Monday, August 07, 2006

Cost vs. Benefit - Overstating the Obvious

We thought we'd tackle the first post after Hiatus with an inspiration from the comment to NGR II - Train Control posted by Christopher Parker. Nice shot at cost-benefiting our argument out of existence! (Or is it benefitTing?)

But not so fast.

When we do cost vs. benefit analysis, are we always seeing the big picture? In Chris' case, we think not. He wants to integrate running of trains into signal systems and traffic control. And he wants the spent money to give us some benefit that will justify the expenditure.

For the last half century, the standard method used by industry (make that ANY industry) to reduce cost has been to reduce personnel. Why should it be any different for Next Generation Rail? Automation means reduction in the work force with corresponding reduction in the salaries and benefits that continue on the red side of the ledger until the employee lives out his or her ever lengthening retirement. There's your cost-benefit.

However, bless him, Chris also argues himself into the real reason why we should automate the train handling process. This is a reason we really haven't gotten to talk about in detail yet, and may not now for a few weeks. This reason is the increase in line capacity. (Think outside the box and ignore Chris' need to create rolling blocks and plan meets. Someday, these, too will be a skill needed only by the computer programmer.)

Railroading is a capital intensive business. Transportation industries, in general, are the only businesses where Service is the product but large amounts of capital must be put in place to provide these services. (Think about that: When the product is sold and used up, it is gone. It doesn't exist. It doesn't even have to be taken to the landfill. We can give you the same kind of service at a call center for self-repair of widgets with no more capital than the cost of a telephone system, not the billions of dollars railroads have to spend for land, taxes, track, trains and equipment.)

So the best approach is to get the biggest bang for your buck, and this would be to run the most trains on the least amount of track using the least amount of equipment to do so. We are not saying that only technologizing control systems can this be accomplished. But, if you take the cost of labor out of the equation, the numbers look a lot better. To do this, every other passenger transport segment has to spend way more money than rail. (Airlines would love to figure out how to land and take off without the pilot, and that's all they need him for right now.)

There are other cost-benefits, too. Because, like sending men into space, the development of the technologies leads to spin-offs that give immediate benefit in many areas. We are sure you can think of examples, but write to us if you can't and we will get you some.

Thanks, Chris, for your thoughtful comments.

© 2006 - C. A. Turek -
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