (and I am even now heading for the nearest nuclear bunker to avoid the massive fall out heading my way), that a voluntary return to the Big Four is an idea whose time has come.

     
    Corbs and Kje7812 like this.
  9. gios

    gios Member

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    In principal sounds a great idea, economy of scale is always important and certainly something that should be considered. The problem is where will this pooled expertise be located in order for easy and cheap access, who will decide priorities and will it have the resources to attract a skilled workforce. This all comes down to the bottom shelf, which is pretty bare at the moment. To keep costs down volunteers would also have to fit into the proposal. Travel to the local railway is one thing, motoring for several hours to work on someone else's loco something completely different. At present the market itself is answering the question to a limited extent, with certain far seeing centres specializing in niche loco engineering aspects, but none of them in one central location.

    I would be all in favour of any saving that could be made from pooled resources. There is no simple answer as to how this might successfully be achieved. Maybe someone a little brighter than me has some ideas.
     
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  10. 1472

    1472 Well-Known Member

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    Whilst paid staff are clearly a considerable cost it is an extreme simplification to suggest that a reduction in the wages bill is the only way to reduce costs. In an earlier post I suggested that H railways do not fully understand and therefore properly control their costs. Nobody has come back on that one but anybody who has run a business in the real world will know what I am talking about.
    I will give a sanitised version of a real Heritage Railway situation to show what I mean.

    Railway X has a choice between purchasing a component for £6,000 or £9,000. It chooses, for financial expediency, to buy the £6,000 component even though it is aware that it is not as durable as the £9,000 one which could fully be expected to last until the next overhaul in 10 yrs time.

    In the financial year in question everything is fine & it appears that £3,000 has been saved.

    Two years on the £6,000 component fails and unexpectedly damages other components resulting in a repair bill of £5,000, an unforeseen lack of availability of the key item to which the component was fitted, and unprogrammed use of paid staff normally engaged on other work.

    To achieve the required level of reliability the £6,000 component has to be replaced by a new £9,000 component which will now last until the item is withdrawn for full overhaul - now 8 years hence.

    Had the £9,000 component been purchased in the first place the cost to next overhaul would have been £9,000.

    As a result of the decision made the actual cost was £6,000 + £9,000 + an unquantified down time & fitting cost - ie > £15,000 & probably nearer £20,000

    How many decisions like this are being made because of a lack of grasp of real costs?
     
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  11. Corbs

    Corbs Well-Known Member

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    Maybe in order to alleviate the bruising of egos and hypothetical banging together of heads, a separate body could be formed 'above' the railways to link them together.

    In several military re-enactment circles there are large organisations (Like the Living History Association) made up of smaller groups, each representing their own chosen unit and country, but they are administrated and regulated by the central organisation.

    This unification could mean several things, for example working parties from one line to another in times of need, sharing of tooling or components, all the way up to joint tickets for members of the public, encouraging them to visit 2 or more lines instead of 1.

    Of course, this shouldn't be to the exclusion of other lines outside of the 'circle' and should serve to bring the movement together as a whole.




    Very true - I imagine it is better to look at what the resources in question are. For example, if there were two 'big' boilershops capable of taking on all manner of work in the H Railway movement, say for example one located north and one south, both project managed, then this is skilled work, often costly, that often goes outside the movement.
    Sending boilers off to (eg) Meiningen to be refurbished may offer a quick, if expensive, solution, but the money goes out of the country and out of the movement as a whole.
     
  12. Corbs

    Corbs Well-Known Member

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    Very good point - it's the old 'cost vs. value discussion', something I've been getting to grips with recently in my day job, for example - we were a large crew operating at 3 different locations. We had 2 vans, a minibus and several private cars. The day before the job, we took the decision to hire a 2nd minibus for £450/day. This meant we were £450 over budget.
    This ended up being seldom used for the majority of the day, but on the 3 location moves everyone and their equipment piled in straight away, no one got lost, everything fitted without the need to pack lots in. The overall time saving was about an hour over the course of the day, which in crew overtime means £2400 for every hour over the agreed timescale.
    So we spent £450 to save £2400 - although at first the cost seemed high, the value to us meant we all finished on time and not massively over budget.
     
