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Planning in British railways
Planning in Railway British R. A. This has been a brilliant decade for transport development and a decade of crisis in national transport planning. The Modernization of transportation policy is a national aim in the U.S.A. and cities throughout the world are spawning programmes to deal with their travel frustrations. In this article an Executive Director of British Rail, and a former Director of Planning, describes the development of planning in the British nationalised railway system from plans which were partial and ad hoc, towards integrated corporate planning, with the aid of computers.
Ccribed OAL
AND
RHUBARB
HAVE
BEEN
DES-
as Britain’s two indigenous products. If we could live abundantly on the proceeds the national planning might be of some help, but not a necessity. It could also be argued that any industry in a primary stage of growth need not make long range planning its top priority. For an industry in a highly developed stage, the position changes. When that industry has experienced diminishing market shares in certain activities and urgently needs new investment, survival itself depends on decisions taken on the basis of long term evaluation. So it is with British Rail. It is hardly necessary to remind the long range planner of the far-reaching constraints on industry by Government. The basis of private business is already determined by company legislation: regulators influence profits, prices and incomes; regional policy bears on the location of industry and the Government impact on technological research is massive. Neither is it necessary to dwell on the reasons for long range planning in the business: they stem partly from these national planning pressures. They also include the impact of rapid technological change, the shortening life cycle of products and techniques, the need for diversithe developing complexity as fication, This article is based on a paper which was presented tothesocietyfor Long Range Planning in London on 28th May, 1969.
72
companies merge into larger groups and the pressures of social change. TRANSPORT
PLANNING
The survival techniques of manufacturing industry apply to transport with even greater force. The threshold of organizational complexity was crossed by railways many years ago. Nationalized industries have their own particular constraints. They are no strangers to merger and diversification, although political, rather than market, forces often provide the reason. Transport is no stranger to rapid technological change. Telecommunications have brought people closer together, radar has expanded sight, mechanization has increased muscle power, new forms of power have revolutionized traction and automation has become the inspiration of systems designed transport. This is a brilliant decade for transport development. Any one of the breakthroughs experienced in hovercraft, freight containers or supersonic flight would earn it a place in history. But it is also a decade of crisis in national transport planning. The names of Beeching, Buchanan, Hall, Geddes and Castle will have their place in British transport history just as Leber and Nora have made their impact on the European continent. The modernization of transportation policy is a national aim in the USA and cities throughout the world are spawning programmes to deal with their travel frustrations.
Executive Railways
Long, Director, Board
O.B.E.,
M.1nst.T.
Passenger,
British
It is significant, however, that the emerging surface transport planning of the 1960s has been a reaction to the problems caused by the over use of roads and under use of railways. It has not been the anticipation of the problem. EARLIER
RAILWAY
PLANS
Within railways, planning has a long history. Indeed. some of the work of years ago might be regarded as modern in some circles today. One of the landmarks in this planning was the report on “The Modernization of British Railways” produced by the British Transport Commission in December 1954. It is well known as the means by which investment began to flow into the railways after a quartercentury of capital starvation: it is less well known as the first major sign of disbelief in the massive continuity of the existing railway system. Following the techniques of traffic costing in the early 1950s. it was realized that there were some areas of transport not suited to a guided system and some disinvestment was necessary. The next great plan came nearly ten years later. This was the report on “The Re-shaping of British Railways” in 1963. Now came a penetrating diagnosis, followed by considerable disinvestment. Less well known was another report which came out two years later-“The Development of the Major Trunk Routes”-and proposed the selective development of a limited route
LONG
RANGE
PLANNING
system. This was one of the plans which remained undeveloped because of political change. By current planning standards these three major plans had three drawbacks. Each was the reaction to-not the anticipation of-a critical situation and tried to regain initiative rather than maintain it. Each was a “one off” task and not to an iterative pattern. Each was insufficiently corporate in conception. It is clear that survival in a changing world depends more on the ability to anticipate new situations than in reacting to them. In this the railway is only like any other industry: in other ways there are differences. The profit motive has conflicted with that of public service and railway management has suffered particularly from soggy objectives. The public owners of the railways have subscribed to the concept of profitable efficiency until this involves the rationalization of their local passenger service. The legacy of the great over-investment in railways of over half a century ago has diverted resources from more positive tasks. Two major influences have shaped the new railway planning. One has been the welcome impact of new management tools on the complex activities of a railway system. The other has been the stimulus of recent legislative change which has created new objectives and constraints for railways in Britain and generated some hope that the political pendulum will swing less violently in the field of transport than has happened since 1948. NEW TOOLS WIDEN RAILWAY PLANNING HORIZONS
The traffic costing break-through nearly twenty years ago had allowed railway policy making to take account of the relative profitability of different activities, but railways still had the endemic diseases of the multi-variable industry: inadequate data and inadequate evaluation. This was one reason why some of the brilliant diagnosis of the Re-shaping Report of 1963 was unaccompanied by prescription. The answer has been in the increasing penetration of quantitative analysis allied to the electronic computer. This is not the occasion to discuss in detail the roles of simulation, investment appraisal, regression techniques, network analysis or decision trees. The important point to make is that the extensive model building brought about by the electronic computer has made it possible to bring together for the first time several techniques into models representing the complex inter-relationships within a railway and to predict what should happen if a specified system is loaded with a given amount of traffic. Consequently, evaluations have shown the
DECEMBER.
