Friday, July 16, 2004
Public transit at lower costs
The McKinsey Quarterly has a good piece on mass-transit systems in its latest issue. The piece primarily addresses the sources of operating deficits among public-transit agencies and examines what can be done to increase productivity and reduce these deficits. According to the authors of the piece, operating deficits originate from two primary sources -- the trade-offs between the system's public-service goal and operational efficiency; factors like fleet maintenance, labour management and fare collection. While the first source has long-term solutions (if the political economy issues can be sorted out), the second has plenty of room for short-term improvements (operating costs could fall by 15-20 per cent) if less efficient agencies learn from global best practice.
The most productive bus systems have drivers at the steering wheel for up to 95 percent of their working hours; meanwhile, many subway and commuter rail operators struggle to deploy drivers for more than half of the time they are at work. Driver utilization rates can fall dramatically if routes and round trips keep drivers idle during significant parts of the workday or don't take account of the time required for mandatory breaks or of the fact that drivers must check their vehicles at the start of each shift. In many cases, it is utilization, rather than wages, that represents the greater improvement opportunity.
Best-practice operators have increased utilization levels through measures such as better overtime management and dynamic staffing (deploying drivers in full- and part-time shifts according to real-time analysis of passenger demand). Other transit agencies have improved utilization levels by taking simpler steps, such as splitting shifts into two four-hour periods to cover the rush hours, with an unpaid break during the day, and cross- training maintenance and clerical workers so that they can drive trains and buses during unexpected spikes in demand.
In maintenance, the challenge is threefold: to improve labor productivity, to define the right maintenance schedule, and to prevent every transit operator's nightmare—breakdowns. To avoid the disruptions they cause, many operators keep extra vehicles and staff standing by, an extremely expensive insurance policy. One North American bus operator with a poor maintenance strategy is so plagued by frequent breakdowns that it keeps nearly 500 extra buses, worth a total of $125 million, either in the shop being serviced or sitting in depots waiting to replace the next breakdown.
Best-practice agencies understand that decisions about a vehicle's operations—which routes it runs, how often, and when—must be coordinated with, and should help to define, the maintenance schedule. They also mine operational and maintenance data to predict replacement cycles for specific components (such as brakes and doors) and schedule maintenance during off-peak times at night or on weekends to minimize conflicts with passenger service. One European rail operator has mined these data so successfully that it has reduced its spare ratio (the number of vehicles kept on standby) virtually to zero during peak hours by improving the reliability of its vehicles. If the most poorly maintained fleets reached average levels, the operators should be able to increase their fleet utilization levels and cut their maintenance costs by more than half.
Paper tickets and monthly passes are relatively inexpensive to issue but require significant station and onboard labor, which for some operators can represent more than $1 a ride. Systems that control access to platforms (by using turnstiles or other barriers to collect fares through tokens, cash, or magnetic cards) must have capital for ticket-vending machines and barriers but require little or no onboard labor. Those using self-validation (or "honor") systems, in which passengers carry proof of payment throughout the journey, can use fewer conductors onboard but need the legal authority to impose stiff fines during spot checks.
Some agencies have deployed new smart-card technologies that can improve service significantly. Hong Kong's Octopus card allows passengers to change modes seamlessly (from bus to rail to subway to ferry), makes it possible to collect passenger data that can be used to improve customer service and to plan routes as well as to develop customer-relationship-management opportunities such as targeted discounts and automatic debit services to replenish fares. Where smart cards are not feasible in the short term, self-validation systems offer a reasonable alternative: they reduce onboard labor costs by 30 to 40 percent and, in Europe at least, have surprisingly resulted in less revenue leakage than many operators initially feared.
The most productive bus systems have drivers at the steering wheel for up to 95 percent of their working hours; meanwhile, many subway and commuter rail operators struggle to deploy drivers for more than half of the time they are at work. Driver utilization rates can fall dramatically if routes and round trips keep drivers idle during significant parts of the workday or don't take account of the time required for mandatory breaks or of the fact that drivers must check their vehicles at the start of each shift. In many cases, it is utilization, rather than wages, that represents the greater improvement opportunity.
Best-practice operators have increased utilization levels through measures such as better overtime management and dynamic staffing (deploying drivers in full- and part-time shifts according to real-time analysis of passenger demand). Other transit agencies have improved utilization levels by taking simpler steps, such as splitting shifts into two four-hour periods to cover the rush hours, with an unpaid break during the day, and cross- training maintenance and clerical workers so that they can drive trains and buses during unexpected spikes in demand.
In maintenance, the challenge is threefold: to improve labor productivity, to define the right maintenance schedule, and to prevent every transit operator's nightmare—breakdowns. To avoid the disruptions they cause, many operators keep extra vehicles and staff standing by, an extremely expensive insurance policy. One North American bus operator with a poor maintenance strategy is so plagued by frequent breakdowns that it keeps nearly 500 extra buses, worth a total of $125 million, either in the shop being serviced or sitting in depots waiting to replace the next breakdown.
Best-practice agencies understand that decisions about a vehicle's operations—which routes it runs, how often, and when—must be coordinated with, and should help to define, the maintenance schedule. They also mine operational and maintenance data to predict replacement cycles for specific components (such as brakes and doors) and schedule maintenance during off-peak times at night or on weekends to minimize conflicts with passenger service. One European rail operator has mined these data so successfully that it has reduced its spare ratio (the number of vehicles kept on standby) virtually to zero during peak hours by improving the reliability of its vehicles. If the most poorly maintained fleets reached average levels, the operators should be able to increase their fleet utilization levels and cut their maintenance costs by more than half.
Paper tickets and monthly passes are relatively inexpensive to issue but require significant station and onboard labor, which for some operators can represent more than $1 a ride. Systems that control access to platforms (by using turnstiles or other barriers to collect fares through tokens, cash, or magnetic cards) must have capital for ticket-vending machines and barriers but require little or no onboard labor. Those using self-validation (or "honor") systems, in which passengers carry proof of payment throughout the journey, can use fewer conductors onboard but need the legal authority to impose stiff fines during spot checks.
Some agencies have deployed new smart-card technologies that can improve service significantly. Hong Kong's Octopus card allows passengers to change modes seamlessly (from bus to rail to subway to ferry), makes it possible to collect passenger data that can be used to improve customer service and to plan routes as well as to develop customer-relationship-management opportunities such as targeted discounts and automatic debit services to replenish fares. Where smart cards are not feasible in the short term, self-validation systems offer a reasonable alternative: they reduce onboard labor costs by 30 to 40 percent and, in Europe at least, have surprisingly resulted in less revenue leakage than many operators initially feared.
