Sri Lanka Transport Board (SLTB) – 5 Year strategic plan


Abstract

Sri Lanka is middle income country in south Asia which gained rapid economic progress with in last few years in annual growth rate over 7%. With the end of civil war in 2009 which dragged for decades the country focuses massive development on its infrastructure and currently investing lots of funds to develop its roads and harbor facilities. With development of these facilities the government has identified the requirement of good transport service across the country assisting to rapid development. Therefore with its none privatization policy the government has planned to strength further state owned transport services and under that it has given priorities of development of Sri Lanka Transport Board (SLTB).

This is report addresses the current issues of the asset management system of Sri Lanka Transport board (SLTB) and suggests new system and project to utilize available assets to optimize the profits. This will allow overcoming current debts of the company and functioning as profitable well established organization with in next five to ten year time periods. The document will address on current challenges the SLTB faces and future plans that are made base on 5 year and 10 years. The director board of SLTB and the transport ministry has made very bold decision on developing SLTB as profitable and competitive service provider in the field which will be contribute to the government funds as well as the vision and policies of the government for next 10 years’ time.

Introduction and background

The Sri Lanka Transport Board (SLTB) is a transport company that is fully owned by the government of Sri Lanka. The company was found in 1958 ( as nationalized transport service and the company passed through its golden era from 1958 to 1978 before open economic policies were introduced to the country. At that time the SLTB was the world largest transport service provider with 7000 omini buses and 50000 employees. ([12].) The step to the nationalized bus service allowed SLTB to develop long distance bus routes and also started to provide services to rural areas. The company has 40% of market share and 44 million rupees of daily income while its total cost per day is 53 million rupees ( [13.] . As obvious its main cost is for fuel that is around 60% from the total income and also it over staffed salary cost is the main problem the company undergoes at the moment. It has its own 8 workshops covering island wide.( [13.],[11.]) However with lack of spare parts and tires lots of buses have been parked at the workshop unable to repair worsening the situation.

Even though SLTB had good head start the board ran in to very soon for financial difficulties as a result of miss management. Currently the company operates with 105 Depots Island wide and it operated average of 4299 buses in 2012 with 34132 employees. In addition operated kilometers were 880336 in 2012. However the company lost per the year of 2012 was six billion Sri Lankan rupees which was beard by the treasury. The treasury pays 917 rupees per month for salaries and the EPF payment of the employees.( [12.],[13.],[9.])

Table 1

2009 2010 2011 2012
Buses and Employees
Bus Fleet (Average) 9,125 7,697 7,933 7,696
No. of Average Buses operated 4,482 4,595 4,366 4,299
Kilometers Operated 912,471 937,019 922,122 880,336
No. of Employees 35,895 34,772 34,263 34,132

Vision

The excellent Transport Provider in the Region

Mission

To provide the public a safe, dependable and comfortable road passenger transports at a reasonable fare system through a staff dedicated to service and obtain the maximum utilization of all resources functioning as a financially viable organization. ([10.],[11.])

The life cycle

The life cycle of one bus is expected as 18 years and it has been estimated by following consideration. There are total 7,735 buses owned by the company and currently 5,932 buses are running over fifty years which need to be replacing soon with new buses. Life cycle analysis is based with following considerations.

  • Life cycle cost analysis

The total life cycle cost per bus as follows.

Unit cost of a bus                                = RS 3,520,000

Total major program cost (rebuild cost) = RS 1,200,000

Higher operating cost                          = RS    900,000

Less Salvage value                              = (RS    500,000)

Total                                                   = Rs 5,120,000 ([1.], [3.])

  • Customer service policies

The SLTB is govern by its customer service policies and it gives the priorities for the customer and public considerations and this will effect in calculating the life cycle of buses. ([10.], [11.])

  • Environmental policies that will mainly consider on air pollution and will try to use maximum efficient engines to the SLTB buses. ([14.])
  • Mileage of buses

The mileage of buss is varying from one bus to another and it will be taken in to consideration when determining the lifecycle.

  • Capital budget impact in ten years time period. ([1.], [3.])