1969
relationships between service quality. cost and revenue in order to test the merits of alternative courses of action. British Rail is still far from representing all its activities in one model, but it has been possible to sub-optimize within the individual businesses, reduce the overlap areas to the minimum and prepare the way for the model of the corporate plan itself. Whilst the main use of computers in railways has been at the logistic level, simulating alternative courses of action and retrieving information from a data base, their value in the strategic field is very considerable. Planning as we know it in British Rail today would not be possible without these machines and their use will develop in several directions, including: (1) the solving of complex long range problems in different functions and disciplines; of (2) the detecting and understanding trends in the social, economic and competitive environment: a field in which computers have made little impact; (3) the improvement of tactical decision processes (e.g. time-tabling, crew rostering, etc.); (4) the physical control of passenger and freight train movements; (5) the integration of component business plans into the corporate strategy; (6) the devising of integrated traffic systems, involving rail with other forms of passenger or freight transport. One unresolved question is whether the computer’s contribution to a railway suggests the centralization or the decentralization of decision-making, but there is no dubiety regarding the quality of the judgment needed to match and control the potential of the computer at all management levels. THE STATUTORY CONSTRAINTS
If it is the tools that have made possible the development of effective long range planning in railways it is new legislation that has set the transport scene, and created for British Rail both objectives and constraints. The Transport Act, 1968, is the first piece of legislation in our history to make transport the servant of national and regional economic planning. It has ended deficit financing by recognizing that railways have certain commercial activities (e.g. freight and the inter-city passenger network) and other activities (e.g. commuter services) which are socially justified within the total arithmetic of transport. It has recognized the inertia that exists in all economic systems by its measures for priming the pump of change in order to
stimulate the best use of the nation’s transport assets and future investments. One significant feature of the Act from the planning aspect is the developing constraint on diversification by British Rail. Since 1947 railways in Britain have relinquished air. bus, road haulage and port interests. If it would be generally accepted that opportunities for diversification should be within the wider transport area, and that the opportunity for success always exists outside a business rather than within it, then British Rail appears effectively blocked. If, on the other hand, the view is taken that industry should expand in areas where its industrial strength lies, British Rail is again blocked in the sense that it cannot move into major fields where it could use its particular expertise. Authority to provide research services, retail petrol in car-parks, manufacture for sale in workshops or build new hotels are comparatively slight diversificaticn for the nation’s biggest passenger and freight operator which no longer operates a throughout rail/road transport service. The contrast between diversification, possibly with the Minister’s consent, and the commercial freedom normally conferred by a company’s articles of association, effectively illustrates the diversification situation of British Rail. Of even greater concern to the railway planner’ is the swing of the political pendulum. Current legislation determines the immediate course of railway policy making but the trend offuture legislation is more significant for planning purposes in an industry where the impact of major investment and transmission of technological innovation into commercial application involves not only five year plans but also a time scale extending towards the end of the century. By the year 2000 past experience indicates that we could have in Britain something between 6 and 10 further Transport Acts with their inevitable impact on long range railway plans. If these are brought about by rapid technological and economic change, they are to be welcomed and can be taken into account in estimating degrees of certainty. Of more concern to the transport planner, however, is legislative change reflecting political, rather than technological influences. Before considering the other features of change this factor of political risk must loom large in evaluating railway plans. THE
NEW
PLANNING
PROCESS
The new planning process in British Rail has envisaged four main stages as following the decisions on objectives (Figure 1). These stages apply to all BR activities but the rail plans are highlighted in view
73
of their
reach decisions on them. Within the external field there is a whole range of possible social changes which are almost Orwellian in character and the economic factors are equally challenging. Our future society may well be one that rejects cash, opts for automated purchasing methods and relies on remote facsimile news: from the transport point of view it is important to mention only a few of the factors which have emerged from the examination. For example, the demand for transport will inevitably increase, particularly in the passenger sector. With increased standards of living, service quality will assume greater importance than price. The cost of labour will steadily rise but money for investment will probably remain expensive. The main part of the
dominating size. The stages are: Forecasting. Business Planning. Integration into Corporate Plan. Decision. action and control. Forecasts are of two kinds: external and internal. External forecasting considers what is changing in the environment and how quickly it will happen: it includes the impact of political, social and economic change and the effect of competition. Internal forecasting concerns the efficiency of production and the rate of technological innovation within the railway. The information within the industry has been. as would be expected. much better-and cheaper to obtain-than external information. Both are needed to provide the stimulus to explore new situations and (I) (2) (3) (4)
FIGURE
1. THE CORPORATE
EXTERNAL
PLANNING
INTERNAL
FACTORS
PROCESS
FACTORS
Railway
production and technology
Demand Legislation Competition
Forecast
t Basis
for
Plans
I
I
I
1 I
BUSINESS
PLANS
I
I
popular exaggeration to claim that transport is undergoing a major technological revolution. The pace of evolution is rapid in several fields (e.g. the gas turbine. the linear motor and tunnelling techniques) but there is no sign of any development which will have the dramatic results which followed the invention of the steam engine. the internal combustibn engine, or powered
I
I
I
Recirculate
I
___t
___
I
CORPORATE
PLAN
Integrate business plans, Implications for track, Manpower, Cash flows, Investment. etc.
-
/I I
Corporate stage
;
Action Monitor
RAIL
more people expected in this country within only the next IO years will be mainly in the great conurbations and create an increasingly metropolitan transport environment. In fuels the advantage will rest with those most suitable for grid distribution and the movement of fossil fuels will be less significant within the freight transport demand. British Rail recognized at an early stage, therefore, that it would have to plan against a background in which the transport operator would strive to be less labour intensive, increase the size of unit loads and seek automation. Also, those unable to improve service quality would find their product unsaleable. In this situation the railwav has examined the potential for increasing its unit load and for exploiting the capacity of its tracks. At the same time it has recognized that. within this country, railways must design their future within an increasing road environment and seek comparibility with it. These developments have been evaluated in terms of service quality and cost, with regard also for environment and social benefit which play increasing roles within the national planning structure. Internal forecasting relates to rail technology and production methods. It is unlikely that we already have. even in embryonic form, the technological developments that railways can put to commercial use within the next twenty years. At the same time it could well be a
i --___--I t
1
I
I
IN BRITISH
some 4 million
I
I i ------__
flight. amaze
are likely to be linked less to any one form of surface transport than to those operators who seize them most effectively for their own purposes. Automation. and the engineering of systems to exploit it, will surely be the main development during the next decade. Railways should be particularly well suited to exploit these developments. They are a guided system working in one dimension: road transport in two: air in three. Perhaps the greatest single development will come from the engineering of new mass production systems which throw into sharp relief what does not conform to the system and ultimately reject it. Already the process is at work: one example is the freight container system which is concen-
trating
74
Technological development will us in many fields but the benefits
movement
between
LONG
main
RANGE
centres
PLANNING
and rejecting freight which does not conform to the new linear marketing process. Another example is to be seen in the package holiday business. The rail reserarch and development portfolio is changing and systematic analysis looms larger in determining research priorities. Whilst market research would never have given birth to many great breakthroughs in research, a study of the main economic and social forces influencing the future will lead to the channelling of limited research resources into the areas of success probability. The closer the relationship between the scientist and the economic forecaster the more realistic will be the scenario. Urban transport probably presents one of the best examples of how a technique such as Delphi could narrow the range of probability in an area where the solution will always be elusive. The consideration of rail technology must not unduly dwell on far ahead situations. Air cushion principles may well provide for a future high speed need or, when we run out of land. we mav well. be served by magnetic suspension In tubes, but transport faces enormous investment when new infrastructure is involved: the FIGURE
2. BRITISH
RAIL
MARKET
CORPORATE
(Passenger (Freight (Passenger (Freight
Hotel
guests
Rail
freight Iron and Coal Oil
Land
and
PLAN
Shippmg Hovercraft Hotels Advertising
Steel
space workshops
MANAGEMENT B R
Shipping
B.R.
