Current economic and managerial issues of transport industry Edites by Proffessor Y.I.Sokolov Monograph

UDC 338
C56
Reviewers:
Professor of “Management of transport complexes” Department of the
State University of Management, Doctor of Economics, Professor T.V.
Bogdanova
First Deputy Head of the “Zheldorraschet” Settlement Center for
International Rail Transportation, JSC “Russian Railways”, Candidate of
Economics V.A. Shlein
Current Economic And Managerial Issues Of Transport Industry:
Monograph / Edited by Y.I. Sokolov – М.: RUT (MIIT), 2020. – 205 p.
ISBN 978-5-7876-0375-0
Synopsis:
The monograph focuses on the current problems of transport economy
and management, inter alia the issues of strategic development and marketing,
quality management, financial planning and budgeting, risk management,
human resources management, international communication in transport
industry, as well as the economic efficiency of modern transport projects and
technologies, including those in the field of digitalization.
The book is intended for researchers and practitioners of transport
industry; it can be of interest to teachers and postgraduate students of transport
universities.
© RUT (MIIT), 2020
ISBN 978-5-7876-0375-0
2
CONTENTS
CHAPTER 1. CURRENT STATE AND PROMISING LINES OF TRANSPORT INDUSTRY
ECONOMY DEVELOPMENT ........................................................................................................... 5
1.1. ECONOMIC AND TECHNICAL CHARACTERISTICS OF TRANSPORT
SECTOR OPERATION .................................................................................................................. 5
1.2.
TRANSPORT MARKET ENTITIES.................................................................................. 7
1.3.
ECONOMIC EVALUATION OF TRANSPORT MARKET CONJUNCTURE ......... 17
1.4. LOGISTICAL BASES OF MANAGEMENT IN GLOBAL TRANSPORT
SYSTEMS ........................................................................................................................................ 27
1.5. CREATING COMPETITIVE ADVANTAGES OF A MODERN TRANSPORT AND
LOGISTICS COMPANY ............................................................................................................... 37
1.6.
IMPROVING PROCESSES IN TRANSPORT COMPANIES: LEAN AND BPM .... 42
CHAPTER 2. DEVELOPMENT OF THE APROACHES TO CORPORATE TRANSPORT
MANAGEMENT ................................................................................................................................. 49
2.1. BUDGETING IN CORPORATIONS..................................................................................... 49
2.2. MANAGEMENT STRATEGY OF CORPORATIONS ON THE BASIS OF
REGULARITIES OF ECONOMIC AND TECHNOLOGICAL DEVELOPMENT ............... 56
CHAPTER 3. TRANSPORT MARKETING ................................................................................... 70
3.1. SPECIFIC FEATURES OF THE DEVELOPMENT OF MARKETING MIX OF
TRANSPORT ENTERPRISES ...................................................................................................... 70
3.2. CONSUMER BEHAVIOR PATTERNS IN CARGO RAIL TRANSPORTATION
MARKET ......................................................................................................................................... 75
CHAPTER 4. TRANSPORT SERVICE QUALITY MANAGEMENT ........................................ 90
4.1. METHODOLOGICAL FOUNDATIONS OF QUALITY ASSESSMENT AND
MANAGEMENT ............................................................................................................................. 90
4.2. QUALITY MANAGEMENT OF PASSENGER TRANSPORTATION .......................... 105
4.3. THE SYSTEM OF INDICATORS AND METHODS FOR ASSESSING THE
ECONOMIC EFFICIENCY OF IMPROVING THE QUALITY OF FREIGHT
TRANSPORT ................................................................................................................................ 112
4.4. ASSESMENT OF ECONOMIC DAMAGE FROM A DECREACE IN SAFETY LEVEL
......................................................................................................................................................... 115
CHAPTER 5. ECONOMIC EFFICIENCY OF TRANSPORT DEVELOPMENT PROJECTS
............................................................................................................................................................. 117
5.1. ASSESSMENT OF THE TRANSPORT INFRASTRUCTURE DEVELOPMENT
ACCORDING TO THE BUSINESS COMMUNITY REQUIREMENTS .............................. 117
5.2. FIXED ASSETS UTILIZATION IMPROVEMENT IN RAILWAY CONSTRUCTION
AS A KEY TO THE TRANSPORT STRATEGY IMPLEMENTATION .............................. 125
CHAPTER 6. TRANSPORT INDUSTRY FINANCIAL ISSUES ................................................ 132
6.1. FINANCIAL ENVIRONMENT OF ENTREPRENEURSHIP AND BUSINESS
RISKS ............................................................................................................................................. 132
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6.2. ESTIMATION AND ANALYSIS OF STATISTICAL DATA FOR TRANSPORT
COMPANIES AT FINANCIAL MARKETS ............................................................................. 139
6.3.
RISK-BASED METHODS IN INVESTMENT APPRAISAL ...................................... 144
6.4.
ACTIVITY-BASED COST MANAGEMENT SYSTEMS ............................................ 150
6.5.
THE CONCEPT AND TYPES OF INNOVATION STRATEGIES ............................ 154
CHAPTER 7. HUMAN RESOURCES MANAGEMENT IN TRANSPORT INDUSTRY ........ 160
7.1. DIGITAL ECONOMY CHALLENGES FOR HUMAN RESOURCES
MANAGEMENT ON TRANSPORT .......................................................................................... 160
7.2.
MODERN ISSUES OF HRM ON TRANSPORT .......................................................... 162
CHAPTER 8. DIGITAL ECONOMY IN TRANSPORT INDUSTRY AND THE DESIGN OF
TRANSPORT SMART MANUFACTURING SYSTEMS ............................................................ 175
8.1. ANALYSIS AND ASSESSMENT OF THE NEED TO IMPLEMENT ACTIVE
INNOVATION MANAGEMENT IN JSC “RUSSIAN RAILWAYS” .................................... 175
8.2. COMPETENCE APPROACH AS A BASIS OF EDUCATIONAL TECHNOLOGIES IN
THE FIELD OF TRANSPORT SECURITY.............................................................................. 177
8.3. FORECASTING AND ANALYTICAL COMPONENT OF STRATEGIC
MANAGEMENT OF DEVELOPMENT OF PRODUCTIVE ECONOMIC SYSTEMS ON
TRANSPORT ................................................................................................................................ 180
CHAPTER 9. INTERNATIONAL COMMUNICATION IN TRANSPORT INDUSTRY ....... 185
9.1. INTERNATIONAL TRANSPORT COMMUNICATION: GOALS AND
CHALLENGES ............................................................................................................................. 185
9.2.
INTERNATIONAL COMMUNICATION IN TRANSPORT INDUSTRY ................ 187
9.3.
FIGHT FOR HIGH-SPEED RAIL .................................................................................. 192
9.4. BENEFICIAL INTERNATIONAL COOPERATION: LOW VIBRATION TRACK
TECHNOLOGY IN BIG CIRCLE LINE OF MOSCOW UNDERGROUND ....................... 196
INFORMATION ABOUT AUTHORS ........................................................................................... 200
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CHAPTER 1. CURRENT STATE AND PROMISING LINES OF
TRANSPORT INDUSTRY ECONOMY DEVELOPMENT
1.1.
ECONOMIC AND TECHNICAL CHARACTERISTICS OF
TRANSPORT SECTOR OPERATION
Transport, as a branch of economy, has a number of specific
characteristics that determine the particularities of all production and financialeconomic processes behaviour.
Let’s consider the characteristics in detail based on the studies conducted
at different times by V.N. Livshits, V.G. Galaburda, M.F. Trihunkov. Economic
and technical characteristics of the rail industry become evident in the
following:
1.
Transport is closely connected with almost all sectors of the
national economy and it is a determining factor for solving many economic,
social, environmental and other problems. As to freight traffic it is directly
involved in the continuation of the production process in the sphere of
circulation of material resources, i.e. it is a part of the capital goods market.
Consumption cost of nearly all products always comprises transportation costs.
2.
As material costs transport usually uses fuel and electrical energy
i.e. there is no “own” raw material in transport industry; therefore in current cost
of transportation there is relatively high proportion (at least 2/3) of wages and
depreciation. Transport is quite an input-intensive and capital-intensive sector of
the national economy. It is characterized by long periods of planning and design,
development and operation of capital assets.
3.
Railways are characterized by substantial spatial separation of
loading and unloading sites, as well as carrying the traffic through direct
connection i.e. using one or more ways. Freight wagons operation being
separated out into an independent business, all services are run simultaneously at
least by two entities (fright cars operator and JSC «RR») to which freight
forwarders and other economic aspects can be added. In the future the number of
entities may increase (for example, after the organizational separation of
transportation activities from the provision of infrastructure services).
4.
As a rule, transport objects have a spatial network character and
have limited territorial interchangeability in providing transport products, which
limits the possibility of business competition.
5.
Transport objects operation tends to be inertial, which reveals itself
both in technical and economic aspects. In the first case, inertial means that
transport objects are able to work for some time “by inertia” due to overloads
and to the detriment of product quality, but keeping the semblance of meeting
the transportation needs of the economy and the population. Economic inertia
results in sluggish response of the market to a current situation.
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6.
There are many interacting elements in the transport system. This
results in high probability of occurence of intermediate effects and the
possibility of achieving goals in various ways. However a significant part of the
functioning and development of transport is not reflected in its performance
indicators but finds expression in the indicators of industries which are served
by transport. Similarly, there may occur intermediated effects in transport
companies of various profiles involved in the process of moving the goods, or in
facilitating this process.
7.
Unlike other modes of transport, on the railways the costs of
maintaining the infrastructure are included in the tariff and paid by customers,
whereas on the road transport maintaining of infrastructure is implemented by
motor vehicle owners tax and it is not directly charged on a specific shipment (a
change of the system began several years ago by using the Platon system), water
and air transport do not maintain the infrastructure at comparable scales. As a
result, the railway transport is found to be in an a priori unequal competitive
position compared with the other transport market entities in an intermode
competition.
8.
A large proportion of infrastructural assets in fixed assets results in
a large proportion of semi-fixed costs of rail transport. Transport market does
not fit into classical model of perfect competition. Competition here takes place
only on parallel courses, but in some regions, primarily in the north of the
European territory of Russia, as well as in Siberia and the Far East, railway
transport is practically a monopolist. In accordance with Federal Law No.147FZ of August 17, 1995 “On Natural Monopolies”, rail transportation is classified
as a naturally monopolistic sphere of economy.
Maintaining government regulation of the railway transportation market is
due to the peculiarities of its operation and development in the interests of social
security and ensuring the effectiveness of the national economy. Regulation is
performed in order to ensure competition and stimulate economic development
in the monopoly segments of the market.
9.
Transport does not produce material goods, it just moves in space
the manufactured articles of other sectors of material production. At that the
qualitative characteristics of the goods transported do not change, only use value
changes upon arrival at the point of consumption.
Non-material nature of the transport market products is determined by
well-known features of any service, for example, so-called 5 «in»: intangibility,
inconsistency, non-interchangeability, inseparability from the source and
inconstancy in quality. It means, that we cannot apply well-known quality
standards of a physical object to the transport production; we need a special
approach to determine the life cycle of the product-service. It cannot be
accumulated or kept in stock, while transport itself should have constant
reserves of rolling stock, carrying capacity and staff to provide consumers with
transportation during the peak demand for transport services, despite the fact
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that the provision and consumption of transport services are simultaneous.
1.2.
TRANSPORT MARKET ENTITIES
Entities of the rail freight market
Railway transport is one of the key modes of the Russian transport
system, that provides over 80% of transport activity (excluding pipeline
transport). For a significant number of cargo owners, railway transport is the
only mode of transport, carrying 70-90% of bulk freight
The entities of the transport market are the consumers of transport
services: cargo owners and passengers; producers of transport services: transport
companies of various types of transport, JSC “Russian Railways” - network
carrier-owner of infrastructure, operators of rolling stock, owners of rolling
stock, forwarders, leasing companies, insurance companies, banks, consulting,
marketing and auditing companies, etc. Altogether, these entities provide the
whole range of services which may be in demand during the transportation of
goods and passengers. All the other types of business involved in the
construction of communication lines and the creation of vehicles and in the
organization of various types of services are also the transport market entities.
Entities actively participating in the rail transportation market can be
divided into the following groups (Figure 1.1).
Figure 1.1 – Classification of the railway transportation market entities by the type of
activity
As a rule, in the freight market, there is only organizational consumption.
There are exceptions to this rule (transportation of personal belongings when
7
moving to a new place of residence, transportation of private cars, etc.) that do
not have a significant effect on the type of market.
The user of railway transport services is a passenger, shipper (sender),
consignee (recipient) or any other individual or legal person using services
(works) provided by rail transport organizations and individual entrepreneurs in
railway transport.
A significant role in the rail transportation market is played by the public
carrier and the owner of the main routes - Russian Railways (OAO RZhD).
The owner of the public railway transport infrastructure is a legal entity or
an individual entrepreneur who owns the infrastructure by right of ownership or
other right and provides services for its use on the basis of the relevant licenses
and contract.
A carrier is a legal entity or an individual entrepreneur who, under a
contract for carriage by common use railway transport, is obliged to deliver
passengers, cargo entrusted to it by the sender, baggage or cargo from the point
of departure to the destination, also obliged to issue cargo or baggage to the
person entitled to receive (to the recipient).
Publicity of rail transportation is fixed by applicable law and means the
carrier’s obligation to transport all the goods presented, if there is a
technological possibility. Russian Railways is the owner of the main
infrastructure, the majority of mainline locomotives and more than half of
shunting diesel locomotives.
A significant part of freight traffic occurs with the participation of private
companies that have their own fleet of cars (owners of rolling stock). These are
operators of rolling stock and captive companies.
The operator of railway rolling stock, containers is a legal entity or an
individual entrepreneur who has a railway rolling stock, containers with the right
of ownership or the other right and provides services to legal entities or
individuals in the provision of rail cars or containers for transportation by rail.
To date, the largest railway operators are:
a) New Forwarding Company (100% of shares belong to Globaltrans);
c) Independent Transport Company (UCL Rail Holding);
d) Federal Freight Company (until November 13, 2012, Second Freight
Company);
e) CJSC “Eurosib SPb-transport systems”;
f) DVTG Group (Far Eastern Transport Group);
g) PJSC Transcontainer;
h) GC Transgarant.
Captive companies are characterized as service companies created by
large mining and industrial enterprises to meet their own transportation needs.
Often, they are created using the rolling stock in the export-oriented sectors of
the economy available on the balance sheet of an industrial enterprise: oil
8
production and refining, ferrous and nonferrous metallurgy, and the production
of mineral fertilizers.
In their activities, captive companies are primarily focused on the needs of
the parent structures and free from the need to find new customers. Their
additional advantage is the availability of financial resources for the purchase of
rolling stock (the parent company itself acquires cars or acts as a guarantor in
leasing operations).
Thus, captive companies are market entities that own and operate a fleet
of wagons in order to meet the transportation needs of the main production.
In particular, the captives are:
a) CJSC Yukos Transservice,
b) ZAO LUKoil-Trans,
c) LLC MMK-Trans,
d) Managing Transport Company (Metalloinvest holding),
e) RusalTrans LLC
f) LLC “Fintrans” (Ilim Pulp group),
g) Fuel and Energy Complex “Mineral Fertilizers”
h) ZAO “PO“ Spetstsisterny ”(ZAO“ SIBUR-Trans ”).
According to the current Civil Code of the Russian Federation, there are
three possible ways for the rolling stock operator to participate in the
transportation process with its own cars:
1) Provision of freight cars. The rolling stock operator under the service
contract with the cargo owner provides wagons for transportation, while the
cargo owner independently concludes a contract of carriage and makes payment
for transportation.
2) Transport expedition. The rolling stock operator under the service
contract with the cargo owner provides wagons for transportation, in parallel
concludes a freight forwarding contract with the cargo owner, on the basis of
which provides the latter with a specified range of freight forwarding services.
The shipper independently concludes a contract of carriage, and the payer is the
operator under a forwarding contract (regulating the relationship of the parties
related to settlements and payment for carriage by the carrier) with the carrier
(JSC Russian Railways).
3) Operator- cargo owner. The rolling stock operator under the contract of
assignment with the cargo owner undertakes obligations to deliver the cargo;
being the owner of the cargo, concludes a contract of carriage with the carrier on
its own behalf and makes payment for the carriage, and is indicated as the
shipper in the shipping documents.
In addition to the existing public railway carrier represented by JSC
Russian Railways, there are two types of these entities: network-wide and local
carriers.
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Network-wide carrier is a carrier that carries out all types of freight traffic
between all public service stations that are open to freight under a contract of
carriage by rail on a public basis.
A local carrier is a carrier that performs freight transportation on a public
basis in certain geographic and product market segments.
Carriers may be owners or tenants of vehicles, cargo terminals or
warehouses. Terminal complexes, depending on the field of activity, are aimed
at the provision of the following basic services:
• coordinating the time of arrival and shipment of goods when
transshipping them from one mode of transport to another (for example, from
road to rail);
• performance of loading and unloading operations;
• temporary storage of cargo;
• organization of long-term storage;
• complete set of shipments;
• performing packing operations;
• registration of transport documents;
• provision of information services.
The main condition for the operation of terminal complexes is the
availability of railway sidings.
It should also be noted that the operators of the rolling stock themselves
can perform the functions of carriers. Having in use or owning terminal
complexes and providing transportation services of their own rolling stock, they
will be more competitive for other participants of the rail freight market, as they
can provide the most favorable conditions for cargo owners.
Forwarding companies, as a rule, do not own either rolling stock or
terminal complexes. The freight forwarder does not perform the transportation,
it acts as an intermediary between the cargo owner and the carrier, who will be
directly involved in the transportation of the cargo, and for which the freight
forwarder in this case will be the client (consignor). The freight forwarder’s
income is made up of the difference between the invoices and the discount
received from the transport company for the amount of cargo provided for
transportation.
Forwarder is an organization (or individual entrepreneur) performing
auxiliary work (services) during rail transportation: loading, unloading
operations in common areas, cargo weighting, passenger service at stations and
in transit, as well as other works (services) associated with the organization and
implementation of the transport of passengers, cargo, baggage and cargo by rail.
As a rule, the list of the services of freight forwarding companies is the
widest, as such companies strive to provide the client with the most
comprehensive range of services, trying to provide door-to-door transportation,
attracting various performers and independently concluding contracts with them
for the provision of a service. The key to the success of the freight forwarding
10
company is to constantly monitor the market for transport services providers and
to conclude the most profitable contracts for themselves, as well as to receive
discounts on transport services.
Compliance with the terms and high quality of the forwarding services
depend on the direct executors of these services, therefore forwarders should be
very serious in finding and selecting carriers in order to ensure successful
competition in the fight for the shipper among a large number of forwarding
companies.
The end consumer in this market is cargo owners who consume the
services of a rolling stock operator, a forwarder, Russian Railways
(infrastructure owner and carrier) to deliver their own goods to consumers, as
well as to obtain raw materials and all the necessary materials for the production
of their own products.
At the same time, the freight forwarder (if participates in the
transportation) and the operator also act as consumers in relation to Russian
Railways. The listed organizations that provide transportation services to cargo
owners, in turn, act as consumers of transport equipment (cars, locomotives,
loading-unloading devices, etc.).
A cargo owner is a physical or legal person who needs the services of
transporting a cargo along a certain route, for a certain fee and with guaranteed
quality.
Cargo owners as the main organizational consumers of transport services
can be divided into two categories:
Shipper (consignor) is a physical or legal person who, under a contract of
carriage, acts on its own behalf or on behalf of the owner of the cargo, baggage,
cargo luggage, empty cargo wagon and is indicated in the shipping document.
Consignee (consignee) is a physical or legal person entitled to receive
cargo, baggage, cargo luggage, empty cargo c wagon.
Figure 1.2 shows the interaction of the main market actors in the rail
freight system.
Figure 1.2 – Interaction between the entities of the rail freight market
11
The contract of carriage is here understood as the direct contractual
relationship between the transport company with Russian Railways. One of the
essential conditions for relations with Russian Railways is the registration of an
EFS account (business account) by transport companies, on which certain
amounts of money necessary for settlement with Russian Railways are frozen.
All tariffs for infrastructure and locomotive traction services provided by the
company are regulated by the tariff guidance (Price list No. 10-01).
A lease agreement is a form of a property contract in which the lessor
(property owner) transfers his property to the lessee (physical or legal person)
for temporary use for a certain cash payment. All revenues, products, etc.
obtained by the tenant with the help of the leased property, owned by the tenant.
As for the contract of renting wagons, it is already clear that the object of the
lease in this case is railway cars.
Car rental in Russia is regulated by article 4 of the Federal Law “On
Federal Railway Transport”, as well as the Regulation “On the Procedure for
Leasing Freight Cars by Railways” created on the basis of this article. Under a
freight forwarding contract, one party (freight forwarder) undertakes, for
remuneration and at the expense of the other party (the shipper or consignee), to
perform or arrange the transportation services specified in the freight forwarding
contract. The concept of the contract of transport expedition is interpreted in the
Civil Code of the Russian Federation (clause 1 of Art. 801 of Chapter 41).
Following on from the above classifications, it can be concluded that all
transport companies organizing cargo delivery by rail are divided as follows
(Figure 1.3).
Figure 1.3 – Classification of entities of the railway transportation market
12
Proposed in Figure 1.3 classification takes into account the organizational
form of the enterprise and specialization in a particular type of rail transport.
There are various enterprises in the market, and many consumers of transport
services have difficulty choosing a transport company. According to the results
of certain studies in this area, an algorithm was developed for choosing a
transport company, using which you can determine with which company it is
more profitable to conclude an agreement on the provision of transport services
(Figure 1.4).
Figure 1.4 – Algorithm of choice of a railway transport company
Before choosing the company, the shipper must determine the volume of
the shipment. If the shipped cargo is a large volume or tonnage, then it is worth
contacting the carrier directly. Work directly allows you to get the maximum
discount and avoid overpaying to intermediaries of the transaction.
One of the drawbacks of working with the carrier directly is the narrow
profile of the service, i.e., the inability to order a full set of services and the need
for a full prepayment for transportation services.
If the shipped cargo is of a small volume or tonnage, then the carrier will
not be interested in working with you and you will have to work through the
forwarder.
The main advantage of working with expedition companies is that the
interaction on all the problems of the various stages of transportation is carried
out with one contact person or organization. If a company approaches the
question of choosing a freight forwarder as responsibly as possible, its cargo
13
will always be delivered on time, and the level of reliability of the services
provided will be as high as possible.
The main risk when working with a freight forwarder is the possibility of
their overcharging of freight rates. The issue of "tariff trading" must be kept
under control by calling round the competitors and comparing the provided
transport tariffs.
Modern transport market is saturated with companies offering different
types of cargo transportation services. The choice is easy to make, the main
thing is to determine which conditions are the most interesting and beneficial for
a particular organization at a given time.
Entities in the passenger market
Railway transport is the leading passenger transport of the Russian
Federation. About 90% of the total passenger traffic on rail transport is carried
out by suburban passenger transportation. Suburban rail transportation satisfies
one of the basic needs of citizens of the Russian Federation - freedom of
movement, ensure labor migration of the population, contribute to the
development of the labor market, play a significant role in the economy of the
country.
The transition of the economy of the Russian Federation to market
relations, carried out since the beginning of the 1990s, radically changed the
financial and economic model of rail transport. In accordance with the Concept
of the Structural Reform of the Federal Railway Transport, commuter passenger
transportation was divided into an independent business unit.
Suburban passenger services are currently carried out by subsidiaries and
affiliates (subsidiaries and affiliates) of Russian Railways - suburban passenger
companies (PPC). Currently, the largest suburban passenger company is OJSC
Central PPK, serving passengers in all directions of the Moscow Railway.
Currently, there are 25 suburban passenger companies operating in Russia.
Including the formation of the first private suburban companies (LLC Perm
Express). The sub-segment of suburban transportation is the organization of
passenger time-lapse transport in the direction of airports, carried out by
Aeroexpress LLC.
The suburban railway complex, bearing the main burden of the social
activities of JSC “Russian Railways”, found itself in the most difficult
conditions of operation: the termination of “cross-subsidization” due to the
carriage of goods; lack of funds allocated from budgets; imperfection of the
regulatory framework; tough competition with road transport; while maintaining
the status of "public carrier", working on state-regulated tariffs and
transportation conditions.
Taking into account the social significance of suburban transportation, the
cost of travel in electric trains is set, as a rule, significantly lower than their
actual cost. With the centralized planning mechanism for managing the national
economy, the price of the ticket was set in accordance with the purchasing
14
power of citizens and was not associated with the actual costs of this type of
transportation activity. The financing of simple and expanded reproduction of
rail transport was largely carried out by the state (subsidies); therefore, this
pricing mechanism was justified from an economic point of view.
As for the entities of the passenger transportation market, they are
currently divided into the following participants:
Passenger is an individual who has entered into a passenger transportation
contract; a person who is not a member of the crew and who is transported by a
vehicle in accordance with a public or unofficial contract of carriage by any type
of transport.
In addition to the end consumer of passenger transport services - a
passenger, there are several subjects of the transport market, who by their
purpose are obliged to provide the transportation process with the necessary
services. These entities are intermediaries and are engaged, in particular, in
organizing passenger service at the station, informing about the nearest train
arrivals and departures, selling and processing travel documents (tickets),
providing security and security services, etc.
In order to ensure the implementation of the transportation process,
transport passenger companies, as well as freight, need to use the services of
infrastructure and rolling stock. In this case, they become organizational
consumers of the mentioned services.
A carrier company as an organizational consumer of infrastructure
services is a legal entity or an individual entrepreneur engaged in passenger
transportation and using infrastructure services provided by the owner of the
railway transport infrastructure for this purpose on the basis of an agreement
concluded between them.
The carrier company as an organizational consumer of rolling stock
services is a legal entity or an individual entrepreneur engaged in passenger
transportation and using for this purpose the rolling stock services provided by
the railway rolling stock operator on the basis of an agreement concluded
between them.
Russian Railways, in particular, is also an organizational consumer of
technical equipment used for the construction of infrastructure facilities, as well
as for the manufacture of new rolling stock, including repair work.
Improving the system of state support for the suburban railway complex
should be aimed at ensuring a balance of interests of passengers, carriers and the
owner of the infrastructure; limiting the growth of tariff load on passengers;
providing incentives to improve the economic efficiency of suburban
transportation. The Center for Corporate Governance of the Suburban Complex
of JSC “Russian Railways” proposed the following mechanism of interaction
between the subjects of the suburban transportation market (Figure 1.5), which
would increase the efficiency of the suburban railway complex:
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Figure 1.5 – The mechanism of interaction of participants in the transportation process
with state regulators
1) on the part of the federal center:
- creation of framework conditions for the industry: requirements for
regional plans for public transport services and guidelines for their development,
standard contracts for transportation, methods for determining the economically
reasonable level of tariffs for suburban transportation, guidelines for
determining the rental rate of suburban rolling stock, interaction mechanisms
and permits disputes between market participants, minimum requirements for
passenger mobility in commuter traffic;
- coordination of the parameters of the regional order for suburban rail
transportation in terms of the forecast volumes of passenger traffic, including the
inter-regional suburban traffic;
- development of requirements for the minimum level of service and
quality standard, mandatory for all carriers; monitoring its compliance;
- determination of the tariff for the public rail transport infrastructure
services;
- regulation of relations between the carrier and the passenger when
paying for travel in order to prevent ticketless travel;
- phased transition to full compensation of costs associated with the
services of public rail transport infrastructure within the regional order;
- full compensation to carriers of the fare of citizens-recipients of social
services on the basis of actual passenger turnover and current regional tariffs;
2) on the part of the entities of the Russian Federation:
- development and coordination with the federal center of a medium- and
long-term regional integrated transport service plan for the period of 5–30 years;
- determination of the parameters of the regional order for suburban rail
transportation and placing an order;
16
- obligatory approval by the carrier of the amount of economically
justified costs and the establishment of an economically reasonable level of
tariff within the framework of a regional order;
- establishment of tariffs for transportation within the framework of a
regional order (in the form of a maximum value of a single trip cost);
- determination of targets for changing the amount of compensation
during the contract period;
- obligatory compensation to the carrier for losses of income arising as a
result of state regulation of tariffs;
3) on the part of the carriers:
- the right to reduce the cost of the ticket in the framework of the regional
order by providing discounts, season tickets and other marketing principles in
order to increase passenger traffic in coordination with the region and to reduce
the amount of necessary compensation;
- obligations to invest income received on the investment component of
the tariff for the transport of passengers within the framework of a regional
order for goals agreed with the region;
4) on the part of the owner of the infrastructure:
- obligations to invest revenues from the provision of infrastructure
services in the development of public railway infrastructure facilities used for
suburban transportation.
1.3.
ECONOMIC EVALUATION OF TRANSPORT MARKET
CONJUNCTURE
Market conjuncture research contributes to optimization of production and
logistics operations, increased productivity of engineering systems, efficient use
of production resources, minimization of resources consumption and production
loss, increased objectivity in market competitiveness evaluation, detailing of the
dynamics and nature of price changes, market capacity, production and
consumption levels, assessment of projection figures for dynamics and
development of commodities markets, their prices, consumption geography and
etc.
The concept of "conjuncture" is quite common in national economic
literature. English literature interprets this term using words and word
combinations in dynamics, for example «market situation; current situation;
market condition».
The economic nature of this concept lies in the characteristics of
economic processes, from the perspective of both the direction and speed.
17
Conjuncture, as noted by N.D. Kondratyev, "is a subnotion related to a more
general, generic concept of economic dynamics." 1
The series of studies of academic economists offer various interpretations
of the transport market conjuncture.
D.A. Macheret proposes the following definition of the transport market
conjuncture: “…this is the current market situation, characterized by a
combination of external and internal affecting parameters, such as volume and
structure of transport services; fare level; expenses, income, profit and
profitability of transport companies; number of people employed, productivity
and salary level in transport; the usage of traffic and carrying capacity of
transport routes; share prices of transport companies and dividends earned, etc.”
2
A similar definition of conjuncture, but with more detailed parameters of
the external and internal environment, was formulated by V.G. Galaburda –
"...this is a specific situation of a certain period of time, characterized by a set of
indicators such as volume and structure of transport services; level of
satisfaction with the transportation requirements and transport component of
price formation; values of cost, income, profit and profitability of transport
companies; rates and prices for construction and services; productivity and
salary level in transport and in the country; the level of the utilization of
productive capacity, investments and fixed capital; the levels of competition and
macroeconomic conjuncture; efficiency and quality of transport services;
development trends of the sphere of circulation, main goods and passenger flow,
and transport infrastructure in the country and regions”. 3
A.V. Ryshkov in his doctoral dissertation “Study of the economic
conjuncture of railway transport” gives the following interpretation – “the
conjuncture of today is not the characteristic of the state of the economy, it is not
the mould in the form of its indicators set. It is the moment in economy’s
movement directly related to the previous and subsequent moments”.
Thus, movement is the key word for understanding the essence of the
concept “conjuncture”. However, most authors rely on the static reflection of
market conjuncture when choosing indicators to characterize it.4
In our opinion, the conjuncture of transport market is the evolution of the
set of internal and external, constant and variable, qualitative and quantitative
1
N.D. Kondratiev, Yu.V. Yakovtsev, LI Abalkin. Large cycles of conjuncture and theory of foresight.
Selected works. М .: Economics, 2002
2
D.A. Machereth. Dynamics of rail transportation of goods as a macroeconomic indicator. [Text] //
Journal of Economic Policy. 2015. T. 10. № 2. C.133-150.
3
V.G. Galaburda, E.A. Ivanova, Yu.I. Sokolov. Transport marketing. Textbook for high schools.
Under the general editorship of Doctor of Economics, prof. V.G. Galaburdy - M .: UMC "Route",
2009.
4
A.V. Ryshkov Investigation of the economic conjuncture of railway transport (methodology,
analysis, evaluation) [Text]: dis. Dr. econ. Sciences: 08.00.05 / Ryshkov Anton Vladimirovich. - M.,
2009. - 355 p.
18
factors, characterizing the transport market situation, considering the changing
trends of the commodity markets conjuncture.
In this regard, it is required to form an indicator in the system of market
conjuncture indicators that will reflect the dynamics of factors changes. We
believe, that this indictor is the transport market conjuncture index.
The traditional analysis of market conjuncture lies in the analysis of cargo
turnover. The analysis of cargo turnover according to the mode of transport
allows us to indicate some stable trends: pipeline transport has maintained its
leading position (48.4%) since the early 1990s, which is explained by the
hydrocarbon orientation of Russian exports in view of long distance between the
country borders and key oil and gas deposits. Railway transport remains in the
second place (45%) in terms of the share of cargo turnover. At the same time, its
share has been growing in recent years (it has grown by 5.2% since 2012).
Despite the large volume of transportation and its heterogeneous structure,
motor transport remains mainly short-range mode of transportation with low
cargo turnover (4.5% of the total cargo turnover). Other means of transport are
essentially specific and auxiliary: inland water transport, sea transport and air
transport.
The main reason for the growth of the cargo turnover in rail transport in
recent years is the increase in the average distance of cargo transportation. This
trend is observed throughout the current development stage of cargo
transportation by rail. Thus, only from 2005 to 2014, the figure increased by
347 km or almost 26.3% in relative terms (Figure 1.6).
Figure 1.6 – Dynamics of the average distance of rail transportation, km
The growth trend in the average distance of cargo transportation by rail is
mainly caused by the competitive pressure of road transport, which dominates
the shorter hauling distance and tends to increase the average distance. The
significant jump in the average transportation distance in 2014, shown in figure
1.1 was caused by the increase in the share of export transportation. This
happened due to the increase in the competitiveness of national companies in the
world energy market as a result of the ruble devaluation. In comparison with
domestic traffic, export traffic has a much longer average distance, which is
19
reflected in the dynamics of cargo turnover. In this regard, the study of the
commodity markets conjuncture is the most important aspect of the analysis.
In the modern economic mechanism of transport complex management, it
is not enough to analyze cargo turnover and volume of cargo transportation. The
analysis of the commodity markets conjuncture is required. At the same time,
the analysis of the commodity structure of traffic should be supplemented by the
analysis of exports and imports, thus helping to determine the development
trends of transport links.
The commodity market conjuncture is characterized by the following
qualitative and quantitative indicators: supply of goods, production volume,
consumer demand, consumption volume, price level, proportionality, market
volatility, cyclical nature of market, development trends, market risk, level of
competition, etc.
The analysis of the commodity market conjuncture for a transport
company and its reflection in the dynamics of the transport market depends on
the nature of the problem to be solved. To make operational decisions, the
analysis of the current situation in the commodity markets is carried out, which
also allows to meet the loading forecasting for 3-6 months. For forecasting for
longer periods, it is necessary to undertake an in-depth analysis (Figure 1.7).
Figure 1.7 – Objectives and sequence of commodity market conjuncture research
For key commodity markets it is advisable to allocate bulk cargoes, that
are mostly raw materials in Russia. The recent years trend indicates that the
national economy of Russia belongs to the raw-materials export model. The
exports share in the country's gross domestic product reaches 40%, and about
the half of it is energy resources.
In railway transport, the dynamics of bulk cargo transportation is positive,
apart from "Oil and petroleum products" group. Transportation of oil by rail had
20
been declining steadily since 2014 and reached 235.8 million tons in 2016,
which is associated primarily with shifting of substantial volume of cargo for
pipeline transport. Also, the negative dynamics (except for 2016) is observed for
"Construction materials cargo" (decrease in loading by more than 30 million
tons per year since 2013), which switched to road transport due to its greater
mobility and the possibility of "door-to-door" delivery. At the same time, it is
worth noting that rail transport is often the only mode of transport capable of
transporting ore and coal from mining sites to export ports, metallurgical
enterprises and power plants. Loading of coal in railway transportation has been
steadily growing since 2013 and reached 328.6 million tons in 2016. Even heavy
rail transportation can provide door-to-door delivery, as is often the case with
coal transportation in China and the United States.
From the point of view of the structure of transported goods, it is based on
five categories: coal, oil and petroleum products, construction materials
(including mainly sand and gravel), iron ore and manganese ore and ferrous
metals. Taken together, these categories cover more than 70% of the total
volume of traffic.
“Coal” holds a leading position in terms of transportation volumes. At the
same time, its share has a steady growth trend: from 2010 to 2016, the share of
coal transportation increased from 23.7% to 26.8% in the total structure of
loading. The second largest group "oil and oil products", related to the middleincome segment is going to be mainly transported by pipeline in the future. It
will be facilitated by the opening of the next branches of the actively expanding
Eastern Siberia – Pacific Ocean pipeline system.
The third place in terms of rail cargo turnover share is divided between
‘iron and manganese ores” and “construction materials”. Iron and manganese
ores are surpassed by construction goods in terms of cargo volume (8.9% in the
loading structure of the RZD network against 11.5% of construction materials).
At the same time, it is worth noting that ores play an important role for the
industry and for the Russian economy. It would be more appropriate to transport
it by rail, in contrast to construction materials, a significant part of which is
transported by road.
Chemical and mineral fertilizers consistently occupy 4.4% of the cargo
turnover of Russian railway transport. At the same time, this group of bulk
cargoes is export-oriented. Provided that the main production capacity is in the
Central and Ural part of Russia, the products are mainly transported for export
either through the border crossings directly in CIS countries, or through the
ports of the North-West and South, which explains the relatively small distances
of delivery (1.6 thousand km in all modes of traffic, 1,55 thousand km in export
traffic).
In our opinion, in order to assess the transport market conjuncture, it is
necessary to form a comprehensive indicator that takes into account the impact
21
of the commodity markets conjuncture and the transport market conjuncture
index (Figure 1.8).
Figure 1.8 – Conceptual framework of the formation of transport market conjuncture
index
The combination of qualitative and quantitative indicators of commodity
markets conjuncture, such as export and its structure, import and its structure,
extraction volume, loading volume, cargo turnover and their structure allows us
to determine the index of the transport market conjuncture.
This indicator can be determined by both cargo turnover and volume of
transport. It can be used for:
- analysis and forecasting of volumes and dynamics of export and import
of goods, materials and raw materials;
- analysis of the impact of prices on the commodity markets situation;
- determining, analysis and forecasting of volumes and dynamics of
goods, materials and raw materials consumption;
- analysis of the impact of the transport services quality on the possibility
of attracting goods traffic to a specific segment of transport market;
- assessment and analysis of regional traffic distribution in the context of
the studied commodity markets;
- analysis and forecasting of development trends of commodity markets
and their dynamic stability;
- analysis of seasonality and cyclicity of the main indicators of market
development, their volatility and factors affecting them.
The transport market conjuncture index in terms of traffic is the sum of
the products of the structure of freight railway transport in the volume of traffic,
commodity markets index and of the coefficient of transportability.
22
The commodity market index is based on the volume of natural resources
extraction. Table 1.1 presents data on the extraction of natural resources,
forming the main bulk cargoes transported by rail.
Table 1.1 – Volume of natural resources extraction, forming the main bulk cargoes
transported by rail, million tons
Name of the resource
Oil extracted, including natural gas liquids
Construction materials
Coal
Grain
Iron and manganese ores
2013
522,1
424,0
353,0
92,4
72,6
2014
526,0
445,1
357,0
105,3
72,4
2015
534,0
446,0
372,1
104,8
72,5
2016
549,1
468,2
385,0
120,7
72,5
Non-ferrous ores and sulphur raw materials
25,1
25,2
25,1
25,3
18,4
25,9
1533,5
19,7
26,5
1577,2
20,1
26,1
1600,7
20,7
26,3
1667,8
Fertilizers, mineral or chemical
Coke
Grand total:
The first place in the natural resources extraction goes to extracted oil,
including natural gas liquids. In 2013, its volume reached 522 million tons and
there is a significant increase every year. The second place in extraction is taken
by construction materials, which production volume has increased by 10.3%.
since 2013. By rail are also transported coal (volume of production reached
385 million tons in 2016), grain (increase in production was 30% in 2013), iron
and manganese ores, etc.
Table 1.2 shows the calculation of the commodity market index, which is
defined as the ratio of extraction of principal natural resources of the current
period to the previous one.
Table 1.2 – Commodity markets indices in the context of bulk cargoes
Name of cargo
2014/2013
2015/2014
2016/2015
Coal
Oil extracted, including natural
gas liquids
Construction materials
1,01
1,04
1,03
1,01
1,02
1,03
1,05
1,00
1,05
Iron and manganese ores
1,00
1,00
1,00
Fertilizers, mineral or chemical
Non-ferrous ores and sulphur raw
materials
Grain
1,07
1,02
1,03
1,00
0,99
1,01
1,14
1,00
1,15
Coke
1,02
0,98
1,01
The grain cargo index increased by 0.01 in 2016 compared to 2014,
despite a sharp drop in 2014. The same dynamics is observed in non-ferrous ore
and sulfur raw materials cargo (+0.01 by 2016), “oil extracted, including natural
gas liquids” (+0.01 by 2016) and “coal” (+0.02 by 2016). The index of
construction materials decreased to 1 in 2014 but has risen to the level of
23
2014 (1.05) by 2016. The index of iron and manganese ores has not changed and
for 3 years was equal to 1. The index of mineral and chemical fertilizers was
1.07 in 2014 and decreased by 0.04 in two years.
Table 1.3 shows the structure of rail cargoes from the perspective of major
transport market segments.
Table 1.3 – Structure of rail cargoes from the perspective of major transport market
segments, million tons.
Name of cargo
Coal
Oil extracted, including natural gas
liquids
Construction materials
Iron and manganese ores
Fertilizers, mineral or chemical
Non-ferrous ores and sulphur raw
materials
Grain
Coke
Others
Grand total:
2013
310,8
2014
315,4
2015
323,3
2016
328,6
250,3
256,5
251,2
235,8
170,2
110,7
141,1
108,6
130,7
109
141
109,5
47,0
49,2
51,4
53,5
20,6
19,3
20,4
21,1
13,8
11,5
302
1236,9
18,2
11,8
270,9
1227
18,7
11,1
298,7
1214,5
19
11,7
303,1
1223,3
The first place in the structure of rail cargo is held by "coal” and stands at
more than 27 % for 4 years. Despite the reorientation towards pipeline transport,
the cargo of extracted oil, including natural gas liquids is ranked second with an
average share of 20%. The third place in the total structure of cargo
transportation is occupied by construction materials cargo with an average share
of 12%. The smallest shares of bulk cargo in the structure of transport belong to
iron and manganese ores (8,95%), mineral or chemical fertilizers (4,37%), nonferrous ores and sulphur raw materials (1,72%), grain (down 1.55%), and cox
(0,96%). Also, other goods occupy more than 24% of the total structure of cargo
transportation.
Transportability index is based on the transportability coefficient. In turn,
the transportability coefficient is the ratio of the traffic by rail volume to the size
of the production of these products.
From 2013 to 2016 the transportability coefficient of coal averaged 0.87,
extracted oil, including natural gas liquids - 0.46, construction materials cargo 0.32, iron and manganese ores - 1.50, mineral or chemical fertilizers - 2.54, nonferrous ores and sulphur raw materials - 0.81, grain-0.16, coke - 0.44.
The index of the transportability coefficient of coal for the period from
2013 to 2016 was in average 0.98, extracted oil, including natural gas liquids 0.96, construction materials cargo - 0.93, iron and manganese ores - 0.99,
mineral or chemical fertilizers -1.003, non-ferrous ores and sulphur raw
materials - 1.006, grain - 1.02, coke - 1.
The index of transportability of coal had decreased by 0.02 since 2014 and
in 2016 amounted to 0.98. Repeating the dynamics of the coal transportability
24
index, the transportability index of extracted oil, including natural gas liquids
decreased by 0.11 during the period under review and was 0.91 in 2016.
Transportability index of construction materials had increased from 2014 (0,79)
and in 2016 was 1.03. The same dynamics is observed in following cargoes: iron
and manganese ores (+0.02), mineral or chemical fertilizers (+0.03), non-ferrous
ores and sulphur raw materials (+0.09) and coke (+0.04). A noticeable decrease
of transportability coefficient is observed in the grain cargo, transportability
index had decreased by 0.28 since 2014 and was 0.88 in 2016.
Thus, based on the above data, the index of transport market conjuncture
in terms of traffic volume was 0.98 in 2014, 0.96 in 2015, 1 in 2016.
The transport market conjuncture index for cargo turnover is the sum of
the products of the rail cargo transport structure by cargo turnover, the
commodity market index and the transportability index.
Table 1.4 shows the data on the turnover of the main bulk cargo
transported by rail.
Table 1.4 – Structure of the cargo turnover in rail transport in terms of major transport
market segments, billion tons-km.
Name of cargo
Coal
2013
900,4
2014
965,4
2015
991,0
2016
1054,2
Oil extracted, including natural gas liquids
461,2
482,7
484,0
421,6
Construction materials
Iron and manganese ores
Fertilizers, mineral or chemical
Non-ferrous ores and sulphur raw materials
Grain
Coke
Others
Grand total:
131,7
131,7
87,8
21,9
22,0
21,8
417,3
2169,2
137,9
114,9
91,9
23,0
22,8
22,9
436,7
2298,8
138,2
115,2
92,2
23,1
23,2
23,1
414,9
2304,9
140,0
140,1
93,7
23,0
23,8
23,4
421,7
2342,6
Coal is the leader in the structure of main bulk cargoes transported by rail
turnover. Its share in the total structure of the main bulk cargoes turnover
increased every year and reached 45% by 2016. The extracted oil, including
natural gas liquids cargo had consistently occupied 21% of the total cargo
turnover for 3 years since 2013, but in 2016 there was a decrease (-3%).
Construction material cargo occupies the third place, since 2013 their
share in the total structure of cargo turnover has increased by an average of 6%.
Iron and manganese ores, despite the declines in 2014 (114.9 billion tons-km)
and in 2015 (115.2 billion tons-km) showed a sharp increase in 2016
(140.1 billion tons-km). The other cargoes, in general showed positive dynamics
for the specified period: mineral or chemical fertilizers (+6.7% by 2016), nonferrous ores and sulphur raw materials (+5% by 2016), grain (+8.1% by 2016),
coke (+7.3%).
On the basis of the above data, the index of transport market conjuncture
for cargo turnover was 1.00 in 2014, 0.96 in 2015, 0.99 in 2016.
25
Table 1.5 shows the results of the calculation of the transport market
conjuncture index for cargo turnover and volume of traffic.
Table 1.5 – Transport market conjuncture index for cargo turnover and volume of
traffic
Transport market conjuncture index
2014 2015 2016
For trafficvolume
For cargo turnover
0,98
1,00
0,96
0,96
1,00
0,99
The transport market conjuncture index in terms of traffic volume was
0.98 in 2014. In 2015, this figure decreased by 0.02 and began to correspond to
the index of transport market conjuncture (0.96), calculated on the basis of cargo
turnover. In 2016, the figure increased by an average of 4% compared to 2015.
It should be noted that in 2016 the transport market conjuncture index in terms
of traffic volume was equal to 1, which indicates a serious market saturation,
however, the transport market conjuncture index in terms of cargo turnover had
only approached 1 and was equal to 0.99. In 2015, both indices were equal to
0.96. At the same time, their dynamics differed in 2014 and 2016. This was due
to the different rates of increase in the average distance of transportation because
of the growth of the export transportation share as a result of the
competitiveness increase of domestic companies in the global energy market due
to ruble devaluation.
Based on the results of the study, the following conclusions and
recommendations can be made:
The transport market conjuncture is the dynamics of changes in the set of
internal and external, constant and variable, qualitative and quantitative factors,
characterizing the transport market situation considering the changing trends of
the commodity markets conjuncture.
In the modern economic mechanism of transport complex management,
analysis of cargo turnover and volume of cargo transportation is insufficient.
Hence the need for commodity markets conjuncture analysis. At the same time,
the analysis of the commodity structure of traffic should be supplemented by the
analysis of exports and imports, thereby contributing to determination of the
development trends of transport links.
The first place in terms of transportation volume is steadily occupied by
the coal cargo. At the same time, its share has a steady growth trend: the share of
coal transportation in the total structure of loading increased from 23.7% to
26.8% from 2010 to 2016. The second largest here is oil and oil products group,
related to the middle-income segment cargo and it is going to be eventually
transported by pipeline. Construction materials cargo (11.5%), iron and
manganese ores (8.9%), chemical and mineral fertilizers (4.4%) have a
significant share in the turnover of rail transport.
To assess the transport market conjuncture, a new complex indicator is
proposed. The indicator considers the impact of the commodity markets
26
conjuncture – "the transport market conjuncture index", determined on the basis