  13. Jamessquared

    Jamessquared Nat Pres stalwart

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    Well, to some extent that is the case (for example Chatham in the south and Crewe 'oop north).

    But outsourcing everything isn't a universal panacea for the railways concerned. In particular, if you outsource all your major boiler work, the risk is you lose the skills in house, which then makes it harder to do even minor repairs. You could arrive at the point where even a couple of broken stays that should be fixable in only a week or two out of traffic suddenly can only be done by hiring in a (possibly hard to get at short notice) contractor or - even worse - having to send the boiler away with a huge amount of consequent upheaval.

    So while outsourcing for major repairs will have its place even on major railways, and can offer economies of scale, any prudent railway would also have to be aware of the risk of in-house skills declining to the point where even minor repairs can no longer be carried out quickly.

    Tom
     
  14. Steve

    Steve Resident of Nat Pres Friend

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    In my earlier post I said that the raison d'etre of a heritage railway was volunteers coming together to run an unremunerative railway and make it remunerative with their freely given toil. I am still convinced that this is the only way the industry will survive. Friend Bean Counter is rightly proud of the NYMR's position at the pinnacle of the movement in terms of passenger numbers. It is also near the top in turnover at about £5m. However, it has wages costs approaching 50% of that turnover and that is unsustainable. Cut that figure to 25% and you have just released £1.25m for infrastructure expenditure. This can only really be achieved by substituting volunteers for paid staff and to do this you need to encourage them as much as possible. The smaller railways generally manage to find their GM's, Mech & Civil Engineers, marketing, etc., amongst their membership and I'm sure that the big boys can do the same if they look hard enough. OK, when you are running 7 days a week, some of the most important jobs may have to be filled by full-time staff but that should always be the last resort. I have a gut feeling that it is the first resort in the case of some of those railways that are struggling to make ends meet.
     
  15. paulhitch

    paulhitch Guest

    Dare I say it but I fear even G-F-G can get a bit gricerish at times. I think I have mentioned this story before in another thread but it bears re-iteration because it was something experienced by me personally and has a relevance here.

    A locomotive, which happens to be a centenarian, arrives at the terminus. The vacuum brake is a noisy one so there is a great deal of snorting and hissing as well as well as steam wisping from the whistles. This is watched carefully by a couple best described as "not unsophisticated". As the train comes to a stand the woman turns to me and enquires "Is it a diesel locomotive got up to look like a steam one"? Sounds a bit like the old advert about the person who could not tell margarine from butter doesn't it!

    I am not saying that all or even a majority cannot tell the difference between steam and diesel but I really do think it is easy for enthusiasts to delude themselves into thinking that the general public are over concerned about what size of locomotive hauls their train. If you told them that they would have to pay extra for the privilege of being hauled by something larger than necessary for the job (as ought to be the case for commercial reasons) then I don't think the "big chuffer" brigade would like the answer. Fares are high enough as it is.

    PH
     
  16. Jamessquared

    Jamessquared Nat Pres stalwart

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    Preserved railways present a rather scary combination of having assets with high capital value, long depreciation times and wafer-thin profit margins on relatively big turnovers.

    Imagine a railway with an asset - lets call it "track" - that has a value of, say, £2.5million on the balance sheet, depreciated over 40 years. That means the depreciation on the track is knocking a £62,500 size hole in the overall accounts every year. But suppose the accountants chose a different accounting policy, with a 50 year depreciation. Now the depreciation is only £50k per year; in other words, a change in policy makes you notionally £12,500 per year better off. With many railways having an annual profit or loss that is generally in the range of +/- £50k on a turnover of £2m - £5m, and suddenly a notional £12,500 saving might tip you from profit to loss. Then imagine the same discussion on every other asset class that have high value but gradual depreciation - buildings, locos, carriages - and think how sensitive the profit/loss account is to the exact accounting policies chosen.