Hovercraft
B T. B R.
Advertismg Workshops
Estates
Rail
1969
Etc.
buildings
Motive Power. Rollmg stock, Stations. Slgnalllng
DECEMBER,
etc
Parcels.
Track
: Marketing Operating Engineering
(1) the assessment of performance in each market. the resources involved, ,the net revenue situation and what could be done to improve profitability with existing markets and resources; (2) the evaluation of new market possibilities, the resources and investment required and the impact on staff and customers; (3) the forming of alternative policies and their translation into the first draft of the business plan. of the plans for the (4) the re-circulation components of the business if, in total, they do not meet the objectives for the business. The task follows the same lines within all the separate businesses of the railway but in different degrees of complexity. In some businesses it is easier to identify markets with resources and management than in others (Figure 2). British Transport Hotels is an example of a comparatively clear business planning situation which has many similarities with the private firm. In this, and similar, iituations it has been necessary in each of the companies to determine the general planning method and timetable, the financial results, the investment demands on British Railways Board resources, the manpower implications and any reaction on other railway interests. If all British Rail businesses were of this type then the Board might be mistaken for a holding company within a conglomerate. The unique planning problem is the railway itself. Even the rail freight and passenger businesses are made up of many sub-businesses with areas of common cost and management. For this reason attention will now be given to the railway sector of the Board’s activities. RAIL
Passenger Inter-Urban
Hovercraft Hotels Advertising Manufacturing
B.R. B.R. B T B.T.
Rail
GROUPS
RESOURCE
PLANS
B.R. Workshops Estates
Passenger Business Casual Commuters
/
BUSINESS
The business planning stage of the planning process has involved for each of the Board’s many businesses:
GROUPS
Contmental
Rail
railway already has a comprehensive system of wayleaves and the first priority must be to exploit it. In addition, it is important to design for the efficient transition from an existing technology to a new one and the conventional train must be improved alongside the development of the unconventional. Against this background our research effort is already enabling the existing route system to be exploited in new ways. One example is the re-thinking of rolling stock suspension methods which has already contributed to vehicle riding qualities at high speed. A second application is in the area of traffic control by two-way communication with the moving grain so opening the way to new methods of signalling and automation. A third is the conception of the advanced passenger train which reduces the power requirements of high speed surface travel and enables existing curves in the track to be negotiated at speeds half as fast again as those of today.
GROUPS
FREIGHT
PLAN
The first phase in the planning of the freight business carried out in 1968 represented probably the most penetrating task of quantitative analysis ever carried out by a railway. It was recognized that new transport legislation would significantly affect the freight business of British Railways although some 90 per cent of traffic would remain the sole responsibility of the Board after the creation of the National Freight Corporation. Within this group of freight businesses were four major challenges: to exploit the system designed freightliner and containership network, to prepare for a reduction in coal carryings, to re-think the future express parcels services and to transform the business in less than train load quantities into a modern system. The starting point of the new freight plan was an evaluation of the alternatives
75
penses and the sale of assets. Revenue. capital income and capital expenses, expenditure were estimated up to 1990 and cash flows calculated. Similar models w’ere evaluated for achieving an optimized freightliner solution. The techniques used are the subject of other papers and it is sufficient to say that the work has resulted in the designing of a more taut freight system with greatly improved use of men and equipment and designed to give high reliability with provision for ultimate control by computer.
