September 2011

Supportability :The Difference between Profit and Loss in the Rail Industry

Keith Jordan – Hitachi Rail Europe

September 11

Agenda

Supportability: The Difference between Profit and Loss in the Rail Industry

Introduction to Hitachi Rail

The UK rail industry – how does it work?

Where does your ticket money go?

The Intercity Express Programme

Providing a service linked to passenger

requirements

Supportability – so what?

Summary

September 11

Hitachi

Supportability: The Difference between Profit and Loss in the Rail Industry

• Hitachi GroupHitachi Group

– 350,000 employees worldwide350,000 employees worldwide– $90B Turnover$90B Turnover

• Hitachi RailHitachi Rail

– 1500 employees Japan1500 employees Japan– 40 employees London (4 supportability)40 employees London (4 supportability)– 110 employees Ashford Kent110 employees Ashford Kent

• Hitachi Rail UK Track RecordHitachi Rail UK Track Record

– First contract win 2005 (£500M)First contract win 2005 (£500M)– Invested £60M in new maintenance depot 2005 - Invested £60M in new maintenance depot 2005 -

20072007– First train delivered to UK 2007First train delivered to UK 2007– Delivered first UK high speed service to Kent in Delivered first UK high speed service to Kent in

20092009– Selected as preferred bidder for the Intercity Selected as preferred bidder for the Intercity

Express Programme in 2009Express Programme in 2009

September 11

How does the UK rail industry work?

Supportability: The Difference between Profit and Loss in the Rail Industry

September 11

Who runs the railways

Supportability: The Difference between Profit and Loss in the Rail Industry

September 11

Where does your ticket money go?

Supportability: The Difference between Profit and Loss in the Rail Industry

September 11

The Railway money go round

Supportability: The Difference between Profit and Loss in the Rail Industry

September 11

The Intercity Express Programme

Supportability: The Difference between Profit and Loss in the Rail Industry

September 11

What does the customer want?

Supportability: The Difference between Profit and Loss in the Rail Industry

East Coast50+ servicesDaily

GWML - 56 services daily

September 11

Good value or Compensation culture?

Supportability: The Difference between Profit and Loss in the Rail Industry

Business Driver

People buy tickets to travel

More people take the train if it is punctual

Ticket price refund for major delay

Customer satisfaction is high when all facilities working (eg Toilets)

Revenue is enhanced through catering/shop

Incentive

Paid daily payment per train

(one charge includes lease (65%) and maintenance (35%)

Penalty for technical delay

Major penalty for train breakdown

Penalty for functional failure

Bonus payable on average KPI

September 11

Obsessively well engineered trains

Supportability: The Difference between Profit and Loss in the Rail Industry

• Excellent quality product

• Evolution of existing proven technology

• Minimise maintenance cost

• Designers fully briefed on maintenance

• 6 month design window

• Cost based design trade off

Design guarantee to Maintenance

• Manufacturer pays 50% of penalties until

MDBF target met

• Bonus paid by maintenance for achievement

September 11

• Boeing 777 ‘Evac’ system

• 100% compliance with regulations

• Vandal proof

• Communication system

– Customers

– Maintainers

Who cares about toilets?

Supportability: The Difference between Profit and Loss in the Rail Industry

“We have already spent

10,000 hours on the toilet”

September 11

We have rehearsed 30 years of maintenance

Supportability: The Difference between Profit and Loss in the Rail Industry

Train by train

Proven operational robustness

September 11

Supportability so what?

Supportability: The Difference between Profit and Loss in the Rail Industry

• Brake pads

• 32 per coach x 1000 coaches = 32,000 pads

32,000 pads x £50 x 10 replacements per year

= £1.6M / /year (£56M over the life)

Electric brake down to 5mph - £15M investment

32,000 pads x £50 x 2 replacements / year = £0.3M / year

(£11M over the life)

Total saving £56M – (£15M + £11M) = £30M

September 11

Wheel life extended by 6months

Stock control fully automated

Major equipment change in 1 hr

Minimise spend on maintenance

Supportability: The Difference between Profit and Loss in the Rail Industry

1 hr equipment exchange

September 11

Using technology to save money

Supportability: The Difference between Profit and Loss in the Rail Industry

Auto inspection

– key systems measured daily

Brake systems

Power systems

– Automatic maintenance instruction

sent to shift manager.

• Train ‘health data’ sent via wifi upon

incident trigger

– Remote access of train management

system to diagnose

– Automatic spares allocation

– Automatic maintenance instruction

sent to shift manager.

September 11

Information supports decision making on performance

Supportability: The Difference between Profit and Loss in the Rail Industry

Automatic Inspection

Train managementSystem Data

Electronic Job cards

Inventory Control

Staff and Attendance

Dashboard Reporting

September 11

Summary

Supportability: The Difference between Profit and Loss in the Rail Industry

September 11 Supportability: The Difference between Profit and Loss in the Rail Industry

The UK rail market is commercially very complex

Our customers will not accept poor performance

Our income is linked to our performance

We are striving to eliminate maintenance cost

Cost effective, through life support is the

difference between profit and loss