    I'm certainly not saying that any railway finance officer would wilfully misrepresent the depreciation periods. But with assets that deteriorate both based on usage and simply time (with more trains, your track wear out quicker - but even if you ran no trains at all, eventually it would still be good for nothing more than scrap), choosing a suitable depreciation period is not a simple matter. But get the policies wrong and it may give an entirely unrealistic view of the real underlying financial health of the organisation.

    Tom
     
  17. ZBmer

    ZBmer New Member

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    There's a definite trend in several of the above posts, to the effect that cutting numbers of paid staff will help many a heritage railway. So it may. However, the thread title includes the idea that safety needs to be preserved, and that's a nuance which most posts so far haven't really taken into account.
    Volunteers are notoriously difficult to control by contrast with employed staff. Their availability is patchy; they tend to require more continuous investment by a railway's management in order to maintain their skill and knowledge levels. Because their numbers of days 'on the job' is usually fewer than a correspondingly-graded employee, the likelihood that they will make a mistake is increased. Yes, I take into account the concept that a volunteer's motivation may well be higher than that of a bored employee, but proportionately over time I'm fairly sure that constant experience is likely to reduce accidents and improve safety. And a number of incidents across the heritage railway movement could be cited to support this case.
    A railway that relies very heavily upon volunteer labour is likely to need more investment on the management side. This will tend to increase cost at the top of the organisation; the very place which has least impact upon the day-to-day visitor experience or hands-on maintenance/ engineering.

    Roger
     
  18. geekfindergeneral

    geekfindergeneral Member

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    Oh no! I have been outed by PH. How will I ever show my face in polite company again? However, in my mitigation I would say that I did not affirm "Sir Frederick Sludgepile" was the Way and the Light. I just asked if it might be...I was suggesting that our collective knowledge may not understand - and I certainly don't - the relationship between between big engines, with their eye-watering costs and relentless track-bashing, little engines with their slightly less eyewatering costs and daintier on their feet, and how the difference influences the bottom line.

    Measured by old fashioned railways-as-transport criteria you and James are right beyond peradventure. But if we are a bit Sheila Showbiz (and we have no choice in that, like it or not), the economics of a concert, or film or West End musical apply and a big box office name will bring in more bums on seats than a hopeful off the C list who no-one has heard of. What I want to understand is the relationship between cost and sales - which is where we came in. And if you are given lemons, make lemonade because we have an awful lot of big engines, especially of the Bulleid/Jarvis/Bond variety. I blame Dai Woodham for being so tardy with his gas-axe.

    I do understand your allegorical couple. Try going out on the main line with a kettle to see utter indifference to the engineering triumph defying the march of progress and still doing what it was built for at the head of the train. Scarcely any normal people spare you a second glance, which is a bit dismaying if you have just forked out £35.000 to hire it.

    NH

    PS Not at all sure about your couple who don't know their low chloresterol spreads, but there is an old music hall joke about the young newly-weds who couldn't tell the difference between Vaseline and putty; All their windows fell out.
     
  19. Corbs

    Corbs Well-Known Member

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    Will they still make £5m with 50% of the paid staff gone though?
     
  20. louis.pole

    louis.pole New Member

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    The places you mention may be all of GWR extraction but to say "tribalism would get in the way of unification" would be a gross understatement. One has only to see how one location likes to hang onto its toys, despite not having the ability to maintain them, to see a hint of that.

    As for the merging of management; that's a complete no-no. Could you see one or more GMs wanting to exchange £40K plus p.a. for their P45? I think of the payouts that have been made in the past to buy them off so they would leave quietly.

    I think I might now don the tin hat and join you.
     

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