open in the less than train load situation. First. it was necessary to identify the most advantageous less than train load system and the second stage was to compare a freight future containing this system with a future without it. In the first stage a mode! was developed which enabled 16 factors such as the number of terminals, marshalling yards and level of rates to be measured and a programme for computer analysis to be designed. More than 1000 different alternatives were considered. The area of greatest apparent profitability revealed by this model resulted in 10 solutions being checked in detail and this involved further models. One estimated methods of working trunk route systems to achieve a predetermined quality of service at minimum cost. Another was a simulation model designed to calculate the cost of different feeder systems checked against real life situations. The solutions analysed in depth by these two models were chosen to show the influence of the key factors on the impact of service quality, of revenue and cost, the concentration of marketing resources and different mixes of train load and part-train load definitions. A preferred solution was then evaluated in more detail followed by the effect on such features as route and administration exFIGURE
3. RAIL
PLAN
RAIL
PASSENGER
PLAN
The rail passenger business differs from the freight in two important respects. Freight relies wholly on its competitive ability to gain shares in certain markets. This also applies in the passenger business with inter-city services but others are dependent on the social benefit value placed on them by the localities they serve and the community in general. In this situation the passenger plan must anticipate not only competition but also aspects of social value within the context of total national transport planning. The second difference stems from the structure of the businesses in that a passenger plan is really the sum of over 350 separate service groups with less
1st PLANNING
centralization of marketing strategy than is required in the freight business. For this reason the model building used for designing national freight systems has.in its passenger context, been more associated with the complex evaluation of variables in situations such as future high speed services or patterns of customer and train movement. As in the freight service it has been recognized that the emphasis must be on increasing quality of service, whether in the competitive or social value categories. THE
RESOURCE
PLANS
Whilst the rail freight and Passenger Business Plans are the main rail product plans. the planning process equaily applies to the railway resources departments both as contributors to the business plans and as planners within their own functions, Prominent in this resource area is the track and signalling system. Reference has already been made to the complex rela,tionships between the freight and passenger businesses, as although some equipment staff and a small part of the track system are exclusive to each business. some are common. The approach has been two-fold One aim has been to identify the route system. also the permanent way and signalling. more closely with different
CYCLE
Rail plan 1st draft Freight plan Freight plan
Passenger plan Passenger I t Production plan
lnfra structure plan Rolling plan )
Workshops plan Manpower plan
76
LONG
RANGE
PLANNING
types and volumes of traffic. The other aim has been to determine the infrastructure appropriate to any given size of passenger and freight services. As much of the route system is determined, almost by definition, by the social service group of passenger services, the first stage has been to define a series of passenger plans. For each of these passenger plans the net revenue has been determined on the assumption that no other traffic is carried. The next steps involve the building in to the several passenger based plans optimal freight net revenue situations so as to achieve a total net revenue position determined by totalling the margins over direct cost of these freight systems, less the additional indirect costs of adding them to the passenger system. The social engineering must be at least as good as the technological so that manpower use is optimized, change is not inhibited and social upheaval is minimized. The manpower plan is therefore an ingredient in all resource and business plans and a major resource plan in its own right. Other resource plans involve the Operating Department, the Engineering Departments and the Workshops. THE
CORPORATE
PLAN
British Rail is now approaching the preparation of its first corporate plan. The main task is the plan for the railway activity. By far the dominant area is the potential clash within the rail plan of the freight and passenger demands and the claims of a minimum track network situation. One of the most delicate operations will be the co-ordination of capital projects, to optimize the cash flow. Figure 3 illustrates the first planning cycle that is now in hand following the preparation of the first business plans. When this is completed recirculation will be necessary if the Board’s objectives are not achieved. Meanwhile the business plans for the other BR activities are in preparation: their main impact on the corporate plan will be in terms of investment and cash flow. ACTION
PLANS
Already we have developed action plans flowing from the individual business plans completed last year as an interim measure towards the corporate stage. The machinery has also been set up for monitoring progress and ensuring that it conforms to pre-set standards. One lesson already learned is the need to devise the strategic plan in such a way that it can quickly lead into the tactical sttuation. THE ORGANIZATIONAL IMPACT OF LONG RANGE PLANNING
The solution
of today’s problems
DECEMBER, 1969
impact on tomorrovv’s organization. For this reason it has been necessary to consider the effect of long range planning on the existing organization and to re-think the organization for planning itself. Under the first heading it was evident that the very forces creating the drive towards long range planning were also creating new organizational demands.The need for free communication and the tendency to departmental polarization suggest that the traditional hierarchical organization does not meet the requirements of long range planning. For this reason we have seen a move towards group procedures for policy-making purposes with the traditional departmental organization providing the stable basis for action planning and day to day management. It is evident that long range planning cannot survive with the habits developed by a traditional pyramidal organization. On the planning organization itself. British Rail developed in 1967 a Central Planning organization on the broad concept that as the urgent always drives out the important a separate long range planning organization had to be formed. It was recognized that this organization would be changed at a later date: it was also seen that no planning organization by itself could produce plans for which line management would accept responsibility. In the ancillary businesses the position was comparatively simple but within the rail passenger and freight businesses a hybrid and intermediate approach was made. In this situation the Central Planning Department became the executive body to the different departments concerned in the preparation of freight and passenger plans. The planning groups often included the heads of the Headquarters’ departments and worked in collaboration with the regional organizations. This approach met the urgent need to prepare the first freight and passenger plans but the second stage of the organizational procedure has now been introduced. The rail freight and passenger business planning has now been combined within the Freight and Passenger Departments so associating the Executive Directors of these groups with the long of the business, the range planning implementation of the plans and the process of control. The Central Planning Department has now become a Corporate Planning Department responsible for the integration of the rail freight and rail passenger plans into a rail plan and then the integration of the rail and ancillary business plans into a corporate plan. CONCLUSION
has its
British Rail is now preparing
the second
series of rail freight and passenger business plans within the new rolling process. The position in the ancillary businesses is very similar. It is now preparing the first corporate plan and, in this operation, the route system is proving the key factor in integration of the rail passenger and rail freight businesses. It has been seen how railway planning in the wider sense is particularly complicated by its relationships with national and regional government. Constrained in opportunity to diversify and controlled in product volume in the field of grant aided passenger services its planning energies must be directed to generate initiatives which will favourably influence its environment. The process of change, whether political or technological, can be expected to accelerate and put greater emphasis on the need for long term planning in railways. From the planning experience of British Rail there are some general conclusions which should be of interest to planners in other fields. Firstly, it is evident that information itself is now such a key input that it merits examination in greater depth by the planner: without the right information business planning is useless. An integrated information system may still be a mirage but more and more data will be spewed out by computer based methods and the filters must be better designed to cope with it. Secondly, it is easy to emphasize the need for objectives, but so much more difficult to design them. The exercise in concentration which they provide is always valuable. Thirdly, quantitative analysis is now well established but industry faces a bottleneck in the shortage of resources. In order to ensure, therefore, that objective evaluation reduces the area of subjective argument it is frequently necessary to determine what the decision would be without adequate quantitative analysis and how much further analysis is justified in order to improve the basis for decision. Fourthly, these evaluation techniques are as valid in research and development planning as in any other area of long term planning. Fifthly, the management of change is more difficult than the design of change. The social ‘bugs’ of innovation make headline news after the technological ‘bugs’ have been forgotten. It is necessary, therefore. to balance the technological and social values so as to avoid technological drive becoming frustrated when it makes its social impact. everybody wants to be a Finally, planner, few to be planned. Planning must be participative even if the organization has to be reshaped to achieve this objective. The right means of introducting Long Range Planning is by inhalation, not by injection. n 71
Ccribed OAL
AND
RHUBARB
HAVE
BEEN
DES-
as Britain’s two indigenous products. If we could live abundantly on the proceeds the national planning might be of some help, but not a necessity. It could also be argued that any industry in a primary stage of growth need not make long range planning its top priority. For an industry in a highly developed stage, the position changes. When that industry has experienced diminishing market shares in certain activities and urgently needs new investment, survival itself depends on decisions taken on the basis of long term evaluation. So it is with British Rail. It is hardly necessary to remind the long range planner of the far-reaching constraints on industry by Government. The basis of private business is already determined by company legislation: regulators influence profits, prices and incomes; regional policy bears on the location of industry and the Government impact on technological research is massive. Neither is it necessary to dwell on the reasons for long range planning in the business: they stem partly from these national planning pressures. They also include the impact of rapid technological change, the shortening life cycle of products and techniques, the need for diversithe developing complexity as fication, This article is based on a paper which was presented tothesocietyfor Long Range Planning in London on 28th May, 1969.