of the dynamics of the key factors of economic growth and taking into account
the peculiarities of transport products development, and contributing to the
formation of an informational basis for the justification of management
decisions on a transport company development. This indicator can be
determined by both cargo turnover and volume of traffic.
In 2014 transport market conjuncture index in terms of volume of traffic
was equal to 0,98, and transport market conjuncture index in terms of cargo
turnover was 1.0. In 2015 these figures decreased to 0.96, and in 2016 there was
an increase in average of 4% compared to 2015.
The formation of basis for assessing the transport market conjuncture in
the system of digital economy indicators contributes to the solution of key tasks
for the transport complex development, namely, it allows to create an
informational basis for commodity markets conjuncture forecasting, taking into
account their seasonality and cyclicity impact, as well as the specifics of the
technological process that determines the requirements for the quality of
transport services.
1.4.
LOGISTICAL BASES OF MANAGEMENT IN GLOBAL
TRANSPORT SYSTEMS
The innovative course of development of the Russian economy
presupposes not only an increase in output, but primarily an increase in its
quality, which ensures a high level of competitiveness of goods and services
provided in the country. This fully applies to rail transport, which performs the
bulk of goods and passenger traffic on a large part of the Eurasian continent.
In 2008, a strategy for the development of railway transport until 2030
(hereinafter – the Strategy) was developed and approved. The aim of the
Strategy is the establishment of conditions for sustainable socio-economic
development of Russia, increasing mobility of the population and optimization
of distribution, the strengthening of the economic sovereignty, national security
and defense capability of the country, decrease in cumulative transportation
costs of economy, increase of competitiveness of the national economy and
ensuring the leading positions of Russia on the basis of advanced and innovative
development of railway transport, harmoniously linked with the development of
other economic sectors, transport modes and regions of the country.
The strategy is aimed at accomplishing the following tasks:
- the formation of an accessible and sustainable transport system as an
infrastructural basis for ensuring the transport integrity, independence, security
and defense capability of the country, socio-economic growth and ensuring
conditions for the realization of the citizens’ need for transport;
27
- implementation of mobilization training in railway transport, military
and special rail transportation, increasing the protection of railway transport
infrastructure objects against the impact of various types of threats, including
acts of sabotage and terrorism;
- realization of the transit potential of Russia on the basis of integration of
railway transport into international transport systems;
- creating conditions for deepening economic integration and increasing
labor mobility;
- decrease in the total transport costs, owing also to increasing the
efficiency of the functioning of the railway transport;
- bringing the level of quality and safety of transportation in line with the
requirements of the population and the economy and the best world standards on
the basis of technological and technical development of rail transport;
- Increasing the investment attractiveness of the railway transport;
- ensuring the right of Russian citizens to a favorable environment.
In the field of freight transport, after the formation in the railway transport
of the organizational and legal and technological conditions necessary to
separate the provision of infrastructure services from transport activities,
consideration should be given to the expediency of organizing an organizational
unit for the provision of infrastructure services from transport activities. Tariff,
organizational and technological measures will be implemented to ensure the
possibility of developing competition between freight carriers.
Operator companies will continue to increase the fleet of rolling stock and
expand the geography of its operation in the CIS countries. The largest of the
companies-operators, created at the third stage of reform, will acquire assets
sufficient to operate as carriers. For carriers, equal conditions for access to
public infrastructure will be created, a unified system for allocating mobilization
capacities and assignments to all market participants will be created, as well as a
system of requirements for carriers, mandatory insurance of carriers' risks will
be introduced.
In order to create a competitive environment, it is planned to develop a
system of state tariff regulation. Tariff for freight transportation will be
differentiated depending on the quality of the service. Tariffs for transportation
(including in its own rolling stock and train units), taking into account the
allocated tariff components, will be established on the basis of data of separate
accounting by types of activity and economically justified, calculated on the
basis of justified costs and the level of profitability sufficient for the expanded
reproduction of fixed assets.
To assess the competitiveness of transportations it is necessary to use a
combination of methods of structural and functional analysis, as well as
approaches based on the theory of product quality and the modern concept of
marketing in transport. The management of transport competitiveness is based
28
on applying the provisions of the theory of regulation of market systems, the
system analysis of economic processes in the transport sector.
The classical definition of the competitiveness of transport products is
understood as the ability to withstand the competition of substitute goods,
services, from the point of view of gaining that market share that provides
favorable sales of transport products and the necessary growth of the revenue of
the transport enterprise.
Modern tools to ensure the competitiveness of the organization are shown
in Table. 1.6.
Table 1.6 – Modern tools to ensure the organization's competitiveness
Competitiveness Tools
Total Quality Management
Lean production
Description
Continuous improvement of quality of all organizational, production and technological
processes of manufacturing products and customer service
Ensuring the long-term competitiveness of the enterprise by eliminating different types
of losses and unproductive costs
Description of the composition and structure of the production system, the formulation
of requirements for its main elements in accordance with applicable international and
national standards
Improvement of the enterprise management system aimed at ensuring a stable, reliable
Business Excellence Model
and long-term presence of the enterprise in the target market and increasing its
(EFQM)
competitiveness
The Practical Program of
Evaluation of the efficiency of the enterprise, the implementation of permanent
Revolution In Factories and improvements and improvements introduced by enterprises that occupy a leading
position in the target market
Other Organizations
Improving the quality of products (services) by reducing the number of "defects" that
Six Sigma
occur during the most important stages of the execution of technological processes
Stakeholder satisfaction, Soothsaying, Speed, Surprise, Shifting, Signaling,
Seven Sigma
Simultaneous and sequential
Lean production + Six
The use of not only well-known methods of quality management, but also a
combination of them with such new approaches as lean production methods
Sigma
Establishment of order in all spheres of activity and strengthening of labor, financial,
System "Arrangements"
industrial, technological discipline in the enterprise
Continuous Acquisition and Providing comprehensive support in the production of complex high-tech products at
all stages of its life cycle
Lifecycle Support
Decision-making using both statistical and non-statistical methods of analysis and
solving urgent problems in order to implement the measures necessary to achieve and
Statistical process control
maintain the state of statistical control of processes, and constantly improve their
stability and reproducibility
ISO 9000
Competitions in the field of Promotion of high-quality goods, services and advanced technologies to the Russian
market and solving the problems of integration of these products into the world market
quality improvement
Comprehensive study of the company, its financial condition and position in the target
Due Diligence
market
Enhanced impact on the consumer of the trademark, advertising appeals and other
elements of advertising activities, united by a certain idea and a characteristic unified
Branding
design that distinguish the enterprise's goods among the main competitors and create a
positive image of it
Continuous activity on creation and development of comprehensive understanding and
Public Relations
trust of the public to the given enterprise, its social importance and image
Distributed in any form, by any means, information about the company, the goods it
produces (services provided), which is intended for potential buyers and is designed to
Advertisement
form or maintain interest in this enterprise and facilitate the sale of its goods (services)
Satisfaction of consumer demand by optimizing the arrangement of advertising
Merchandising
equipment, the location of commodity subgroups and their promotion
Performing all or part of the functions of managing the enterprise by third-party
Outsourcing
specialized organizations
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Balanced Scorecard
Diversification
Differentiation of goods
(services)
Business process
reengineering
Managing performance indicators of an enterprise as an integrated system
Mastering new types of activities, expanding the range of products (services),
developing new markets
Development of a number of significant modifications of goods (services) that are
substantially different from similar goods (services) of main competitors
Total redesign of business processes in an enterprise with the ultimate goal of
achieving fundamental improvements in the main indicators of its activities: cost,
quality of services and rates
For the freight transportation company, the main activity is the
implementation of the transportation process. As additional services it is
possible to allocate the following:
- loading and unloading services;
- storage services;
- services for cargo preparation for transportation;
- provision of rolling stock for rent;
- forwarding services;
- other additional services (information, insurance, etc.).
Competitiveness of the transport enterprise is the ability to satisfy the
effective demand of customers in the transportation of a certain volume and
quality, which allows to take the leading place in the market of transport
services and get the most beneficial effect.
The competitiveness of any product or service is determined by the
market, that is, by the process of the producer-consumer relationship. Efficiency
is largely determined by the level of development of the production
infrastructure.
In general, to organize work to ensure the competitiveness of any objects
(systems), it is necessary to clearly formulate their mission, development
strategy, assess opportunities, strengths and weaknesses, links with the external
environment and solve other problems.
Competitiveness systems are the basis for achieving the competitiveness
of any facilities. The economic laws of the functioning of market relations, the
laws of organization, scientific approaches, principles and methods of
management are common both for strategic marketing, and for innovative,
production management and other sections (subsystems) of the management
system. The number of analyzed laws, applied approaches, principles and
methods is determined by the stage of the object's life cycle, its complexity and
other factors.
The concept of "competitiveness" is characteristic for various levels of
management of the national economy. Thus, it is necessary to differentiate the
competitiveness of a product (service), enterprise (organization), industry,
region, national economy (country). Between them there is a direct and inverse
relationship (Figure 1.9). Competitiveness is usually determined by comparing
one object with other similar objects (often the best ones; for example, a given
product with other goods of a homogeneous group, one region with other
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regions, etc.). At the same time, competitiveness at different levels of the
hierarchy is realized through competitive advantages.
The region, acting as a fairly independent socio-economic structure,
provides an opportunity to view it as an active business entity in the national
market.
Competing companies (organizations) are usually those of them whose
economic interests coincide in full or in part when they are based (work) in this
target market or segment.
Competitiveness of national economy
Competitiveness of industries
Competitiveness of regions of the country
Competitiveness of regions of the country
Competitiveness of goods (services)
Figure 1.9 – Implementation of competitiveness at various levels of the hierarchy of
national economy management
Competitiveness of the organization is a more complex and generalizing
concept in comparison with the notion of "competitiveness of goods".
Competitiveness of an organization is an integral numerical characteristic, by
means of which the company's final business results of its activity are evaluated
over a certain period. This is a sufficiently developed, multi-criteria and at the
same time interrelated system of elements, each of which is designed to reflect a
numerical (for example, scoring) evaluation of a certain type of potential. At the
same time, the generalization of different types of potentials makes it possible to
give an integral assessment of the company's competitiveness level.
Increasing competition between producers forced the industrialized
countries to seek additional opportunities to reduce the logistics (and in
particular, the transport) component in the final price of the goods. This required
the creation of new equipment, the development of transport infrastructure
(including logistics centers - LC), the introduction of modern transport and
logistics technologies, which ultimately reduced the transport and logistics
component in the final price of the goods to 10-12%, and the total costs of
commodity producers for transport and logistics services by 10-30%.
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In the field of freight transport, there is competition between rail and other
modes of transport in different market segments (in terms of directions,
distances, types of cargo, freight service level of cargo owners, etc.).
The current stage of development of market relations in the world is
characterized by a significant tightening of competition, turning it into hypercompetition. The main factors of increasing competition between producers of
products (services) are an increase in the rates of scientific and technological
progress, the attraction of investments on a permanent basis in the development
of production in order to ensure significant growth in labor productivity, the
introduction of innovations and the dynamic development of modern
information technologies.
The concept of managing the process of delivering goods from the
manufacturer to the consumer using various methods and methods of its
organization and implementation in the modern economic literature is
determined by the concept of logistics. This concept applies to all types and
methods of delivery. It is especially important in the case of mixed messages,
the most labor intensive and costly in terms of their organization and
implementation.
In the broadest sense, logistics is treated as management of an enterprise
in conjunction with suppliers and consumers of its products. One of the founders
of the development of this concept, Professor of the Higher Commercial School
of Bordeaux (France) Pierre Casaban, defines it as "a combination of ways and
methods of efficient management of commodity flows with the lowest costs and
high level of organization and implementation of supply, product market
management, production and marketing, including and after-sales service." At
the same time, according to the author of the work cited, before logistics there
are two tasks of a strategic nature: "effective control over costs in order to
reduce them and achieve high quality supply, production, marketing and aftersales services." An important place in the above concept is given to the
organization and implementation of the transport of goods (not only the
transportation process itself, but all the related operations). Separately, attention
is focused on the need to reduce the cost of storage.
The opposite, treating logistics in the narrowest sense is the point of view
that defines this concept as a set of operations to "reduce the cost of packaging,
handling, transportation, customs clearance, warehousing, reduction and
minimization of costs associated with brokering and transport activities" . In
other words, the term is linked almost exclusively to the issues of improving the
transport process and related operations.
In the works of American economists, the term logistics of business
appears. In this case, it is deliberately stressed that the concept of logistics is
meant in the framework of economic and commercial relations, and not the
military term "logistics", which means in the US provision of supply,
transportation and storage of military equipment and manpower.
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Business logistics in the United States means "the process of planning and
organizing the delivery of materials necessary for production, the delivery of the
enterprise's products to commercial warehouses or to the retail network, as well
as proper control over these operations." In particular, this meaning is given to
business logistics by two American economists: Steiner and McAndhiney.
Recently, a number of authors began to tend to the definition of logistics
as a concept associated primarily with marketing. In particular, marketing
logistics "is the analysis, planning, organization and control of all moving and
warehousing operations associated with the flow of finished products from the
end of the production line to the arrival of products on the market, as well as the
associated distribution channels required for the organization and provision of
interaction between the company and its markets."
Analyzing the listed definitions of logistics, you can see that the concept
of logistics in any case is a process of managing the activities of the enterprise,
associated with the organization and planning of transport and all other
operations for the delivery of goods, including the activities of various
intermediary companies and firms.
The most important is the fact that the concept of logistics becomes the
cornerstone of the economic strategy of the largest industrial, agricultural,
commercial and other enterprises. The implementation of the concept of
logistics in practice is recognized as the most important strategic point in the
issues of achieving a highly efficient transport system in developed countries. In
particular, the director of one of the largest consulting firms in the UK, RE
Tuhuson, O Sullivan, assessing the possible situation in Western Europe in the
late 1990s stated that "the strategic point of the distribution system in Europe
there will be a successful implementation by the companies of the concept of
logistics - without this, companies in competition can not win." Implementation
of the concept of logistics in a practical place is given a prominent place in the
strategy of American and Japanese entrepreneurs. A third of efforts related to
the improvement of its activities, Japanese corporations spend on solving
problems of delivery of goods (i.e. logistics). American companies are going to
allocate for this more than 25% of their activities.
In other words, in the United States and Japan, as well as in Western
Europe, this concept is given a very significant place in the development of the
company's overall strategy, both now and in the future.
The general concept of logistics is closely related to the question of the
mechanisms for its implementation in practice. Ways and methods can be very
different: from a well-organized process and planning delivery and determining
the rational (in terms of costs, safety of goods in transit, etc.) transportation
route to computerization of final settlements for all logistics operations that have
taken place.
In the economic literature, the following types of logistics are
distinguished:
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- Warehouse;
- Production;
- Transport;
- Information (use of electronic computers to solve logistics problems).
As part of the supply and marketing logistics, operations are carried out to
plan, regulate the supply of raw materials and materials and control it, and also
to deliver finished products to consumers.
Production logistics is aimed at achieving a high degree of interaction of
all production units with minimal outlays of raw materials and labor.
Transport logistics provides management of the organization's process and
carries out cost-effective and safe delivery of goods from the place of their
manufacture to the places of consumption at strictly stipulated times.
Information logistics provides control over all operations related to the
availability of raw materials and semi-finished products, the release of finished
products, the state of production stocks, the volumes of supplies, the
transportation of raw materials for production and finished products to the retail
network, etc., analyzes the activities of the enterprise and assesses the state of
the enterprise deeds.
The main thing in logistics is the system approach, which includes the
design and structuring of the system for the most effective use of space and
time, the organization of material and information flows. The fulfillment of
logistics requirements is realized through the creation of effective logistics
systems covering supply, production and marketing, including all transportation
and storage issues.
The purpose of the logistics system is the delivery of goods and products
to a given place in the right quantity and assortment at a given level of costs.
The logistics system as a queuing system has connections with the external
environment. The connections are usually cyclical, since they usually reflect the
stages of the serial transmission of the material flow between the contacting
subsystems. At the same time, the logistic system can also be characterized as a
system with time constraints.
A flexible logistic system is a system in which bringing the material flow
to the consumer is carried out both through direct connections and with the
participation of intermediaries. An example of the system under consideration is
the supply of spare parts, when shipment to the addressee of the parts of rare
demand is usually made directly from the central warehouse, and details of
standard and increased demand from the intermediary's warehouse.
A logistic system with direct connections is a system in which a material
flow is brought to the consumer without the participation of intermediaries, on
the basis of direct economic ties.
An echeloned or multi-level logistics system builds a material flow on the
way from producer to consumer in such a way that it passes through at least one
intermediary.
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The effectiveness of the introduction of innovative processes in the
logistics of international transport can be defined as the result of quality delivery
of goods from one country to another.
In the logistics system, the following components are included:
transportation, storage and storage- handling, packaging and management of
production reserves.
For the company operating the logistics system, it is necessary to have a
clear idea of all these elements. The main content of the elements is given
below.
Transportation as part of a logistics system involves:
- characteristics of each mode of transport and its technical and economic
ability to carry out this transport;
- ensuring the safety of cargo;
- compliance with legislation;
- registration of transport documentation;
- operation of transport equipment;
- Timetable;
- Routing of transportation;
- calculation of transportation costs, etc.
Warehousing and storage as elements of logistics determine:
- the role and importance of the warehouse economy in the policy of
organization of delivery of goods;
- location and operation of warehouses;
- construction and location of warehouses;
- storage methods;
- schemes for using the storage space;
- forms of use of this or that technique in the organization of warehouse
operations.
Loading and unloading in the logistics system solves the problems:
- application of various methods and methods of transfer;
- a choice of means of mechanization of works;
- use of packages (containers, pallets, pallets).
Packaging as an element of business logistics solves the problems:
- the choice of the nature of the package and its role in the transfer of the
goods of the enterprise;
- safety and security of goods in the warehouse and in transit;
- determination of sizes, forms and technical requirements for packaging;
- the effect of packaging on total costs.
Inventory management logistics examines:
- The theory of management of industrial stocks and its applications to the
company's operations and policies in the matters of commodity circulation
(delivery);
- Economic quantities of supply;
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- economic quality of the party;
- Procedures for controlling stocks;
- issues of providing a guarantee stock;
- cost of production stocks;
- aspects of damage and moral aging products.
Setting and formulating strategic goals in the field of organization of
logistics activities serve as the initial basis for selecting and developing
strategies that ensure their achievement. There are the following types of
strategies:
• basic - are the choice of the model of behavior of an innovative
enterprise as a whole and a separate strategic economic unit in a particular
market situation;
• functional - complexes of activities and programs for individual
functional areas and divisions of innovative enterprises.
By the nature of interaction with the external environment, strategies are:
• Defensive (reflect the company's reaction to the actions of competitors
and indirectly to the needs and behavior of consumers). They are divided into
protective, imitative, expectant, direct response;
• Offensive. Include active R&D focused on marketing; merger strategies;
acquisition strategies. Offensive strategies usually require credit investments
and, therefore, are more applicable to innovative enterprises that have a
sufficiently high financial potential, qualified staff of managers and creative
scientific and technical personnel.
The development of innovative strategies at the enterprise is based on the
following tasks:
• development of strategic goals;
• an assessment of the capabilities and resources of an innovative
enterprise to achieve these goals;
• analysis of trends in marketing activities and scientific and technical
sphere;
• identification of innovative strategies with a choice of alternatives;
• Preparation of detailed alternative plans, programs, projects and budgets;
• evaluation of the activity of an innovative enterprise on the basis of
certain criteria, taking into account established goals and plans.
In the 60-90s of the 20th century in the USA and Europe, in the field of
transport and distribution of commodity flows, the following problems and
trends emerged, the account of which is necessary to understand the need to
create LCs of various formats:
• Lack of warehouse space in the vicinity of large cities;
• development of intermodal (multimodal) transport within countries
using standard ISO containers;
• Excessive congestion of roads, primarily in cities and an increase in the
volume of freight road transport;
36
• a decrease in the share of rail transport and, as a result, the emergence of
initiatives to develop intermodal (multimodal, combined) transport schemes to
support national railways;
• Lack of port facilities and the need to build additional cargo handling
and storage facilities, both in the ports themselves and in the territories located
within the country;
• initiatives on national railways that have reduced the market share of rail
freight through the introduction of intermodal logistics technologies.
The listed factors should be taken into account both directly by the
participants of the logistics market, and by the authorities of different levels:
from local to state. In addition to the need to solve social problems (support for
national railways, environmental problems caused by road transport), the
authorities of many states are interested in supporting small and medium-sized
enterprises.
Recently, this problem has come to the fore: the emergence of powerful
logistics providers, creating their own logistics networks, has placed small and
medium-sized firms in unprofitable conditions. In addition, small companies are
faced with the problem of creating telematics systems, the use of which is today
a necessary condition for existence in the logistics market.
Large firms can afford the introduction of modern information systems to
manage their activities, whereas for small and medium-sized enterprises, the
high cost of IT support can become an unsurmountable obstacle.
Aggregate costs in the logistics system are formed as follows: consumers on average 24.3%, suppliers - 13.5, intermediary organizations - 3.2, for
transport including all related operations - 54%.
Based on the figures given, it can be seen that transport is of primary
importance in the logistics system, therefore the term transport logistics is often
introduced. It is based on combining the economic interests of senders,
recipients, transport workers and others involved in the delivery of goods of
organizations and enterprises on the basis of the creation of transporttechnological systems.
1.5.
CREATING COMPETITIVE ADVANTAGES OF A MODERN
TRANSPORT AND LOGISTICS COMPANY
In the field of freight transport, there is competition between rail and other
modes of transport in different market segments. Foreign experience shows that
the greatest efficiency in both micro- and macro-economic terms is provided by
integrated logistics services, in which logistics companies provide a variety of
logistics services for the promotion and maintenance of commodity-material
flows.
According to expert estimates, direct costs for logistics and logistics
services in many European countries are of the order of 8-14% of GDP (France:
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10%, Germany: 7.8%, the EU as a whole: 13.3%) with an upward trend. The
logistics account for 6-12% of the labor force of the total number of employees.
In the system of market economy, the main goal of transport production is
the fullest satisfaction of the customers' needs for transportation when achieving
the required level of quality of transport services and ensuring the
competitiveness of rail transportation in the transport services market.
For rail transport enterprises, whose activities are subject to rather strict
competitive conditions and high level of risk, transport security, operational
efficiency and financial stability can be ensured by the formation of a
competitive status involving the use of the financial and property potential of
railways.
In connection with the deep integration of the Russian economy and the
transport system into the international one, issues related to the study of the
potential for the development of the competitiveness of domestic railway
transport companies are acquiring particular urgency.
The classical definition of the competitiveness of transport products is
understood as the ability to withstand the competition of substitute goods,
services, from the point of view of gaining that market share that provides
favorable sales of transport products and the necessary growth of the revenue of
the transport enterprise. Transportation of goods is currently one of the main
strategic services in the Russian Federation.
Transport means not only transportation as a process, but also related
works and services rendered by transport organizations. From the point of view
of economic theory, products created in the sphere of transport, taking into
account the postulate of continuing the process of production in the sphere of
circulation and for the sphere of circulation, transportation is a special
commodity-service. Transportation of goods is the main type of service.
In modern conditions, one of the main elements of effective competition
is precisely the provision of a number of additional services to the cargo owner.
The optimal combination of the cost and quality of these services for each
transport company helps to increase their competitive status.
Competitiveness of the transport company is the ability to satisfy the
effective demand of customers in the transportation of a certain volume and
quality, which allows to take the leading place in the market of transport
services and get the most beneficial effect.
The ability of a transport company to compete in the transportation
services market depends largely on the competitiveness of transportation and on
the totality of the economic methods of the organization's production and
financial activities that affect the results of competition.
Assessment of competitiveness, analysis of competitive advantages and
the formation of a set of measures to improve the competitive status of the
transport company are inextricably linked with the development of a system to
ensure the competitiveness of the transport market.
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To determine the composition of groups of competitors, different criteria
can be applied (Figure 1.10).
Figure 1.10 – Criteria for the classification of competitors by different groups
The analysis of the activities of the organizations that make up the
strategic competitive group is carried out for the subsequent planning of the
company's development strategy (Figure 1.11).
Figure 1.11 – The objectives of the company's strategy development
The level of competitiveness of the organization should be recognized as
one of the main generalizing indicators by means of which an integrated
39
assessment of all its potential and, if necessary, forecasting opportunities and
final economic performance of the activity can be given.
The competitiveness of the organization is ensured by the various
advantages that are acquired by it in comparison with its main competitors,
namely economic, financial, investment, personnel, image, etc. Moreover, all
these competitive advantages should also be given a numerical estimate.
Subsequently, they, as noted above, are used to calculate the integral assessment
of the level of competitiveness of the company.
With increasing requirements for the level of transport services, the
requirements for the range of logistics services provided are also increasing.
Consider the capabilities of existing types of logistics operators, depending
on their level.
A logistics provider is a commercial organization providing services in
the field of logistics, performing individual operations or complex logistics
functions, as well as integrated management of the customer's logistics chains.
In practice, under the term level 1PL (from the English "first party of
logistics». the first side of logistics) is understood by companies that specialize
in certain areas of the logistics business. Their activity consists in providing
services for performing certain operations during the delivery of goods:
transportation, storage, customs clearance, etc.
Companies rendering services of type 2PL are freight forwarders, as well
as freight forwarding companies and organizations that act as intermediaries
between buyers (cargo owners) and sellers (1PL) of services. Unlike companies
like 1PL, we are talking about the complex provision of services in several
directions at once, for example, when cargo is transported by several modes of
transport in the transport system, but customs clearance services are also
performed.
As a result of the transition to a better level, the term "third party
logistics" appeared - 3PL, which characterizes outsourcing companies that "sell"
a complex service for the delivery of goods on a door-to-door basis, this is all
the required operations and ensuring the proper level of transport security. But at
the same time, their functions do not include the management of cargo flows: all
the issues in this case are solved by the "buying" side, i.e. consignor or
consignee.
3PL means a set of logistics services - from delivery and address storage
to order management and tracking of goods movement. The function of 3PLprovider includes the organization and management of transportation,
accounting and inventory management, the preparation of import and export
documentation, warehousing, cargo handling, delivery to the end user.
4PL Logistics Provider 4PL is a supply chain manager that brings together
the resources, capacities and technology of your organization with the resources,
capabilities and technology of another logistics enterprise and manages it to
offer customers the most complete solution to the challenges in the supply chain.
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It is important to note that 4PL-providers, or providers of the 4th level, are
necessarily connected with the production process. As a rule, 4PL-providers are
large logistics providers with a large infrastructure and modern supply chain
management systems, implementing high-tech processes and implementing
complex logistics schemes at the required level of safety and efficiency of
resource use.
At the same time, with the development of electronic business, there are
changes in logistics outsourcing and a new type of logistics intermediaries 5PL, which became known as system integrators of the 5th level, or virtual
logistics operators, appears. This type of providers is currently undergoing the
formation stage and it has the opportunity to significantly improve the existing
indicators of logistics service.
Third, fourth and fifth level providers are logistics operators and centers
providing complex services, and therefore it is best to attract them for customs
representation and transportation of goods. However, in the case when the
company itself is capable of performing any logistic operations, it is possible to
save considerably without using all the services of such organizations at once,
and special service packages, as a rule, already prepared for clients with
different types of requests.
According to modern quality standards, it is assumed that logistics centers
(LC), whose work is built on modern approaches to transport management and
planning, will significantly improve the competitiveness of domestic transport
companies and will solve the following tasks:
- attraction of large-scale private investments in the implementation of
LC project;
- construction of high-tech production and storage facilities and integrated
roadside service infrastructure;
- creation of modern and effective systems of engineering, communication
and information support of the LC;
- introduction of modern information technologies for tracking parcels,
optimizing the loading of vehicles, maintaining information exchange;
- improving the procedures for customs clearance, registration and
control, bringing them in line with world practice;
- attraction of large freight forwarding companies specializing in the
delivery of goods using information network and terminal technologies for the
organization of the transportation process and contractual logistics in LC;
Creation of an efficient LC distribution network for developing large
retail structures and networks, as well as storehouses for wholesale and smallscale wholesale of imported goods, aimed at revitalizing and legalizing the trade
and purchasing business of private business structures.
In a strategic aspect, the complex of functions performed by LCs allows
us to consider them not only as national transport and logistics nodes, but also as
a kind of framework linking the transportation process, rolling stock and
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infrastructure into a single integrated system, not only of the country or region,
but also in the perspective of the global market.
Creation LC provides direct interaction of large shippers, forwarders,
customs structures, providers of additional services with a backbone transport
system. Such centers, as a rule, are connected with each other and with the main
seaports by regular railway service, which allows to consider them as a direct
continuation of the sea container system.
A promising option for developing the growing freight and container
flows passing through the sea trading ports (ICCs) is the creation of container
transport-logistic terminals (TLTs) and the introduction of container block train
technology that delivers goods of different exporters to one destination and vice
versa.
Thanks to competition in the market of transport services, the combination
of state and public interests with the interests of the enterprise or firm is
achieved. Under current conditions, companies use the most economical
combinations of resources to produce a certain type of product that gives the
greatest profit. Thus, the maximization of the profits of domestic transport
companies and their successful work in the world market of transport services in
a strategic perspective will ensure a positive growth dynamics of the gross
domestic product, which will have a positive impact not only on the economy of
the sector, but will also have a positive impact on the development of the
Russian Federation as a whole.
1.6.
IMPROVING PROCESSES IN TRANSPORT COMPANIES:
LEAN AND BPM
Currently, large industrial and transport companies, banks are actively
applying the principles of lean manufacturing (Lean management) to optimize
their business processes. A huge number of companies in the manufacturing of
products and providing services set themselves the task of reducing
unproductive losses in order to be more profitable and meet international quality
standards. Lean manufacturing serves as a tool for the implementation of this
task, which helps to restructure the business at all levels of management.
The concept of lean manufacturing involves continuous long-term work to
improve the quality of products or services provided, to minimize losses while
achieving maximum productivity of business processes. The principles of lean
manufacturing include:
1. Determination of the value of the final product;
2. Definition of value streams;
3. Ensuring the continuous flow of value creation of the product;
4. Pulling of the product by the consumer;
5. Striving for excellence.
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The practical application of these principles allows the company to
become more efficient due to the growth of labor productivity, competitiveness
and quality of the products, possibly without requiring capital expenditures for
the reorganization of business processes. By introducing lean production, an
enterprise is to eliminate losses – actions that do not bring value but require
resources, which will help to significantly shorten the production cycle and
reduce the total cost of production.
In the classical theory of lean production, it is customary to single out
seven types of losses, including:
1. Overproduction - the performance of work before it is required or the
output of products that no one ordered;
2. Transportation (unnecessary movement of materials, products);
3. Waiting, i.e. when during working hours the main activity is not carried
out (all types of loss of time, including forced downtime, lack of information,
materials);
4. Stocks (over-acquired stocks, as the extraction of funds from the
company's turnover, because their storage does not create value and requires
time and place);
5. Defects, losses due to production with defects;
6. Loss of excessive processing that does not bring value;
7. Losses for extra movements, not directly related to the implementation
of production activities.
Lean companies aim at constant struggle with losses and their causes - in
our case it was bad planning, unnecessary interruptions, and inefficient
distribution of duties among the employees of a company or division.
The formation and description of the essence, principles, algorithms for
the introduction and application of lean production was greatly contributed to by
Womack, James P., Daniel T. Jones, Michael Wader, Jeffrey K. Liker, Hobbs D.
and others. Fundamental research on the development of lean production in
various fields of activity is reflected in the writings of the authors of various
countries: USA (Womack, James P.), Great Britain (J. Lucy, D. Fillingham, and
others), Japan (K. Ishikawa)
They all agree that there should be a clear set of rules in order to provide
an algorithm for sequential actions that would ensure the effectiveness of change
in business.
At the present stage in order to reduce these non-productive costs and
losses, the following lean production system key tools aimed at eliminating nonproductive costs and losses in the production process are identified:
•
Just-in-Time, JIT, the essence of which is in the presence of only
the necessary stocks (raw materials, semi-finished products), the absence of
extra stocks, improving the quality of products to the state of “no defects”,
reducing the duration of the production cycle by reducing equipment time, line
size and production batch size, gradual improvement operating fields and doing
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all this with minimal cost. As noted, one of the most important tasks of JIT is to
ensure the balance of the three subsystems in the company: the managing one,
the supporting one and the processing one. The JIT system allows you to create
a system of continuous flow (pull system) of the movement of the necessary
resources to fulfill the order and create value for the client. In addition, there is a
rhythm of resource flows: material, labor and financial, achieved by balancing
consumer demand.
•
Value Stream Map, VSM is a graphical interpretation of the current
state of business processes and their future state. Managers can see at which part
of the production process losses occur and implement the appropriate changes.
And thanks to the map of the future value stream, you can see the business
process after the implementation of measures to remedy the situation. According
to M. Rother, “mapping allows you to improve the whole process in general,
rather than optimizing individual parts, which allows you to create product value
by coordinating material and information flows”.
•
Material Requirement Planning, MRP – this lean production tool
was developed by Joseph Orlicky in the 1950s in the USA and involves the
formation of orders for resources as needed and in the appropriate volume in
order to fulfill a customer’s order. The MRP tool serves as the informational
incarnation of JIT. And the efficiency of the MRP tool can be achieved by
working together with the TPM and Kanban.
•
Total Production Maintenance, TPM - this tool allows you to
maintain at the proper level the fixed assets of the company and to carry out
customer orders on time with minimal costs, even if it is necessary to carry out
production changeover. The proper implementation of this tool is impossible
without the constant involvement of staff in the process of improving
operational work.
•
Kanban - is an information system that ensures the coherence of the
company's departments in cases of ordering and supplying materials,
components or work in progress. Serves as an indispensable platform for
ensuring the smooth operation of the MRP tool.
•
Total Quality Management, TQM – this is a tool of lean
manufacturing, which provides continuous improvement of the quality of all
business processes and reduction of production costs in the company. G. Laszlo
was the main ideologist of this lean-instrument in the 1960s. It is important to
note that TQM does not add value to the product, which is contrary to the
principles of lean manufacturing. However, this tool ensures customer
satisfaction with product quality and prevents significant company losses in a
future period. It includes five major areas: quality assurance (Quality Assurance,
QA), quality policy (Quality Policy, QP), quality planning (Quality Planning,
QPL), quality improvement (Quality Improvement, QI).
•
Visual Control - the key elements of this Visual Control lean
production tool - poke-yoke, andon and jidoka are used to automatically stop
44
equipment when emergency operations or various kinds of malfunctions occur.
These tools allow you to accurately determine the location of the fault. Jidoka
starts the mechanism into action, and andon displays an informational message.
Poke-yoke is needed to reduce the occurrence of malfunctions in the production
process by installing fixing or warning mechanisms on or near equipment.
•
Standard Work - This tool serves as a logical continuation of visual
control. It allows you to identify, analyze and conceptualize the losses that occur
in the links of the business process. The main goals of the instrument are the
rhythm of production, minimizing the “total costs” and the constant expansion
of the production process.
•
5S is an important tool for lean manufacturing, based on the
following principles: 1) separation of the necessary tools in the work from
unnecessary; 2) the organization of the necessary tools to work in an effective
and convenient way; 3) cleaning your workplace; 4) constant adherence to the
first three principles; 5) their improvement in the production process.
•
Kaizen – this principle of lean manufacturing was developed in
Japan after World War II and implemented by many Japanese companies.
Kaizen is a business philosophy that involves “lossless” production. Product
quality must be integrated the production process, and not controlled at the
output. Customer needs are not constant. They change under the influence of the
external environment, and losses are always associated with the creation of a
high value of the product for the customer. In addition, the company's
employees are its key asset and carriers of values and culture of lean
manufacturing. Therefore, the process of training employees needs the closest
attention, since the process of creating the value of a product is carried out by
the company’s employees.
•
Hansei is the so-called final tool of lean manufacturing, which
penetrates the whole culture, the spirit of the whole company. But this culture
captures not only the operating core (the company itself), but also the objects of
the operating system: suppliers, business partners.
All these tools of lean manufacturing make it possible to identify actions
that really create value to the product, to exclude retroactive actions and, in
addition, to avoid unproductive losses in the future.
A recent study by McKinsey, during which interviews were conducted
with Toyota employees, shows that the company does not consider the tools and
techniques developed by it as the sole basis of its production system. The
company only eliminates specific problems with their help and will use them
until better solutions are found or conditions change. Toyota’s success does not
depend on specific methods, but on the characteristics of the management
culture: focus on the highest quality at reasonable costs and creating mutual trust
between management and employees, direct and visible participation of
managers in solving production problems and staff development, etc. There are
45
no secrets here, but Toyota consistently implements these principles with
inimitable perseverance - and this is how it differs from others.
Summarizing, we can say that in addition to tools and methods, the
concept of lean production has two major components: it is a systematic
approach to ensuring high efficiency (that is, special systems for measuring
efficiency, organizational solutions and training systems) and a culture of
continuous improvement.
Lean companies are also struggling with deviations from the standard,
which manifest themselves in fluctuations in the level of quality and duration of
production processes. To compensate for the negative effects of deviations from
the standard, traditional companies have to produce more than necessary, and
keep a larger volume of stocks of finished products and semi-finished products.
Finally, lean companies are trying to minimize the negative effects of
fluctuations in demand. While traditional enterprises calculate production
capacity based on maximum demand (there is a risk that capacity will stand idle
between demand peaks), leanr companies will initially try to make production
facilities as flexible as possible in order to adapt them to constant changes in
market conditions.
Lean companies carefully select tools based on the specifics of the
problems of production and other components of the business, adapt them to
their needs and train specialists from different departments to use them.
A production system is a complex of business processes embedded in the
process model of a company, its customers, service providers, and resources.
The transformation of the concept of lean manufacturing in BPM is due to the
need to identify a promising target state of the production system, improving the
organizational model for eliminating losses and reflecting the best practices for
improving business processes in Russia and abroad.
The system of efficient production is a set of processes for carrying out
transportation activities and processes that ensure its implementation, without
loss of capacity, speed, carrying capacity, fuel and energy resources, labor costs
and controllability in the interests of the national economy. The system of
efficient production is based on the innovative thinking and proactive outlook of
managers and staff, on the principles of rationality, the corporate culture of
continuous improvement and customer focus.
The similarity of approaches to the use of lean production tools in any
sector of the national economy, including transport systems, is due to the fact
that the production processes of a transport company, which determine the
results and indicators of its activities, are a combination of interrelated methods
and methods of rational combination of labor with the means of production, the
result of which creates value for the client. The value of rail transport processes
lies in the movement of products from the place of production to the place of
consumption in the required time, with which there are significant differences
46
between the production system of the transport company and the organization of
industrial production:
 product of transport is the movement of goods and passengers,
transport does not create and does not change the natural-material form of the
product of its labor;
 transport does not own to the subject of his labor - the cargo which is
transported, it is the property of the senders and recipients of cargo;
 unlike industry, transport products cannot accumulate;
 processes of production and consumption of transport products are not
separated in time and space. Transport products are consumed in the production
process, i.e. in the process of transportation;
 transport reserves can be created only in the form of infrastructure
reserves and carrying capacity;
 the need for transportation can occur everywhere, so that the
manufactured product can be delivered to the place of consumption;
 since the production process is implemented in wide spatial-temporal
coordinates with the participation of many structural divisions, a single
technological process in the transportation of goods is necessary.
Analysis of the best practices of management and organization of
effective domestic and foreign companies has shown the need for a combination
of the production system and the company's business system. A business system,
which is consistently creating added value by increasing efficiency and
controlling costs, allows you to outpace competitors and compensate for market
risks. The unity of the objectives of the production system and business system
with the integration of economic and technological indicators allows
simultaneously with the improvement of production processes (technological
processes) to ensure commercial efficiency of activity.
The main objectives of the creation and development of an effective
production system are the following:
ensuring the financial stability of the company by increasing the
value of products and services to an external client;
reduction of losses and additional expenses of the company;
improving the quality and reliability of processes.
The key principles of an efficient production system of a transport
company are:
• Priority of long-term goals;
• Proper and on-time compliance with the needs of clients (both external
and internal);
• Employees are the main resource of the company, ensuring its long-term
sustainable growth. Personnel training and development is one of the main areas
of operation of the production system;
47
• Development is based on systemic continuous improvements aimed at
achieving the company's strategic goals through inter-functional and large-scale
projects with visible results;
• Guaranteed safety of all processes;
• Innovative assets of infrastructure, digital technologies, logistics, and
mobility should be considered the priority value of an efficient production
system.
The transition to the target state in the field of an efficient production
system of a transport company is carried out by solving a set of tasks both in the
production unit and in other business units of the holding, in the following
priority areas:
optimization of technological processes, ensuring the elimination of
duplicate functions;
changes in regulatory documents regarding extra requirements
(actions, operations) that do not add value to internal and external customers
without affecting the level of security;
application of paperless and innovative digital technologies;
the expansion of polygon replication projects of lean production,
providing a significant increase in the effect;
the formation of multifunctional projects to improve end-to-end
processes;
improving the organizational management model that ensures the
integration of lean production into the Company's main activities, as well as the
integration of the implementation of lean manufacturing projects with the
implementation of programs to increase the efficiency of the activities of
Russian Railways;
developing a culture of continuous improvement.
48
CHAPTER 2. DEVELOPMENT OF THE APROACHES TO
CORPORATE TRANSPORT MANAGEMENT
2.1. BUDGETING IN CORPORATIONS
A budget is a document which helps to forecast the financial results and
financial position of a business for one or more future periods. At a minimum, a
budget contains an estimated income statement that describes anticipated
financial results. A more complex budget also contains an estimated balance
sheet, which includes the entity's anticipated assets, liabilities, and equity
positions at various points in time in the future.
A prime use of the budget is to serve as a performance baseline for the
measurement of actual results.
Targets of budgeting:

Forecasting of financial results;

Setting target of cost-effectiveness and profitability;

Setting limits to the most important expenses;

Proof of the financial effectiveness of a company’s business.
Every large company has been using budgeting for a long time. The
advantages of budgeting include:

Long term planning orientation;

Profitability review;

Performance evaluations;

Сash flowsprediction;

Cash allocation;

Cost reduction analysis.
These advantages give opportunity to use budgeting efficiently enough.
However, there are also some problems, for example:

Inaccuracy;

Rigid decision making;

Labor intensive process;

Cost permit on;

Only consideration of financial outcomes.
The disadvantages noted here are widely prevalent and difficult to
overcome.
There is a typical set of budgets. But any company may develop its own
set of budgets today. For example, Russian railways has a set of 27 budgets.
This set is called the album of budget forms. And now we will consider a set of
budgets, which is common for any company.
The main elements of the budget management system are financial and
organizational structure, budget forms, regulations, budgetary procedures.
49
Financial and organization (corporate) structure of the company or its
subsidiaries and affiliates is a set of structural elements of Responsibility
Centers.
Responsibility Centers (RC) are a part of a company activity, headed by a
manager, who is responsible and motivated for the results of the decisions taken
in the framework of the conferred powers.
Each RC matches one or more elements of the company’s organization
structure.
A Financial Responsibility Center (FRC) is characterized by:
- the company’s scale of activities;
- the structure of revenues and expenditure;
- a system of key performance indicators (KPI);
- the methods of calculating financial results;
- forms of budget planning, monitoring and analysis;
- budgeting procedures.
Responsibility Centers are elements of financial structure. Responsibility
Centers can include income center, cost center, profit center, investment center.
Income center is a responsibility center which manager is responsible for
generating income, but is not liable for the costs.
The main indicator of an Income center’s activity is earned income.
Cost center is a structural unit of the company, which head is responsible
for the fulfilment of the production plan and achievement of the planned level of
production cost.
Profit center is a segment which leader is responsible for both revenue and
costs for his/her department.
The aim of profit center is to maximize profit through the optimal
combination of indicators of inputs, production volume and prices.
Investment centre is a segment of the company which managers do not
only control the costs and revenue of the divisions, but also monitor the
effectiveness of the use of funds invested in them.
In the planning and control, the budget indicators are given in the budget
form. These are tables containing planned or actual values of budget indicators.
The list of budget forms, the structure of indicators and the appearance are
not strictly regulated and are determined by the characteristics of each company
management and change with the company's management requirements .
Budget is a set of interlinking plans that quantitatively describe an entity’s
projected future operations.
It is used as a yardstick to measure actual operating results, for the
allocation of funding, and as a plan for future operations.
The budget allows to analyze income and expenses in various aspects: on
the responsibility centers, activities, budget items, projects and products, etc.
50
Budget regulation is an established procedure for development,
submission, transmission, coordination, consolidation, processing, plan-fact
analysis and evaluation of budget fulfilment of different types and levels.
The main task of budget rules is to ensure control over the course of
fulfilment of various kinds of budgets and levels of management.
The main elements of the Budget regulation are:

budgetary period, which was adopted at the company;

timing and the development order, coordination, reporting,
consolidation and approval of the budgets of different levels;

and budget cycle or a step of financial planning. This is a period
after which reports on the previously developed and approved budgets are
prepared, the plan-fact analysis and a revision (correction) of the budget for the
remainder of the budget period are carried out.
The budgeting provides for the procedures of planning, control, analysis,
regulation.
Budgetary procedure – planning. Budget development by activities and
structural units is based on the principle of counter flow of information between
the Responsibility Centers. That means that budgets are formed "bottom-up" and
coordinated "top-down".
Operating budgets are calculated using a periodically revised norms and
standards (costs, inventories, debts) (Figure 2.1).
Financial budgets are formed on the basis of operating budgets. In the
aggregate the operational and financial budgets make a consolidated budget of
the company, as well as the combined budgets of the intermediate Responsibility
Centers (subsidiaries and affiliates).
Budgetary procedure – control. There are several types of budgetary
control:

preliminary control at the stages of budget formation;

monitoring over the budget period;

control at the end of the budget period.
51
REALIZATION
planning volume index
actual fulfillment volume index
planning qualitatve index
actual fulfillment qualitatve
index
planning expenses on cost
element
forming staff list based
on manning level
actual fulfillment expenses on
cost element
BUDGETS
actual labour productivity
essessment
planned labour productivity
essessment
PLAN
fulfillment staff list
planned actual
index index
REPORT
planned/
actual
analysis
Analysis of the fulfillment of the plan for
operating costs, cost of production in general
and the types of work, of the main production
and economic indicators, staff list and so on
Development of measures to save
operating costs and improve the
efficiency of the branch
Figure 2.1 – The algorithm of the basic economic indicators of "Russian Railways"
Budgetary procedure – analysis. In order to make decisions it is necessary
to analyze the reasons and factors of deviations.
Budget analysis uses data of the management reporting system. The
reports contain comparative data of natural and planned and actual cost
performance indicators of Responsibility Centers, as well as evaluation of the
changes from period to period, values of cumulative total from the beginning of
the year, and other total indicator.
Budgetary procedure – regulation. The regulation is required by two
reasons:
1.
to overcome the differences between planned and actual values of
the budgetary indicators.
2.
to adjust the budget when overcoming the discrepancies between
the actual and planned values is not possible (for example, when during the
52
budget period it becomes clear that it is unreal to execute the budget) or
pointless (if arising circumstances lead to a conscious change in budget
parameters).
In modern conditions it is relevant to use such a tool of economic
management as Activity-Based Management (АВМ).
ABM is a method of identifying and evaluating activities that a business
performs using activity-based costing to carry out a value chain analysis or a
reengineering initiative to improve strategic and operational decisions in an
organization.
Activity-based costing establishes relationships between overhead costs
and activities so that overhead costs can be more precisely allocated to products,
services, or customer segments.
Operational ABM is about doing things right, using ABC information to
improve efficiency. Those activities which add value to the product can be
identified and improved.
Activities that don’t add value are the ones that need to be reduced to cut
costs without reducing product value.
Strategic ABM is about doing the right things, using ABC information to
decide which products to develop and which activities to use.
The activities of any company (business, firm, company), as an open
system, can be represented in the form of a well-known functioning scheme
(Figure 2.2).
In this case, a business process should be understood as the process by
which a stable, purposeful system of interrelated activities, corresponding to the
technological sequence of work, transforms inputs into outputs, representing the
customer value.
The main elements of the ABM system are:

Process owner – the official responsible for the course and the
results of the process;

Process characteristics – indicators by which it is possible to judge
the effectiveness of the process;

The process results consumer;

The input process – the process of objects entering;

The output process – the result, for which the process is performed
(products, information, services);
Operation - some kind of the business process relevant to the technology.
ABM adds up of the achievements of separate business processes and is
focused on the overall result.
Business processes with respect to the main activity of the company are
divided into the operating performance of business and development processes.
The operating performance of business, in its turn, is divided into basic
and auxiliary (subsidiary).
53
Management
Input
Process
Business Process
Output
Process
Responsible Party
/Executor
Figure 2.2 – The ABM scheme of the company
The basic processes contribute mainly to the value creation of the
company.
The beginning and the end of the process are the external customer who is
willing to pay for the results of the process (e.g., production, sales, service and,
etc.).
Auxiliary (subsidiary) processes include those that do not contribute
directly to the value creation of the company.
They accompany the basic processes, and generate data, information or
regular administrative procedures (e.g., providing of material, labour and
financial resources, etc.)
The implementation of the ABM approach requires the following
conditions:

a sufficient level of detail of the production process;

reasonable labour, material, and technical standards;

the ability to handle large volumes of operational information;

determining the level of regulatory costs for each operation of the
production process;

linkage of measures, cost items with the regulations costs.
The implementation of the ABM approach in the budgeting system is
reflected in the regulatory target budget and production costs.
The structure and procedure of formation of these budgets are closely
associated with automated accounting systems, which allow to take into account,
to process and store large amounts of data, for example Automated budget
management system of JSC "Russian Railways" (RZD ASBU).
Budget production (Regulatory target budget, RTB) is a two-level and
three-level budget model production, which take into account the volume
54
indicators for production operations, carried out structural units of the line level
with the consolidation at the regional level and the level of the central branch as
a whole, in coherence between budgetary parameters production budget ASBU
Railways.
Regulatory target budget costs (RTBC) - is the budget costs generated by
cost items and cost components based on volume indicators of production
budget of structural units of the line level, on the basis of standardized working
hours, costs rates of material-technical and energy resources in the context of
production operations.
RTBC is a tool designed to formalize the relationship between:

The parameters of the production and costs budgets;

Production plans (for production operations) and resource costs
standards for production operations;

Planned prices;