Funds are the limited factor that will restrict of getting new buses and therefore the life cycle must be decided considering also the budget allocation for next ten years of time since the life cycle must have relationship with available budget and operational requirements. ([14.])

Stake holders

The company has major three stake holders as the government, public or its customers and also its employees.

The government

As government fully owned public company SLTB still runs under the government funds as a results of continuous debts it face annually which is around 6 billion rupees and the debts are directly paid off from the government treasury in another words the tax payers. Therefore government major concern is to bring down major cost factors of SLTB and make it profitable and most preferred transport service in the country. The company is currently under the transport ministry and current minister Kumara Welgama pays special attention on the area and has launched five year strategic plan to bring the cost down as well as to raise the daily income from 44 million rupees to 60 million rupees. The major targets are as follows.

  • Increase the daily income up to 60 million per day
  • Increase the total market share up to 50%
  • Reduce the cost and head per bus as 5 per bus from current level of 9 per bus (

The customers (The public)

Currently 55% of transportation requirement of the public has being fulfilled by the public transport services and this figure is expected to reduce to 44% in 2022. However as a result of fast economic growth and continuous changes in public life and rising expectations at the moment customers of the SLTB are expecting a quality customer friendly service from the company that still make challenge to the employees and the management.

Employees

The company owns unionized employees that separated in to two unions which are connected to two major parties of the country and one of big challenge the company face is over staffed work force. Currently for one bus there are about nine employees at the moment as a result of long run miss management and unwanted political intervention to the management of SLTB. The unions are currently demand in high range for salary income since their unsatisfied salary levels and currently treasury pays 10500 rupees each month for every employee while remaining balance need to be fulfilled by the each depot. The treasury paid 943 million rupees as salaries of the employees 4000 million to pay EPF and gratuity funds. However still workforce requirement of some required areas need to be fulfill as bus conductors and drivers. In 2011 the company recruited 110 graduates as management trainees to increase its quality of service. ([6.])

 Major outcomes and expectations

The strategic plan is developed based with the government policies and requirements. The major guide lines were concerned as follows. The director board is highly concentrated on making profit to the company and following outlines have been made all by the approval of ministry of transport and following major objectives are out line for the coming five year and ten year periods. ([9.], [13.])

Table 2

Objective Current Within five year Within ten year
Increase the daily income 44 millions 60 millions 100 millions
Reduce head per bus 9 per bus 6 per bus 4 per bus
Reduce daily cost 53 millions 45 millions 45 millions
reduce customer harassment complains 70% 40% 20%

 

Performance requirements and indicators

The Key Performance Indicators (KPI s) have being made considering vision and mission statements along with the guidelines from board of directors and transport ministry. In addition government policies and regulations are taken in to the consideration when the main KPI were made.

Average mileage of a bus between two regular service = 5000 KM

The buses need to be run average mileage of 5000KM before it is serviced since otherwise lifecycle cost of the bus will be increased. Therefore it needs to be closely looking and total productivity maintenance systems need to introduce to achieve this target.

Average mileage of bus per day = 200 KM

Each and every bus needs to run average 200 KM per day to earn the profit margin required.

Heads per bus = 6 persons

Currently the heads per bus is around 9 and this figure need to bring down systematically by not extending of retirement period and voluntary resignations to six per head.

Daily cost = 44 millions

Currently this is 53 millions of rupees and this value needs to be bringing down using cost effective method and reducing wastages.

Customer complains = 40%

Currently there are about 70% of customers are not satisfied with the service and the company witnesses regular complains. The 70% figure needs to bring down at least to 40% within next five years of time period.

 Asset inventory

The SLTB owns many assets vary from buses, spare parts to lands and buildings that have being distributed island wide within 105 depots. The company faces continuous threat also to protect its varies kind of asset by being theft and in reason years there are significant effort is made toward this mission and certain actions were taken to avoid such a action.

Apart from that currently some depots do not have proper asset inventory and they are in the process of recreating new asset inventory that is updated. However the company has done significant effort toward the asset inventory control and the major asset inventory figures are shown in the table below. ( [10.])