72
companies merge into larger groups and the pressures of social change. TRANSPORT
PLANNING
The survival techniques of manufacturing industry apply to transport with even greater force. The threshold of organizational complexity was crossed by railways many years ago. Nationalized industries have their own particular constraints. They are no strangers to merger and diversification, although political, rather than market, forces often provide the reason. Transport is no stranger to rapid technological change. Telecommunications have brought people closer together, radar has expanded sight, mechanization has increased muscle power, new forms of power have revolutionized traction and automation has become the inspiration of systems designed transport. This is a brilliant decade for transport development. Any one of the breakthroughs experienced in hovercraft, freight containers or supersonic flight would earn it a place in history. But it is also a decade of crisis in national transport planning. The names of Beeching, Buchanan, Hall, Geddes and Castle will have their place in British transport history just as Leber and Nora have made their impact on the European continent. The modernization of transportation policy is a national aim in the USA and cities throughout the world are spawning programmes to deal with their travel frustrations.
Executive Railways
Long, Director, Board
O.B.E.,
M.1nst.T.
Passenger,
British
It is significant, however, that the emerging surface transport planning of the 1960s has been a reaction to the problems caused by the over use of roads and under use of railways. It has not been the anticipation of the problem. EARLIER
RAILWAY
PLANS
Within railways, planning has a long history. Indeed. some of the work of years ago might be regarded as modern in some circles today. One of the landmarks in this planning was the report on “The Modernization of British Railways” produced by the British Transport Commission in December 1954. It is well known as the means by which investment began to flow into the railways after a quartercentury of capital starvation: it is less well known as the first major sign of disbelief in the massive continuity of the existing railway system. Following the techniques of traffic costing in the early 1950s. it was realized that there were some areas of transport not suited to a guided system and some disinvestment was necessary. The next great plan came nearly ten years later. This was the report on “The Re-shaping of British Railways” in 1963. Now came a penetrating diagnosis, followed by considerable disinvestment. Less well known was another report which came out two years later-“The Development of the Major Trunk Routes”-and proposed the selective development of a limited route
LONG
RANGE
PLANNING
system. This was one of the plans which remained undeveloped because of political change. By current planning standards these three major plans had three drawbacks. Each was the reaction to-not the anticipation of-a critical situation and tried to regain initiative rather than maintain it. Each was a “one off” task and not to an iterative pattern. Each was insufficiently corporate in conception. It is clear that survival in a changing world depends more on the ability to anticipate new situations than in reacting to them. In this the railway is only like any other industry: in other ways there are differences. The profit motive has conflicted with that of public service and railway management has suffered particularly from soggy objectives. The public owners of the railways have subscribed to the concept of profitable efficiency until this involves the rationalization of their local passenger service. The legacy of the great over-investment in railways of over half a century ago has diverted resources from more positive tasks. Two major influences have shaped the new railway planning. One has been the welcome impact of new management tools on the complex activities of a railway system. The other has been the stimulus of recent legislative change which has created new objectives and constraints for railways in Britain and generated some hope that the political pendulum will swing less violently in the field of transport than has happened since 1948. NEW TOOLS WIDEN RAILWAY PLANNING HORIZONS
The traffic costing break-through nearly twenty years ago had allowed railway policy making to take account of the relative profitability of different activities, but railways still had the endemic diseases of the multi-variable industry: inadequate data and inadequate evaluation. This was one reason why some of the brilliant diagnosis of the Re-shaping Report of 1963 was unaccompanied by prescription. The answer has been in the increasing penetration of quantitative analysis allied to the electronic computer. This is not the occasion to discuss in detail the roles of simulation, investment appraisal, regression techniques, network analysis or decision trees. The important point to make is that the extensive model building brought about by the electronic computer has made it possible to bring together for the first time several techniques into models representing the complex inter-relationships within a railway and to predict what should happen if a specified system is loaded with a given amount of traffic. Consequently, evaluations have shown the
DECEMBER.