Non-standardized direct and indirect costs.
Budget of expenses for items is cost budget, formed in general for a
branch and its structural units by transportation activities types with details on
the articles and items of expenses in accordance with the Classifier of
managerial cost accounting articles of JSC "Russian Railways".
Matrix of interaction of divisions of branches is table form showing the
internal interactions.
The basic foundation for calculation of the regulatory target budgets is the
decomposition of the production process with subsequent calculation of the cost
for each operation.
To systematize the production operations carried out in the railway
transport sphere, for the purpose of regulation of all business processes by type
of activity and the integrated type of work, the company has developed and
implemented the Unified classifier of production operations wich represents
centralized set of production operations.
Nowadays Nomenclature of income and costs approved several hundreds
of item-specific functions (direct production) costs, besides the Unified classifier
of production operations approved in an average from 50 to 100 production
operations for each costs item.
The task of regulatory target budgeting is to achieve high-precision
planning, based on the desire objectivity and obligatoriness to achieve a result
and sufficiency of the resource base.
That task is provided by the integration of the real needs of production
with the regulatory costs.
So, the application of regulatory target costs budget provides linage
indicators of production budget and costs budget, graunds of valuation of
production indicators and formation of units responsibility for non-fulfillment of
relevant parameters.
55
2.2. MANAGEMENT STRATEGY OF CORPORATIONS ON THE BASIS
OF REGULARITIES OF ECONOMIC AND TECHNOLOGICAL
DEVELOPMENT
Modern models of corporate management for modern large corporations
are an element to which it is necessary to pay attention systemically and
attentively. Otherwise corporations can face problems in production activity and
loss of the market positions in the market in the conditions of high market
competition. Modern companies when conducting the business consider all
possible strategies and features of the model of corporate management.
Therefore they have an opportunity to attract additional large investments and to
reach high growth rates. First of all it is reached due to the high level of
administrative decisions. Transition to the new level of economy connected with
new technological ways calls for need in active introduction in modern models
of corporate management of adaptive corporate structures of management of the
companies. It is characteristic first of all of basic and most widespread models of
corporate management in the world, the main three ones being: AngloAmerican, German and Japanese models of corporate management. It is
especially important in the transport sector which is closely connected and
cooperates with all sectors of economy, including what formation of new
technological ways is actively conducted.
Models of corporate management
Models of corporate management perform the main function which
consists in creation of an efficient system which helps the investors to solve
their business tasks and to protect their interests. This model contains a set of
administrative elements. These administrative elements include the boards of
directors, compensation regulation mechanisms, mechanisms of motivation and
punishment of personnel, various administrative techniques. The characteristic
of the model of corporate management which this or that corporation approaches
as much as possible depends on different factors. First of all the model depends
on the structure of corporation, its economic, and market tasks and challengers
the corporation faces.
In Russia modern models of corporate management by corporations have
arisen under the influence of market requirements. Modern corporation is
characterized by a number of legal aspects. Let’s distinguish the following
characteristics of the organization of corporate business:
- Independence of the legal entity;
- Limited liability of investors;
- Possibility of transfer of stock, owned by individual investors;
- The centralized management.
The corporation gives the chance to certain investors to divide risks.
Besides, one legal or physical entity can act as the investor of many
corporations. Thanks to the size large corporations can bear risks inaccessible to
56
a certain investor. The Russian market and the current unstable economic
conditions push Russian corporations to the search of new forms of the
organization of business, with the purpose of providing its stability. International
experience shows that the most effective form are national models of corporate
management. Corporations as a type of the organization of investment activities
develop under the influence of preference processes to large investors.
Responsibility of investors within corporations is limited to the contribution
size, and risks of losses can't exceed the sum of the invested amount. This gives
the chance of dispersal of risks due to investment into several various
corporations. The corporate model promotes dispersion of finance among
investors. It leads to the need of creation of such model of management which
would divide the functions of management with possession.
When the corporation has a large number of owners, it is impossible to
provide an opportunity to each owner to take part in the management of the
corporation. But on the other hand it helps investors to limit their responsibility.
Corporations give the right to operate business to hired managers. Investors give
an opportunity to directors to make business decisions on various activities,
except the most basic strategic decisions.
Modern models of corporate management look as the open system
receiving various resources. These are first of all informational, labor, financial,
technological resources. The corporation transforms the arriving resources
therefore there is additional cost, income, the share of the market grows and the
volumes of realization of goods and services grow.
Classification of models of corporate management
Characteristics distinctive from each other have various national models
of corporate management. We will consider models of corporate management
which exist at the moment and are the most popular. First of all we review three
models of corporate management and they are: Anglo-American model of
corporate management, Japanese model of corporate management and German
model of corporate management.
These models of corporate management have characteristic pronounced
signs:
- The major members and founders;
- Structure of property of stock of corporation;
- Structure of the board of directors;
- Standards of the applied legislation;
- Standards of information openness for the organizations which enter
listing at the financial exchanges;
- There are questions for which it is necessary to receive the consent of
investors;
- There is a system of interaction between the main participants.
Further we will consider these main models of corporate management.
57
The Anglo-American model of corporate management is used in the
United States, New Zealand, England, Australia, Canada. The distinctions which
are caused by national legislations of these countries are inherent in this model
of corporate management. The American model of corporate management has
the following characteristics:
- Interrelation with distinctive signs of joint-stock property;
- Stocks of corporations are used by the population as the instrument of
preservation of finance;
- Corporations issue stocks for the purpose of attraction of the additional
investments contributing to the development of business;
- The institutional and private investors accepting risks with the purpose
of receiving profit based on a difference between sale and purchase value of
stocks act as the main owners of corporations;
- Investments into corporations are possible with confidence in efficiency
of the model of corporate management therefore potential investors carry out the
analysis of the stock market for the purpose of determination of the quality of
models of corporate management;
- High liquidity of the stock market.
The main types of market control consist in acquisitions, merges and
repayment of corporations. It provides effective market control over work of
managers of corporations. Legislative rules and stock exchanges make the
demands for the level of information openness of financial position of
corporations. Managers bear administrative and legal responsibility for violation
of these norms. All participants of the model of corporate management have
duties and in case of their violation investors have an opportunity to block the
decisions made by the managers, to file a suit with the court for compensation of
the caused damage.
At the beginning of the twentieth century the development of large
business groups was characteristic for the USA. The state in response to crisis of
the beginning of the twentieth century carried out a series of tax reforms which
were directed against corporations. Transformations in a banking system, and in
the field of carrying out transactions on securities were carried out in parallel.
The possibility of banking institutions to own more than five percent of shares
of other enterprises was limited. Growth of the importance of institutional
investors in models of corporate management became the result of
transformations. At the same time there was a decrease in influence of private
investors. In the modern world of the American model of corporate management
4/5 of all commercial transactions are made by institutional investors. Thus,
about a half of all stocks are in private ownership. The American pension funds
controlling about 65% of the capital of the enterprises have no representatives in
the boards of directors. According to the legislation of the United States in order
to have tax benefits the pension funds have restrictions on a share of stock
holding.
58
The Anglo-American model of corporate management is characterized by
the system of institutional investors. This system has significant effect on
administrative processes of corporations. In this model of corporate management
by the principal governing body, the annual meeting of shareholders, is held at
which the list of directors is formed and the most important decisions for the
company are made. Considering high extent of stock dispersal in this model of
corporate management a meeting of shareholders is a mere formality, and the
basic control element is the board of directors. The board of directors controls
activity of corporation, reports to owners and the state agencies exercising
control of commercial activity.
In this model of management protection of interests of investors, ensuring
growth of their capital through increase in cost of the company belongs to the
main objectives of the board of directors. Directors in such model bear full
responsibility for quality of management. The number of board members is
defined by administrative need. In each state of the USA the minimum number
of board members is defined by the laws and can be various. The structure of the
board of directors is formed of external and internal members. Internal directors
are a part of corporate management of corporation. Independent (external)
members of the boards of directors have no personal interests in corporation. It
promotes more objective solutions of questions of corporate management at the
level of corporation. For effective management of the company the number of
independent directors has to be more than one, but it is less than a half of the
total number of board members. The exception to this rule can exist for banks
and insurance corporations in which boards of directors, internal and
independent directors bear identical responsibility for results of activity of
corporation.
If the corporation uses model of corporate management with structure of
council with primary representation of internal directors, then the problem
which arises in the questions connected with objective control of their own work
is always shown. Often to resolve this problem, corporations increase the
number of independent board members.
The emphasis in Anglo-American model of corporate management is
placed on responsibility of managers and employees to the board of directors.
The board of directors is completely accountable to council of shareholders. The
efficiency of performance of the controlling functions of the board of directors is
influenced by structure of investors of corporation. If a circle of shareholders is
small, then representatives of shareholders can join the board. At the same time
the most effective and objective controlling systems are developed. When the
number of shareholders is big, the external directors who aren't connected with
management of corporation act as their representatives.
The American model of corporate management is characterized by
existence of permanent various committees in the boards of directors of
corporation. The task of these committees consists in development of
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recommendations about the main decisions made by council. The most often
formed committees in corporate management of this type are: administrative,
financial, auditor, on salary and for public relations.
The United States Securities and Exchange Commission demands
obligatory existence of committees on remunerations and on audit.
Tasks of the board of directors of corporation are also the choice of the
president, vice-president, Chief Executive Officer and other positions. Chief
Executive Officer (CEO) who reports to the board of directors and is
accountable to investors is given large powers.
Main pluses of the American model of corporate management:
- High level of attraction of private accumulation which provides the stock
market;
- Orientation of shareholders on sectors with high profitability;
- The task of corporation consists in ensuring growth of business value;
- Openness of corporations.
Negative sides of the American model of corporate management:
- High cost of the attracted capital (high dividends);
- Activity of the stock market leads to essential distortions of the actual
price of assets;
- Weak differentiation of the administrative and controlling functions;
- The interests of shareholders of corporations are represented most often
by a large number of certain small investors that strengthens the controlling
function of the stock market.
German model of corporate management
To a large extent the German model of corporate management is
presented in the states located in the central part of Europe and Scandinavia. The
German model of corporate management is based on social interactions. All
interested objects, including various public organizations, banks, investors,
owners, employees, various contact audiences participate in the solution of
economic and administrative questions of the corporate enterprises.
Unlike Anglo-American model of corporate management the German
model of corporate management is characterized by the closeness. It occurs
because activity of systems of models of management of the German type is
controlled by banks.
Emergence and development of the German model of corporate
management formed under the influence of:
- High concentration of the capital;
- High level of bank control;
- Low degree of dispersion of stocks of private investors;
- Low liquidity of the stock market;
- Full participation of workers in management of corporation;
- Frequent cases of cross holding of shares.
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It should be noted that compared to the USA the population of the
European states most often sees ways of saving personal financial means in their
placement on bank deposit accounts. In turn banks credit business, take shares
and bonds of liquid corporations, and, therefore, they carry out rigid monitoring
of models of corporate management of corporations whose shares they hold.
Besides, in Germany since 1976 participation of workers in the
management is defined legislatively. According to requirements of the law of
Germany, the staff of corporations elects a third of all representatives in the
board of directors, provided that the number of staff of corporation exceeds five
hundred people. For corporations with a number of workers bigger than two
thousand people, the number of their representatives in the supervisory board or
the board of directors increases to a half of all members. The rest of council is
elected by shareholders. Positive feature of the German model of corporate
management is that it tries to take into account the interests of employees and
effectively motivates them to protect the interests of the corporation. On
condition of wide representation in model of corporate management of labor
collectives the need for involvement of labor unions for the solution of difficult
questions disappears. Therefore labor unions don't take part in management of
the companies.
The majority of German enterprises are included into extensive networks
of cross holding of shares. It means that such corporations act as shareholders
for each other. One of basic elements of such network are banks and insurance
companies. In the course of formation of the German model of corporate
management banking institutions acted as underwriters. Often the situation
occurs when corporations, wishing to receive a financing maximum at the IPO,
invite a bank whose representatives are elected to the supervisory boards or the
boards of directors and subsequently turn out as the largest shareholders. Now
the main objective of the German model of management is establishment of
long-term interactions of corporations and investment structures. Introduction of
the German model of corporate management leads to formation of the systems
of large holdings which are closely connected with each other.
The specific feature of the German model of corporate management
assumes vote by shares which are placed for saving in commercial banks.
Besides, the leading role of banks in a corporate management system is provided
with practice of delegation to banks of the rights by other shareholders on vote
in the supervisory boards and the boards of directors. As a result a large number
of private shareholders gives an assignment to banking institutions to vote
during the annual meetings of shareholders with the shares which are preserved
in banks. Often there are cases when commercial banks carry out crediting on
the security of shares and, respectively, also have an opportunity to participate in
model of corporate management for time when shares are in pledge at bank.
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Under the German laws the two-level model of corporate management has
been created. The supreme body of such structure is an annual meeting of
shareholders. Its competences:
- Choice of structure of the supervisory boards of corporations (boards of
directors);
- Management of profit;
- Appointment of the auditor;
- Editing Charter.
The difference of the board of directors of the German model from the
American consists in a two-level design. At the German model in the board of
directors there is a board and the supervisory board.
The board is defined by the supervisory board. In the work board
members are completely accountable to council. The same person can't be both
in board, and in the supervisory board at the same time. Representatives of
board have no right to be engaged in any commercial activity besides work in
this corporate body. The board usually includes from five to fifteen people
working on the main activities of corporation. The main objective of board
members is the leadership in economic activity of corporation with full personal
responsibility for result.
Control of activity of board and works of all corporation are carried out by
the supervisory board. Except shareholders as it has been stated above, the
serving enterprises, bank representatives, representatives of investment funds,
the insurance and other companies connected with this enterprise take part in it.
The circle of the main objectives of the supervisory board includes
selection of management of the top link and control of his work. Besides,
members of this body carry out elaboration of strategy of corporate
management. Decisions on all questions are made by a majority vote.
The number of members of the supervisory board is defined by the size of
corporation. Minimum number of members of the supervisory board is three
persons. There are corporations from the German model of corporate
management when the supervisory boards include more than twenty members.
Advantages of the German model of management:
- Low price of attraction of the capital;
- Orientation on the solution of long-term tasks;
- High financial stability;
- An accurate distinction between management and control.
Negative sides of the German model of corporate management:
- Insignificant influence of such external factor as stock market;
- High level of concentration of the capital;
- Weak attention to minority shareholders;
- Low degree of transparency that creates obstacles for investments.
The German model of corporate management in the simplified form can
be presented as the closed system around commercial bank. The representation
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in the supervisory boards of other commercial organizations creates conditions
for accounting of interests of all interested parties, and not just owners.
Compared with the American model the German model of corporate
management differs in low focus on the stock markets and growth of stock
value. The German model of corporate management provides independent
control of competitiveness and results of activity. At the moment, the existing
laws of the European Union allow corporations to use in the European market
both single-level American models of corporate management, and two-level
German models of corporate management.
Japanese model of corporate management
Formation of the Japanese model of management of corporations
developed under the influence of the Japanese culture and political and
economic conditions of Japan during the post-war period. It is based on the
principles of interdependence and social unity.
For business of Japan during the pre-war period it was characteristic the
existence of a limited number of industrial and economic conglomerates which
carried the name of zaibatsu (財閥). The term (zaibatsu) appeared in the
nineteenth century and was widely used up to the middle of the twentieth
century. It defined big family clans under which control there were the largest
financial and industrial syndicates. Processes of active demonopolization of the
markets are characteristic of post-war Japanese economy in the conditions of the
American occupation. Corporations carried out exchange of shares with
informal arrangements that these shares of corporations would not be sold.
These obligations were strictly observed and it prevented risks of loss of control
over corporations. These processes led to formation of corporate associations of
new type which were called to keyreets (系列). But all these processes and
transformations didn't concern the bank sphere.
The economic program of development of Japan realized by its
government promoted distribution of financial resources between the largest
banks. Banking institutions bore all risks characteristic of formation of
investment processes. Around large banks conglomerations of industrial,
insurance and trade enterprises were formed. Keyretsu is diversified corporation,
its basis being the principle of mutual holding of shares. The existence of its
own banking system, the universal trading company, rotation of managers in the
corporation and the obligation for mutual deliveries are inherent in it. Such
groups are formed with a backbone kernel in the form of a big bank which is
engaged in financing of participants of the group that interferes with emergence
of hostility and processes of absorption. A role of banks in this model of
corporate management key.
Features of corporate management in the Japanese model:
- Concentration of property at shareholders of the large and average level;
- Cross holding of shares of corporations which make up keyreets;
- The central role of banks in functioning of industrial group;
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- The main task of industrial groups of Japan – sales market expansion.
In Japan in comparison with other developed countries there is lower
liquidity of the stock market. System control of work of corporations is made by
the head bank acting as the shareholder and the most significant creditor. A
certain formality of the boards of directors is characteristic of the Japanese
enterprises. In their structure there are a lot of members, but all of them can be
ranked as internal directors. Under the supervision of the board of directors there
are about four or five levels of management. This high representation on the
boards of directors is caused by tradition according to which top managers of the
companies at retirement are often appointed board members of the enterprise of
the supplier. The number of external directors in the Japanese corporate model is
small. All decisions on management are made on the basis of consensus during
negotiation processes the participants of which are all members of the
corporation. After that the board of directors only formally confirms the
decisions made.
The characteristic features of the Japanese management model of keiretsu
can be attributed to the important role of personal relationships among the
management, which contribute to the application of joint experience and
collective knowledge. Relations between companies are based on partnership
within the group. This excludes the possibility of non-friendly acquisitions.
Thanks to the motivation of the participants of the groups for future cooperation,
one can conclude that the Japanese model of corporate governance is preferable
for long-term development. The Japanese model is characterized by a low
probability of bankruptcy and the emergence of conflicts of interest. This creates
conditions for external and internal stability.
Positive sides of the Japanese model of corporate management:
- The low cost of the attracted capital;
- Long-term orientation;
- Focus of corporations on high competitiveness;
- Financial stability of corporations.
Negative sides of the Japanese model of corporate management:
- Low attention to profitability of investment;
- Full prevalence of bank financing;
- Low openness of corporations;
- Neglect of interests of minority shareholders.
The Japanese model of management of corporations differs in being the
closed system which is based on strict control from the financial organizations.
It gives the chance to solve the management activity control problem
characteristic of the American model.
Features of the model of corporate governance in Russia
The Russian model of corporate management is only at formation stage.
Privatization of the enterprises in the conditions of non existant legislative base
regulating activity of the commercial enterprises and formation of the market in
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the conditions of a certain chaos have served as a push to its development. As a
result of such situation there were constant conflicts of shareholders with
directors. For resolution of these conflicts the outside the law methods and
means were often used. It had created a severe need in the country for the
development of a legal base for settlement of problematic issues in models of
corporate management. “Joint-Stock Companies Act", adopted in 1996 became
the first law among such documents. It didn't give answers for settlement of
many sensitive issues corporate management was facing. Financial crisis of
1998 caused even more aggravated problems for the models of management of
corporations connected with improvement in the country. Owners of many
enterprises began to show active interest in the basic principles of effective
corporate management which would assume protection of the rights of
shareholders, would provide the stable profit of corporations and openness of
their activity.
Since 2000 internal codes of corporate management in most Russian
corporations began to appear in large quantities. In the environment of the crisis
which began in the fall of 2008 the owners of corporations began to depart
actively from administrative processes and began to be guided more often by
strengthening of a role of chairmen in the boards of directors. The discrepancy
of this process was that chairmen of the boards of directors in most cases had no
necessary powers, and the main power remained with the main owners of
corporations. As a result the boards of directors created on the basis of
requirements of the main shareholders couldn't form adequate to situations
strong strategic administrative decisions for realization of specific needs of
corporations.
The economic crisis has shown a nominal essence of the boards of
directors in Russia. Many corporations have as a result come to the need of
revision of their strategic plans of the development. To the forefront there came
the purpose of survival of business in crisis conditions. Prevailing was not the
long-term outlook, but planning for no more than one year. In the conditions of
short-term planning the role of the boards of directors decreased, and
management performed by top managers began to play the leading role in the
model of corporate management. In modern conditions this situation has
remained so far, this being aggravated because of sanctions imposed by the
western countries on Russia and the Russian companies, as well as economic
inadequacy of the Government of the Russian Federation. For the solution of the
questions in the Russian corporate management it is necessary to make decisions
on such questions of corporate management as:
- Resolution of conflicts in combination of administrative functions and a
role of owners in corporation;
- Considerable increase in efficiency of the existing control systems with
top management activity in the background;
- The questions connected with unfair distribution of profit;
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- Questions of the existing information protection in corporations.
All existing problems of corporate management in the Russian
corporations amplify the prospering corruption in higher levels and the corporate
environment, application of unlawful methods of management, an adverse
business situation in the country, frequent changing the rules of the game by the
government.
Essential change of a situation in the Russian corporate management
requires improvement of the main groups in models of corporate management:
- Subjects of internal management;
- The external elements which are directly influencing the decisions made
on the development of corporation.
- The small period of development of the Russian model of management
of corporations will be defined by its main features:
- High concentration of property;
- Low level of differentiation of controlling and functions of the owner;
- Highly closed nature of the Russian companies.
The low degree of openness of Russian corporations is due to the high
likelihood of raider attacks, as well as the strong pressure from the government
structures that takes place in modern Russia. Small and medium enterprises
especially suffer from administrative barriers. As a result, many of them taking
into account the problems in the economy have all chances to cease to exist. At
the same time, the Russian management model has positive aspects:
- Long-term development of the company;
- Predictability of internal and external factors;
- Low risks of bankruptcy;
- Presence of strategic cooperation;
- High efficiency of controlling mechanisms in relation to organization
management.
Such weaknesses as low extent of study of technologies at the start of
innovative projects and products are characteristic of the Russian model of
management of corporations. The negative factors influencing the development
of the Russian administrative model are the lack of interrelation of the applied
methods, some features of the Russian business culture and certain elements in
mentality of people.
The advantage of the Russian model is the advantage of the existing
legislative rules over the recommended standards of corporate management.
It is necessary to promote development of modern Russian model of
corporate management. Only in this case such prospects appear:
- Increase in corporations appeal from the point of view of investments;
- Involving investors in long-term projects;
- Increase in efficiency of economic and marketing activity of
corporation;
- Lower credit terms;
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- Growth of market value of corporation;
- Simplification of access to the capital markets;
- Increase in business reputation of a corporation.
In the following years the introduction and constant use of the major bases
of the model of corporate management of the company can have notable
financial effect. Paramount objectives in the field of improvement of the model
of corporate management for domestic enterprises are:
- Introduction of the best international experience;
- Constant participation in formation and legal standards in the sphere of
protection of the rights of owners;
- Focus on attraction of investments.
Achievement of these similar purposes will be possible when performing
the following:
Development of the effective mechanism of counteraction to unlawful
write-off of paperless securities;
Expansion of publicity;
Development of accurate rules of corporate absorption with the
description of the procedure by correction of purchase order for more than 1/3
common stocks;
Improvement of procedures of establishment and liquidation of legal
entities;
Modernization of technology of the choice of board members;
Application in the field of distribution of the controlling functions of the
principle of variability;
Development of an effective system according to the decision of internal
disputes.
Besides, the most economically developed countries of the Western world
move to the other level of economic and technological development. Their
models of corporate management quickly adapt to transition to new
technological ways. Russian economy and most corporations are adapted for
work in a paradigm of old technological ways and the problems in the Russian
model of corporate management which can aggravate the lag from the most
developed countries in the economic and technological aspect and do not allow
to make a breakthrough in the conditions of the formed new technological ways.
The transport industry in the modern world is at the forefront of scientific
and technological progress. The transport industry introduces many new
engineering technologies and developments as one of the first branches of the
economy. But it takes the best corporate management practices, including those
at the level of strategic management. The transition to other level of economic
and technological development of modern society creates prerequisites to basic
changes in approaches in corporate management by transport corporations.
In the last decades at the strategic level of corporate management by
transport corporations expert systems began to play an important role in making
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strategic decisions along with people in connection with the development of the
computer technology and global networks,
And in recent years developments in self-training expert systems with
elements of artificial intelligence, including the field of corporate management
are actively conducted. Now expert systems help solve problems of definition of
strategic positions of a corporation in the market, purchase of assets for strategic
investments. But the situation in a number of the countries upon transition to
other level of economic and technological development when the paradigm of
the management of corporation, including modern transport corporations
changes is quite real. The management systems of a transport corporation based
on artificial intelligence will play a significant role in the adoption of strategic
management decisions. In the future this will cause changes in corporate
governance models of corporations and in existing national legislation that
regulates corporate governance issues.
Expert systems for corporate governance in transport corporations are the
base platform for future expert systems based on artificial intelligence. The
creation and application in practice of expert systems in the last decades in the
leading countries of the world in various sectors of the economy: politics,
technology, transport, and the military industry has become ubiquitous. The
creation of expert systems based on new approaches, close to the subject of
artificial intelligence, has made this area of scientific knowledge largely closed
to the general scientific community for understandable reasons.
Despite new approaches and technologies in the development and creation
of expert systems for corporate governance in transport corporations, the
principal difficulties in creating them are still:
- Transfer to expert systems of corporate management in transport
corporations of "deep" knowledge of subject domain is a big problem. As a rule,
it is a consequence of complexity of formalization of heuristic knowledge of
experts.
- Expert systems on corporate management in transport corporations are
incapable of providing intelligent explanations of the reasonings as it is done by
the person. As a rule, expert systems only describe the sequence of steps taken
in the course of search of the decision.
- Debugging and testing of any computer program is rather laborconsuming business, but to check expert systems is especially hard.
- Expert systems on corporate management in transport corporations
currently possess a shortcoming: they are incapable of self-training (or are
limited in self-training). To support expert systems in a current state constant
intervention in the knowledge base by engineers on knowledge is necessary.
These difficulties will be eliminated in the future with emergence of selftraining expert systems on corporate management in transport branch on the
basis of artificial intelligence.
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The main advantages of artificial competence which the expert system on
corporate management in transport corporation gives over the person expert are
the following qualities:
1. Constancy. The human competence weakens over time. Having
rummaged in activity of the person expert can seriously affect his professional
qualities.
2. Ease of transfer. Transfer of knowledge from one person to another is a
long and expensive process. Digital data transmission is a simple process of
copying of the program or file of data.
3. Stability and reproducibility of results. Expert systems are steady
against "hindrances". The person easily comes under the influence of external
factors which are not directly connected with the task solved. The expert-person
can make different decisions in identical situations because of emotional factors.
Results of expert system – are stable.
4. Cost. Experts, especially highly skilled, cost a lot. Expert systems, on
the contrary, are rather inexpensive. Their development is expensive, but they
are cheap in operation.
At the moment the development of expert systems on corporate
management in transport corporations doesn't allow to stop using the expertperson completely. Though the expert system copes with the work well,
nevertheless, in certain areas the human competence obviously surpasses
artificial intelligence. However in these cases also the expert system on
corporate management in transport corporation is able to afford not to use the
services of the highly skilled expert, at the same time having left the expert of
average qualification using the expert system for strengthening and expansion of
his professional opportunities. In the process of development of technologies of
artificial intelligence expert systems on corporate management in transport
corporations with elements of artificial intelligence will in the future make
revolution in corporate management in all main models of corporate
management which this article tells us about.
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CHAPTER 3. TRANSPORT MARKETING
3.1. SPECIFIC FEATURES OF THE DEVELOPMENT OF MARKETING
MIX OF TRANSPORT ENTERPRISES
To function in the markets or market segments, the transport company
may use some set of more or less effective tools which, when assembled,
constitute a marketing mix. The marketing mix can be developed for each
segment separately, or it can be the same for the entire transport market. It
includes a set of controllable marketing variables, the combination of which is
used by the transport company to bring about the desired response from the
target market. The marketing mix includes everything a firm can take to
influence the demand for its product. Numerous opportunities can be combined
into four main groups: pricing (tariff) policies, product policies, methods of
transport services distribution and promotion. Now let’s consider their possible
use in the transport market.
Pricing policy is one of the traditional tools for the work in market
segments.
For each selected segment in the marketing mix, an individual tariff
(pricing) policy is chosen. It uses, as a rule, the strategy of cost minimization the desire to reduce costs due to the effect of scale. The implementation of this
strategy is possible only for working in very large market segments, and as a
rule, in several at once. The Russian Railways, due to its scale, can afford to
implement such a strategy (which has been happening for many years).
Considering that the increase in the scale of the transport business is one of the
strategic goals of the company, it is obvious that this strategy will be applied in
the future. It is believed that the implementation of such a strategy causes the
most intense competition, so it is necessary that the strategic advantage in the
form of low cost transportation should be sufficiently stable.
Decisions on the granting of preferential tariffs must be supported by the
Russian Railways only if there are long-term contracts with the shipper that can
guarantee certain traffic volumes along the agreed routes and a stable revenue
base.
When developing a product policy, a transport company can be guided by
one of three product strategies, or it can combine them.
There must be the strategy of improving consumer properties and the
quality of transportation according to those indicators that will be significant for
cargo owners. It is recommended to determine, on the basis of customer surveys,
methods of correlation and evaluation of demand elasticity, priorities in
improving the service quality for various market segments. At the same time,
persistent consumer preferences are formed, which can be quite weakly
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dependent on the price and this fact gives the company considerable competitive
advantages.
Innovation policy involves the acquisition of competitive advantages
through the creation of fundamentally new products or technologies, or the
satisfaction of existing conscious or unconscious needs in a new way.
Organizations that have chosen this strategy seek to create a competitive
advantage by implementing radical innovations in transportation and the
provision of additional services. An organization that has implemented a radical
innovation gets the opportunity to create additional profits due to a jump in sales
profitability or by creating a new segment of consumers. An alternative is the
sale of new technology to other transport organizations.
In addition, the introduction of innovations can be used by transport
companies to reduce operating costs - as an aid to the implementation of a
leadership strategy in reducing costs.
The implementation of this strategy implies fairly large allocations of
money of the company on research and development, which will allow it to lead
in new equipment and technologies and implement an innovative strategy.
The services range expansion. The following tasks are solved at the same
time:
• The increase of a transport company profitability;
• Obtaining strategic advantages in serving the clientele in the transport
market;
• Filling free market segments and meeting hidden demand from cargo
owners, etc.
Obviously, in different segments of the market the range of transportation
services provided will be different, just as the profitability of the segment itself
will be different in terms of both basic and related services. By some estimates
the market for additional services is utilized less than a third at present.
Ultimately, the range of transport services is determined by the demand in
the country's consumer market, the economic situation, the degree of
involvement in the global economy and other factors. Among other things the
range expansion has a positive effect on the overall level of service quality for
transport services consumers.
Distribution methods – are all sorts of activities through which the product
becomes available to target consumers.
Product availability can be considered in three forms: informational,
geographical, and price affordability.
In order to increase the information availability of cargo transportation
services in the framework of the system of corporate transport services, a
network of automated workplaces of agents has been established and it is
operating at Russian Railways. The introduction of an automated system for
receiving ETRAN applications and an automated management system for shiftdaily loading planning (AMS SDP) allows you to approximate the level of
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documents automation (applications, shipping documents, accumulative and
registration cards, statements of supply and cleaning, receipts of various fees,
clearance of wagon sheets for small and container shipments, forwarding
applications, acts, notifications, etc.) to 100%. The detailed plan for loading the
road for the next (planned) day formed by the AMS SDPis one of the main
elements of the interaction between the Territorial Centers of Corporate
Transport Service and transport and stations management. This plan ensures the
timely satisfaction of the applications agreed with the CCTS. The Express-3
ticketing system has been introduced in the passenger complex.
Price affordability. The possibility of applying a flexible tariff policy is
currently limited by public authorities control. As a matter of principle,
incentive discounts can be applied.
Geographic accessibility can be increased both through large-scale
transport projects (construction of pioneer railways, etc.), and through
organizational measures. Any activity can be considered as increasing the
transport accessibility of the cargo owner to the railway infrastructure, as a
result of which new customers gained access to the railway infrastructure, for
example, using vehicles for cargo transportation from the sender’s warehouse to
the railway station, as well as expanding interaction with other modes of
transport in general.
The marketing mix provides for certain methods of sales promotion of
transport services.
Advertising is the most common method of sales promotion, but due to
the uniformity of transportation products of all competitors, branded advertising
should be used. Such kind of advertising promotes a positive image of a specific
transport company as the most reliable carrier that best meets transportation
needs. With the company's advantages in the range of services provided,
commodity advertising informing about the services provided by the company,
which are not available to competitors can be used.
Various marketing activities (tariff policy, convenient transportation
conditions for cargo owners, advertising and public relations) have basically the
same effect: they attract customers and increase the volume of implemented
work and services. Therefore, it is enough to choose one or several (not all) of
the listed areas of work. In addition, the success of the implementation of
measures for stimulation of the transport enterprise services sale depends on the
correct timing of the incentive event. So, if the carriage is seasonal, information
about the new range of services, discounts, etc. should be given to shippers in
the run-up to the next season.
Despite the fact that the traditional marketing approach based on building
a marketing mix is relevant and effective, in order to maintain long-term
business relationships of the transport company with customers it is useful to use
the ideas of relationship marketing. At the same time, the transport company,
having a certain client base, seeks to retain shippers, users and passengers,
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building business relations on the basis of mutually beneficial contracts and
striving to help clients in solving non-standard problems. This approach does not
contradict the idea of building a marketing mix for a number of selected target
segments. It is based on an individual approach in working with every important
client.
The following options are possible for planning strategies for working
with target segments when implementing a marketing mix:
1. Expansion of borders, increase in the company's share in existing
segments and development of new transport market niches due to:
• geographic expansion of the transportation company by participating in
the construction of new roads, railway lines to the places of origin or redemption
of prospective cargo flows;
• interaction with other modes of transport, the development of
multimodal and intermodal transport;
• development of fundamentally new activities, covering the whole
process of cargo delivery with taking full responsibility for its implementation,
for tracking the passage of goods along the entire route of their movement on
different types of transport;
• priority servicing of high-income customers in order to increase the
income of the transport company.
2. Improvement of transport technologies and the quality of transport
services to customers includes the following steps:
• Reduction of the delivery time, the introduction of express trains and
differentiation of their speeds;
• Expansion of the road trailers and rail trailers usage;
• Coverage of the new cargo traffic along the transport corridors system;
• Ensuring the rhythm of the transportation required by the customer;
• Implementation of the “one-stop shop” principle;
• Access to the infrastructure of the independent carriers at a convenient
time, etc.
3. Creation of a unified logistic chain of the material flows movement in
the regions, in the country and in the international traffic by:
• mutually beneficial cooperation with the main cargo-forming enterprises
of the region;
• development of logistic maps (schemes) of the optimal cargo traffic for
individual products and market segments in order to reduce transport costs in the
final price of these products;
• finding reserves for reducing the expenses of a transport enterprise
(various options for discounts and benefits on taxes and the prices for the
products it consumes) in order to subsequently provide discounts to tariffs;
• support for freight-generating enterprises of the regions experiencing
temporary economic difficulties in retaining freight traffic;
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• reaching mutually beneficial agreements (tariff agreements) with all
participants in the logistics chain in order to minimize the costs of the client and
its member enterprises;
• implementing a strategy of cooperation with foreign transport
enterprises (for example, with CIS railways) for reorienting export-import goods
to Russian railways.
For an informed choice of a strategy for working in a market a transport
company should assess its competitive position relative to its leading
competitors on the basis of market analysis. It makes sense to separately assess
the competitiveness of the transport enterprise in relation to the most powerful
domestic and foreign competing enterprises in other types of transport and in
relation to other carriers (enterprises) in their mode of transport. There are
frequent situations in railway transport where, depending on the situation, an
independent carrier or operator can be considered as a competitor or as a partner
(for example, passing private passenger trains in conditions when Russian
Railways cannot fully meet the demand in a particular direction is considered a
partnership, and in the conditions of the struggle to attract passengers with low
demand for transportation it can be seen as a competition). In any case, it is
necessary to carry out a comparative analysis of such carriers in order to identify
in time the danger of losing competitive advantages, as well as ways to improve
them. In this connection, a qualitative or scoring assessment of the enterprise’s
competitiveness can be carried out. In the latter case, it is necessary to
implement the weights of each factor of the competitiveness significance on the
basis of the expert assessment of the enterprise specialists.
Based on the chosen strategic direction for each customer segment
(shippers, independent carriers, operators, passengers), they separately develop a
set of marketing activities for its service, which provides guidelines and
principal approaches to working with the segment. The marketing mix includes
a detailed description of the distinctive features of a service or a complex of
works and services offered by a transport enterprise to this segment. For
example, for the segment of carriers in containers of large quantities of goods
for export by rail, the range of services may include (aside from rhythmic,
timely delivery of serviceable platforms for loading) also intermediary services
in negotiating with the port administration about the acceptable cost of cargo
handling in the port, with shipping company it may include the talks on the
supply of ships at the appropriate time for transshipment of containers to them in
order to reduce the time for their processing, talks on the cost of freight, the
introduction of through tariff rates, etc. In addition, the marketers of railways
can, if desired by shippers, provide consulting services on the most profitable
transportation routes, information on world prices for products and services, etc.
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3.2. CONSUMER BEHAVIOR PATTERNS IN CARGO RAIL
TRANSPORTATION MARKET
The theory of consumer behavior study is largely based on the concept of
“homo economicus” characterized by the following features:
- rational decision-making driven by goal-setting, comparison of
alternatives and choice of the most effective consumption option;
- possession of all complete information about the market and the product;
- desire to maximize the benefits.
These characteristics are obvious to be ideal for individual consumption
and rarely occur in the real world. Actually, an individual customer often makes
purchases guided by emotional, rather rational motives. He/she does not possess
expertise in all areas where he/she has to make purchases and does not have full
information about all purchased goods (including special technical info).
Therefore, even if an individual customer is really eager to maximize the
benefits of consumption, this goal is not always achieved in practice.
As for a corporate customer in a particular, including transportation,
market, it operates exceptionally rationally, possesses the most complete, maybe
even all, information (its own reporting, official statistics or special-order
analytical studies) and obtains a sufficient expertise level to correctly interpret
information received, in order to evaluate technical performance of new
products or effectiveness of transportation methods.
This results in rational customer behavior that maximizes the benefits; it is
attributed to an individual customer, but actually inherent to corporate
customers.
Thus, corporate consumption, as a purely rational one, is more susceptible
to analysis and forecasting than individual consumption.
Let us consider the customer behavior patterns in the cargo rail
transportation market from the perspective of the transport industry fundamental
features that we defined earlier.
1. The monopoly of rail transport in a number of areas (lack of a duplicate
infrastructure for other transportation modes) limits the freedom of consumer
choice and makes customers less sensitive to standard market incentives, such as
transportation price and quality. At the same time, greater competition between
operators partly mitigates this scenario, allowing the cargo owner to rationally
choose the operator that delivers its goods in the most efficient way.
2. The transportation market is a service market as its products are
immaterial. This makes it difficult to assess the consumptive properties of
products in this market and thus raises additional difficulties in assessing the
correlation between transport service quality and consumer demand. In this
work, we made an attempt to analyze this correlation.
3. Rail transport affects all productive industries, products of which it
carries. Transported goods significantly differ in terms of their characteristics
75
and properties, requiring various conditions of transportation. Thus,
transportation companies have to deeply segment this market and tailor specific
marketing mixes for each sector.
The fact that any consumable goods are transported and many of them are
transported several times (at all stages of processing) significantly bolsters the
role of rational consumer behavior as compared to individual consumption (a
person who bought a wrong hat did not lose much, relatively speaking, and on a
one-time basis; a consumer transporting their goods in an inefficient way loses a
lot and on a regular basis).
4. Due to the non-recurring nature of transportation service rendering and
consumption, it is impossible to detect poor-quality products before they reach
the consumer. In other words, the customer receives a transportation service of
its actual quality. In case the transportation is substandard, it causes such a loss
as if the customer has used defective goods for the whole period of their service.
This factor significantly aggravates the interaction between the manufacturer
and the consumer of transportation products and requires transportation
companies should pay maximum attention to the quality of transportation
services.
5. The transportation market rigidity determines the sluggish response of
customers to changes in consumer incentives (prices and quality, first and
foremost) made by the transportation company. This situation is associated with
significant costs connected with changes made by cargo owners to logistics
chains. Obviously, switching to a different transportation mode (that ensures
higher service quality) requires the benefits of quality enhancement should be
significantly higher than the costs of logistics change and the risks of such a
measure.
6. If the state regulation of the rail transport operation is preserved, it
complicates the interaction between the manufacturer and the consumer, thus
hampering the logic for market behavior and the client’s reactions to consumer
incentives. This market, in fact, has only two such incentives: price and quality
of transportation.
Customer Types in Transportation Market
The need to study customer behavior and its determinant factors in respect
to the transportation market is driven by the enhanced competition in the field of
cargo and passenger transportation, as well as an increased customer focus from
transport operators. From the perspective of customer behavior study, the
transportation market can be represented as the following extended scheme
(Table 3.1).
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Table 3.1 – Transport Market Structure by Types of Competition and Consumption
Competition Cross-branch
Inter-branch in rail transport
Consumption
Individual
Organizational
Passenger transportation on Passenger
transportation
parallel routes
carried out by various rail
companies
1. Cargo transportation on Renting our rail cars for
parallel routes
transportation by operators
2. Passenger business trips
Table 3.1 applies the following concepts:
Cross-branch competition means competition between transportation
modes that have parallel (geographically interchangeable) traffic routes.
Inter-branch competition means competition between organizations of the
same transportation mode (as for rail transport, operators competition in freight
traffic and carriers competition in passenger traffic on the infrastructure
belonging to Russian Railways, OJSC and other owners).
Individual (non-productive) consumption means the use or final
consumption of goods and services by people to meet their life needs. In the
process of non-productive consumption, consumer items disappear immediately
or gradually. Non-productive consumption falls into personal (population needs)
and public consumption (satisfaction of common needs). Personal consumption
meets the needs of people in food, clothing, housing, education, health, etc.
Common needs concern management, science, defense, etc.
Corporate (production) consumption means the use of resources, tools,
raw materials, supplies, energy, information, labor, etc. during the production of
new products.
Let us consider the list of consumers in the passenger transportation
market.
1. Individual consumption. Consumers are passengers who travel for
personal purposes at their own expense (for example, to their places of work
(study) or recreation).
2. Corporate consumption. Consumers are the passengers who travel for
business purposes (business trips) at the expense of entities which sent them.
Only corporate consumption takes place in the cargo transportation
market. There are exceptions to this rule (transportation of personal belongings
when moving to a new place of residence, transportation of individuals’ cars)
with no significant impact on the market type.
77
Forwarder
Cargo owner
Russian Railways
OJSC
Manufacturers of
rail transport
technical means
Operator
Figure 3.1 – Consumers in the Cargo Rail Transportation Market (Arrows Point from
the Manufacturer to the Consumer)
Consumers in the cargo rail transportation market are shown in Figure 3.1.
Rail rolling stock operator means a legal entity or an individual
entrepreneur who has ownership or other rights in rail wagons and containers
and participates in the transportation process using these rail cars and containers
pursuant to a contract with the carrier.
Public rail transport infrastructure owner means a legal entity or an
individual entrepreneur who has ownership or other rights in the infrastructure
and provides services in its use pursuant to relevant licenses and agreements.
Carrier means a legal entity or an individual entrepreneur who has
assumed the obligation, pursuant to the contract of transportation by public
railway transport, to deliver the passenger or deliver cargo, luggage or cargoluggage entrusted to it by the sender from the point of departure to the point of
destination, as well as to issue cargo, luggage or cargo-luggage to the person
authorized to receive it (the recipient).
The functions of the carrier in cargo traffic and the infrastructure owner
are carried out by Russian Railways, OJSC.
Forwarder means an entity (or an individual entrepreneur) performing
support works (services) at rail transportations: cargo handling in public places,
cargo weighing, servicing passengers at stations and along the way, as well as
other works (services) related to the organization and implementation of
passengers, cargo, luggage and cargo-luggage rail transportation.
The end user in this market are cargo owners who consume services from
the rail stock operator, forwarder and Russian Railways, OJSC (the
infrastructure owner and the carrier) to deliver their goods to customers and
receive raw materials needed to produce their own products.
In this case, the forwarder (if it participates in the transportation) and the
operator also act as consumers as related to Russian Railways, OJSC. In their
turn, the listed organizations rendering transportation services to cargo owners
act as consumers of transport equipment (cars, locomotives, handling devices,
etc.).
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It is important to note that there is corporate consumption for all existing
types of the producer-consumer interaction in this market5.
Cargo owner is a private individual or legal entity who needs
transportation services to carry its cargo along a certain route, for a certain
payment and with the guaranteed quality.
Cargo owners as the main corporate consumers of transport services fall
into the following two categories:
Cargo shipper (sender) means a private individual or legal entity who,
pursuant to the carriage contract, acts in its own behalf or on behalf of the owner
of cargo, luggage, cargo-luggage or an empty freight car and is specified in the
transportation document.
Cargo recipient (receiver) means a private individual or legal entity
entitled to receive the cargo, luggage, cargo-luggage or an empty freight car.
As for the passenger transportation market, the following consumer types
are currently represented here:
Passenger means a private individual who has concluded a passenger
carriage contract; a person who is not a member of the crew and who is
transported by the vehicle pursuant to the evident or tacit carriage contract by
any transportation mode.
Apart from the passenger or the end user of passenger transport services,
there are several transport market players, whose purpose is to provide services
that are necessary for the transportation process. These players are called
intermediaries and are engaged in, inter alia, the organization of passenger
service at railway stations, informing about next arrivals and departures of
trains, sale and registration of travel documents (tickets), guard and security
services, etc.
To ensure the transportation process is implemented, passenger, as well as
cargo, transportation companies have to use the infrastructure and rolling stock
services. In this case, they become corporate consumers of the above-mentioned
services.
Carrier company as a corporate consumer of infrastructure services means
a legal entity or an individual entrepreneur that is engaged in passenger
transportation and uses the infrastructure services provided by the rail transport
owner pursuant to the agreement concluded between them.
Carrier company as a corporate consumer of rolling stock services means
a legal entity or an individual entrepreneur that is engaged in passenger
transportation and uses the rolling stock services provided by the rail rolling
stock operator pursuant to the agreement concluded between them.
Sokolov Yu.I., Lavrov I.M. Consumer Behavior in the Transport Market: Textbook. – M.: Federal
State Budgetary Educational Institution of Higher Professional Education "Educational-methodical
center for education in railway transport", 2018. – 222 p.
5
79
In particular, Russian Railways, OJSC is also a corporate consumer of
technical means used to construct infrastructure facilities and to produce new
rolling stock, inter alia, for carrying out repair works.
Currently, the Federal Passenger Company (FPC), being Russian
Railways, OJSC’s subsidiary, is engaged in the provision of services in order to
carry passengers and cargo-luggage by rail along long-distance routes.
Suburban passenger transportation is currently carried out by Russian
Railways, OJSC’s subsidiaries and associates, suburban passenger companies
(SPC). At the moment, Central PPK OJSC is the largest suburban passenger
company serving passengers along all the Moscow railway directions. Currently,
25 suburban passenger companies operate in Russia. Moreover, first private
suburban companies are being formed (Perm Express, LLC). The organization
of scheduled passenger transportation to airports forms a sub-segment of
suburban transportation served by Aeroexpress, LLC.
Factors of Customer Behavior in the Transportation Market
1.
Competition Level
Currently, competition plays a fundamental role in the economy of any
country. The modern market economy is a complex system embracing a vast
number of industrial, commercial, financial and information entities interacting
within the extensive system of business legal rules and united by the concept of
market.
Transport is an active and indispensable participant of production and
social processes and the most important production infrastructure of the
economy. However, transport performs certain production and marketing
functions, creating and selling its own products, i. e. cargo and passenger
transportation, in the market. Therefore, the transport market can be defined as
an assembly of transport and non-transport entities (enterprises) and individuals
who interact with each other to sell and buy transport products (services).
Market relations characterize a special type of the national economy
organization, where there are no intermediate managing, planning or other
administrative agencies between the producer and the consumer that regulate
their activities. Competition (lat. concureere – to encounter, to compete) is the
key concept that sums up the essence of market relations.
Competition in transport is a process of competing or rivalry between
transportation companies and entities for traffic volume based on comparing
distinctive characteristics of transportation services in terms of volume, quality
and cost of clients’ transportation by one or several transportation modes of
transport and routes. Competition is really effective to promote personal
engagement, entrepreneurial spirit and productive social labor. The threat of
huge losses forces an entrepreneur to “achieve the impossible” and adjust its
costs to low market prices. In such a way, it is the market price competition that
forces an entrepreneur to turn to its hidden reserves.
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Competitive behavior among market participants falls into the following
several types:
- Creative (productive): the behavior aimed at creating prerequisites that
ensure superiority over rivals;
- Adaptive: the behavior taking into account innovative production
changes (copying) and proactive actions of rivals; and
- Sustaining (securing): behavior aimed at maintaining of achieved
positions.
Competition is one of the most important ways to improve the efficiency
both of the entire economic system and all its parts. Like any other phenomenon,
it has its positive and negative aspects.
Positive aspects of competition:
1.
Competition prompts the constant looking for and making the
advantage of new production opportunities;
2.
Competition requires improvement of equipment and technology;
3.
Competition facilitates improvement of product quality;
4.
Competition ensures lower costs (and prices);
5.
Competition requires products suppliers (sellers) should lower the
prices for products offered;
6.
Competition focuses on the high-demand product range;
7.
Competition improves product quality (the customer is always
right);
8.
Competition introduces new management forms.
Negative aspects of competition:
1.
There is a ruthless and brutal attitude towards the weak under
competition;
2.
Numerous “victims” in the form of bankruptcies and
unemployment.
Product competitive ability is influenced by the following factors:
a) Its production:
- Labor productivity;
- Tax rate;
- Introduction of scientific and technical advancements;
- Profit margin of an enterprise;
- Amount of labor compensation.
b) Its consumption:
- Product selling price;
- Quality;
- Novelty;
- After-sales service;
- Pre-sale training level.
According to its market characteristics, the transport market is mainly
oligopolistic, representing large multi-purpose transport companies that provide
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services for cargo and passengers carriage (except pipeline). These companies
fall into the category of the public transport, i. e. that which has no right to deny
service to clients if the known conditions are met. However, some country
regions are dominated by a natural monopoly of one transportation mode (for
example, rail in the Eastern regions or sea transportation for mass
intercontinental carriages). In large metropolitan areas and regions with welldeveloped transport infrastructure there appears monopolistic and pure or
perfect competition.
Natural, climatic, socio-economic, and other factors also greatly influence
transport development and location. The persistent road problem is still topical
in Russia. The length, density, networks, and transport provision for Russian
customers do not meet optimal needs and are significantly lower than in other
countries.
To determine the competition level in the transport sector, it is necessary
to consider the technical and economic features, technology specifics and
operating conditions of different transportation modes within the country.
In this regard, it should be noted that rail transport is far from holding a
monopolistic position in terms of the volume of cargo carried, with about only
40 % of the respective sector. These transfers are usually primary and direct
from the supplier to the consumer, i.e. mostly non-repeated, while road transport
performs almost more than 70 % of the carriage volume with a repeat factor of
more than 4. In some economy sectors, road transport is almost irreplaceable
(ore quarries and coal mines, agriculture, construction, trade, etc.). Here, pure
and monopolistic competition is quite real. The same can be said about urban
passenger transportation, where the share of bus service is 60 %. In recent years,
the number of private cars owned by individuals (about 156 cars per 1,000 city
dwellers in 2005 as compared to 52 in 1985) has been growing in Russia, which
creates competitive conditions both for urban and intercity passenger traffic.
The level and types of competition in the transport market largely depend
on the technical and economic peculiarities of the transportation modes. Rail
transport is indispensable from the track and has limited maneuverability due to
the high infrastructure capital intensity and centralized traffic management
efficiency (as well as in terms of traffic safety). It is technically, technologically
and economically designed for the mass movement of goods and people over
long distances (the average range of cargo delivery is more than 1,550 km; the
average passenger transportation distance along long routes is 780 km).
Road transport is highly maneuverable, very accessible on almost any
surface and provides door to door delivery. However, due to its relatively low
productivity and poor environmental performance as compared to other
transportation modes, its effective scope is mostly limited with short and in
some cases medium distances. The average distance of cargo transportation by
road is 24–26 km. However, it should be taken into consideration that almost
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70 per cent of the roads are parallel to rail line. Therefore, road transport is one
of the main competitors to railways at distances up to 500 km or more.
The scope of river and sea transport is limited to natural waterways in
coastal areas of rivers and seas or artificial canals and ports. Here, medium- and
long-distance mass transportation is the most effective.
Air transport is efficient mainly for passenger transportation and urgent
cargo deliveries, while it is technically limited by the availability of airfield
facilities. Mass cargo transportation is impossible due to high costs.
Pipeline transport specializes in transfer of liquid and gaseous products,
i. e. it is preliminary limited in its scope of application and is essentially a
natural monopoly on the transportation of crude oil, gas and petroleum products.
Despite their high initial capital costs for construction, high productivity of
pipelines ensures their undoubted advantages over other transportation modes
due to low tariffs and prime cost of oil, petroleum products and natural gas
transportation.
Thus, as can be seen, each transportation mode occupies a certain segment
(area) in the transportation market depending on its technical and economic
features and weakly or in some cases not competing with each other (except for
road transportation). However, oligopolistic, monopolistic and even pure
internal competition is possible within every transportation mode segment.
Railway transport is a certain exception, since it is not always economically
feasible to build parallel railways of different owners. At the same time, rail
transport often operates in the oligopolistic transportation market, competing
with other transportation modes. However, the competition level in Russia’s
regions is different: it is higher and wider in the European part and relatively
small and narrow, with some monopoly elements of any transportation mode, in
the Asian part (railways – in the South, river and sea transportation – in the
North, during the navigation period).
Depending on who dominates the market, we can distinguish the seller’s
market and the buyer’s market. The seller’s market is a market where sellers
have more powers and where buyers have to be the most active market players.
A shortage of products (demand exceeds supply), insufficient quality and
unprofitable prices (as perceived by consumers) are intrinsic to this type of
market. If there are few sellers and they are not eager to transfer their assets,
while buyers are numerous and tend to quickly comply with their wishes, prices
are likely to increase and seller will enjoy more favorable sales conditions.
The buyer’s market, on the contrary, is characterized by a stronger
position of buyers as compared to sellers. Under these conditions, the seller is a
more active player in the market; as a rule, there is an excess of products (supply
exceeds demand) and their quality and prices are satisfactory (as perceived by
consumers). It is a saturated market (when sellers’ supply exceeds buyers’
demand (the buyer’s market) that is the basic condition for marketing concept
application and ensuring its effectiveness.
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Currently, the buyer’s market dominating most countries requires the
seller (manufacturer) should be more active in studying the behavior,
preferences, opinions and wishes of consumers (buyers).
2. Transportation Cost
While explaining the importance of prices in a market economy based on
marketing principles, UNCTAD experts (UN Conference on Trade and
Development) point out the following:
1.
Prices serve as a means of establishing relations between the
company and buyers of its goods and help to create a certain image of it, which
may affect its subsequent development.
2.
Prices determine the company’s profit margin and earning power
and hence its viability.
3.
Prices have really significant impact on the company’s revenues
from the sale of products, so they can determine its production structure and
routine working methods, including the adoption of operational cost saving
measures.
4.
Prices are an essential element to determine the company’s
financial stability and its ability to take financial risks.
5.
Prices are the company’s strongest weapon against competitors in
the market.
6.
Prices for the products of a number of sectors, such as oil, gas and
coal industries, electric power and ferrous metallurgy (freight tariffs can be
rightly attributed to this group), are basic and have an impact on the state of an
individual company, as well as national and even global economies.
The transportation price is the most transparent incentive as it is quite
easy to calculate the impact of any reduction in the transportation price on the
efficiency of cargo owners. Railway pricing is still subject to governmental
regulation, however the volume of the regulated segment is gradually
decreasing: with the car compound of the tariff having been deregulated,
Russian Railways, OJSC has got the right to apply a tariff corridor for its
services. However, the continued regulation reduces the effectiveness of the
price policy as a tool to stimulate transport demand.
In the cargo transportation market, the positive reaction of the cargo
owner to the transportation price reduction is determined solely by the effect
obtained. For price stimulation, the effect scale can be determined by the
following formula:
EP  R   CPR  PT1  PT0   CI ,
(3.1)
where R – is the revenue from the sale of the product batch, RUB;
CPR – is the cost of production of the product batch, RUB;
PT1 , PT0 – is the transportation price of the cargo parcel after and before the
reduction respectively, RUB;
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CI – is the cost incurred by the cargo owner to change the supply chain,
RUB.
A transport company that uses consumer incentives must first calculate
the effect the consumer receives. This will enhance the validity and
effectiveness of measures to influence consumer behavior.
As you know, demand analysis is one of the initial stages in the marketing
pricing process. As a rule, demand determines the maximum price level.
However, the demand itself depends on the price to a certain extent. Therefore,
to carry out a right price policy, it is necessary to be aware not only of the
demand profile for a particular product or service at a certain point in time and
at current prices, but also of the degree of demand variation if the price
decreases or increases.
With this purpose, we analyze the price demand elasticity (PDE), or the
percentage change of the demand when the product price changes by 1 %. This
value is used to measure the demand sensitiveness to product price movements,
provided that the remaining factors influencing the demand do not change.
PDE can be presented in the following form:
PDE 
V / V1
,
P / P1
(3.2)
where V1 – is the demand value (sales volume) prior to the price change,
pcs;
V – is an increase or decrease in demand (sales volume) after the price
change, pcs;
P1 – is the product price prior to its change, RUB;
P – is a decrease or increase in the price, RUB.
If there is a non-linear dependence of demand on price, which is often the
case when the consequences of a significant price change are considered, the
arithmetic mean values of two prices and two amounts characterizing the
demand are accepted and the PDE formula takes the following form:
PDE 
V2  V1  P1  P2 
 P2  P1 V1  V2  ,
(3.3)
where V1 and V2 – is the demand value before and after the price change,
pcs;
P1 and P2 – is the price before and after the change, RUB.
PDE is expressed as a negative number, since under the law of demand a
price movement causes the opposite change in the demand volume. For
example, if the product price increases by 1 %, it results in a 0.5 % reduction in
the annual sales of the product; PDE equals 0.5/1 = -0.5.
If the denominator of the equation above is positive, the numerator will
have a negative value, and vice versa. The ratio of the two percent changes will
always be negative as the numerator and denominator have different signs.
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The PDE denominator can reduce from zero as inf. The higher is the
absolute value of PDE, the greater is the demand price elasticity. For example,
demand is more elastic at PDE = -5, rather at PDE = -1 as the absolute value 5 is
greater than the absolute value 1.
Demand is considered to be elastic if the absolute value of PDE is from 1
ad inf. Demand is called inelastic if the absolute value of DPE changes from 0 to
1. If PDE is zero, the demand is said to be completely inelastic. Demand is
considered to be absolutely elastic if the absolute value of PDE equals infinity.
The PDE change areas are shown in Table 3.2.
Table 3.2 – Price Elasticity Change Range
Relative sensitivity of demand to
Numeric
Absolute
price
value
value
(change direction
PDE
PDE
excluded)
-1 < PDE < 0
0 < PDE < 1
% change V < % change P
PDE = -1
PDE = 1
% change V = % change P
-<PDE <-1
1 < PDE <
% change V > % change P
Demand
Inelastic
With unit
elasticity
Elastic
The less elastic is the demand, the higher is the price that can be set by the
product seller, if, for sure, there are no price restrictions for any other reasons
(first of all, many states legislate the price limits for products and services from
monopolists). At the same time, the seller has no conditions to influence demand
through price movements. When demand is inelastic, the price decline causes
such a small increase in sales than the total revenue may decrease. The more
elastic is the demand, the more opportunities the seller has to make advantage of
its pricing policy in order to increase sales.
To use the data on demand elasticity in pricing, foreign economists
recommend the following formula:
P
CMG
,
1  (1/ PDE )
(3.4)
where CMG – is marginal costs, RUB.
For example, if the marginal cost is $ 5 per product unit and the elasticity
is −2, then the price benchmark might be as follows: 5/(1 − 0.5) = $ 10
The PDE value can significantly vary by product type and by the same
product on different market segments. For example, according to data available
on the European market, PDE for cars ranges from −1 to −2.2.
Elasticity estimation plays an important role in deciding whether to use
price instruments to stimulate demand. However, the identification of demand
elasticity is a challenging task. It requires long-term monitoring of buyers’
86
reaction to price movements. A number of economists allow for determination
of indicative elasticity through buyers’ surveys.
It should be taken into account that elasticity is usually greater over an
extended period, when demand has already adjusted to a higher price, as
compared to short time periods.
Corporization of railways and increased competition for transportation
services require a broad application of the elasticity accounting principles in
tariff setting in order to conduct a flexible tariff policy in the transport field.
However, it should be taken into account that elasticity varies by transportation
type (freight and passenger), route types (far-distance and suburban, direct and
local), cargo types and country’s regions.
3. Transport Service Quality
The quality of transport services is another incentive to customers.
Transport service quality is a set of transport service characteristics which
determine its ability to meet consumers’ needs by proper and effective
performance of transport and related services, as well as to meet the specified
standards and regulations, contract terms or usual requirements for transport
service.
The stimulating function of quality is indisputable, but less obvious as
compared to price, because it is more difficult to calculate the effect of quality
improvement for the cargo owner. However, quality is the main factor to
influence on consumers in modern world. Our analysis of demand elasticity on
price and quality of transportation demonstrated that the price elasticity equals
0.53, while non-price elasticity (quality-based) is 1.0, i. e., quality improvement
results in a twofold increase of transportation compared to the similar tariff
reduction.
The quality of transport services is one of the key factors that determines
the cargo owner’s choice of the carrier in a competitive market. At the same
time, different customers require different levels of quality, focusing on their
financial position, type and price of products transported, etc. Thus, the client
who makes cars for transportation will make some quality requirements, and the
client who makes crushed stone – others. The ideal balance in the transport
market will be achieved only if the supply and demand levels coincide, as well
as their structure in terms of the quality of services provided.
The quality indicator system for transport services includes the following
parameters:
- Speed or time of delivery (SD);
- Safety of transported cargo (SC);
- Complete satisfaction of transportation demand (DS);
- Regularity or frequency of cargo delivery (CR);
- Complex transport services (CS);
- Transport provision over the area (TP);
- Transport accessibility for customers (TA);
87
- Transportation safety (TS);
- Environmentally friendly transport (EF).
This indicator system is based on the marketing principles according to
which the product manufacturer aims to serve interests of its consumers (and
benefits from it itself) and also focuses on final, rather than intermediate, result
of production and sales activity, i. e. on gaining profit from production of highquality goods and services that comply with consumers’ requests, rather than
saving resources on product quality.
In general, the economic theory of transport service quality is based on the
following main provisions:
1. The relative nature of quality indicators determined by the ratio of
actual and standard values of the indicator. This makes it possible to ensure
comparability of the calculation results generated for different transportation
modes, transport companies, transportation options, etc.
2. The need to combine natural and monetary quality evaluation, i. e. to
determine the level of quality, costs and results associated with its achievement.
At the same time, it is unacceptable to include transportation price into the list of
quality indicators, since price and quality are equal factors of transport products
competitive ability.
3. Focusing the quality management system of transport servicing on
consumers’ interests, provided transportation process technology is respected.
4. Focusing the quality management system on the final, rather than
intermediate, result.
5. The need to evaluate the effectiveness of quality management taking
into account non-transportation costs and results.
Traditionally, the efficiency of quality improvement was evaluated
through cost reduction of transport entities. However, such an approach is not
objective enough, although based on reported data, especially under market
conditions, as it does not include revenue and, therefore, consumers’ reaction to
changes. This is due to the fact that demand growth forecasting in case quality is
improved is somewhat challenging.
Similarly, it is also possible to determine the transportation demand
elasticity depending on transport service quality by replacing price indicators for
transport quality indicators in the formula. For railways, the formula of demand
elasticity takes the following form if a particular indicator of transport service
quality is improved.
V Q
QDE 
 ,
(3.5)
Q V
where V – is the demand value (sales volume) prior to the quality change,
pcs;
Q – is the initial level of transport service quality indicator, %;
V – is an increase or decrease in demand (sales volume) after the
quality change, pcs;
88
Q – is an increase or decrease of the transport service quality indicator,
%.
The absolute elasticity value can be measured from zero ad inf:
1  QDE   – demand is elastic when influenced by changes in transport
service quality;
0  QDE  1 – demand is inelastic when influenced by changes in transport
service quality;
QDE  1 – demand with a 1-point elasticity and when influenced by
changes in transport service quality adapts in proportion to it.
The basic formula for demand elasticity on quality may look as follows:
V
QDE 
,
(3.6)
QCOM
where V – is demand (sales volume) change, %;
QCOM – is the change of the comprehensive indicator of the transport
entity operation quality, %.
The assessment of the comprehensive indicator ( QCOM ) of the transport
entity operation is the only challenging task. Being a tool to assess the
implementation of work conditions previously specified with the client (delivery
time, cargo safety, etc.), a comprehensive quality indicator primarily reflects the
compliance of works to specified quality standards. Ideally, the comprehensive
quality indicator should equal 1, which is practically impossible, as
transportation is a probabilistic process affected by varied factors that cannot be
predicted or controlled by the transport entity management.
The level of solvent demand is directly and strongly related to the
transportation process quality. These indicators are linked by straight and linear
relations. The higher is the operational level of a transport entity, the higher is
demand.
Since quality demand elasticity is much stronger for cargo transportation
as compared to price demand elasticity, it makes it possible to find reserves to
enhance quality. Simultaneous management of price and quality enables us not
only to improve profitability, while preserving the set volume of transportations
(in other words, without losing our clients), but also to attract additional money
due to increased railway transport loading that will allow to most fully unlock
the economic and technological potential of rail transport.
89
CHAPTER 4. TRANSPORT SERVICE QUALITY
MANAGEMENT
4.1. METHODOLOGICAL FOUNDATIONS OF QUALITY
ASSESSMENT AND MANAGEMENT
Quality is a set of attributes of an object that distinguish it from other
similar objects and determine its use value.
The most important and fundamental principle of this theory is the relative
nature of quality indicators determined by the ratio of actual and standard values
of each indicator. Such an approach increases the information capacity and
comparability of indicators. Let us illustrate this point with an example of cargo
delivery time, which is the most important indicator of transport services
quality. Let us assume that the cargo is delivered from Tula to Nizhny Novgorod
in 10 days. Is it good or bad? Is the final quality level high or low? Only a
person who keeps in mind all the distances between the railway stations and has
learned by heart the rules of calculating time limits for rail cargo delivery can
give an immediate answer to this question. However, for us it will be enough to
compare the actual delivery time with the standard one (in our case, the
calculation provides the timeline of 8 days), and we are able to conclude the
quality level is insufficient.
The compliance with the principle of quality indicators relativity can be
presented as the following formula:
Qi 
NA
,
NS
(4.1)
where Qi – is the level of compliance with the i-th indicator of transport
service quality;
NA – is the actual absolute value of the i-th quality indicator;
NS – is the standard absolute value of the i-th quality indicator.
This formula is applied to measure indicators that improve when
increased. For example, speed: if the standard daily speed should be 240 km per
day, while the actual speed equals 200 km per day, then:
QS 
SA 200

