Personal Finance

Efficient transport crucial to business cost-cutting efforts

Traffic jam in Nairobi. Inefficient transport systems costs businesses time and money.  FILE PHOTO | NMG
Traffic jam in Nairobi. Inefficient transport systems costs businesses time and money. FILE PHOTO | NMG  

Stories of countries that have experienced rapid economic growth are intertwined with the development of high-speed passenger and cargo train service.

A 2014 World Bank report showed that high-speed rail service in China introduced on April 18, 2007, had become immensely popular with an annual ridership of more than 1.44 billion in 2016, making the Chinese High-Speed Rail (HSR) network the most heavily used in the world.

Notable railway lines include the world’s longest, the 2,298-kilometre Beijing–Guangzhou high-speed railway and the Shanghai Maglev, the world’s first high-speed commercial magnetic levitation line and the only non-conventional track line on the network.

As of early 2017, about 12,000 miles of high-speed rail track had been built for around $25 million (Sh2.5 billion) per mile ($300 billion or Sh30 trillion). It is expected that another 12,000 miles of track will be built through 2025 alone.

China’s HSR has significantly impacted traveller behaviour and the economy. According to a World Bank Consultant, there are many productivity and economic gains from the high-speed trains in China, including saving time for travellers, reduced noise, less air pollution and fuel savings.

High-speed trains are not only allowing business managers from deep inside China to reach bigger markets, but also prompting foreign executives to look deeper in China for suppliers as wages surge along the coast.

The new inner suburbs are rapidly expanding and attracting large numbers of residents, partly because of China’s rapid urbanisation and HSR. These positive effects are critical for economic growth and development.

According to Nikkei Review (2014), when Japan launched its first bullet trains and the high-speed line that connected two massive economic hubs, Tokyo and Osaka, about 53 years ago, travel time between them was cut from about seven hours to four.

The shinkansen, as it’s called in Japanese, has carried roughly 10 billion riders since then, with a pristine record of safety and dependability: There haven’t been any fatal train derailments or collisions, and the average delay is 36 seconds.

The shinkansen has long been a symbol of Japanese efficiency, but its importance in shaping Japan’s economy is much more than symbolic.

Most of Japan’s population lives in a surprisingly small number of places — only 20 per cent of the country’s land is habitable — and a high-speed train is an elegant solution for shuttling workers from one dense city to another.

One of the biggest headaches of a business that operates in a developing country like Kenya is transport.

About a month ago, I attempted to highlight the transport plight of a Kenyan employee working in a city where the cost of transport both fiscal and timewise are astounding.

Now, a business whether small or large contends with the same problem but in a grander scale when trying to move their human resources or cargo within the country.

Allow me to paint a picture. A training and institution like The Kenya Institute of Management (KIM) that works with a battery of consultants and equipment that need moving around between major towns from its headquarters in Nairobi could easily end up spending 10 times more in both time and money using road and air transport compared to a speed rail train.

Two consultants travelling on a return trip from Nairobi to Mombasa by air would need a minimum of Sh50,000 broken down into Sh20,000 air tickets for each passenger adding up to Sh40,000 and Sh10,000 for their equipment if they do a late booking.

They would also spend at least five hours — two hours check-in time, one hour of the almost guaranteed flight delay, one hour of flight and one hour of check out time.

Compare that with the five hours one would need to cover the same distance using the standard gauge railway (SGR) train at Sh4,000. This is 10 times cheaper and unvarying ticket price irrespective of how late a booking is done.

As a management professional, you don’t appreciate the extent this scenario has on cost management until you have to do this for about 20 consultants at least 12 times a year. The saving could add up to Sh10 million.

This, in Lean Six Sigma, a management methodology highly championed by KIM in the East African market, is the aspect of lean. In this regard, the SGR is a major boost towards a more developed economy.