1969
relationships between service quality. cost and revenue in order to test the merits of alternative courses of action. British Rail is still far from representing all its activities in one model, but it has been possible to sub-optimize within the individual businesses, reduce the overlap areas to the minimum and prepare the way for the model of the corporate plan itself. Whilst the main use of computers in railways has been at the logistic level, simulating alternative courses of action and retrieving information from a data base, their value in the strategic field is very considerable. Planning as we know it in British Rail today would not be possible without these machines and their use will develop in several directions, including: (1) the solving of complex long range problems in different functions and disciplines; of (2) the detecting and understanding trends in the social, economic and competitive environment: a field in which computers have made little impact; (3) the improvement of tactical decision processes (e.g. time-tabling, crew rostering, etc.); (4) the physical control of passenger and freight train movements; (5) the integration of component business plans into the corporate strategy; (6) the devising of integrated traffic systems, involving rail with other forms of passenger or freight transport. One unresolved question is whether the computer’s contribution to a railway suggests the centralization or the decentralization of decision-making, but there is no dubiety regarding the quality of the judgment needed to match and control the potential of the computer at all management levels. THE STATUTORY CONSTRAINTS
If it is the tools that have made possible the development of effective long range planning in railways it is new legislation that has set the transport scene, and created for British Rail both objectives and constraints. The Transport Act, 1968, is the first piece of legislation in our history to make transport the servant of national and regional economic planning. It has ended deficit financing by recognizing that railways have certain commercial activities (e.g. freight and the inter-city passenger network) and other activities (e.g. commuter services) which are socially justified within the total arithmetic of transport. It has recognized the inertia that exists in all economic systems by its measures for priming the pump of change in order to
stimulate the best use of the nation’s transport assets and future investments. One significant feature of the Act from the planning aspect is the developing constraint on diversification by British Rail. Since 1947 railways in Britain have relinquished air. bus, road haulage and port interests. If it would be generally accepted that opportunities for diversification should be within the wider transport area, and that the opportunity for success always exists outside a business rather than within it, then British Rail appears effectively blocked. If, on the other hand, the view is taken that industry should expand in areas where its industrial strength lies, British Rail is again blocked in the sense that it cannot move into major fields where it could use its particular expertise. Authority to provide research services, retail petrol in car-parks, manufacture for sale in workshops or build new hotels are comparatively slight diversificaticn for the nation’s biggest passenger and freight operator which no longer operates a throughout rail/road transport service. The contrast between diversification, possibly with the Minister’s consent, and the commercial freedom normally conferred by a company’s articles of association, effectively illustrates the diversification situation of British Rail. Of even greater concern to the railway planner’ is the swing of the political pendulum. Current legislation determines the immediate course of railway policy making but the trend offuture legislation is more significant for planning purposes in an industry where the impact of major investment and transmission of technological innovation into commercial application involves not only five year plans but also a time scale extending towards the end of the century. By the year 2000 past experience indicates that we could have in Britain something between 6 and 10 further Transport Acts with their inevitable impact on long range railway plans. If these are brought about by rapid technological and economic change, they are to be welcomed and can be taken into account in estimating degrees of certainty. Of more concern to the transport planner, however, is legislative change reflecting political, rather than technological influences. Before considering the other features of change this factor of political risk must loom large in evaluating railway plans. THE
NEW
PLANNING
PROCESS
The new planning process in British Rail has envisaged four main stages as following the decisions on objectives (Figure 1). These stages apply to all BR activities but the rail plans are highlighted in view
73
of their
reach decisions on them. Within the external field there is a whole range of possible social changes which are almost Orwellian in character and the economic factors are equally challenging. Our future society may well be one that rejects cash, opts for automated purchasing methods and relies on remote facsimile news: from the transport point of view it is important to mention only a few of the factors which have emerged from the examination. For example, the demand for transport will inevitably increase, particularly in the passenger sector. With increased standards of living, service quality will assume greater importance than price. The cost of labour will steadily rise but money for investment will probably remain expensive. The main part of the
dominating size. The stages are: Forecasting. Business Planning. Integration into Corporate Plan. Decision. action and control. Forecasts are of two kinds: external and internal. External forecasting considers what is changing in the environment and how quickly it will happen: it includes the impact of political, social and economic change and the effect of competition. Internal forecasting concerns the efficiency of production and the rate of technological innovation within the railway. The information within the industry has been. as would be expected. much better-and cheaper to obtain-than external information. Both are needed to provide the stimulus to explore new situations and (I) (2) (3) (4)
FIGURE
1. THE CORPORATE
EXTERNAL
PLANNING
INTERNAL
FACTORS
PROCESS
FACTORS
Railway
production and technology
Demand Legislation Competition
Forecast
t Basis
for
Plans
I
I
I
1 I
BUSINESS
PLANS
I
I
popular exaggeration to claim that transport is undergoing a major technological revolution. The pace of evolution is rapid in several fields (e.g. the gas turbine. the linear motor and tunnelling techniques) but there is no sign of any development which will have the dramatic results which followed the invention of the steam engine. the internal combustibn engine, or powered
I
I
I
Recirculate
I
___t
___
I
CORPORATE
PLAN
Integrate business plans, Implications for track, Manpower, Cash flows, Investment. etc.
-
/I I
Corporate stage
;
Action Monitor
RAIL
more people expected in this country within only the next IO years will be mainly in the great conurbations and create an increasingly metropolitan transport environment. In fuels the advantage will rest with those most suitable for grid distribution and the movement of fossil fuels will be less significant within the freight transport demand. British Rail recognized at an early stage, therefore, that it would have to plan against a background in which the transport operator would strive to be less labour intensive, increase the size of unit loads and seek automation. Also, those unable to improve service quality would find their product unsaleable. In this situation the railwav has examined the potential for increasing its unit load and for exploiting the capacity of its tracks. At the same time it has recognized that. within this country, railways must design their future within an increasing road environment and seek comparibility with it. These developments have been evaluated in terms of service quality and cost, with regard also for environment and social benefit which play increasing roles within the national planning structure. Internal forecasting relates to rail technology and production methods. It is unlikely that we already have. even in embryonic form, the technological developments that railways can put to commercial use within the next twenty years. At the same time it could well be a
i --___--I t
1
I
I
IN BRITISH
some 4 million
I
I i ------__
flight. amaze
are likely to be linked less to any one form of surface transport than to those operators who seize them most effectively for their own purposes. Automation. and the engineering of systems to exploit it, will surely be the main development during the next decade. Railways should be particularly well suited to exploit these developments. They are a guided system working in one dimension: road transport in two: air in three. Perhaps the greatest single development will come from the engineering of new mass production systems which throw into sharp relief what does not conform to the system and ultimately reject it. Already the process is at work: one example is the freight container system which is concen-
trating
74
Technological development will us in many fields but the benefits
movement
between
LONG
main
RANGE
centres
PLANNING
and rejecting freight which does not conform to the new linear marketing process. Another example is to be seen in the package holiday business. The rail reserarch and development portfolio is changing and systematic analysis looms larger in determining research priorities. Whilst market research would never have given birth to many great breakthroughs in research, a study of the main economic and social forces influencing the future will lead to the channelling of limited research resources into the areas of success probability. The closer the relationship between the scientist and the economic forecaster the more realistic will be the scenario. Urban transport probably presents one of the best examples of how a technique such as Delphi could narrow the range of probability in an area where the solution will always be elusive. The consideration of rail technology must not unduly dwell on far ahead situations. Air cushion principles may well provide for a future high speed need or, when we run out of land. we mav well. be served by magnetic suspension In tubes, but transport faces enormous investment when new infrastructure is involved: the FIGURE
2. BRITISH
RAIL
MARKET
CORPORATE
(Passenger (Freight (Passenger (Freight
Hotel
guests
Rail
freight Iron and Coal Oil
Land
and
PLAN
Shippmg Hovercraft Hotels Advertising
Steel
space workshops
MANAGEMENT B R
Shipping
B.R.