 0,83 .
SS 240
The reverse formula is used for indicators that deteriorate when increased:
Qi 
NS
.
NA
(4.2)
Delivery time serves as an example of an indicator that deteriorates when
increased: the longer is the delivery, the lower is the quality. If we substitute the
data from the above delivery terms example in this formula, we obtain:
90
QT 
ТS 8
  0,8 .
Т A 10
The use of the above formulas leads to the following rule: the value of
relative quality indicators will always vary within the interval from 0 to 1:
(4.3)
0  Qi  1 .
In some cases, the quality level may exceed 1; however, usually it does
not mean that the quality level is exceptionally high. For example, body parts
are delivered to an automobile plant within 5, rather than standard 7 days (for
example, on May 4, not on May 6). The cargo recipient (the automobile plant)
will use these details not earlier than May 6 since the other components
necessary for the assembly of the car (engines, transmission units, wind shields,
etc.) are to arrive in due time, on May 6. The automobile plant will have to find
additional warehouse space to store the spare parts delivered ahead of the
schedule and allocate additional cargo movers, guards and other employees (as
the most part of employees are engaged into their routine work). Thus, in this
case the only thing early delivery brings to the cargo recipient is additional
expenses (warehouse rent, extra employees compensation, etc.), and it is not
considered as an advantage. On the other hand, in the case of perishable goods
(e. g. foodstuffs with a short shelf life), early delivery gives the cargo recipient a
better chance of selling products before their expiry date. In general, when the
calculated value of the quality indicator is higher than 1, it equals 1. If all
transport service quality indicators are measured within the range from 0 to 1, it
ensures their comparability with each other and provides objective information
to prioritize resources allocation for quality management.
The method of calculating the indicators of the quality of transport
services for freight owners
The physical unit of transport products in terms of freight is freight
dispatch, i.e. consignment following from one consignor to one consignee and
drawn up with one set of shipping documents. Transportation of this freight has
the same quality characteristics, because if the shipment is delivered late, then
entirely, if the freight was not preserved, one commercial act is drawn up for one
shipment, etc.
Accounting for the quality of freight shipments allows to detail the results
of calculations by categories of shipments (route, by wagonload, container,
small ones), which provides additional opportunities for analyzing and
identifying the causes of certain negative phenomena. In addition, accounting
for the quality of freight shipments does not exclude the possibility of
accounting in terms of weight (i.e. in tons) in cases when this is necessary.
The calculation of the quality indicator for all indicators (except for the
full satisfaction of the demand for transportation) will be conducted according to
the following universal formula:
Qi 
N SV
,
NT
91
(4.4)
where Qi – is the level of the i indicator of the quality of transport
services (in fractions of a unit or percent);
NSV – number of shipments made in compliance with the standard value of
the indicator, units per period;
NT – total number of shipments in the same period.
The calculation formulas take the following form:
1.
Level of speed or urgency of cargo delivery:
QSD 
N SD
,
NT
(4.5)
where NSD – is the number of shipments delivered in compliance with the
standard delivery time, units;
NT – the total number of shipments over the same period.
Both indicators are determined according to the data of the TsO-31 form
and, if necessary, can be detailed by type of freight and categories of shipments.
2. The level of preservation of freight:
QSC 
N SC
,
NT
(4.6)
where NSC – is the number of shipments delivered without loss of freight
or with losses not exceeding the norms of natural loss, units. The value of this
indicator can be determined by the formula:
(4.7)
N SC  NT  NVC ,
where NVC – is the number of shipments delivered in violation of the
condition of freight safety. Depending on the purposes of the analysis, it can be
determined by the number of drawn up commercial acts, by the number of
claims filed by freight owners or by the number of claims filed.
Accordingly, the formula for calculating the level of safety of goods
carried may take the form:
QSC 
NT  NVC
.
NT
(4.8)
3. Level of regularity or delivery variability of freight:
QCR 
NCR
,
NT
(4.9)
where NCR – is the number of shipments made in compliance with the
guaranteed interval or a fixed arrival time, units. The value of this indicator can
be determined during the marketing survey of freight owners.
4. The level of complexity of transport services:
QCS 
where NCS
scheme, units.
–
NCS
,
NT
(4.10)
the number of shipments made under the "door-to-door"
92
The value of the indicator can be determined by reports on the use of
access roads. In the event that the service was provided through the use of the
company's own transport company engaged in railway transportation, such
shipments should also be taken into account if complexity.
5. Completeness of meeting the demand for transportation:
QDS 
NT
,
NA
(4.11)
where NA – the number of applications for transportation for the period,
6
units .
The method of calculating indicators of the quality of passenger
transport service
Passenger transport has a great social importance, since it satisfies one of
the most important human needs - the need for stirring. Passenger traffic clearly
characterizes one or another type of transport, as passengers, on the basis of
their own considerations, assess their advantages and disadvantages differently.
The passenger transport market provides passengers with the services of various
types of transport, which are often unequal in cost, speed, regularity and
comfort.
The passenger, guided by his abilities, goals and tastes, and sometimes
forced, prefers this or that type of transport.
Passenger transportation can be carried out for various purposes:
scientific, business, industrial, for the purpose of travel, etc. Transport services
for tourists and sightseers occupy a certain share in the entire volume of
passenger traffic. Therefore, the assessment of service quality will also depend
on the purpose of the trip. It is especially important to take into account the
clients' expectations during the organization transport services in the tourism
industry, because travel is already obviously something interesting and exciting,
and the trip itself should not be viewed as a necessary and unpleasant side of
travel.
The main advantage of passenger traffic on any type of transport is the
high quality of transport services perceived by customers. The quality of
passenger service depends on the organization of the transport process, the
design features and the technical condition of the rolling stock used and the
route, the development of the route network and other factors. Reliability and
timeliness of travel is one of the main criteria for assessing the quality of
passenger services. The movement of passenger transport on a schedule without
disrupting regularity creates conditions for the guaranteed travel of transport
customers over time. This increases the demand for transportation and
6
Sokolov Yu.I., Ivanova E.A., Lavrov I.M. Quality management of transport services: a textbook for
universities. Ed. Yu.I. Sokolov. – M.: Federal State Budgetary Educational Institution of Higher
Professional Education "Educational-methodical center for education in railway transport", 2018. –
275 p.
93
contributes to the efficiency of transport. Rail passenger transport has such
important economic and ecological advantages and such high safety indicators
that, without any doubt, in Russia it will retain a sufficiently high
competitiveness even for a distant future.
For a quantitative assessment of the quality of passenger traffic, it is
advisable to break the totality of its characteristics into 4 subsets, which are
separate categories of passenger traffic quality, namely: safety or the number of
accidents; the level of organization of the movement of vehicles in time
(frequency, rhythm, regularity, accuracy of movement, as well as the
dependence of movement on external conditions); time spent on the trip, taking
into account the expectations or speed of movement of passengers; ease of use
of transport - a set of amenities provided to passengers at stations and on the
route, that is, comfort.
Solving the problem of improving the quality of passenger transportation
requires the synthesis of private assessments within the framework of certain
categories of transportation quality, and then reducing them to a general integral
quality indicator. Private indicators of the quality of passenger transport service
are determined on the basis of a synthesis of official statistics, calculations and
the results of passenger traffic surveys. When examining passenger traffic, it is
important that the quality of service both at train stations and en route is
evaluated with the participation of the passengers themselves. Suggestions for
improving the services made by passengers can be viewed as passenger
requirements for the quality of transportation.
The quality of service is characterized by the presence of passengers'
claims to service at stations and in transit, due to the late departure and arrival of
trains, as well as to the discrepancy between the proposed train category, car
type, location, train departure date and real demand.
For example, during the examination of long-distance passengers in
railway transport, over 100 types of claims were identified. However, they were
distributed as follows; claims for the technical and sanitary condition of cars 44.7%; on catering on the route - 29.7%; travel comfort - 24%; organizing ticket
composting on the way - 1%; for other reasons - 0.6%.
Among the claims to maintenance at the initial stations, the following
prevail: lack of seats in the waiting room - 23.4%; poor nutrition organization 21.3%; lack of services provided - 13.7%; the absence or lack of space in the
storage chamber - 13.2%; unsatisfactory work of the information service - 7.9%;
rudeness of officials - 7.4%; other reasons - 13.1%.
Important indicators of consumer properties of passenger transport
products are: speed, comfort and convenience of travel, speed of issuing tickets,
frequency and regularity of traffic, intermittent messages, etc. Being guided by
them, the passenger gives preference to one or another type of transport, type of
messages, travel time, etc.
94
Another sample survey of passenger traffic in railway transport showed
the importance for passengers of the quality characteristics of transport services
for passengers (%);

Comfort - 23.3%;

Time spent on ticket issuance - 21.7%;

Timeliness of departure and arrival of trains - 17.7%;

Speed - 16.7%;

The volume of services provided at stations and en route - 11.5%;

Train departure frequency - 5.5%;

Ticket price - 3.6%.7
A specific direction for improving the quality of passenger traffic in longdistance traffic is an increase in the number of fast corporate trains, comfortable
intercity buses, and new types of airliners in civil aviation. They are
distinguished by high speed, increased comfort and safety of travel. Message
rates as indicators of quality are very significant for passengers. Transportation
of passengers at high speeds should be considered as high-quality transport
products. Increasing the speed of passenger transport gives a great economic
effect, as it accelerates the turnover of rolling stock, increases the carrying
capacity, as a result of which savings are achieved in capital investments in
rolling stock and the cost of passenger traffic is reduced. High-speed transport
lines are becoming a powerful means of accelerating the development of
tourism, expanding business and cultural ties in the regions and with other
countries. High-speed rail transport is distinguished by a high carrying capacity
for mass transportation, lower specific energy consumption, and it allows
significant savings in the socially useful time of the population.
Quantitatively, the quality of passenger transport service can be assessed
by the following indicators:
Level of performance of the train schedule:
QSP 
ТM  ТD
,
ТM
(4.12)
where ТM – time of the train from the point of departure to the point of
destination, an hour.
ТD – time of train delay, an hour.
This indicator can also be calculated by the formula:
QSP 
N
N
AES
T
,
(4.13)
where  N AES ,  NT – the number of transport units (trains) departing and
arriving at intermediate and final points according to the established schedule
and their total number, respectively;
Safety level of passenger traffic ( QSP )::
7
Data from the site "Rosstat"
95
QSP 
L
L
A
(4.14)
,
R
where LA , LR – the specific value of the actual and regulatory level of
traffic safety (the number of accidents and crashes, respectively, per 1 billion
pkm).
The level of comfort of the trip passengers (QCOMF):
QCOMF
V

V
A
COMF
R
COMF
,
(4.15)
A
R
,VCOMF
where VCOMF
– the list (volumes) of services to passengers is
actual and according to the established rules (standards) at the starting and
ending points and during the trip, respectively;
The level of safety of passenger baggage ( QSB ):
 BP   BLOSS 
QSB  
,
 BP
(4.16)
where  BP – the volume of baggage transportation for the period under
consideration or by correspondence in question, tons;
 BLOSS – baggage loss, tons;
Level of population mobility:
I MOB 
N
PASS
N POP (1   FOR )
LMOB
LOMOB
 A ,
LMOB
;
(4.17)
(4.18)
where IMOB – population mobility index, the number of passenger trips per
person;
 N PASS – the number of passengers carried;
 N POP – population;
βFOR – the proportion of foreign citizens visiting the country and using the
mode of transport in question.
LAMOB , LOMOB – actual and optimal level of mobility of the population
The optimal level of mobility of the population (LMOBO) can be determined
on the basis of marketing surveys of the population’s need for movement by
means of transport, as well as studying its dynamics over past years or in
comparison with other countries.
The average specific value of the free area per unit of rolling stock for
passengers (V F A ) and its comparative level in various types of rolling stock
(L VT):
VFA
V