Table 3

Asset units Asset life Asset life cycle Current value
RS millions
Busses in running condition 5932 1 to 18 years 18 years 20881
repairable buses 929 more than 18 years 18 years 3270
salvage buses 297 more than 18 years 18 years 297
engines 1000 1 to 4 years 9 years 105
tires 54332 between 50000 Km 50000KM 556
batteries 32456 between 3 years three years 730
other spare parts N/A vary vary 335
lands owned 553 acres N/A N/A 12560
buildings owned 232 More the 10 years 30 years 11340
Total 50074

 

Deterioration and condition analysis

The deterioration and the condition analysis will be separated to two parts as mobile assets and fixed assets and the analysis are done accordingly for better clarification.

Mobile assets

The mobiles assets of SLTB is mainly buses and therefore major analysis are done considering total buses. Currently there are total 7158 buses which are owned by the SLTB and apart from that there are 2156 buses are older than 15 years. In addition 60% of total buses are older more than 10 years. From this year onward considering cost factors, customer requirements and also environmental policies the board of directors have been taken decision to remove 1432 buses from the service and replace new buses instead. There are already 200 buses have been purchased from Ashok Leyland and other 100 more buses to be added soon. In addition the government has opened discussion with some Indian and Chinese companies to purchase 3000 buses this year on lease basis.

However the private bus companies are protesting against this move fearing the SLTB will expand its current bus routes invading their own routes and build unbearable competition. Therefore currently the company and the transport ministry are in the process of negotiation to solve the problem.( [2.],[6.],[8.])

Fixed assets

The company owns larger no of lands and buildings which has very high no of commercial values. The total land value is estimated 12560 millions of rupees while building value is 11340 millions of rupees. However there are 50% of buildings that need to be repaired and total estimated cost for the repairs are 334 million rupees.

Apart from this fixed assets the company owns two subsidiary companies which are associated with the company employees well faire and engineering facilities. They are National transport medical institute and Lakdiva Engineering Company (PVT) ltd.

Challenges and opportunities

The SLTB still owns good reputation for its brand among the public and it is the largest single service provider in the field with the market share of 40%. It has good technical staff and well established infrastructure all over the island. In addition it has the full support of the government and the treasury and good will of the transport ministry. However the company face certain challenges in overall as well as in managing its assets and the company needs to overcome these challenges by making them opportunities of the business.

Continuous political intervention

This is one of biggest challenge that the SLTB faces as a result of government fully owned company. The company needs to adjust to each government policies and vision and work accordingly which is a challenge to SLTB. However there are very successful government owned companies which have been facing with the same challenge yet come up in very profitable. In addition the government owned companies has the full blessing of the government and the government always gives priority to its companies when conducting any project.( [12.])

Aged buses and lack of spare parts

There are around 929 buses in various depots as a result of breakdowns and lack of spare parts. In addition there are 297 salvaged buses that need to sell on metal cost. For reparable buses the company already allocated 600 million rupees to  buy 100 engines,1000 batteries and also 23000 tires as soon as possible and the buses will be repaired at the Lakdiva Engineering company and other works shops island wide and sooner will added to the running bus lot. In addition there are chance to have good income to the company by selling the old and salvaged buses in public auction and company expect to raise 2000 million rupees income by the auction. In addition Lakdiva Engineering Company is repairing some engines that are already in place and the company has plans ahead for 2013 to establish new procured tire factory. In addition lakdiva engineering company has capabilities to extend its services to the private and government firm which will bring additional income to the SLTB and also there is possibility of producing 250 new buses annually as well as it can repair around 500 engines per year.  In addition the feasibility test already done to see the possibility of Setting up a new work-shop to repair units, sub units and injector pumps. Apart from these steps there are need to be centralized data base for the spare parts that can be use for the optimization the resources and also spring blade manufacturing factory is also required to be set under the Lakdiva Engineering company to serve the requirements of the SLTB. ( [2.],[6.],[8.])