Hovercraft
B T. B R.
Advertismg Workshops
Estates
Rail
1969
Etc.
buildings
Motive Power. Rollmg stock, Stations. Slgnalllng
DECEMBER,
etc
Parcels.
Track
: Marketing Operating Engineering
(1) the assessment of performance in each market. the resources involved, ,the net revenue situation and what could be done to improve profitability with existing markets and resources; (2) the evaluation of new market possibilities, the resources and investment required and the impact on staff and customers; (3) the forming of alternative policies and their translation into the first draft of the business plan. of the plans for the (4) the re-circulation components of the business if, in total, they do not meet the objectives for the business. The task follows the same lines within all the separate businesses of the railway but in different degrees of complexity. In some businesses it is easier to identify markets with resources and management than in others (Figure 2). British Transport Hotels is an example of a comparatively clear business planning situation which has many similarities with the private firm. In this, and similar, iituations it has been necessary in each of the companies to determine the general planning method and timetable, the financial results, the investment demands on British Railways Board resources, the manpower implications and any reaction on other railway interests. If all British Rail businesses were of this type then the Board might be mistaken for a holding company within a conglomerate. The unique planning problem is the railway itself. Even the rail freight and passenger businesses are made up of many sub-businesses with areas of common cost and management. For this reason attention will now be given to the railway sector of the Board’s activities. RAIL
Passenger Inter-Urban
Hovercraft Hotels Advertising Manufacturing
B.R. B.R. B T B.T.
Rail
GROUPS
RESOURCE
PLANS
B.R. Workshops Estates
Passenger Business Casual Commuters
/
BUSINESS
The business planning stage of the planning process has involved for each of the Board’s many businesses:
GROUPS
Contmental
Rail
railway already has a comprehensive system of wayleaves and the first priority must be to exploit it. In addition, it is important to design for the efficient transition from an existing technology to a new one and the conventional train must be improved alongside the development of the unconventional. Against this background our research effort is already enabling the existing route system to be exploited in new ways. One example is the re-thinking of rolling stock suspension methods which has already contributed to vehicle riding qualities at high speed. A second application is in the area of traffic control by two-way communication with the moving grain so opening the way to new methods of signalling and automation. A third is the conception of the advanced passenger train which reduces the power requirements of high speed surface travel and enables existing curves in the track to be negotiated at speeds half as fast again as those of today.
GROUPS
FREIGHT
PLAN
The first phase in the planning of the freight business carried out in 1968 represented probably the most penetrating task of quantitative analysis ever carried out by a railway. It was recognized that new transport legislation would significantly affect the freight business of British Railways although some 90 per cent of traffic would remain the sole responsibility of the Board after the creation of the National Freight Corporation. Within this group of freight businesses were four major challenges: to exploit the system designed freightliner and containership network, to prepare for a reduction in coal carryings, to re-think the future express parcels services and to transform the business in less than train load quantities into a modern system. The starting point of the new freight plan was an evaluation of the alternatives
75
penses and the sale of assets. Revenue. capital income and capital expenses, expenditure were estimated up to 1990 and cash flows calculated. Similar models w’ere evaluated for achieving an optimized freightliner solution. The techniques used are the subject of other papers and it is sufficient to say that the work has resulted in the designing of a more taut freight system with greatly improved use of men and equipment and designed to give high reliability with provision for ultimate control by computer.
