Being in the business of supplying safety-critical signalling systems for railways is high-pressure enough. But when Network Rail further demanded that signalling suppliers reduce costs by 30% by 2008, Westinghouse Rail Systems (WRS) knew it had to fight for survival.
WRS management responded by raising productivity targets, but the company's employees were sceptical about achieving cost reductions from, for example, better use of engineering resources, cheaper sub-contracts or more efficient scheduling of installation works. They were also nervous that there might be redundancies.
For just under five months in 2004, PA Consulting Group led a small team of consultants and company staff in analysing how WRS had performed when delivering previous signalling contracts and looking for opportunities to cut costs. WRS had never been able to compare costs across contracts before, because contracts differ in size, complexity, sub-contracts and technology deployed. But by using a simple model built by PA, WRS was able to identify trends and cost drivers, spotting where and why significant deviations from estimates were occurring.
The team conducted workshops with managers and staff across disciplines to identify possible areas for cost reduction; using the PA model helped overcome much of the scepticism that had hampered progress. The benefit from each idea suggested was assessed: for example, it was discovered that pre-emptive site surveys alone could achieve 5% of the necessary savings, just by avoiding needless delay.
Out of 20-plus initiatives evaluated, five were chosen for trials, including 'hot-housing' projects to find engineering solutions to recurring problems; better resource management and pre-emptive decision-making; and use of incentives and targets to change behaviour. Through these, staff could see their own power to make change.
As a result, WRS was able to reduce tender price estimates by 30% within one year, without reducing margins or sacrificing quality or safety. According to engineering director Colin Brown, the benefits of these changes are potentially worth more than a hundred times PA's fees.
PA's analysis helped WRS meet Network Rail's efficiency challenge, reducing tender price estimates by 30% without sacrificing margins.
- Address cultural inertia and internal scepticism.
- 'Analyse it all' to produce a compelling case for change.
- Focus on solutions within your control.
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