Fixed assets

The company owns lot of lands and Buildings Island wide and most of them are in placed with high commercial value and total current total value is around 25000 million rupees. The company needs to have detailed and updated database for each and every buildings and lands and those can be utilized in manner of profit making with very careful analysis. Some depots like Jaela has identified this opportunity to produce good income and it has set a vehicle service center utilizing its current resources to service vehicles in another government firms as well as private firms. In addition there are plenty of opportunities to rent out some buildings as well as lands to the third parties that are not necessarily need for the current operations of the depots.

National transport medical institute

The medical institution was introduced in the purpose of serving SLTB labor force in their medical requirements however sooner it became profit making to the company. Currently it has about five Institution Island wide and by expanding its services there are plenty of opportunities to have good income to the SLTB. ([12.])

Unionized and less motivated labor force

The SLTB labor force is mainly hired by each government purposes in the past and as a result they are highly unionized and less motivated. There are regular customer complaints against the workers and there is lots of cheating and mismanagement is taken place. It estimated that the company loses 10% of its daily income due to mismanagement and cheatings. The workforce needs to be trained with the focus of modern requirements of the company and the customers and there are need of restructure all management criteria’s to overcome the issue. It is need to have productive discussions with the labor unions to achieve the goal by getting both win win situation. However the company owns experienced and technical staff with expert knowledge of the field that it has given very good advantage over other competitors.

Inefficent management systems

The company still uses very old filing systems as system of management and it is highly consuming of time as well as not very efficient in modern requirement it needs to be replaced with modern computer system and need to be maintaining as centralized data base. The staff and the management need to be trained to new system and this will help to reduce the time as well as the staff of certain activities.

Current and future technologies

Currently there are not much modern technology is used for SLTB management and therefore it is need to be replaced with the new appropriate system in the process of operational Excellency of the company. Currently there are ongoing project for seeking of database and network system for the company and the recommendations are towards the SAP data systems that will be very efficient and modernized system that will cater next ten years management requirements of the company. There should be optimized solutions for planning, visibility and also in cost management.

There is also need of GPS system to in place for the purpose of better management and utilization of the buses which are on roads. There are requirement of producing RS 20000 per day from one bus and therefore one bus needs to run around 200 KM per day. For this purpose it is need to have closer look on the buses and regulate them well with timely needing.( [4.], [9.])

Corporate asset management plan

The strategic plan is made considering the optimization of use current asset that the company owns. The plan has made in two parts considering expansion of current ongoing projects and new project proposals. When the planning of strategies government policies, company vision and mission as well as direction from the ministry of transport and board of directors were taken in to consideration.

The main focus was to minimize the total life cycle cost of a bus and maximum utilization of every assets of the company toward a profit making company.

An expansion of current ongoing projects

Replacement of new buses for old buses

Currently there are about 1432 busses need to be replace immediate as board decision made and therefore there are around 1000 busses need to be purchase immediately to fulfill the minimum requirements. For this purpose 200 busses already purchased from the Ashok Leyland and another 100 busses will be hand over very soon. The government already has allocated 1500 million rupees in this matter and will allocate another 4500 million as soon as first lot is purchased. There are requirement of another 3000 busses and the company is in the discussion process to purchase those from china or India. These buses need to purchase in this year and add to the routes which will increase number of running buses up to 7000.this will help to increase the revenue and also cost per one bus including head per one bus that is currently around 9.

In addition the company expects to sell old buses and salvaged buses that will gain 2000 million rupees of income. ( [2.],[6.],[8.])

Randiva Engineering company (pvt) ltd.

Purpose of establishing this company was assisting SLTB maintenance operation and following projects are proposed to for next five years.

  1. Project of bus bodies repairing for Buses of SLTB and also repair other private and government bus bodies.
  2. An establishment of procured tire factory.
  3. An establishment of new work-shop for repairing 500 engines per year and repair units, sub units and injector pumps
  4. Starting of spring blade manufacturing factory.

For this purpose above following strategies need to be implemented.