open in the less than train load situation. First. it was necessary to identify the most advantageous less than train load system and the second stage was to compare a freight future containing this system with a future without it. In the first stage a mode! was developed which enabled 16 factors such as the number of terminals, marshalling yards and level of rates to be measured and a programme for computer analysis to be designed. More than 1000 different alternatives were considered. The area of greatest apparent profitability revealed by this model resulted in 10 solutions being checked in detail and this involved further models. One estimated methods of working trunk route systems to achieve a predetermined quality of service at minimum cost. Another was a simulation model designed to calculate the cost of different feeder systems checked against real life situations. The solutions analysed in depth by these two models were chosen to show the influence of the key factors on the impact of service quality, of revenue and cost, the concentration of marketing resources and different mixes of train load and part-train load definitions. A preferred solution was then evaluated in more detail followed by the effect on such features as route and administration exFIGURE
3. RAIL
PLAN
RAIL
PASSENGER
PLAN
The rail passenger business differs from the freight in two important respects. Freight relies wholly on its competitive ability to gain shares in certain markets. This also applies in the passenger business with inter-city services but others are dependent on the social benefit value placed on them by the localities they serve and the community in general. In this situation the passenger plan must anticipate not only competition but also aspects of social value within the context of total national transport planning. The second difference stems from the structure of the businesses in that a passenger plan is really the sum of over 350 separate service groups with less
1st PLANNING
centralization of marketing strategy than is required in the freight business. For this reason the model building used for designing national freight systems has.in its passenger context, been more associated with the complex evaluation of variables in situations such as future high speed services or patterns of customer and train movement. As in the freight service it has been recognized that the emphasis must be on increasing quality of service, whether in the competitive or social value categories. THE
RESOURCE
PLANS
Whilst the rail freight and Passenger Business Plans are the main rail product plans. the planning process equaily applies to the railway resources departments both as contributors to the business plans and as planners within their own functions, Prominent in this resource area is the track and signalling system. Reference has already been made to the complex rela,tionships between the freight and passenger businesses, as although some equipment staff and a small part of the track system are exclusive to each business. some are common. The approach has been two-fold One aim has been to identify the route system. also the permanent way and signalling. more closely with different
CYCLE
Rail plan 1st draft Freight plan Freight plan
Passenger plan Passenger I t Production plan
lnfra structure plan Rolling plan )
Workshops plan Manpower plan
76
LONG
RANGE
PLANNING
types and volumes of traffic. The other aim has been to determine the infrastructure appropriate to any given size of passenger and freight services. As much of the route system is determined, almost by definition, by the social service group of passenger services, the first stage has been to define a series of passenger plans. For each of these passenger plans the net revenue has been determined on the assumption that no other traffic is carried. The next steps involve the building in to the several passenger based plans optimal freight net revenue situations so as to achieve a total net revenue position determined by totalling the margins over direct cost of these freight systems, less the additional indirect costs of adding them to the passenger system. The social engineering must be at least as good as the technological so that manpower use is optimized, change is not inhibited and social upheaval is minimized. The manpower plan is therefore an ingredient in all resource and business plans and a major resource plan in its own right. Other resource plans involve the Operating Department, the Engineering Departments and the Workshops. THE
CORPORATE
PLAN
British Rail is now approaching the preparation of its first corporate plan. The main task is the plan for the railway activity. By far the dominant area is the potential clash within the rail plan of the freight and passenger demands and the claims of a minimum track network situation. One of the most delicate operations will be the co-ordination of capital projects, to optimize the cash flow. Figure 3 illustrates the first planning cycle that is now in hand following the preparation of the first business plans. When this is completed recirculation will be necessary if the Board’s objectives are not achieved. Meanwhile the business plans for the other BR activities are in preparation: their main impact on the corporate plan will be in terms of investment and cash flow. ACTION
PLANS
Already we have developed action plans flowing from the individual business plans completed last year as an interim measure towards the corporate stage. The machinery has also been set up for monitoring progress and ensuring that it conforms to pre-set standards. One lesson already learned is the need to devise the strategic plan in such a way that it can quickly lead into the tactical sttuation. THE ORGANIZATIONAL IMPACT OF LONG RANGE PLANNING
The solution
of today’s problems
DECEMBER, 1969
impact on tomorrovv’s organization. For this reason it has been necessary to consider the effect of long range planning on the existing organization and to re-think the organization for planning itself. Under the first heading it was evident that the very forces creating the drive towards long range planning were also creating new organizational demands.The need for free communication and the tendency to departmental polarization suggest that the traditional hierarchical organization does not meet the requirements of long range planning. For this reason we have seen a move towards group procedures for policy-making purposes with the traditional departmental organization providing the stable basis for action planning and day to day management. It is evident that long range planning cannot survive with the habits developed by a traditional pyramidal organization. On the planning organization itself. British Rail developed in 1967 a Central Planning organization on the broad concept that as the urgent always drives out the important a separate long range planning organization had to be formed. It was recognized that this organization would be changed at a later date: it was also seen that no planning organization by itself could produce plans for which line management would accept responsibility. In the ancillary businesses the position was comparatively simple but within the rail passenger and freight businesses a hybrid and intermediate approach was made. In this situation the Central Planning Department became the executive body to the different departments concerned in the preparation of freight and passenger plans. The planning groups often included the heads of the Headquarters’ departments and worked in collaboration with the regional organizations. This approach met the urgent need to prepare the first freight and passenger plans but the second stage of the organizational procedure has now been introduced. The rail freight and passenger business planning has now been combined within the Freight and Passenger Departments so associating the Executive Directors of these groups with the long of the business, the range planning implementation of the plans and the process of control. The Central Planning Department has now become a Corporate Planning Department responsible for the integration of the rail freight and rail passenger plans into a rail plan and then the integration of the rail and ancillary business plans into a corporate plan. CONCLUSION
has its
British Rail is now preparing
the second
series of rail freight and passenger business plans within the new rolling process. The position in the ancillary businesses is very similar. It is now preparing the first corporate plan and, in this operation, the route system is proving the key factor in integration of the rail passenger and rail freight businesses. It has been seen how railway planning in the wider sense is particularly complicated by its relationships with national and regional government. Constrained in opportunity to diversify and controlled in product volume in the field of grant aided passenger services its planning energies must be directed to generate initiatives which will favourably influence its environment. The process of change, whether political or technological, can be expected to accelerate and put greater emphasis on the need for long term planning in railways. From the planning experience of British Rail there are some general conclusions which should be of interest to planners in other fields. Firstly, it is evident that information itself is now such a key input that it merits examination in greater depth by the planner: without the right information business planning is useless. An integrated information system may still be a mirage but more and more data will be spewed out by computer based methods and the filters must be better designed to cope with it. Secondly, it is easy to emphasize the need for objectives, but so much more difficult to design them. The exercise in concentration which they provide is always valuable. Thirdly, quantitative analysis is now well established but industry faces a bottleneck in the shortage of resources. In order to ensure, therefore, that objective evaluation reduces the area of subjective argument it is frequently necessary to determine what the decision would be without adequate quantitative analysis and how much further analysis is justified in order to improve the basis for decision. Fourthly, these evaluation techniques are as valid in research and development planning as in any other area of long term planning. Fifthly, the management of change is more difficult than the design of change. The social ‘bugs’ of innovation make headline news after the technological ‘bugs’ have been forgotten. It is necessary, therefore. to balance the technological and social values so as to avoid technological drive becoming frustrated when it makes its social impact. everybody wants to be a Finally, planner, few to be planned. Planning must be participative even if the organization has to be reshaped to achieve this objective. The right means of introducting Long Range Planning is by inhalation, not by injection. n 71