  1. Restructure the work force.
  2. Implementation of lean concept across the company with the help of experts to gain the efficiency with motivation, staff satisfaction, improving staff welfare facilities, training programs etc.
  3. Introducing waste reduction methods along with lean implementations.
  4. Getting advance payment of 2.5 million from treasury every month.
  5. Generate the profit and make independent company by not relying on treasury funds by introducing new management concepts.
  6. keep continuity in obtaining repairable buses from SLTB and also from armed forces, private sector and also from other government authorities.

Implementations on National Transport Medical Institute

Following activities are planned to implement within next five years. ( [8.])

Computerized data base system to be introduced

In order to provide quality and efficient services to our customers computerized data base system will be introduced between the department of the Commissioner of Motor Traffic, our head office and branches.

Add amendments to the registration of Motor Vehicle Act

To have more legal authority to NTMI the registration of Motor Vehicle Act will be amended.

Productivity improvement programs

All staff works were made standardized and clearly defined Key performance indicators were given to each and every staff members. Training and development programs are continuing to with experts support.

 Modernization of head office building

To provide expanding and modern requirements the management understood that the current building facility is not catering well and new six storage building is on construction to cater on these requirements.

Development of co- operate plan for National Transport medical institute

This was identified as major requirement for the institute and the plan is in its final stages.

New project proposals

New information management system and GPRS

To cater for modern requirement of customers as well as minimize the wastages of the operation it is necessary to have good data management system to the company. To have good cost management system it is necessary to gather and analyze data which are updated and correct. Specially for a transport company to have good asset management system it need to be capture all the tasks performed as well as all the cost of maintenance. By analyzing these data they can be used in

  • Will provide good tracking system for spare parts inventory which will be determine minimum and maximum level of the spare parts.
  • There can be taken some kind of average cycle counting especially for critical and high cost spare parts and base on that decision can be made.
  • The management KPI can be set for each and individual department and persons.

Introducing of GPS system to the buses is very important as well for the support of daily operations and planning of daily bus routes. That will help to depot management to get accurate decision to allocate and plan buses that are necessary in each individual road. ([4.])

Peoples development and training

In the journey toward the modernized transport service provider it is necessary to have self motivated very skill workforce and there for necessary training programs need to be organize for the work force of SLTB both motivational as well as technical trainings have to be organize according to requirements.

Maximum utilization of commercial land and buildings

Converting some company owned lands and buildings in to money making assets is very important and for this purpose there has to be proper analysis of commercial value each and every land and building owned by the company and with good feasibility test it can be analyzed and then action plan need to be done accordingly.

Appropriate asset management system

Currently the company is studying few asset management systems and currently identified SAP system as good system to install for the company management system. It provides total data management system and also there are local companies that give expert support for the system. In addition the SAP has identified as a world class management service provider in various fields and it is very user friendly system to use.

Likely benefits and cost

Following table shows the summery of the cost and benefits of the ongoing and proposed projects and each and every project will have full versions of project report which will be analyzed them in deep.

Table 4

Project Cost Benefits
  RS millions  
Replacement of old buses with new buses 18000 Less asset cycle cost
Better customer satisfaction
Easy maintenance
Randiva Engineering company ltd 30 Better maintenance services
Less cost
Additional income
National Transport Medical Institute 20 Additional income
Introduction of information management system and GPRS 200 Better information collection
Better asset management
Less operational cost
Peoples development and training 20 Highly motivated work force
Multi skilled work force
Better customer relationship
Maximum utilization of commercial land and buildings 1 Additional income
Total cost 18271

Conclusion

The SLTB is in the crisis of debts and it needs to stand on its own foot with proper management of its assets and the board of directors have being identified this as a priority concern. Therefore it is necessary to replace current system with proper and well tested system to overcome the current challenges.  For this purpose SLTB will need proper assets management system and each and every asset must be optimized of utilization and used in profit making purpose.

For this purpose challenges and opportunities need to be identified and proper plan has to be implemented defining clear goals and setting proper targets in each and individual are. By this approach there are plenty of opportunities to develop SLTB as profitable and most preferable transport service in the country as well as there are potential of developing it as global service provider.

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