N
RS
T
PASS
96
;
(4.19)
LVT 
i
VFA
,
к
VFA
(4.20)
where VFAi ,VFAк – specific free area of various types of rolling stock i and k,
sq.m;
V
– total, free for passengers, area of a rolling stock unit, including
common areas, sq. m;
 N PASS – number of passengers in a rolling stock unit, people.
It is obvious that for passengers it is preferable to have a large individual
free area, all other things being equal. Comparisons can be made by type of
transport. According to this quality indicator, sea transport is in the first place,
followed by river, rail, road and air. The average specific value of the free area
has a different value depending on the duration and destination of the trip. It is
less important for a short business trip of 2-3 hours, and quite significant for a
tourist trip.
Methods of integrated assessment of the quality of transport services
The above-mentioned transport service quality indicators should be
combined into a single comprehensive indicator to assess the quality level in a
single number. A comprehensive quality indicator can be used by the cargo
owner to choose the carrier in order to pay attention both to transportation price
and transport service level, evaluating it for different transportation options.
A transport company, analyzing its competitor activities, can compare the
level of quality provided by certain companies in order to determine competitive
advantages and main factors of success in the market.
Finally, the definition of the comprehensive quality level is needed to
further compare it with a carriage fee and determine allowances for increased
quality and reductions in case of quality deviations.
Transportation service quality can be comprehensively assessed by two
methods: additive (from the Latin additives – ‘added’) and multiplicative (from
the Latin multiplico – ‘multiply,’ ‘increase’) evaluations.
Additive evaluation is calculated by the formula:
RS
T
n
QAD   Qi   i ,
i 1
(4.21)
where  i – is specific weights of certain quality indicators of transport
service in the overall system, i  1 .
The formula of multiplicative estimation is represented as follows:
n
QMULT   Qi .
i
(4.22)
i 1
Let us consider the use of these techniques using a reduced five-indicator
system as an example. Initial data for calculation are specified in Table 4.1.
Table 4.1 – Data on Values and Specific Weights of Transport Service Quality
Indicators for Cargo Owners
97
Indicator
Indicator value
Delivery cycle
0.79
Indicator
specific weight
0.29
Complete satisfaction of
transportation demand
0.97
0.23
Delivery term compliance
0.87
0.2
Transported cargo safety
0.81
0.17
Complexity transportation level
0.72
0.11
Comprehensive transport service
quality indicator
0.843
-
Let us perform the calculation.
Additive evaluation:
QAD=0.79×0.29+0.97×0.23+0.87×0.20+0.81×0.17+0.72×0.11=
= 0.2291+0.2231+0.1740+0.1377+0.0792=0.8431
Multiplicative evaluation:
QMULT  0, 790,29  0,970,23  0,870,20  0,810,17  0, 720,11 
0,9339  0,9930  0,9725  0,9648  0,9645  0,839
Thus, the calculation results are close to each other, but in this case the
multiplicative evaluation gives a slightly lower result than the additive one.
Let us consider a situation where one of the indicators (for example, the
delivery cycle) is zero.
Additive evaluation:
QAD=0.97×0.23+0.87×0.20+0.81×0.17+0.72×0.11=
= 0.2291+0.2231+0.1740+0.1377+0.0792=0.614
Multiplicative evaluation:
QMULT  00,29  0,970,23  0,870,20  0,810,17  0, 720,11 
0,9339  0,9930  0,9725  0,9648  0,9645  0
Thus, the multiplicative evaluation assumes that in case any of the
indicators equals zero, the complex quality indicator will equal zero (i. e. quality
is absent).
The choice of an evaluation method depends on the analysis purpose and
peculiar demand from cargo owners. It can be assumed that in some situations, a
quality indicator will be of little value to customers and its failure will not have
a decisive impact on the carrier choice. In this case, additive estimation that
98
demonstrates just a slight decrease in quality as compared to the original quality
would be preferable.
If an indicator which equals zero is fundamental for customers and is
included in the set of the most important criteria for choosing a carrier, a
multiplicative evaluation will be more objective.
It should be noted that the multiplicative evaluation formula is
transformed into the additive estimation formula simply by taking the logarithm.
The disadvantages of the additive formula include possible
“compensation” of the quality level for certain parameters at the expense of
others, as well as the importance of the comprehensive quality indicator when
indicators equal zero.
At the same time, the additive formula grants more opportunities for
intermediate analysis during calculations.
The comprehensive transport service quality assessment method can be
used to compare the quality of transportation modes, transport companies, time
periods, regions and countries.
Specific weights characterize the importance of a particular quality
indicator for consumers. Their values may vary by region, by type of cargo, by
the size of enterprises and other characteristics. Reliable information about their
values can be obtained by interviewing cargo owners, and such polls should be
conducted regularly. Cargo owners should give a point estimate of the
significance of indicators on a ten-point scale.
Processing of the received information is performed as follows. The
scores for each indicator are summed up, the sum of points for each indicator
correlates with the total amount of points given by the respondents for all
indicators:
n
m
n
i
j
i
 i   Ni  Nij ,
(4.23)
where  i – rating i indicator of transport service quality by cargo owners;
N i – quality score;
N ij – customer quality score;
n – number of quality score;
m – number of customers interviewed.
As can be seen from the above, we obtain the specific weights of the
indicators, the sum of which will be equal to one.
The specific weights calculation example of transportation service
indicator is presented in Table 4.2.
99
Table 4.2 – The specific weights calculation example of transportation service
indicator
Assessment of the significance of quality
Enterpise 1
indicators
1
2
3
4
5
Enterpise 2
8
3
7
3
5
Enterpise 3
7
6
8
4
7
Enterpise 4
9
4
6
9
6
Enterpise 5
8
8
5
6
1
Enterpise 6
7
7
9
5
2
Enterpise 7
6
9
1
4
2
Enterpise 8
6
9
6
4
3
Enterpise 9
4
5
2
7
5
Enterpise 10
8
6
3
4
4
63
57
47
46
35
0.25
0.23
0.19
0.19
TOTAL
Specific weight
Total points
amount
248
0.14 1.00
The Table 4.2 presents data from the interview of 10 freight companies on
the significance for them of 5 quality indicators.
Each cargo owner should give an assessment of the importance of each
indicator on a 10-point scale (0- completely unimportant, 10- extremely
important).
The sum of received points is summed over each column (quality
indicator) and correlates with the total sum of points obtained for all indicators,
for example: 1 
63
 0.25 .
248
As a result, we obtain the set of values of specific weights of indicators
that meet the condition:   1 .
The method of integrated assessment of the quality of transport services
can be used to compare the level of quality by means of transport, transport
companies, periods of time, regions and countries.
Methods for evaluating the effectiveness of improving the quality of
transport services
The effectiveness of improving the quality of transport services is largely
determined by the presence of sufficient effective demand for transportation of
higher quality.
The level of demand for transportation, which ultimately determines the
amount of profit of transport companies depends on a variety of factors that
100
include both uncontrolled parameters, the effects of which cannot be predicted
most accurately (emergency situations, accidents during transportation, etc.) and
controlled ones the transport organization is able to manage and thereby
influence the change in demand. To evaluate the degree of dependence of
demand on the factors influencing it, the methodology for estimating elasticity
can be used.
The analysis of the elasticity of demand in terms of the quality of
transport services requires knowledge of the dependence of the quantity
demanded on the volume and economic indicators of transport operations.
In practice, such work can be done only on the basis of long-term
observations and analysis of the relationship between the quality of transport
services on the one hand, income, expenses and profits associated with its
increase on the other.
For the organization of transport complexes, the formula non-price
elasticities of demand take the form of a formula (3.5).
The absolute value of non-price elasticity can be measured from zero to
infinity, similarly with price elasticity.
In order to determine what proportion of the traffic volume was caused by
a direct improvement in quality, it is necessary to carry out a factor analysis, that
is, to make a distinction between extraneous factors and the studied one. This
can be done using statistical research methods.
The changing in quantity demanded for transportation as socio-economic
phenomenon over time is investigated by statistics using the method of
constructing and analyzing time series. Time series are the values of statistical
indicators, which are presented in a certain chronological sequence (for
example, the absolute values of traffic volumes over several years). For
example, the absolute value of traffic volumes over several years.
When smoothing random fluctuations of the time series (uneven values of
traffic volumes) in statistics, use alignment methods, one of which is the method
of analytical alignment.
To find the irregularity factor, it is necessary to have accurate data on the
volume of cargo transportation for the entire considered period of time,
including, as a rule, several years ( Vt ), as well as to find the monthly mean
t
values of the volume of traffic ( V j ) and seasonality index ( I SEAS
). In the case of
the presence of a complete time series, the value of the volume of cargo
transportation for a certain month is found using the following formula:
t
Vt  V j  I SEAS
 t ,
(4.24)
where  t – component of the unevenness factor, which is the
uncontrollable value of the impact on demand.
101
The calculations are carried out on the basis of quarterly reporting data on
the level of quality of services on the rail freight market – Quality Index8, as
well as on the basis of data from the Federal Service of State Statistics on Rail
Transport9.
After the value of the irregularity factor is found for the time intervals of
interest, they are displayed schematically or graphically with their corresponding
time scale, and then the amplitude of oscillations of the observed phenomenon is
analyzed.
To determine the relationship between the level of demand and the
analyzed factor (the level of transport service quality), a linear approximation is
used based on the least squares method as follows:
(4.25)
V  a Q  b ,
where V – value of transport products demand, million tons;
Q – value of complex quality indicator;
a, b – design ratios used in the least squares method.
Based on studies of the current state of demand for transport services and
the level of a complex quality indicator, this function will have the following
form10:
(4.26)
V  1.00  Q  62.20 .
In graphical form, this dependence is shown in Figure 4.1.
Figure 4.1 – The dependence of the demand for transportation on the level of quality
of transport services
8
Research in the sphere of consumers' assessment of the quality of services in the market of freight
transportation by rail [Text] / Report of quarterly studies of the Quality Index. – Moscow: RZDPartner, 2012-2019.
9
Federal Service of State Statistics [Electronic resource]. Access mode: http://www.gks.ru/
10
Sokolov, Yu.I. Management of the quality of transport services for cargo owners in conditions of
multiplicity of participants in the transportation process [Text]: monograph. / Yu.I. Sokolov,
I.M. Lavrov – M.: The Golden Section, 2015. – 168 p.
102
In this way, the coefficient of non-price elasticity of demand for freight
transport is currently about 1.
As an object of comparison, we will give an example of the dependence
of the demand for transportation on the level of cargo owners' satisfaction with
the level of the tariff (P) for the services provided by them using a similar
formula:
(4.27)
V  a  P  b  0.53  P  97.22 .
In graphical form, this dependence is shown in Figure 4.2.
Figure 4.2 – The dependence of the demand for transportation on the level of
satisfaction with the level of tariffs
So that the coefficient of elasticity on a non-price factor, obtained on the
basis of dependence, is almost two times higher than the coefficient of elasticity
on a factor of price factor – its value was 0.53. Thus, the dependence once again
confirmed the high importance of improving the quality of transport services as
an effective factor in the competitiveness and profitability of transport
companies.
Given the quantity of the elasticity of demand, it is possible to give an
objective prediction of the change in demand for transportation as the quality
improves to a certain level.
Denote the initial value of the complex indicator of the quality of
1
transport services that the company provides to cargo owners as QCOM
. The
company aims to raise the level of quality by holding various events to the level
2
2
1
QCOM
 QCOM
QCOM
 . Then the planned increase in the quality level will be:
dQ 
2
1
QCOM
 QCOM
100 , (%).
1
QCOM
(4.28)
By using the indicator of elasticity of demand relation to quality ( EQ ), we
obtain the fitted value of the increase in demand for transportation:
d D  dQ  EQ .
(4.29)
103
However, not always planned quality improvement measures are so
comprehensive that all particular quality indicators improve at once. If
improvement is planned for one indicator (with a constant level of other quality
indicators and relative density of all indicators), the quality increase can be
determined by the formula:
dQ 
Q
2
1
 Q11  1
Q11  1  Q2   2  ...  Qn   n
100 , (%),
(4.30)
where Q11 , Q12 – is the values of the quality indicator that changes during
the planned event, respectively, in the current and future period;
Q2 ...Qn – is the value of other specific indicators of quality, unchanged
during the implementation of the planned event;
1... n – is a specific weights of the relevant quality indicators.
Consider an example of the three quality indicators, the values of which
are presented in Table 4.3.
Table 4.3 – Data for calculating the quality level
Q1  0.8
Q2  0.85
Q3  0.9
1  0.4
 2  0.3
3  0.3
Suppose that with the implementation of a certain measure Q increases to
the level of 0.9.
Then the increase in quality will be:
dQ 
 0.9  0.8  0.4
0.8  0.4  0.85  0.3  0.9  0.3
100 
0.04
100  4.73%
0.845
and the increase in demand, with the same level of elasticity as in the
previous calculation, will also amount to 4.73%.
It is obvious that the higher the proportion of a changing indicator and the
absolute value of its change, the greater will be the increase in the complex
quality indicator.
The physical magnitude of the increase in demand for transportation can
be determined by the formula:
Pl  Pl0  dQ ,
(4.31)
where Pl0 – is the initial value of the company's turnover (satisfied
demand for transportation), tkm.
Thus, having the opportunity to predict changes in demand for
transportation while improving quality, we can evaluate the effectiveness of this
event, taking into account changes in revenues and expenses associated with
transportation, as well as costs directly related to improving and maintaining the
level of quality of transportation services provided.
The economic efficiency of quality improvement can be determined by
the formula:
E  PR1  PRо  CQ  ( REV1  TС1  QC1 )  ( REV0  TС0  QC1 )  CQ , (4.32)
104
where PR0 , PR1 – is the profit of the transport company for the period,
respectively, before and after quality improvement, rub.;
REV0 , REV1 – are revenues of the transport company before and after
quality improvement, rub.;
TС0 , TС1 – are transportation company costs before and after the increase
quality, rub.;
QC0 , QC1 – are costs associated with the current level of quality of
transport service, before and after its increase, rub.;
CQ – are one-time costs associated with bringing the quality of transport
services to the target level, rub.
The condition under which a quality improvement event would be
appropriate is the presence of a positive result, i.e. profit growth (∆PR) exceeds
the costs associated with improving the quality:
PR  CQ .
(4.33)
It is possible to evaluate the effectiveness of quality improvement by
alternative simplified method. In this case, the estimated increase in profits from
quality improvement for the period analyzed:
PR    Pl1   Pl0  i1  c1  ,
(4.34)
where  Pl 0 ,  Pl1 – is freight turnover of the transport company before
and after quality improvement;
i1 – is an income after carriage after quality improvement. i1  i0 , that is,
the income rate after quality improvement may be equal to or exceed the income
rate for a lower quality transport service, depending on the current market
conditions;
с1 – is the cost of transportation of the company before and after quality
improvement, kopecks / 10 tkm. с1  с0 , that is, the cost of services and higher
quality may be slightly higher.
In this case, as described earlier, the value of  Pl1 is determined on the
basis of an estimate of the elasticity of demand, and the condition for efficiency
is the observance of inequality (4.33).
4.2. QUALITY MANAGEMENT OF PASSENGER TRANSPORTATION
The active development of the economy of the country and the society is
impossible without ensuring the necessary level of passenger transportation
quality. The growth of living standards and of people readiness for international
and domestic mobility, the development of economic and cultural
communications within countries and between them lead to a steady increase in
the number of trips. These objective trends make the passenger transport
complex meet the best international standards.
105
The economic aspects of passenger transport services quality
management
Undoubtedly, improving the quality of passenger transport services is a
transport companies’ target. However, the problem of low profitability or even
unprofitability of passenger transportations impedes the transport complex
development and requires participation in its financing of interested municipal,
regional and federal government structures. The development of territories’
transport accessibility is directly interrelated with cities’, regions’ and the
country economic growth, increases their attractiveness for business, tourism
and life. One of the most important state tasks in Russia is to increase the
population transport mobility, because it characterizes the life quality level.
Now, there is a tendency for this indicator to fall (Table 4.4). It is easy to see
that in the crisis year of 2015, on the background of a decrease in the overall
population long-distance transport mobility, passengers were more likely to use
the cheaper intercity buses.
Table 4.4 – The analysis of transport workload dynamics and the
population transport mobility in Russia 1112
Year
Index
2010
2011
2012
2013
Number of passengers, million
22065
21913
21370 19652
people
inc. rail passengers
947
993
1059
1080
railway passengers on the
1058,
infrastructure of JSC «Russian 946,5
993,1
1079,6
8
Railways»
inc. commuter traffic
831,6
878,3
942,2 968,8
inc. long-distance traffic
114,9
114,8
116,6 110,7
inc. bus passengers, with
13434
13305
12766 11587
individual entrepreneurs
inc. in long-distance traffic
252,5
110,9
93,1
69,1
inc. commuter and city traffic
13181,5 13194,1 12672,9 11517,9
inc. inland water transport 16
14
14
13
passengers
inc. air transport, passengers 59
66
76
86
with international transportation
intercity transportation by all 399
260,9
250,7 221,4
means of transport
Population of Russia, million 142,9
143,0
143,3 143,7
people
Number of own cars per 1000 228,4
242,0
257,5 273,1
population in Russia, units
11
2014
2015
19558
19122
1076
1025
1070,3
1020,4
967,2
103,1
922,5
97,8
11554
11523
59
11495
13
126,8
11396,2
13
95
94
216,6
318,6
146,3
146,5
283,3
288,8
Ivanova, E.A. The system of passenger transport service quality management: monograph Moscow: Izvestiya, 2018. - 250 p
12
Transport and communications in Russia. 2016: Statistical compilation. / Rosstat. - M., 2016. - 112
p.
106
Population transport mobility in
Russia, trips per inhabitant
Long-distance transport mobility
in Russia
inc. the number of long-distance
trips by rail
154,4
153,2
149,1
136,8
133,7
130,5
2,79
1,82
1,75
1,54
1,48
2,17
0,80
0,80
0,81
0,77
0,70
0,67
The development of transport service quality should be economically
justified. When the key quality level indicators of passengers service is
relatively low their improving will lead to the increase of the demand for
transportation (Figure 4.3). However, as a rule, the service quality improvement
requires additional costs, and as a consequence causes the growth of price
(Figure 4.4). Up to a certain quality level, passengers are ready to pay for quality
increase, but further price rising ceases to correspond to the passenger's
perception of the trip as appropriate, the overestimated quality does not attract,
the demand begins to fall (to the right of point b in Figure 4.3).
Q
b
Qmax
К
Figure 4.3 – Dependence of transport services demand on the transport
service quality
P
К
Figure 4.4 – Dependence of the transport services price on the service
quality
Methods of assessing the passenger transport services quality
When assessing the transport service quality, the perception of service
components affects the passenger's reaction in addition to objective factors. The
passenger is in the service area, interacting with transport company employees
and other passengers. The final service quality assessment depends much on the
107
mood of the passenger, personnel competence and hospitality. Therefore, in the
case of passenger service unlike freight transportations, customer satisfaction
scores are often taken into account in addition to natural indicators.
Service companies (including transport companies) use various methods
of customer satisfaction evaluation: the methods of SERQUAL;13 SERVPERF;14
INDSERV; the Kano method;15 Customer Satisfaction Index (CSI), Net
Promoter Score (NPS) and others. At present, the passenger service quality
assessment based on the CSI index is applied in JSC "Federal Passenger
Company", JSC "Central Suburban Passenger Company" and many other
Russian transport companies.
Consumer passenger traffic quality indicators
To control the passenger transport services quality (consumer quality), the
scientifically based system of indicators is necessary.
In Russia GOST 51004-96 "Transport services. Passenger Transportation.
The nomenclature of quality indicators" is valid. It defines the obligatory groups
of passenger transport services quality indicators, such as information service,
comfort, speed, timeliness, safety of luggage, safety of transport services.
To estimate the passenger service quality, it is advisable to divide the set
of quality indicators into subgroups that represent different transport service
quality categories (in the opinion of the author, it is more accurately to call them
«service quality characteristics»). Professor of RUT (MIIT) V.G. Galaburda
highlights the following categories of passenger transport service quality: safety,
the level of vehicles’ movement time organization; travel time including
waiting; convenience (comfort).16
On the basis of various methodological approaches generalization the
author suggests the following system of basic properties and indicators of the
passenger transport service quality by means of transport or on the route, which
is necessary for integrated transport service assessment.
1) Safety (protection from threats to the passenger life and health at
transport facilities as a result of terrorist attacks, natural disasters, man-made
disasters which don’t depend on the transport company, as well as protection
from accidents resulting from passengers entering the hazardous area of the
transport facility). This property is measured by the corresponding safety level
indicators. For example, the author suggests determining the "the level of
passengers’ life safety at transport facilities" indicator by the formula:
13
Parasuraman A., Zeithaml V. A., Berry L.L. A conceptual model of service quality and its
implications for future research. Journal of Marketing, Vol. 49 No. 3, 1985, 41-50.
14
Cronin J.J., Jr., Taylor S.A. Measuring Service Quality: A Reexamination and Extension. Journal of
Marketing, Vol.56 (July 1992), 55-68.
15
Kano Noriaki, Nobuhiku Seraku,Fumio Takahashi, Shinichi Tsuji . Attractive quality and must-be
quality: Journal of the Japanese Society for Quality Control (in Japanese). 14 (2): 39–48. (April 1984).
16
Galaburda, V.G. United transport system. - Moscow: Transport, 1996.
108
N nl
,
(4.35)
N nl  N al
Nnl, Nal – are the normal and actual deaths number per 1 billion passengerkm for the period (year).
It is proposed to take the number of deaths per year equal to 0.5 people as
a norm for the passenger traffic safety level. The number of victims is to be
taken equal to half of the minimum achieved level for the last 10 years or in case
of small number of victims – also 0.5 people.
2) Preservation (safety) of luggage and passenger property. The indicator
"baggage safety level" is calculated by the formula:17
QSL 
QSB 
BP  BLOSS 
BP
,
(4.36)
BP – is the volume of baggage transportation for the period under review
or for the correspondence in question, tons;
BLOSS – is the volume of baggage loss or the volume of baggage that
arrived with damage, tons.
3) Speed of travel (time spent on a trip by means of transport or on the
route). It can be measured by the "speed level" indicator:
QSL 
Tп
,
Tmin
(4.37)
Tп, Tmin – are travel time by means of transport and the minimum possible
travel time by alternative means of transport or by other logistical route
(including by private transport).
4) Availability of the trip (the availability of tickets at the right time, the
right class of vehicles, the possibility for low-mobile people to use transport).
The transport availability is estimated by "the level of demand satisfaction
completeness" indicator:
QDS  1 
N REF
,
N A
(4.38)
N REF – is the number of failed trips (refusals) by the means of transport
due to lack of tickets for the required vehicle or flight and other inconveniences
in the year under study;
N A – is the actual volume of passenger transportations, people.
5) Reliability (timetable accuracy) is estimated by the indicator "the level
of traffic schedule implementation" (the share of routes, trains, flights canceled
or proceeded with schedule non-compliance)18:
17
Transport marketing. Textbook for high schools / Galaburda VG, Bubnova GV, Ivanova EA / Under
the general editorship of V.G. Galaburdy M.: "Route", 2011. - 456 p.
18
Transport marketing. Textbook for high schools / Galaburda VG, Bubnova GV, Ivanova EA / Und er
the general editorship of V.G. Galaburdy M.: "Route", 2011. - 456 p.
109
QSP 
N
N
AES
,
(4.39)
T
where  N AES ,  NT – are the numbers of vehicles (trains, buses, etc.),
departed from and arrived at intermediate and final points according to the
established schedule, their total number respectively.
6) Information availability (complete information on the vehicles
timetable, simplicity and rapidity of ticket purchase, information completeness
on the trip). The index "level of information availability" is proposed to be
determined by the formula:
QIA 
N S
,
NT
(4.40)
where N S , NT – are the number of requests from passengers for
obtaining the necessary information to the various sources provided by the
transport company, which resulted in its successful receipt and the total number
of such applications.
7) Comfortability. It is proposed to evaluate the vehicle's comfortability
on the basis of the indicator "average free area for passengers in a mobile unit"
with an adjustment to the vehicle wear level. The level of comfort (QFC) shows
the ratio of service conditions in this means of transport ( S if i ) to it is greatest
achievable value ( Sfkk ):
QFC 
Sf 
i
f
S if i
S kfk
p
Stotal
Dpc
;
(4.41)
,
(4.42)
k
f
where S , S – are average free for passengers area on various means of
transport or types of rolling stock i and k, m2;
ηi, ηk – are average corresponding rolling stock wear;
p
Stotal
– is the total area of a rolling stock unit free for passengers,
including common areas, m2;
Dpc – is the number of passengers per vehicle, people.
8). Professionalism of staff (the knowledge of job descriptions and the
behavior in accordance to official duties, general staff culture: attentiveness,
empathy). The indicator "personnel professionalism level" is proposed to be
determined by the formula:
QPS 
S S
,
ST
(4.43)
where SS , ST – is the number of revealed inconsistencies in the
personnel competence to accepted job descriptions and conduct standards and
110
the total number of the staff knowledge and behavior monitoring and analyzing
cases.
All indicators listed are natural, relative, and are suitable for
comprehensive assessment of the passenger transport service consumer quality
integral level.
The production security of the quality of passenger transportation
For efficiently use of production facilities (rolling stock, transport
infrastructure), the transport company develops technical measures aimed at
improving the passenger service quality and at the same time achieving high
performance indicators. In passenger transportation, the latter include time
rolling stock use indicators (section and technical train speeds), as well as the
qualitative indicators of the passenger cars use:
1. The car population - is the average number of passengers travelling in a
car on the route. It is calculated as the ratio of passenger turnover to the run of
passenger cars.
2. The train turnover - is the time between the passenger train departure
from the station of its registration and the next departure of this train from the
same station.
3. The average daily mileage of the train is the average distance traveled
by a passenger train per day.
4. The performance of a passenger car is the average passenger-kilometers
per passenger car from operating fleet.
The measures for improvement of service quality and customer
satisfaction level are developed on the basis of the study of client's travel
planning and realization process. Thus, the Holding "Russian Railways" has set
a goal to increase passenger commuter traffic 2 times in the long-distance, and
1.5 times in inter-regional communication by 2030. To achieve this goal, the
Holding's client-oriented program is formed in accordance with the stages of
passengers servicing process: the choice of the means of transport and the type
of rolling stock; ticket purchasing; waiting for the train; servicing on the route;
feedback with passengers.
To improve the comfort and passengers awareness at the planning stage of
the trip, the passenger companies of the "Russian Railways" Holding will
develop their presence in the Internet, will provide passengers with
understandable and complete information on the current options of
transportation services available, and improve the passenger transportation
logistics by rail and other means of transport.
The main criterion for choosing the transport mean is, as a rule, the
travelling time. For the long-distance transportation, it is planned to implement
measures to increase the speeds on the routes and to expand the number of "Day
Expresses". The program includes appointing in 2017-2019 of 22 accelerated
suburban trains, the introduction of double-deck trains on the routes Moscow Kislovodsk, Rostov - Adler, Moscow - Izhevsk, Moscow - Kazan, Moscow 111
Novorossiysk, St. Petersburg - Murmansk and others. To increase the level of
comfort, it is planning to purchase 490 double-decker cars for fast intercity
trains, 802 new cars for electric trains, 907 cars for long-distance superior
comfort trains, 90 high-speed trains "Lastochka", etc. The program also includes
trainings for personnel on customer-oriented interaction with passengers.
To increase the ticket buying convenience the program includes the
development of new services at railway stations, launching the sales of tickets
for commuter trains via a mobile application, the possibility to register luggage
and to order tickets for the disabled through an Internet portal, etc.
To improve the operational quality indicators the train composition varies
according to the car population. For instance, the Moscow-Voronezh trains with
double-deck sedentary cars running since 2015 are particularly in demand from
May to September. The train composition in this period includes up to 15 cars.
But when the demand decreases the trains have only 7 cars.
As we see, Russian railways worked out a significant number of technical
measures to improve the passenger service quality. Their financing is not always
possible at the expense of transport companies. Transport service quality
management is an obligatory and necessary activity also for federal, regional
and local authorities, representing the area interaction of state and commercial
structures.
4.3. THE SYSTEM OF INDICATORS AND METHODS FOR
ASSESSING THE ECONOMIC EFFICIENCY OF IMPROVING THE
QUALITY OF FREIGHT TRANSPORT
Now we will consider the types of economic effects from improving the
quality of transport services.
Quality improvement or the achievement of its given level presupposes
the formation of a result in the form of a certain use value. The use value is a
useful object (product, process) and it is necessary and sufficiently determined
by the quantity and quality of this object. In this case, the quality expresses the
degree of the object utility.
The change in the use value (the degree of utility) is one of the types of
economic effects from quality change.
First of all, it is connected to the offer of a new object, a new quality to
the market leading to an increase in the market share, turnover, company image,
customer satisfaction, victories over competitors, etc.
The second type of economic effects is determined by the degree of
quality assurance offered by the company to the market. It assesses the negative
consequences for the company related to the inconsistency of the real quality
level with the project, as well as the quality that the company declares in its
prospectuses, advertisements, contracts, etc. This type of effects is called
112
“prevented loss”. The prevented loss is an avoided negative economic result,
due to quality assurance measures (penalties for late delivery, unsecured goods
delivery, etc.).
Economic effects
Increasing the
utility of
transport services
Prevented damage from
poor service
Cost saving of the transport
company (optimization of
operational work)
Figure 4.5 – Types of economic effects from improving the transport
services quality
The third type of effects is associated with saving the transport company's
costs, both current and capital, due to optimization of operational work,
increasing the reliability of technical facilities and reducing the need for all
types of resources to perform a given amount of work. Effective quality
management can really increase the productive power of the transport company,
primarily by reducing the cost of materials and labor for the same amount of
production.
Any improvement in transport services quality is characterized by some
efficiency, so it brings a certain useful result, while requiring, as a rule,
additional costs. It should be noted that transport costs bring a result or effect
both in the transport sector and beyond. Therefore, there arises the problem of
assessing and accounting for the off-transport effect.
The off-transport effect is defined as the benefits, associated effects or
losses received in various spheres of socio-economic life of a society as a result
of using a particular mode of transport and various transport technologies, but
not affecting the financial performance of transport companies.
It happens for two reasons:
Firstly, while improving the transport services quality, the railways seek
to attract additional traffic volumes, but this will only be possible if the effect of
providing new services is obvious to the cargo owner in order to influence his
decision to change the carrier or increase the shipment volume.
Secondly, if a significant part of the effect of quality improving is created
by the cargo owner, the railway transport can receive its share of the effect by
changing the tariffs for transportations of higher quality. Under these conditions,
knowledge of the transport effect value is necessary to establish the tariff that,
on the one hand, would be advantageous for transport, would pay its costs and
bring a certain profit, and on the other hand it would create interest among the
cargo owners, increasing the efficiency of its production.
113
In practice of quality improvement, the following off-transport effects
(damage) can occur:
- from the acceleration of the goods delivery;
- from increasing the transportation rhythm;
- from increasing the safety of the goods carried;
- from increasing the complexity of service;
- from increasing the environmental friendliness of transport processes.
Achieving the effect from accelerating the goods delivery both in
transport and cargo owners is possible due to the use of both organizational and
technical measures (organization of the accelerated passing of a part of trains on
stations and hauls, improving scheduling of trains, etc.), and at the expense of
large-scale activities that require significant capital investment (for example,
increasing the passing capacity of the hauls and processing capacity of stations
on heavy-traffic lines by building additional roads, increased locomotives
capacity, etc.).
For industrial goods with continuous production, as a rule, the rhythm of
supplies is of great importance along with the delivery time. Compliance with
the transportation rhythm implies a fixed time of shipment, the implementation
of the delivery time, and the correspondence of the interval between deliveries
of the production cycle duration at the serviced company.
Delivery acceleration gives effect only at simultaneous and synchronous
delivery acceleration of all components. The effect is achieved by accelerating
the turnover of capital. With the accelerated delivery of individual components,
the current production stock (in terms of parts delivered earlier than the time
limit) grows; the company incurs additional storage costs. When delivering
goods outside of working hours (a day off or a holiday, night shift), the company
must also contain an additional staff of workers. Elimination of such a situation
and the transition to such a supply chain, where the delivery interval is exactly
equal to the duration of one production cycle of the enterprise, gives an effect to
the consignee, which can be determined as the difference in the warehouse costs
of the consignee at the relevant delivery options.
Thus, delivery acceleration is effective for perishable and scarce goods,
for industrial cargoes - in the case of uniform production and acceleration of the
delivery of all components, and the maximum effect will be achieved when
delivering goods “just in time” on the terms of the consignee company, so if the
transport company focuses its work on its production cycle.
It should be taken into consideration that the considered examples refer to
a uniform production cycle. For seasonal consignments consumed year-round,
faster delivery will not have an effect, since the cargo is usually delivered to a
warehouse. Transportation of such goods is approximately 30% of the total
volume.
Safety of transported goods has great importance for cargo owners,
characterized by the size of cargo losses during transportation. Usually the
114
railway compensates the damage in the amount of the value of the goods lost
through the fault of the railway workers. This takes into account the size of the
natural loss of cargo, or force majeure, which caused the loss of cargo. The cost
of cargo is determined based on its price specified in the seller's account or
provided for by the contract, or based on the average market price of the goods.
Increasing the transportation complexity (the transition to “door-to-door”
delivery scheme) also contributes to the economic benefit of cargo owners by
carrying out the following activities:
- use or construction of access roads;
- purchase of road transport by railway for the complex goods delivery
under the scheme “door-to-door”;
- signing of general contracts by the railways and attraction of other
modes of transport as subcontractors in a mixed transportation.
As part of the off-transport effect, with increasing complexity of services,
the reduction of the costs of cargo-owners can be called, connected with the
need for the organization and technical support of multimodal transport: the staff
of the shipper enterprise engaged in the transportation organization is reduced,
but the cost of transportation increases.
Increasing the environmental friendliness of transportation also gives an
effect to cargo owners. The first component of the effect is associated with an
increase in the safety of goods on the route. The effect of cargo owners is
expressed in the growth of working capital. Actually, the environmental effect is
achieved due to changes in production technology at industrial transport
companies.
4.4. ASSESMENT OF ECONOMIC DAMAGE FROM A DECREACE IN
SAFETY LEVEL
The effect of improving safety over a certain period of time will be
defined as the prevention of damage from accidents, wrecks and other track
safety violations. Therefore, first of all it is necessary to determine components
of such damage.
The damage from violation of traffic safety will consist of the following
elements:
1)
Loss and damage of technical means of transport:
DTECH   ni  Ci ,
(4.44)
where ni – is the quantity of transport equipment of the i-type (cars,
locomotives, permanent devices) affected by the accident, units;
Ci – is the cost of replacement or restoration of the appropriate transport
equipment, including installation costs, rub;
2)
Loss of cargo:
DC  V j  C j ,
(4.45)
115
where Vj – is the volume of losses of the j-cargo, t;
Сj – is the cost of the j-cargo, rub.
3)
Losses related to injury or loss of life.
To assess the amount of compensation, there is an international method
that is based on reimbursement of the wages that the victim could earn for the
rest of his life. This sum is generally determined by the formula:
J   Z  T  t   M ,
(4.46)
where J – is the amount of compensation;
Z – the number of deaths in one crash, people;
T – the average life expectancy in the country where the deceased lived,
years;
t – is the age of the deceased, years;
M – the average annual salary in the country where the deceased lived,
rub/year.
It should be noted that for the purpose of assessing the losses of the
national economy from the death or loss of a person’s ability to work, this
formula is only partially suitable: an employee not only receives wages, but also
creates a certain cost, often exceeding its value. In this regard, it is proposed to
assess damage as the ratio of the cost of final goods and services produced in a
country for the year (GDP) to the number of economically active population (P):
J
GDP
*(T  t ) .
P
(4.47)
In this case, we get the value of GDP that the state loses for one year as a
result of the death of a person.
Thus, the total damage from violations of traffic safety is determined by
the formula:
DTS   ni  Ci  V j  C j 
GDP
*(T  t ) .
P
(4.48)
The effect of train safety measures can be determined by this formula as a
reduction in damage in the current period compared with the previous similar
period.
It should be noted that in order to correctly assess the effectiveness of
traffic safety measures, it is necessary to consider the costs and results for a
period so long that during it all the consequences of management decisions, both
positive and negative, have time to appear. In addition, in the calculations it is
necessary to take into account the costs and results that arise not only in
transport, but beyond.
Compliance with these principles will allow making the assessment more
objective, will allow more efficient distribution of resources in priority areas of
train safety.
116
CHAPTER 5. ECONOMIC EFFICIENCY OF TRANSPORT
DEVELOPMENT PROJECTS
5.1. ASSESSMENT OF THE TRANSPORT INFRASTRUCTURE
DEVELOPMENT ACCORDING TO THE BUSINESS COMMUNITY
REQUIREMENTS
Introduction
The condition of transport infrastructure significantly affects the
development of the economy and the society. The analysis carried out using
statistical methods showed a significant correlation between the level of the
transport infrastructure development and GDP per capita – the most
representative indicator of the socio-economic development.19 This relationship
is clear from the point of view of economic logic. The "motor" of economic
growth is entrepreneurial activity.2021 The transport opens and helps to realize
business opportunities by entering new markets or access to cheaper and better
quality resources. This finally contributes to economic growth and human wellbeing.
The issues of the transport infrastructure development are considered in
various aspects in the works of both domestic and foreign scientists.
Among the researchers who have made a real contribution to the theory
and methodology development of economic evaluation and management of
transport infrastructure, we can highlight the research works of the scientists
such as Ryshkov A.V. (2010), Beloglazov A.Yu. (2010), Zakharov K.V. (2010),
Kirzner I. (2010), Lapidus B.M. (2008), Yelizariev Yu.V. (2008), Sokolov
M.Yu. (2016, 2017), Lyovin B.A. (2016), Mogilevkin I.M. (2010), Sotnikov
E.A. (2005), A.A. Walters (2004), R. Vogel (1964), S.M. Grant-Muller (2001),
E. Quinet (1998).
The aim of this study is to develop a methodology for assessing the
transport infrastructure development (on the example of the Russian Federation)
based on the business community estimates and Rosstat data using quantitative
and statistical methods of evaluation and statistical data for 10 years.
Methodology
Taking into account the close relationship between transport and
entrepreneurship, the survey assessed the level of transport infrastructure
development by the business community representatives. The Russian business
19
Macheret D.A., Ryshkov A.V., Beloglazov A.Yu., Zakharov K.V. Makroekonomicheskaya otsenka
razvitiya transportnoy infrastruktury // Vestnik VNIIZhT. 2010. No.5. pp. 3-10. (rus)
20
Mizes L. von. Chelovecheskaya deyatelnost: traktat po ekonomicheskoi teorii / perevod s
angliiskogo. - Chelyabinsk: Sotsium, 2008. - 878p. (rus)
21
Kirzner I. Konkurentsiya i predprinimatelstvo / perevod s angliiskogo. - Chelyabinsk: Sotsium,
2010. - XIV+272p. (rus)
117
climate survey conducted by the Russian Union of Industrialists and
Entrepreneurs covers transport infrastructure assessments of the members of all
economy sectors, which makes their results quite representative.22 In order to
confirm the objectivity of the transport infrastructure assessment the business
community members analyzed official data of Rosstat.2324 They make it possible
to compare the dynamics of the railway and the highway road infrastructure
development, as well as to confirm the objectivity of the entrepreneurial
assessment of transport infrastructure.
The assessment of the transport infrastructure development was carried
out using quantitative methods and was performed in several stages:
1. Assessment of the transport infrastructure situation by the business
community representatives on a 7-bit scale as of 2007, 2011 and 2016.
2. Grouping of the estimates obtained within a 5-point scale, with
allocation of unsatisfactory (1-2 points) and satisfactory (3-5 points) estimates.
3. Modal assessment of transport infrastructure condition.
4. Median assessment of transport infrastructure condition.
5. Assessment of the dynamics of the railways’ and the highways’
development according to the official data of Rosstat.
6. Comparison of the evaluation results of the railways’ and the highways’
development according to the official Rosstat data and to the business
community data.
Results
Taking into consideration the relationship between transport and
entrepreneurship, the business community members are interested in assessing
the transport infrastructure development.
Representatives of the business community assessed the transport
infrastructure condition on a 7-bit scale. Such a high level of detail makes less
obvious the comparison of estimates in dynamics. Therefore, when carrying out
the analysis, the extreme estimates of transport infrastructure condition (on the
one hand "very bad" and "bad", on the other hand - "good" and" very good")
were combined. The results of this analysis are shown in Table 5.1. This made it
possible to reduce the scale of estimates to a 5-bit one which made it possible to
interpret it within the usual 5-point scale, with the allocation of unsatisfactory
(1-2 points) and satisfactory (3-5 points) estimates.
22
RSPP. O sostoyanii delovogo klimata v Rossii v 2016 godu. Kratkii doklad. - Moscow, 2017. - 39p.
(rus)
23
Transport i sviaz v Rossii. 2016: Statisticheskii sbornik / Rosstat. - Moscow, 2016. - 112p. (rus)
24
Lapidus B.M., Macheret D.A. Strategiya razvitiya zheleznodorozhnogo transporta - instrument
innovatsionnogo proryva otrasli v interesakh obshestva i ekonomiki Rossii // Ekonomika zheleznykh
dorog. 2008. No.10. pp. 12-20. (rus)
118
Таble 5.1 – Dynamics of the transport infrastructure condition estimates by Russian entrepreneurs, %
Transport
Highways
Railways
Seaports
infrastructure
condition estimates
2007
2011
2016
2007
2011
2016
2013
2016
1. Bad or very bad
47,5
21,0
17,3
9,6
7,0
8,4
27,0
20,0
2. Rather bad
Total share of
unsatisfactory estimates
3. Medium
4. Rather good
5. Good or very good
Airports
2007
2011
2016
18,2
18,8
13,0
18,5
34,7
25,0
9,4
17,4
13,2
13,5
20,0
13,7
19,9
7,2
66,0
55,7
42,3
19,0
24,4
21,6
40,5
40,0
31,9
38,7
20,2
14,4
11,5
21,6
17,9
25,6
21,8
22,3
25,1
40,7
20,4
26,4
28,5
27,9
19,8
24,8
22,9
22,6
22,7
29,6
22,7
25,4
26,1
8,1
4,8
10,3
33,6
14,5
23,6
11,9
12,5
22,8
9,1
28,3
Total share of
satisfactory estimates
34,0
44,3
57,7
81,0
75,6
78,5
59,6
60,2
68,1
61,4
79,8
The average score
(on a 5-point scale)
2,1
2,5
2,8
3,6
3,2
3,5
2,8
2,9
3,2
2,8
3,5
Transport infrastructure
condition modal
estimation
Bad or
very bad
Rather bad
mediu
m
Good or
very
good
medium
Rather
good
medium
medium
Good
or very
good
mediu
m
Good or
very
good
Transport infrastructure
condition median
estimation
Rather
bad
Rather bad
mediu
m
Rather
good
medium
Rather
good
medium
medium
mediu
m
mediu
m
Rather
good
119
In addition, modal and median estimates of the transport infrastructure
condition are revealed. Modal estimates are those that occur most frequently.
For example, in 2016 the average estimate (25.6%) was the most common
among highways’ condition estimates, while the average estimate for railways
was "rather good" (28.5%). However, the modal estimate, being relatively more
frequent, is not predominant. Moreover, the frequencies of different estimates
can be very close. For example, in 2016 the evaluation of highways’ condition
as "rather bad" was characterized by a frequency which is slightly different from
the frequency of the modal evaluation (25%). Therefore, the modal rating was
complemented by the median estimates. The median estimate is located in the
middle of the cumulative distribution of estimates, that is the "central trend" of
estimates.
Proportion determination of satisfactory and unsatisfactory ratings,
weighted average score, as well as modal and median estimates, makes it
possible to characterize the transport infrastructure quality from the point of
view of the business community in comparison by mode of transport and in
dynamics.
Both on average, and on a ratio of satisfactory and unsatisfactory
estimates the leaders are railways and airports, the outsiders are highways. (At
the same time, the proportion of satisfactory estimates, as well as the modal
estimate at the airports is slightly better than that of the railway infrastructure).
Seaport infrastructure estimates (which began to be recorded only in 2013) are
not high, but still better than those of highways. These are very significant
results, demonstrating the advantages of privately owned transport infrastructure
(even if the owner, as in the case of railway infrastructure, is a company whose
shares are wholly owned by the government). In turn, almost completely "state"
highway infrastructure is in worse condition.
On the other hand, the highways’ condition (according to the business
community estimates) has a clear tendency to improvement. The increase in the
proportion of satisfactory grades and the average score, the increase in modal
and median grades from 2007 to 2016 indicate this.
There is no clear trend in the railway and seaport infrastructure. As for
airports, we can talk about an unstable tendency to improve.
Official Rosstat data make it possible to compare the dynamics of the
development of railway and highway infrastructure (Table 5.2). The results of
the analysis of Rosstat data are correlated with the dynamics of the Russian
entrepreneurs’ evaluations. While the main indicators for the railway
infrastructure development have not changed much since 2007, the length of
public highways has almost doubled. Thus, in the context of the insufficient
level of private investment in transport infrastructure, although non-state
infrastructure is in better condition, but is not developed. At the same time the
governmental infrastructure is developing, but its quality is lagging behind the
requirements of users. In particular, the attention is drawn to the slow growth in
120
the length of paved roads, as a result of which their share in the total length
decreased by 12.9 percentage points. The share of roads with improved surface
coverage has also been reduced.
Таble 5.2 – The railways and highways development indicators change
Indicators
2007
2011
2015
Change:
2015 to 2007
Railways
Operational length,
thousand km (at
year end)
Specific weight:
Of electrified
sections, %
two-track and multitrack sections, %
85
86
86
+1,2%
50,4
50,5
50,6
+0,2 p.p.
43,5
43,8
44,0
+0,5 p.p.
Public highways and roads
Operational length,
thousand km (at
year end)
Including roads
with a hard surface,
thousand km
Specific weight of
hard surface roads,
%
Specific weight of
improved coverage
roads, %
747
927
1481
+98,3%
624
728
1045
+67,5%
83,5
78,5
70,6
-12,9 p.p.
68,8
65,8
62,3
-6,5 p.p.
In other words, the highway infrastructure development is more extensive,
and its quality leaves much to be desired. It is no accident that, given the
positive dynamics of estimates, the highways’ condition is estimated to be much
lower than that of railways.
The situation with railways is different. Their ownership of JSC "RZD",
which is a nationwide freight rail carrier, earning its income on the transport
market, on the one hand, stimulates care about the infrastructure maintenance in
a condition that allows the efficient implementation of the transportation
process, and, on the other hand, gives financial resources generated by the
market activity. (And this is an important argument in favor of the unity of
railway infrastructure and transportation activities).
However, these financial resources are not enough to expand the network
and to construct new railways.
It is no accident that the railway transport development Strategy adopted
by the Russian Government in 2008 provided for the need to unite the efforts of
all parties interested in the railway infrastructure development – not only the
Russian Railways holding and the government, but also private investors and
121
regions.2526 On this basis it was planned to build over the period 2008-2015
5193 km of new railway lines, 2407,9 km the second and 348,5 km the third or
fourth paths, to electrify 3918 km of railway lines. However, given the limited
financial resources of the Russian Railways holding and the state budget and the
low investment attractiveness of the railway infrastructure for private investors,
the indicators for the railway infrastructure development provided by the
Strategy are, as follows from Table 2, have not been achieved yet.
The solution of this problem lies in establishing the legal and, from a
broader perspective, the institutional conditions for attracting the private capital
to the railway sector to expand the market opportunities of JSC «RZD».27
Attracting private investment is necessary for the development of
infrastructure of other modes of transport – including highways and roads,
traditionally financed by the budget. Therefore, the Ministry of transport
position seems quite reasonable. It is focused on attracting private investment to
the implementation of projects in the public-private partnership format with the
use of various options of "long-term contractual relations with investors».
It is important that one of the priorities of such projects is the upgrading
of the seaport infrastructure associated with the development of railways. In the
main export destinations, rail freight flows are sent to the seaports, so the
harmonious development of railway and seaport infrastructure is key to the
efficiency of such transportations and significantly affects the competitiveness
of Russian goods on world markets. Meanwhile, as it can be seen from
Table 5.1, the Russian entrepreneurs assess the seaport infrastructure condition
significantly lower than that of the railways. Seaport failures often complicate
the movement of goods on the railways, disrupting the transportation process at
significant sites of the network. And taking into account the implementation of
such projects as the BAM and Transsib modernization, which will increase the
export potential of the Russian economy, the requirements of entrepreneurs to
the development of the seaport infrastructure will certainly increase. And it is
necessary to prepare for their implementation in advance.
Of course, the transport infrastructure development (as well as
infrastructure in general), with all its importance for business and economic
growth, is not the "magic lever" by clicking on which this growth can be
significantly accelerated. To increase significantly the growth rate, the transport
infrastructure improvement should be carried out in conjunction with the public
institutions’ improvement and the development of human capital, which is the
25
Strategicheskoye razvitiye zheleznodorozhnogo transporta Rossii / B.M. Lapidus and others. Moscow: MTsFER, 2008. 304p. (rus)
26
Lapidus B.M., Macheret D.A. Sovremennye problemy razvitiya i reformirovaniya
zheleznodorozhnogo transporta // Vestnik VNIIZhT. 2015. No.6. pp. 3-8 (rus)
27
Macheret D.A. O chem svidetelstvuyet stoletnyaya dinamika pokazatelei krupneishikh
zheleznodorozhnykh sistem // Ekonomicheskaya politika. 2016. Vol.11. No.6. pp.138-168 (rus)
122
main component of the modern society wealth.28The latter problem should be
paid the special attention to due to the fact that, in the opinion of the Russian
entrepreneurs, one of the three most acute problems hindering entrepreneurship
is the lack of qualified personnel. According to the foreign business evaluations,
the lack of qualified personnel is one of the two most acute problems hindering
entrepreneurship in Russia.
Detailing personnel problems of the Russian business by the personnel
categories it should be noted that in the first three deficit categories of
employees there are specialists of the highest level of professional qualification
– almost half of the Russian entrepreneurs pointed to the shortage of such
specialists.
In this regard, it should be noted that it is important to train the specialists
of the highest qualification for transport itself, without which neither the modern
transport infrastructure development not the long-term improvement of the
efficiency and competitiveness of the Russian transport system is possible.
Russia has a very strong tradition of higher transport education, founded
in the XIX century with the creation of the Institute of communication engineers
(now the PGUPS in Saint-Petersburg) and the Imperial Moscow engineering
school of the Ministry of Railways (now the Russian University of Transport).
These were the integrated transport universities, but in the thirties of the last
century the specialized universities "rebuffed" by type of transport. It was
associated with the differentiation of the transport complex management
system.2930
Currently, the dominant global trends are the integration of different
transport modes within multimodal transport systems and the convergence of the
transport modes in the creation of innovative transport systems. This requires the
integration of transport education, the development of new areas of training in
inter-transport and general transport directions. The basis for solving these
problems should be the implementation of the decision adopted by the
Government of the Russian Federation on the establishment of the Russian
University of Transport on the basis of the Moscow state University of railway
engineering (MIIT) – the head transport University of the country. The Russian
University of Transport (created in 2017) should become a system integrator of
scientific and educational potential and the main types of educational activities
in transport, ensuring the quality of education for the transport sector of the
country12.
28
Mogilevkin I.M. Globalnaya infrastruktura: mekhanizm dvizheniya v budushchee / IMEMO RAN.
Moscow: Magistr, 2010. - 317p. (rus)
29
Lyovin B.A. Sozdaniye Rossiiskogo universiteta transporta - etap v evolutsii otraslevogo
obrazovaniya // Transportnaya strategiya - XXI vek. No. 35 (4). 2016/17. p.84 (rus)
30
Lyovin B.A. Оtraslevoye obrazovaniye v realizatsii Transportnoi Strategii Rossii // Byulleten
Obiedinennogo uchenogo soveta OAO ''RZD''. 2016. No.5. pp. 1-4. (rus)
123
Considering the large-scale tasks provided by the Transport strategy of the
Russian Federation till 2030 on the transport infrastructure construction,
including high-speed railway and automobile communication, the development
of training specialists (in the field of transport construction including the design
of the transport infrastructure objects, and also the transport construction
economy) in the Russian University of Transport is fundamentally important.
We should focus particularly on the problems of training economists for
the transport industry. Transport is a dynamic system whose key components are
in the process of spatial movement. Because of this, as well as the economic
characteristics of transport production (transportation), the transport economy
differs significantly from the industry economy and other economic activities,
and in many aspects it is not just specific but much more difficult than the other
activities of the economy. Transport economists should know the subject area
perfectly, including the problems of transport equipment, technologies, design
and transport facilities construction. It is no accident that training of economists
for transport and transport construction is traditionally carried out in the
transport universities. MIIT has almost 90 years of experience in such training
carried out within the framework of the specialized Institute of Economics and
Finance. It seems that at the Russian University of transport such training should
be expanded in relation to the integrated development of the transport complex,
covering all modes of transport in their multimodal interaction.
At the same time, the close relationship between the technical,
technological and economic aspects of the transport complex functioning and
development, which is mentioned above, requires the restoration of the
economic engineers’ education in the field of transport and transport
construction. Previous experience shows that such training is appropriate in the
form of the specialists’ training.
Improving the quality of transport education in the Russian Federation
will contribute to the successful implementation of the country's Transport
strategy, bringing the transport infrastructure in a condition that meets the
requirements of both the business community and the population of Russia
improving the Russian economy efficiency.31
Thus, the transport infrastructure development in accordance with the
requirements of the effective business needs not only stimulating private
initiative based on the market institutions’ improvement but it also needs
developing human potential through the conclusion of a new level of higher
education in the field of transport.
The systemic solution of these tasks will stimulate the growth of
entrepreneurial activity, increase the pace and ensure the sustainability of the
country’s socio-economic development.
31
Sotnikov Ye.A. Istoriya i perspektivy mirovogo i rossiiskogo zheleznodorozhnogo transporta (1800 2100). Moscow: Intekst, 2005. 112p.
124
5.2. FIXED ASSETS UTILIZATION IMPROVEMENT IN RAILWAY
CONSTRUCTION AS A KEY TO THE TRANSPORT STRATEGY
IMPLEMENTATION
There are no doubts nowadays, that due to high significance of transport
in modern society one of the most important indicators of sustainable social and
economic development of any country is its transport infrastructure development
level. And that economic growth, obviously, at the same time is the basis of
national economic security.
One of the key objectives of the Government of the Russian Federation is
to provide transport accessibility of any region of the country based on welldeveloped communication lines system, that obviously rises both strategic and
economic security of both separate regions and the whole country.
Having a huge area, in order to achieve sustainable development, Russia
needs an appropriate transportation system badly because its various separate
regions are to be connected with each other. And the only way to connect them
is to have developed communication network and modern up-to-date vehicles
that would provide for country’s activity like blood vessels in a human body.
And that is not an exaggeration. Communication lines are really strategic
economic objects because they provide connection between different parts of
countries even during natural disasters, against terrorist attacks and industrial
disasters.
Being a part of any economic system communication lines are always the
basis of its creation. Nowadays it is hard to imagine any sector development
without communication network. However its influence on a national economy
is not limited to interconnectivity among different economic agents.
Communication network development itself is an incentive of any economic
systems development that could stop existing otherwise.
According to the transport strategy of Russia 54,285 billion roubles are
meant to be spent for railway transport development.32 New railways (more than
20,000 kilometers), secondary main tracks, electrification are meant to increase
railroad capability, provide transportation routes, create conditions for new area
expansion and development of useful minerals deposits in underdeveloped areas
(Siberia, Far East, polar regions), provide for growing needs of population and
business in transportation service, including high-speed rail. And significant role
in this strategy implementation belongs to transport construction that is to
implement investment ideas and create transport infrastructure on the basis of
innovative construction technologies and use of up-to-date machinery. Therefore
in order to provide communication lines system development it is necessary to
32
Economics of railway construction: textbook / B. A. Volkov et al. - - M.: FGBOU DPO "Training
center for education in railway transport", 2017. — 397 p.
125
develop construction sector and in particular its sub-sector – transport
construction.
Transport construction is one of the biggest consumers of construction
materials and machinery, that is why it encourages machinery-producing and
construction materials industries development, promoting import substitution
that, in its turn, causes, on the one hand, decrease of construction expenses and
make construction product cheaper and, on the other hand, as scientific
researches show, encourage scientific and technological advance in general. 33
Construction (and its subsectors like transport construction) is a fundcreating sector, but at the same time construction itself is in need of fixed assets,
especially fixed assets in use (machinery). Fixed assets is a basis of production
and economic activities of any enterprise and one of the main paths of its
investments. That is why fixed assets characterize economic and productive
possibilities, determine rate of the sector development. Their content, quality
and utilization efficiency have impact on production output, financial results of
the activity, development of the important proportions in Russian economy.
One of the most important problems in construction is a problem of
efficiency growth of machinery assets (machines, plant, means of transport and
equipment) utilization. And if before it was supposed to use machines as much
as possible to ensure the growth of productivity, now construction companies
have enough equipment and need to assess how efficiently it is used.
Besides, taking into account the latest foreign-policy developments there
is a high relevance of import substitution issue in domestic production, 34
including construction. That is why production and delivery of domestic
machines that can provide independent process execution and technological
development are of high significance.
About two thirds of estimated cost are expenses determined by the
appropriate configuration of fixed assets. In modern construction a great
importance is attached to plant and equipment, since the realization of
infrastructure projects often depends on them. Besides, the choice of equipment
determines not only investment volume but macroeconomic effect too. As
researching experience shows machine provision has a considerable
macroeconomic impact.
Due to severe deficiencies in investments the most important indicators of
investment activity are the increase of construction fixed assets renewal, current
facilities utilization improvement and intensification of production. Production
intensification of construction companies makes it possible not only to mitigate
the need for fixed assets and depreciate value but also to cut labor inputs and
33
V.V. Soloviov, A.V. Poltava, A.V. Vlasov, I. Rustamova. Economic methods of regulating the
equipment configuration in construction. The volume of the Strategica Conference proceedings. –
Romania, Bucharest, 2018.
34
Martynova S.A. Vahrushev S.I. Importozameschenie v rossiyskoy stroitelnoy tehnike //Modern
technologies in construction. Theory and practice. – 2016 –P.2 – p. 242-249
126
labor outlays. Intensification rises major construction efficiency, reducing unit
costs, increasing productivity of labor, profit and creating financial resources for
accelerated fixed assets renewal. Besides fixed assets intensification makes it
possible to save investments.
Immediacy of the problem of fixed assets enhancement caused by a lack
of material and financial resources and irrational fixed assets utilization leads to
a production costs rise and a necessity of an additional requirement in money. In
this respect current fixed assets intensification makes it possible to increase
production output and its efficiency without additional capital investments.
The problem of resource-saving (effective resource utilization) has one of
the highest priorities in both scientific researches and enterprises activity.
Economic recession in the sector due to the economic system
transformation towards market economy led to a slump in investment activity
and caused considerable difficulties in the renewal of fixed assets.
Besides, according to researches of V.V. Soloviov (RUT) 35 to add to
economic and financial difficulties, provision of construction sites with
machinery has a number of important special aspects for such a big country as
Russia. In Europe the vast majority of construction projects is located in
habitable and populated areas where well developed infrastructure is available.
In Russia, on the contrary, the majority of construction projects is pioneering
and builds up infrastructure. It takes some particular machine independence
during the service life of the production facilities. The complexity of delivery of
replacement parts, service teams and maintenance vehicles to constructions sites
increases the risk of wasted time that leads to decline of machine train economic
indicators and construction lags. That is why in Russia there has been a priority
in favor of repairable systems when there has been a maintenance capability in
construction sites. But since nowadays construction machinery and equipment
are basically delivered to Russia from abroad, the traditional scheme is being
broken down and it causes a number of difficulties.
Taking the necessity of considerable investments in machinery purchase
into account special recommendations of technical provision should be created
for construction companies and according to Soloviov who builds his point of
view upon the proceedings of several researchers (U.A.Verigin (2004), Е.М.
Kudryavtsev (2005), V.B. Permyakov (2008) and others) it can become a
relevant scientific issue. The relevance of his researches is macroeconomic
appraisal of construction fixed assets independent of interests of certain
participants of construction market, that was achieved through multiplier models
development of sectoral production figures of impact on macroeconomic
indicators of economic growth.
35
V.V. Solovyev. A.V. Poltava. Economic methods of regulation of equipment of the construction
complex production funds. "Trends of economic development of the transport complex of Russia:
foresight, forecasts and strategies" national scientific and practical conference 22 March 2018 MIIT.
127
The scarcity of investments made the researchers and professional
community to look for new approaches to compensate a lack of money for
buying equipment. Therefore a number of ideas regarding fixed assets renewal
appeared. Nowadays a lot of attention is paid to leasing and its different types. 36
There are other ways of fixed assets development improvement such as:
charging of depreciation methods improvement, depreciation distribution
improvement, current fixed assets utilization improvement, loan rates decline,
attraction of financial resources of population to investment process of the fixed
assets renewal. Generally, according to the results of research conducted by
Pankratov E.P. a classification of the most considerable factors of fixed assets
renewal improvement was made.37
In respect to Russian reality there is one more special feature that made it
possible to eliminate scarcity. It is well known that nowadays construction only
consumes production facilities, but does not produce them, 38 although in 70s-80s
of the last century construction companies created a lot of construction machines
eliminating their scarcity. Since generally there was still a scarcity of
construction machines any new asset had high indicators of utilization
efficiency. This trend still exists in current economic environment as well. 39
That applied to equipment of both factory production and construction
companies own production.
Plant and equipment provide construction and installation works
performance that lets a company get profit. That is why plant and equipment
state analysis is an important factor, that improves economic efficiency and
competitiveness of a company.
Any company has to use its own machinery as efficiently, as possible for
cost saving and tax-optimization. And to cope with the task a company first of
all has to optimize fixed assets structure according to its intended activities.
Besides a company has to renovate its own fixed assets up to date and use them
effectively cutting costs and optimizing the tax burden.
Improvement of asset utilization depends a lot on a system of relevant
indicators, that characterize the level of asset utilization efficiency. One of the
36
Innovations in leasing of construction equipment and machinery. Poltava A.V. in the collection:
Modern problems of economic management of the transport complex of Russia: competitiveness,
innovation and economic sovereignty. International scientific and practical conference dedicated to the
85th anniversary of the Institute of Economics and Finance of MIIT. Moscow state University of
railway engineering, Institute of Economics and Finance. 2015. P. 200-201.
37
Pankratov E.P., Pankratov O.E. Fixed assets of construction: reproduction and renewal /
Monograph. International Academy of investment and construction Economics. - Moscow:
Ekonomika, 2014.
38
Kaverzina L.A. Lukovnikova E.I. Normativno-pravovaya baza opredelenya strategicheskoy roli
stroitelstva v razvitii regionalnoy economiki// The world of economics and law. 2014 - № 4-5 – p. 4758.
39
Pankratov E.P. O povyshenii investitsionnoy activnosti obnovlenya osnovnyh fondov stroitelstva//
Vestnik Rossijskogo gosudarstvennogo torgovo-e`konomicheskogo universiteta (RGTE`U). - 2012. No. 3. - p. 75-82. [in Russ.]
128
primary indicators is the capital productivity ratio. According to researches of
Soloviov V.V. who studied machinery utilization in transport construction and
made a post-event analysis of it in the context of lifting facilities and cranes, the
indicators of the capital productivity ratio have a spread in values in favor of
Soviet-era when basically there was a provision of domestic machinery and
there was a certain scarcity of plant and machinery that made it possible to use
them better and get more production efficiency unlike the present time when the
market is saturated by both imported and domestic machinery. All that time
machinery provision was followed by a significant decrease of domestic
machinery production and a dramatic rise of import. Besides in Soviet-era there
were a lot of irregular lifting appliances produced by construction companies
which had, by the way the best capital productivity ratios.
For example indicator values of the capital productivity ratio for railway
cranes changed from 1.07 in 1980s to 0.97 in present time, for semimobile
cranes – from 1.12 to 0.86, for trestle cranes and pillar cranes – from 1.1 to 0.79,
for tracklaying cranes – from 1.08 to 0.8.7 It is obvious that nowadays capital
productivity indicators of building machinery of many Russian construction
companies are even less than 1, that shows underuse of equipment in
construction combined with high operating costs. It should be noted, that the
representative selection refers to construction projects with rotating scheme of
work organization that as a rule helps to get better indicator values of the capital
productivity ratio. Therefore the results show that the issue of the efficient
machinery utilization is more relevant now that the issue of the machinery
scarcity because of a lack of means.
On the other hand, it is worth mentioning that actually capital productivity
ratio does not make it possible to evaluate asset utilization degree completely. It
is in direct proportion to labor productivity and reciprocally proportional to its
capital-labor ratio. That is why the sector development is efficient when increase
of labor efficiency is higher than the capital-labor ratio.
It is necessary to decrease labor requirements and at the same time
increase capital-labor ratio. There are some factors like a list and a structure of
works, resources price change, that affect capital productivity ratio and do not
depend on the asset utilization efficiency.
Having analyzed the indicators it is possible to make conclusions about
fixed assets utilization and if it is necessary make decisions how to use fixed
assets better. Possible improvements basically can be implemented by two ways:
1)
Increasing of time utilization (extensive way)
2)
Output growth (intensive way)
Fixed assets utilization improvement is achieved by means of shiftworking arrangements rise, outage reduction, downtime reduction, movement
delay decline, seasonality of production elimination. Fixed assets utilization rate
may be provided as a result of different measures such as: introduction of
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advanced methods of construction technology and organization, prefabricability
of construction growth, talent management increase and others.
Although special indicators of fixed assets utilization efficiency are
basically applied for assessment of separate enterprises activity, they are able
finally to predetermine macroeconomic effects of the sector and the national
economy in general.
Lately the situation with machinery has got better that made it possible to
create great infrastructure objects both in transport construction and other
construction sub-sectors but the problem of fixed assets utilization is still
relevant in all the levels of Russian economy. Nowadays when there are more
means for fixed assets renewal there is no such an urgent need for enterprises to
create their machine train the right way. The problem is even getting worse.
One of the reasons of decline asset utilization is the absence of
scientifically-based normative base of machine need in construction. As a result
construction companies do not have an opportunity to determine their own real
needs for fixed assets according to their quantity and structure of work. That is
why some of them have extra machinery and others cannot complete
construction site works because of lack of machinery and finally lose money.
The researches show that with the increase of machine provision to some
limit all the indicators are getting better but when the limit is exceeded it leads
to oversupply of machines and their underuse.
In order to determine a rational range of machine application and a
rational capital-labor ratio for the best efficiency of construction companies the
researches were conducted, which made it possible to estimate that the best
production figures correspond to the capital-labor ratio equal 270-280 thousand
roubles for a million roubles of construction and installation works. The
overrunning leads to machine oversupply of construction companies, machines
underuse, machinery operating cost growth, cost development and labor
productivity. Those researches were conducted for construction enterprises in
agriculture by Pankratov E.P. Therefore, limits of the capital labor ratio were set
which make it possible to determine oversupply of construction machines and
make right conclusions concerned equipment provision in construction
companies.
The same approach is strongly needed for transport construction. Because
as it was shown above there is a certain machinery underuse in construction
companies implementing great projects of transport infrastructure construction
using budgetary funds. And if before researches like this were relevant because
of a lack of investments then now they could save a considerable amount of
budgetary funds. It is well-known that major projects using budgetary funds do
not have any lack of machinery. On the contrary, the quantity of construction
machines makes one doubt of their application necessity and their further use.
And in order to avoid these doubts and make sure of appropriate expenditures as
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per their intended purpose there is a definite feasibility of economic methods of
regulating the equipment configuration application.
In order to create such methods it is necessary to collaborate with
construction companies to help get more initial information about their
machinery use for further calculation of the indicators of fixed assets utilization.
But construction companies faced with solving more important problems
of their survival do not find time and other resources to pay attention to it. The
problem is getting worse because of the absence of relevant data about
construction companies activity. That is why there is a strong reason to conduct
researches like this and make them fiscal because as we indicated before it is not
only a particular problem of separate construction enterprises. As long as
creating of economic methods of regulating the equipment configuration is able
to produce macroeconomic effects the government is supposed first of all to be
interested in it as obviously market players in sustainable market conditions
have to pay proper attention to these issues for their own sustainable
development.
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CHAPTER 6. TRANSPORT INDUSTRY FINANCIAL ISSUES
6.1.
FINANCIAL ENVIRONMENT OF ENTREPRENEURSHIP AND
BUSINESS RISKS
Economic development is impossible without management of related
economic and other risks. Risk management and risk appetite form an essential
basis for the progress of economy and society.
Risk means doing business under conditions of future results uncertainty,
which can be either positive and offer new opportunities or negative therefore
threatening economic development. Risk can be categorized as an outcome of
economic factors (source-based risk), which affects economic stability of an
organization (type-of-influence risk), resulting from economic activity.
As any economic category business risk can be described through its
functions. Most researchers traditionally outline constructive, destructive,
innovative, defensive and analytical functions of a risk.
Constructive function is achieved as risk being a driver of new social and
economic activities as it facilitates creativeness, result-focus and problemsolving.
Risk can be destructive when business decisions are taken with unjustified
risk resulting in adventurism and voluntarism.
Risk can also act as a defensive mechanism due to historical and social
aspects as entrepreneur`s right for risk being fixed in law.
Compensating and social-economic functions are also attributable to
business risk.
Compensating function creates additional benefits for a risk-taker
compared to planned results if outcome of risk is positive.
Social-economic function under conditions of market competition outlines
groups of efficient proprietors of businesses and even industries where risk is
acceptable. Government interference when market risk is in place limits
efficiency of risk’s social-economic function. Although being aside of regulating
risks of market participants the government should not limit its responsibility for
facilitating stable and safety conditions for business operations therefore
decreasing uncertainty of business environment and increasing predictability of
future. This specifically relates to market participants who require special and
social support and care.
Economic essence of risk, its social and economic mission are reflected in
the following functions: adaptive-cognitive, redistributive, stimulating and
supervisory.
Adaptive-cognitive function means that every new potentially risky
situation is estimated by market participants (sometimes even unconsciously)
via the historical experience of the mankind. Adaptive-cognitive function of risk
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enables people to act and adapt their actions to current market conditions using
continuity, experience and intuition.
Redistributive function as a part of social reproduction process is
responsible for shifting cash and material resources from inefficient market
participants who underestimated business risk and suffered economic
consequences to those risk-takers whose risk was justified and successful.
Stimulating function means motivating market participants to take extra
risk to get extra benefits (i.e. additional revenue, income, reputation and other
types of market success).
Supervisory function is attributable to risk as economic category. The aim
of risk’s supervisory function is to facilitate smooth and efficient economic
processes in the society supervised by government authorities.
Along with the above-mentioned functions some other ones can be
outlined, such as development function and methodological one.
Development function under conditions of business risk is based on the
following:

development is impossible without risk;

development is impossible without investments and attributable
risks;

development is impossible without business activity of market
participants;

development is impossible without taking risk;

development is impossible without considering internal and
external environment change.
Methodological function under risk condition is realized through applying
standard approach to identify, describe, evaluate, classify, monitor and manage
different types of business risk.
Classification of business risks can be rather complicated due to different
types of uncertainties in place.
Depending on a scale business risks can be classified as internal and
external. External risks can be further broken up into national (attributable to
economy of one country) and international (related to economies of different
countries).
National risks include:

macroeconomic risks, threatening all sectors of country’s economy;

microeconomic ones, attributable to specific enterprises,
organizations and other market participants.
Macroeconomic risks can be of two types: government-related risks and
local risks. State-related risks are attributable to state authorities, while local
risks relate to specific projects and arise in a specific industry and/or region.
State-related risk arise while country’s economic strategy is being
developed, when different priorities and scenarios of a country development are
chosen and implemented.
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Risks can be also classified according to the subjects of risk and types of
exercise. The subject of risk can be an individual, or an organization exposed to
risk and being aware of it. The principle risk-takers are:

business enterprises;

individuals (entrepreneurs, owners of businesses);

other subjects of risk (non-profit organizations, including state
authorities).
Internal risks can be also classified depending on different types and
features. Business risk type is a group business context attributable to similar
situations or risk awareness, decision-making processes and market participant
behavior under conditions of uncertainty. Several types of risks can be outlined:

production;

investment;

financial;

merchant;

complex;

banking.
The last type of risk is often viewed as a separate category due to its
importance and specific implementation, although it is often considered to be a
part of financial risk.
Exercise type is often characterized as a combination of a specific subject
of risk and risk-event. Exercise type is a more specific concept of a risk type as
in similar business case there can be several types of one risk in place relevant to
situation. Besides, there can be different types of risk in a similar business case
for different market participants.
Let us outline major exercises types for the most important type of market
participants – production enterprises. Among production risks the most
important ones are risks of business interruption and irregularity of production
process. Production risks are further subdivided into industrial production risks
and other risks (mostly, agricultural).
Investment risks for production enterprises arise most often on preproduction stage of business cycle. Investment (and innovative) risks being
essential for business development will be further explained.
The major type of financial risks exercise for production enterprises is a
loss of liquidity and threat of bankruptcy. Risks of reduced income and risks
related to investments in different types of securities are also attributable to
financial risks.
Merchant or trade risks for production enterprises materialize mostly in
insufficient inventory or lack of demand for it.
Inflation risk is a major type of exercise of complex risks.
The major types of banking risks exercise are credit, interest, bank
liquidity, liquidity of transactions and settlements, fraud risks.
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The major type of risk exercise for individuals are:

production risks – loss of labour capacity and productivity;

financial risks – failure to fulfill financial obligations when dealing
with securities;

merchant risks – non-meeting the demand and workplaces.
The major types of risk exercise for enterprises are:

currency risk;

merchant risk of public services demand;

complex risk of market participants’ reaction on economic
watchdog activities, etc.
Sometimes dynamic and static risks are also outlined.
Dynamic risk arises due to unforeseen changes of capital cost because of
business decisions taken or sudden changes in market or political environment.
Such changes can lead to either negative (losses) or positive (additional revenue)
outcomes.
Static risk of assets loss arises because of property damage and loss of
revenue due to insolvency of enterprise. The result of static risk exposure is
usually negative and results in losses for enterprise.
Depending on sources of origin the following risks can be outlined:

risks related to business activity (financial and technological);

risks related to personality of entrepreneur (behavioral and
managerial);

risks arising due to lack of information of external environment (on
micro and macro levels).
Depending on timing business risks can be broken down into following
groups: long-term, short-term and permanent.
Short-term risks are those which affect enterprise during a known
timeframe, for example exposure to transport risk when goods are transported,
or settlement risk when specific contract is executed.
Long-term risks remain in place for a longer period than foreseen timehorizon, for example construction risks and risks arising when new technology
is being developed.
Permanent risks are those which are always a threat to business activity in
specific region or industry, for example liquidity risk in a region with imperfect
legal system or destruction risk for buildings in a seismically active region.
Depending on level of exposure such types of risks as acceptable, critical
and catastrophic can be outlined. Level of exposure is defined for each
enterprise individually.
Acceptable risk is the one which can be taken and overcome by a risktaker without changes in its business activity.
Critical risk is named so because when an enterprise is exposed to it,
significant change of business activity of a risk-taker is required, including
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concentration of all available resources (including managerial) on to overcome
it, as well as adjusting business tasks and providing economic safety for a
market participant.
Catastrophic risk during exposure leads to a collapse of an enterprise.
Risk management in such case is limited to a proper business liquidation with
minimal losses to its owners.
Classification of business risks
To adopt a consistent approach to formalizing potential threats, risks need
to be classified by their source.
Risk classification means breaking them down into groups using specific
criteria aligned with the purpose of the exercise.
A research-backed framework for risk classification helps to clearly
identify the place and role of each risk within the system of risks. When
classified, risks can be effectively managed using risk-specific tools and levers.
Financial fragility risk (risk of financial imbalances in a business). The
risk is caused by a suboptimal capital structure (excessive leverage) that results
in volume mismatches between business’s cash inflows and cash outflows.
Bankruptcy risk (unbalanced liquidity risk in a business). The risk is
caused by a decline in the liquidity of current assets, which brings about timing
mismatches between a business's cash inflows and cash outflows.
Investment risk. The risk shows the probability of financial losses during
a business’s investment operations. Investment risk types correspond to
investment types and include real investment risk and financial investment risk.
Inflation risk. The risk describes the likelihood of a decline in equity value
(expressed as a business’s financial assets) and in expected proceeds from
financial transactions. In today's environment, this risk is permanent and is
inherent in almost all financial deals that a business may be engaged in.
Interest risk. The risk reflects an unexpected change of the financial
market interest rate (both for deposits and for loans). It is caused by changes in
the financial market environment as a result of government regulations, growing
or squeezing free cash, and other factors. The implications affect business’s
securities offerings (equity and bonds), dividend policy, short-term financial
investments, and other financial transactions.
Currency risk. This risk is inherent in businesses engaged in international
trade (importers of raw materials and feedstock and exporters of end products).
It shows the likelihood of failure to receive expected earnings and arises from
changes in relevant foreign currency exchange rates and their subsequent impact
on expected cash flows from international transactions. When importing raw
materials and feedstock, businesses are at a disadvantage when a foreign
currency exchange rate rises against the national currency. Similarly, a declining
FX rate causes financial losses for businesses engaged in end product exports.
Bank deposit risk. This risk is associated with the inability to claim cash
from bank deposits or have deposit certificates repaid. It is a relatively
136
uncommon risk that arises from improper assessment and selection of a
commercial bank for depositing purposes.
Credit risk. This risk exists in financial operations of a business that
provides commodity or consumer loans to its customers. The result is the
customers' failure to pay or untimely payment for the products supplied under
loan agreements.
Tax risk. This risk can be expressed as one of the following: introduction
of new taxes and charges applicable to certain areas of doing business; increase
in the rates of existing taxes and charges; changes in payment terms and
conditions for some of the tax payments; cancellation of privileges and benefits
currently available to a business.
Innovation risk. This risk is associated with introduction of new financial
technologies and use of financial instruments.
Fraud risk. In financial transactions of a business, this risk means the
likelihood of a bankruptcy fraud, forfeiture of documents to enable third parties
to misappropriate cash and other assets, embezzlement of certain types of assets
by employees, etc.
Other risks. They include the risk of natural disasters and other force
majeure risks that can cause a business to lose part of its expected earnings and
some of its assets (fixed assets and inventories), e.g. risk of untimely processing
of cash management operations, securities issuer risk, etc.
The rationale for building a corporate risk management framework at
Russian Railways is the associated financial benefits and the need to put
proactive management tools in place. As such, the company’s understanding of
the necessity to introduce corporate risk assessment and management points to a
high maturity level of ongoing and strategic decision making.
Key approaches to building a risk management framework
Effective risk management is a consistent ongoing process that spans all
organizational layers and is integrated with key business processes in order to
contribute to better managerial decision making. Risk identification, monitoring
and assessment need to be incorporated into operations and investment planning
on a regular basis.
A consistent approach to risk management ensures operational
sustainability against the backdrop of external uncertainties that affect the
financial performance of the business. To respond to the ever-changing
environment, businesses need to build and maintain an effective risk
management framework based on a clear structure, adequate resources, and
alignment with business strategy and targets.
The key approaches to building a risk management framework are as
follows: integration, consistency and continuity, integrity, economic rationale
and responsibility.
Integration: risk management is an important element of corporate
governance and is embedded into the overall governance framework. Risk
137
management processes need to be integrated into key business processes,
including business planning and target setting. Risk management covers all
business functions and units.
Consistency and continuity: risk management needs to be a consistent
ongoing process that involves a structured sequence of regular risk management
procedures in line with the changing internal and external environment.
Integrity: businesses need to manage specific risks and implement
relevant processes as a part of their overall risk management framework.
Economic rationale: risk management framework needs to be aligned with
the size, organizational structure, strategy and goals of the business. Risk
management needs to balance associated costs and the cumulative impact of
risks on the business given the probability of risk (total risk level). Allocation of
financial and other resources to risk mitigation measures needs to be based on
the risk's materiality for the business, the priority of risk response and expected
outcome.
Responsibility: risk management needs to be among the responsibilities of
all business functions, units, officers and employees of the business.
Estimation of risk
Estimation of risk can be quotative, qualitive and mixed. Different
enterprises use different methods of estimating risk outcomes and probabilities
of events. For most enterprises it is enough to use three-dimensional method of
estimation – high, medium and low level.
Any system of risk estimation should achieve the following minimum:

reliability and efficiency of business process

efficiency of internal control

adherence to legislation and regulations.
Risk management provides reliability and efficiency of business activities
of enterprise through defining risks which require attention of management and
defining priorities of risk according to business targets of an enterprise.
Efficiency of internal control is defined as degree at which risk can be
reduced or avoided by using procedures of internal control. Methods of control
are estimated versus absence of such methods and its costs.
Adherence to legislation does not assume any other scenarios expect
fulfilling its requirements.
The basis for financing risk is insurance although it is worth mentioning
that some risks cannot be insured.
Monitoring of risk
Efficiency of risk management depends on ways of controlling and timely
notification about changes of risk management. Appropriate monitoring allows
to:

analyze efficiency of used methods of changing the level of risk;

provide suitable level of information;
138

accumulate required knowledge for further steps in analyzing and
estimating risk and methods of managing it.
Risk monitoring is of a great importance for timely adjustments of risk
management system. Besides, monitoring provides valuable information for
estimating efficiency of procedures of decreasing level of risk exposure and
efficiency of risk-financing. Proper monitoring allows to identify and analyze
risk of an enterprise on professional expert level.
Risk management allows market participants to act efficiently under
conditions of uncertainty and related risks and use existing opportunities for
growth.
6.2.
ESTIMATION AND ANALYSIS OF STATISTICAL DATA FOR
TRANSPORT COMPANIES AT FINANCIAL MARKETS
Many financial and economic problems need quantitative solution in
modern financial world. The theory and practice of finance call for more
intensive usage of mathematical analysis, mathematical statistics, econometrics,
optimization methods for accurate evaluation and analysis of investment
problems, finance risk management, finance markets behavior and solution of
complicated problems as a whole. Company specialists connected with financial
services (or financial markets) must be able to use all range of quantitative
methods as a base of their activity. Here we tried to present main mathematical
methods for solving the basic problems and to describe the most important ones
for transport companies.
Evaluation of future cash flows
Financial analyst must usually consider a lot of future investment
proposals and, after theoretical evaluation, choose the best one. Process of
simple interest discounting for the short time activity is used. We have to find
present value (PV) of future long-time flows by applying compound discount
factor to the future sums. It is necessary to remember, that we can compare only
values, discounted to the one time moment - the focal date, fixed at the
beginning of calculations. Financial mathematics uses a well-known formula
kn
FV  PV 1  i k  ,
(6.1)
where PV – present value;
FV – future value;
i – nominal interest rate;
k – number of interest computations during a year;
n – time from appearance of FV in the financial flow to the focal date.
Sometimes it is useful to consider discounting with continuous
discounting rate:
PV  FV in .
(6.2)
139
PV, FV and n are the same as in (6.1), i – is the force of growth – the rate
used in continuous financial processes.
Continuous rates are rather the theoretical problem but they allow an
efficient use for more complicated processes (for example, containing floating
parameters). It is efficient to turn to equivalent continuous rates for evaluation of
financial flows with different future sums and different compound interest rates.
Calculation of future cash flows is of great importance in evaluation of
financial instruments, investment problems, leasing and many other problems.
Now we consider not the financial rents, but processes with irregular sums and
irregular time between them.
For example, if you want to find the profitability of leasing, make an
equation where present cost is equal to the sum of discounted future values. The
interest rate in the equation is the profitability. Of course, the practical solution
of equation uses special numerical methods. Well-known computer programs
realize the solution with great accuracy. Calculations allow comparing the
different variants of future flows and finding the best one for the investor.
Analysis of investment projects uses the idea of discounted future values
also in comparison with the present costs. Both Net Present Values, Payback
Period, Internal Rate of Return and other problems allow formalization and
solution using the idea of discounted flows. Some of them are described in detail
in special literature.
Problems of calculation at financial (especially security) markets are an
important part of our work. Financial market is the market where money funds
are the commodity: owners sell funds to users. Securities (as money funds)
belong to security market (shares, bonds, futures, etc.; as a whole – financial
instruments). The problem of assessment of such instruments and calculation of
their rate of return by statistical data or instrument parameters is of great
importance nowadays.
Let us try to assess the present value of bonds and shares by their
parameters.
Bonds:
For zero-coupon bonds present value is equal to future value (nominal
value of bond) discounted by time T with compound interest rate.
Present Value for coupon bonds value is determined as sum of discounted
coupon future values (every coupon is discounted by own period using market
interest rate) plus discounted final payment (principal at maturity). Individual
spot-rates differ for complicated cases.
We can find yield to maturity (YTM) for all these kinds of bonds from
equation for determination of present value. If we know present value of bond,
nominal value and coupon, then interest rate in the equation means YTM.
Duration is one more interesting bond parameter. Professionals of security
market calculate duration comparing bond price change with the change of
market interest rate. Duration is the relation of weighted discounted coupon cash
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flow to the simple discounted coupon cash flow (discount rate here is YTM).
For financial specialists the duration shows the level of risk, but there is no
sense in comparing bonds with different terms. We propose to divide the value
of duration by its term, and obtain value “d”:
0 < d < 1.
(6.3)
Bonds with small “d” mean less risk for the bond-keeper, than bonds with
big “d”. It is interesting for investor at the stage of choosing the bond.
Shares:
We usually calculate the present value of ordinary share as present value
of all future dividends using average market rate for discounting. Of course,
dividends have own rate of growth. If rate of growth is constant, we use Gordon
model for share present value. As shares are termless, all these methods have
weak points. There exist other ways in financial theory. We do not discuss them
in this article.
Present value of preference shares with constant dividends is the sum of
infinite geometrical progression:
(6.4)
PV  div i ,
where div – value of constant dividend;
i – market interest rate.
Mathematical statistics for financial market and other problems
Now we shall speak about discreet data only because all market data are
usually discreet. Data may or may not form a group. It is important, that we can
calculate average, dispersion and standard deviation by these data. All indices
are in accordance with the ideas of probability theory and its numerical
characteristics, describing the prime statistical series.
By the way, the dispersion and standard deviation are numerical
characteristics of risk in many financial problems, such as price of share, credit
activity, investment portfolio problem and others.
The analysis of real financial and socio-economic processes requires the
processing of large amounts of statistical data. It is often necessary to evaluate
the numerical values of various parameters, to check assumptions, to establish a
connection between the factors. We use methods Identifying patterns in the
statistical data allows us to make informed decisions and make reliable
forecasts.
We make the statistical distribution of the sample (series) after the initial
processing of statistical data. It can be simple or interval (in case of large sample
size) one.
x sample average:
x
k
k
n
1 n
1 k
xi   xi  ni   xi  i   xi  wi .

n i 1
n i 1
n i 1
i 1
 wi
141
(6.5)
Sample variance is the arithmetic mean of the squared deviations of the
variants from their mean:
DB   B2 
n
1 n
1 k
2
2
2
x

x

x

x

n

 i 
 i  i   xi  x   wi .


n i 1
n i 1
i 1
(6.6)
Standard deviation exists, too:
1 k
2
S S 
 xi  x   ni , (n > 30).

n  1 i 1
2
(6.7)
These calculated parameters serve as point estimates of the distribution
parameters of the random variable.
In addition to point estimates, it is possible to construct interval estimates
for various parameters under study.
Inspection of statistical hypotheses
The initial information on statistical calculations already makes it possible
to apply the theory to practical financial problems.
Statistical hypothesis is hypothesis on the form of an unknown
distribution or the value of parameters of a known distribution. The procedure
for inspection is elaborated for popular hypotheses, the proper tables for
different distributions are available.
The hypothesis put forward for inspection is the null one, the opposite
hypothesis is competing or alternative. We accept the conclusion about the
validity of the null hypothesis with a probability of error type 1, considering the
given level of significance.
Example. The manager of credit department of a large company wants to
find out whether the average monthly balance of credit card holders is R75.000.
He randomly selected 100 accounts, the average monthly balance of owners was
R83.with a selective standard deviation of R23.. Task: with a significance level
of 5%, determine whether the manager's statement average balance is different
from R75.is true.
Solution:
Proceeding from the condition of the problem, we formulate the
hypothesis:
H 0 : m  75000rubles (average card balance = R75,);
H1 : m  75000rubles (the average balance of cards is different from
75 000 r);
 2 – unknown; n > 30 Significance level.
To test the hypothesis H 0 we apply recommended criterion (it is random
variable with a known distribution law) and proper critical region.
z
x  m0

(two-sided critical region).
n
We calculate the observed value of hypothesis z
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(6.8)
z
x  m0

?
n
m0  75; n  100;  s  23.65; x  83.4 ;
83.4  75
z
 3.5518 .
23.65
100
Critical area:
We find the critical point in proper tables
5)
The observed value of the criterion falls into the critical region (3.5518 is
more than 1.96); z U .
Consequently, the null hypothesis is rejected, i.e.at 5% significance level,
the assumption about the balance of cards is incorrect.
This example is quite simple, but there are examples of much more
interesting practical tasks in financial analysis.
For example, possibility to compare the work of company divisions,
verify different information, inspect the financial decisions. The theory of
statistical hypothesis is very useful in practice.
Correlation
Important problem in financial analysis is the investigation of connection
between two or more random variables given in statistical data. For example,
evaluation of portfolio risk (securities or credits) call for knowledge, if the
prices of share X and share Y rise simultaneously or not. We are to find
covariation and correlation by statistical data. Covariation demonstrates if
dependence exists or not. It can be positive or negative, but it does not show the
strength of connection between two random variables. You can divide
covariation by multiplied standard deviations of variables and obtain an index
“correlation coefficient”. It is dimensionless. We shall call it correlation. Its
value lies between -1 and +1. If the value of correlation is equal to -1 or +1, then
we have full linear dependence between variables. If the value lies near zero,
then variables are practically independent.
Estimation of risk for security portfolio demands for calculation of
covariation and correlation coefficient for all existing pairs of securities. Then
we can estimate the portfolio risk in accordance with Harry Markowitz portfolio
theory.
Problem of estimation is useful not only for strict market specialists. In
statistical analysis of all problems, where “average value” is important and
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standard deviation means risk, we can apply portfolio theory and calculation
formula of H. Markowitz.
In addition, we can find the optimum solution for the problem of risk
minimization, which is interesting for practical usage: finding the best portfolio
composition with given profitability, choosing set of companies with given gain
and minimal risk and many others.
Regression equation is rather well-known and widely implemented, so,
we’ll not discuss it here.
Modern state of financial and economic problems calls for mathematical
solution, using new methods and digital abilities. Transport companies are able
to improve the financial indicators in accordance with the rules of digital
economy.
6.3.
RISK-BASED METHODS IN INVESTMENT APPRAISAL
Risk-based Methods in Investment Appraisal
For a person in charge – a Project is collaboration of processes, involving
observing, design and enterprise’s creation. An idea takes shape from related
tasks solved in certain period to rich particular results. For business people, such
as investors, a Project is a way of spending money to gain a profit. Investors
could not spend money blindly, so they need clear view of how much money
they spend for what benefit.
Nowadays Investment Appraisal Theory gives answers to the investors
about project profitability and effectiveness, using mathematical methods and
techniques. Investment Appraisal methods include a few stages as follows.
The pace of Russian economic development requires an appropriate
improvement and development of the country’s railway infrastructure since
railway is Russia’s main transport system.
The investment program of the Russian Railways has main tasks as
follows:
- eliminating bottlenecks on the rail network’s main routes;
- renewing rolling stock;
- ensuring the operational reliability and security of the transportation
process;
- imparting new performance and operational characteristics to the railway
infrastructure.
High-speed railway lines are new specialized railway lines designed for
trains travelling at speeds of between 200-400 km/h.
The construction of these lines is associated with an increased level of
risk, which should be taken into account when determining the discount rate for
similar projects. However, such projects in Russia are of great national
importance and implemented through public-private partnerships. The overall
144
economic, social and environmental impact of their implementation should be
taken into account.
Таble 6.1 – The Russian Railways Investment Program – Score
Indicators, mln. Rubles
Project Title
2016
2017
2018
Expenditure Expenditure
Target
Total, including:
376,371.7
479,491.0
549,589.9
The Government projects
173,705
194,403
210,894
The Russian Railways’ own
202,666.6
285,087.7
338,695.6
projects:
Ensuring rail transport safety
41,666.1
114,805.6
97,514.3
Removing infrastructure constraint
45,171.5
62,451.1
108,291.4
Improving the Russian population's
12,246.2
15,608.1
9,564.0
access to transport
Renewing rolling stock
91,337.6
76,964.1
104,641.6
Other Projects
12,245.1
15,258.7
8,757.7
In general, we see a positive trend in virtually all components of the
investment program, with the exception of targeted investments for the renewal
of rolling stock. Until 2017, we observed a negative trend in spending on
ensuring the safety of rail transport with a lower peak of 41,666 million rubles in
2016, then beginning in 2017 there was a sudden 3-fold jump in these
investments, most likely due to construction of high-speed railway lines.
Risks related to the implementation of the investment program of the
Russian Railways may arise during the transition period when the fleet of
locomotives is updated (if there is a significant time gap between the old park's
decommissioning in large numbers and the commissioning of a new fleet).
Having analyzed a number of normative documents of the Russian
Railways, we can conclude that the risk assessment of transport complex
projects can be carried out based on the results of a comprehensive risk analysis
of business processes caused by this project or the deviation of the cost of
existing business processes through in-depth analysis of business processes.
The analysis of the process involves a thorough study of the process (or
part thereof) to achieve its full understanding in order to maintain or achieve
superiority of the process over similar processes of competitors, to carry out its
continuous improvement or transformation. The analysis of process carried
includes the study of the external environment of the process.
The analysis of the processes includes the study of the external
environment, the significant factors of the Company's internal environment, the
requirements of regulators and industry standards, market development trends,
level and type of competition.
Key factors to consider in the process analysis are:
interrelation with strategic goals of the Company;
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purpose (s) of the process; the place of the process in the integrated
process model of the organization and operation of the Company;
the nearest target state of the process;
problems that prevent the achievement of the nearest target state of
the process;
used process control technology.
Method of calculating the net present value (NPV)
This method is based on the calculation of the gap between the total
project Net Cash Flows and Investments called Net Present Value (NPV).
Obviously, NPV must be positive making a company’s value growth. Project
with biggest NPV is defined best.
The main advantages of this method are its simplicity for understanding,
information availability, calculations. The disadvantage is that it does not take
into account non-monetary (hidden) nature of some types of costs (such as
depreciation) and related tax savings, the possibility of reinvestment of income,
time of inflow and outflow of cash and time value of money.
N
NPV  
t 0
CFt
1  r 
t
.
(6.9)
Method of calculating the payback period of the project (PBP)
This method is based on the calculation of the number of years needed for
full recovering of the original costs. The time lag when the cash flow of income
will be equal to the sum of the cash flows of costs is an important indicator of
the project effectiveness. The project with the least PBP has to be selected. The
method ignores the possibility of reinvested earnings and the time value of
money. We cannot calculate PBP if it does not make profit for the time being.
There is also improved method, when instead of calculating cash flow as
it is, discounted cash flow is used (the time value of money). Discounted
Payback Period (DPP) is the period over which the discounted cash flows of
income are equal to discounted cash flow costs. This uses the concept of cash
flows taking into account the possibility of income’s reinvestment and the
money’s value overtime. Both versions of this method are easy for
understanding and use. They make us able to judge about a project’s liquidity
and riskiness. Continuous PBP means the prolonged funds immobilization
(reduced liquidity) and increased project riskiness.
However, both versions ignore cash flows after the expiry of the payback
period. They are successfully used in the circumstances when company tries to
maximize revenues in the shortest possible time.
DPP

t 0
CFt
1  r 
t
0.
Method of calculating the interest rate of return (IRR)
All proceeds and project costs are adjusted to present value using a
discount rate obtained on the basis of externally given average cost of capital
146
and based on internal rate of project profitability itself, which is defined as the
rate of return at which the present value of revenues equals the present value of
the costs which means NPV = 0. Thus obtained the net present value of the
project is settled with a net present value of costs. Approved projects are
projects with an internal rate of return exceeding the average cost of capital
(taken as the minimum acceptable rate of return).
This method involves complex calculations and does not always allocate
the most profitable project. The method assumes the unrealistic situation of
reinvestment of all intermediate cash flows from a project internal rate of return.
However, the method takes into account changes in the value of money over
time.
N

t 0
CFt
1  IRR 
t
 0.
Each of the methods of analysis of investment projects provides an
opportunity to consider the individual characteristics and features of the project.
The most effective way to evaluate and select investment projects needs to
recognize the complex application of all the basic methods in the analysis of
each of the projects. Further analysis involves evaluation method, which brings
all methods together for unified model. This is necessary, because most of the
time the lists of projects looks like this:

Investment Project 1:
NPV = 250000; PI= 10%; IRR= 7%; DPP = 7.84;

Investment Project 2:
NPV = 200000; PI= 25%; IRR= 14%; DPP = 9.12;

Investment Project 3:
NPV = 100000; PI= 20%; IRR= 16%; DPP = 8.76;

Investment Project 4:
NPV = 150000; PI= 15%; IRR= 12%; DPP = 6.38;
The other direction of analysis improvement includes movement from
static model into real project. This part includes facts that cannot be taken into
account at the very first look because of uncertainty.
Risks as a part of investment analysis
Every investment includes risks. Risk is potential of gaining or losing of
value. The main difference between statistical expectations and risks is
uncertainty. It means that you can measure only potential because of
unpredictable and uncontrollable outcome. That is why we need mathematics to
turn potential into value.
There are many risks at investment analysis. Indeed, there are so many of
them that there is even no certain method of their classification. Maybe the most
logical method is evaluating of causes. With this classification, we can
determine:

Technological risks;
147

Economic risks;

Political risks;

Social risks;

Environmental risks;

Regulatory risks.
To assess risks, there are few methods that are used in investment
analysis. The easiest of all is analysis of investment scenarios. The best way to
describe this method is example. Let us make very simplified model. According
to gathered information, we have report about project scenarios and percentage
of possibility of them to happen:
Pessimistic
Optimistic
MostProbable
% of
happening
20%
30%
50%
M=
D=
d=
NPV
-15000
25000
5000
7000
196000000
14000
Where: "M" is expected value, "D" is variance and "d" is standard deviation.
As we can see, the result of analysis tells us that Net Present Value of
original model was 5,000, while including risks make NPV take the value of
7,000+-14,000. Even at this stage of analysis we can tell that investments are
risky. Further econometrics analysis will tell us more about degree of risks, but
it is all up to investor to decide, whether to take risks or not.
The other method of analysis is called sensitivity analysis. The outcome
of risks can change volume of production, costs of production or prices.
Changing of such important indicators changes the outcome results. The
relationship between change of basic indicators and change of outcome in result
is called sensitivity in investment analysis. The more this ratio is, the more risks
basic indicators contain.
The last and the most estimated method is discount risk analysis. This
method is based on idea that risks are taken into account by increasing discount
rate. This can be done by giving each risk included number or multiplier and so
adding or multiplying them to the base discount rate.
Most of the time investors use all the methods together. To make
scenarios realistic analysts calculate outcome of risks with discount risk
analysis. To make evaluation of risks more accurate sensitivity analysis may be
used.
At the end, as was mentioned before, investment analysis just gives
accurate information, decreasing uncertainty about investment project. It is up to
investors to decide how to use this information.
There is also one very specific thing about risks. When we are talking
about risks as a part of analysis, we think about certain things that have certain
148
outcome but that is not true. Sometimes set of specific events makes improbable
outcome (as it looks before it happens). This kind of "unpredictable" risks care
called The Black Swan.
The Black Swan: the impact of highly improbable
The Black Swan theory was first introduced by statistician Nassim
Nicholas Taleb. This theory represents the extreme impact of certain kinds of
rare and unpredictable events (named outlier in statistics) and humans' tendency
to find simplistic explanations for those events retrospectively. The term "black
swan" was a Latin expression: its oldest references found in the Juvenal's
expression "a good person is as rare as black swan".
According to Taleb's book "The astonishing success of Google was a
black swan; so was 9/11 black swans underlie almost everything about our
world, from the rise of religions to events in our personal life". Other more
detailed examples and their summarizing are found at first part of "The Black
Swan" book.
The most important part of this work is not influence of such events, but
the reasons of not acknowledging them until after they occur. The answer is
found in the second part of book called "We just can't predict".
Let us have a look at swans. Every swan a person had seen, read or heard
about is white, so the person concludes that every swan is white. However, this
sort of conclusion is inconclusive. You can call it "false conclusion" because
premise was also "false". Black swans come from this kind of "false
conclusions". There are many reasons of black swan to happen, which are
grouped in two: first, is lack of knowledge and second is human psychology.
Because of these reasons, according to Taleb, "triplet of opacity" (three
types of misconceptions) occurs.
First is "narrative fallacy". This type of misconceptions refers to a
person's tendency to construct stories around facts instead of using just statistical
information.
Second is "ludic fallacy". "The Black Swan" shows idea of "finite
knowable worlds ("games") versus infinite and unknowable world ("natural
world"). Therefore, this type of misconceptions shows that you cannot use
models in "natural world" because every model has "rules" that limits
expectations.
Third is "retrospective distortion". This type of misconceptions refers to a
person's tendency to assign retrospective explanations to make events seem
more logical than they are.
Anyway, that is just the beginning of chains of misconception. According
to this analysis, Taleb concludes, instead of trying to prevent "black swans" we
have to accept them and "build robustness against negative ones and be able to
exploit positive ones".
Therefore, according to investment analysis, to build this kind of
robustness, we can divide our portfolio and use small part of it to maximize the
149
breadth of investments. With this kind of investment we won't lose completely
when negative "black swan" happens, and will have profit from positive "black
swan".
At the last part of "The Black Swan" theory Taleb states that a black swan
event depends on the observer. For example, what may be a black swan surprise
for a turkey is not a black swan surprise to its butcher; hence the objective
should be to "avoid being the turkey" by identifying areas of vulnerability in
order to "turn the Black Swans white".
Conclusion
Modern investment analysis theory is highly advanced in terms of
understanding how business works. Use of investment analysis is vital not only
for investors, but also for people in charge of projects. Understanding the
business in terms of money, costs and profit allows organization of healthy
business with positive outcome for everyone included and society itself.
It seems to follow the known proverb "If you want to make God laugh,
tell Him about your plans". Investment analysis works with real projects and
includes analysis of its status and predictions. Predicting the outcome of
uncertain events and making long-term decisions is the most important part of
project management because of amount of money that is allocated.
Despite being advanced, investment analysis theory is still developing. As
life becomes more and more complex and intricate, investment analysis theory
must become more and more advanced to answer the challenge of life.
The investment activity of the entity is related to a whole range of
business processes. Synergetic effect in the implementation of the project will be
obtained not only in the form of NPV but also the cumulative effect of possible
optimization or vice versa rise in the cost of certain business processes. This risk
is reduced if the effectiveness of business processes is relevant to this
investment project additionally analyzed. Despite the complexity to determine,
the project cash flows are adjusted for the cumulative effect of changes in the
cost of business processes and risks. It is especially important to consider when
assessing large infrastructure projects of the transport complex.
6.4.
ACTIVITY-BASED COST MANAGEMENT SYSTEMS
Cost accounting has changed over the recent decades and will continue to
change due to growing information needs for business management. Activity
Based Costing (ABC) has influenced substantially the development of cost
accounting methods.
Management information systems of tracking and providing information
about horizontal aspects of business have lagged far behind managers’ needs.
Activity Based Costing and Activity Based Management make up for this gap
150
by providing cost and operation information in this respect. 40
It is widely believed that the author of the Activity Based Costing is
Robert S Kaplan. However, the main ideas of the ABC method had been
proposed earlier.
In 1971, George J. Staubus, Professor at the Haas School of Business at
the University of California, proposed a cost accounting model where activities
are cost objects instead of final output. This model was used as the basis for the
Activity Based Costing method, which was first described conceptually from a
theoretical and practical point of view by Robert S. Kaplan and William J. Bruns
in 1987 in the book "Accounting and Management: Field Study Perspectives".
The concept of ABC was developed in manufacturing sector of the United
States.
Traditionally, cost accounts had arbitrarily added a broad percentage of
analysis into accounting of the indirect cost or assigned indirect cost with regard
to direct cost proportionally to labour costs.
Industrialization has changed the cost structure of manufacturing products
diminishing also the share of labour costs. In the beginning of the 20th century
labour costs accounted for 50 per cent of the total costs, material costs – 35 per
cent and overhead costs – 15 per cent. This is because production was more
labour intensive. By the end of the 20th century manufacturing became more
machine intensive and overhead costs accounted for 60 per cent of the total
costs, material costs – 30 per cent and labour costs only – 10 per cent.
So, as the share of indirect or overhead costs rose, traditional cost
accounts became increasingly inaccurate, because production activities are
performed both by people and machine while indirect costs were different for
various products concerned.
For example, it may take more time to produce one item than another with
an expensive machine, but since the amount of direct labour and materials might
be the same, additional time of using the machine is not taken into account and
the same broad indirect costs percentage is added all around, i.e. when multiple
products share common costs, there is a danger of one product subsidizing
another.
Meanwhile industrialization increased manufactured products range.
Additionally, increasing business competition led to more precise cost
accounting for each product.
In the same breath information processing technologies were improved. It
became easier and cheaper to compile and store information.
The direct costs of labour and materials can be directly referred to the
relevant product. But overhead cost is usually not correlated with direct costs.
And the main question is how to specify indirect costs. This is the main
difference between the traditional methods of cost accounting and Activity
40
Activity Based Costing Topic Gateway Series No. 1 CIMA, 2008.
151
Based Costing.
The main disadvantages of traditional methods are:
1. We can’t see real costs for each product. And the profitability of each
manufactured product can’t be determined.
2. Managers don’t have the information to take operational decisions.
But these methods have advantages too: calculation process is simple,
cheaper, and less time-consuming.
Overhead absorption into products is the main difference between ABC
and traditional costing. Traditional absorption costing uses one general
absorption base, (labour hours, machine hours, direct labour cost) to charge
overhead to products, whereas ABC uses many individual cost drivers as
absorption bases (e.g. the number of orders, or the number of despatches).
There are four steps to implementing Activity Based Costing:
The first stage is to identify the activities for which the cost should be
calculated. At this stage it is necessary to make a bill of activities for each
product and calculate cost pool for each activity.
What do we mean by activities?
Activities are any event, unit of work or task with a specific goal – such as
setting up equipment for production, designing products, distributing finished
goods or operating equipment. Activities consume overhead resources and are
considered cost objects.41
We group production overheads into activities, according to how they are
driven. The total amount of resources consumed by type of activity is called the
cost pool.
For each cost pool, there should be a cost driver.
The second stage is to identify the cost drivers for each activity, that is
what causes these activity costs to be incurred.
A cost driver is a factor that influences (or drives) the level of cost.
The cost driver helps allocating expenditures in a systematic manner that
theoretically results in more accurate calculation of the true cost of producing
specific products.
In other words, the cost driver is a measurement unit, which determines
the amount of the total cost for a particular type of activities. The cost driver is
supposed to change according to activities’ volume.
The direct labour hours have historically been the most common cost
driver. ABC uses many cost drivers as absorption bases (e.g. the number of
orders, or the number of despatches, square meters). More technical cost drivers
include machine hours, the number of change orders, the number of customer
contacts, the number of product returns, the machine setups required for
production or the number of inspections.
The third stage is to calculate costs per unit of activities. For these costs,
41
Atkinson, Anthony A., Bunker, Rajiv D., Kaplan, Robert S., Jung, Mark S. Management
Accounting.: Trans. with English. - Moscow: ID Williams LLC, 2016. - 880 p.
152
we can use the term ‘activity cost driver rate’. The activity cost driver rate is
calculated in the same way as the overhead absorption rate in traditional costing.
However, a separate activity cost driver rate will be calculated for each activity.
It is calculated by dividing the total activity cost (or in other words ‘costs pool’)
by the total cost driver volume.
The fourth stage is to calculate costs of activities allocated to a particular
type of product. It is necessary to multiply activity overhead absorption rate by
the sum of cost drivers for each product.
In the 1980s, the Activity Based Costing was actively advertised as a new
and revolutionary method. But it is worthwhile noting that a similar
methodology for the allocation of indirect costs had been used in the railway
transport field long before the ABC method appeared. In the early twentieth
century, cost drivers in the form of natural gauges (for example, axeskilometres, gross ton-kilometres, reduced gross ton-kilometres and others) were
used to distribute indirect costs by type of movement.
Currently actual indirect costs are distributed by type of activity also using
natural meters.
The Activity Based Costing method accomplishes a two-stage indirect
costs distribution. At the first stage, costs are allocated to individual production
functions. At the second stage costs are allocated directly to the finished output.
The separate cost accounting methodology in the railway transport field is
a three-stage cost allocation system.
At the first stage production overhead costs and general administrative
expenses are distributed to cost-function items of specific (direct production)
costs.
At the second stage, the costs of the track facilities are distributed among
the types of the railway track.
At the third stage, costs are allocated between activities. 42
Activity Based Costing is implemented not only as a cost calculation
method, but also as a management system. ABC generates management
information, which helps to take strategic management decisions.
ABC system identifies the activities within the business and calculates
cost pool for each activity. It helps reduce production costs, identify the main
causes of waste and improve the manufacturing process.
ABC is the most accurate calculation of the cost per unit of product with
high share of overhead costs. It helps taking decisions on pricing, analysing the
production profitability of each product, identifying unprofitable products, and
reducing per-unit costs. It also allows to see the structure of direct and indirect
costs for each product.
On the downside of Activity Based Costing system are the difficulties to
42
The order of separate accounting of incomes and expenses by subjects of natural monopolies in the
sphere of railway transportation (approved by Order No. 225 of the Ministry of Transport of the
Russian Federation of August 12, 2014).
153
introduce it and expensive accounting system. It takes much time to introduce
the system.
Before Activity Based Costing system is introduced in a company, we
need to formulate the objectives to be achieved after the implementation of the
system.
Taking into account that the system requires significant costs for
implementation and collection of necessary information, it should be calculated
whether these costs are justified after the introduction of the system.
When the ABC system is implemented in a company, the materiality
guideline should be used to group overhead costs into more significant and less
significant ones. The most significant costs are the expenditures having the
greatest relative share in the total cost amount and having the greatest impact on
the production costs.
The Activity Based Costing should be used to allocate the most significant
indirect costs, separating them by activity and generating information on cost
drivers for each activity.
Less significant indirect costs can be allocated by traditional methods
using a common cost driver. This way of implementing the ABC system is
simple, cheaper and less time-consuming. It will reduce the costing labour
intensity and will significantly reduce the accounting costs.
6.5.
THE CONCEPT AND TYPES OF INNOVATION STRATEGIES
The choice of a strategy is essential to the success of innovation activities.
A firm’s failure to foresee the changing circumstances and to offer a timely
response can bring it to a crisis. The choice of a strategy is a crucial component
of innovation management activities. A strategy can be defined as a decisionmaking process.
“Strategy” means a set of interrelated activities aimed at enhancing the
viability and strength of an enterprise (Firm) vis-á-vis its competitors. It is a
detailed, comprehensive and integrated plan for achieving intended business
outcomes.
Planning for research and development (R&D) and other types of
innovation activities link to the choice of strategy.
Strategy development pursues two primary objectives:
1. Efficient distribution and utilization of resources. This is an internal
strategy addressing the planning of limited resources such as capital,
technologies, and human resources. It also embraces the acquisition of
enterprises within new industries, withdrawal from undesirable industries,
selection of an efficient “portfolio” of enterprises.
2. Adaptation to the external environment. The aim is to ensure an
efficient adjustment to the change in external factors (economic changes,
political factors, demographic situation, etc.).
154
Strategy development starts with the formulation of the enterprise’s
general objective, which must be clear to all experts. Setting the objective plays
an essential role in linking the firm to the external environment, market and
consumers.
The enterprise’s general objective must account for the following:

The firm’s core lines of activity;

The principles for operating in the external environment (the
principles for trading, customer treatment, maintaining business relations);

The enterprise’s culture, its traditions and the operating climate.
Two aspects must be accounted for when choosing the objective: the
composition of the firm’s customer pool and the needs it intends to cater to.
Setting of the general objective is followed by a second stage of the
strategic planning process – that of objective refinement. E. g. the following
primary objectives can be identified:

profitability;

markets (sales volume, market share);

output;

financial resources (capital size and structure; debt-to-equity ratio;
working capital size, etc.);

production facilities, buildings and structures;

organisation (changes to organisational structure and operations).
For the objective to be achievable, the following requirements must be
accounted for when setting it:

The objective must be formulated clearly and concisely and be
expressed in specific values (monetary, natural, labour);

Each objective must be limited in time and include a deadline for
achieving it.
Objectives:

can be long-term (up to 10 years), mid-term (up to 5 years) and
short-term (up to 1 year);

they are updated to reflect the environment changes and control
results;

must be achievable;

must not be mutually denying.
Strategic planning relies on careful analysis of the firm’s internal and
external environments, which includes:

evaluating the changes occurring or possible over the planned
period;

identifying the factors threatening the firm’s positions;

examining the factors favourable to the firm’s operations.
The processes and changes occurring in the external environment have a
vital impact on the firm’s operations. The primary contributors associated with
155
the external environment are economics, politics, market, technology,
competition. Competition is a particularly important contributor. Therefore, it is
important to identify the main competitors and their market positions (market
share, sales volumes, objectives, etc.).
To this end, it would be practicable to research into the following:

evaluating the competitors’ current strategies (market behaviour,
methods for promoting products, etc.);

examining the impact of the environment on the competitors;

attempting to collect data regarding the rivalling research
developments, as well as other information, producing a forecast of the
competitors’ future actions and mapping out effective response measures.
Careful examination of the competitors’ strengths and weaknesses and
comparing their results versus the firm’s own performance will allow to design
the competition strategy better.
An innovation strategy is the means for achieving the enterprise’s
objectives pertinent to its internal environment.
Innovation strategies are categorised into the following groups:
Product strategies which focus on developing new products, services,
technologies;
Functional strategies which include scientific research, operations,
marketing and service strategies;
Resource strategies which provide for introducing a novelty element into
resources (labour, logistical, financial, information);
Organisational and managerial strategies, which address the changes to
management systems.
The firm’s science and technology (S&T) policy, market position and the
product life cycle theory form the basis for developing the innovation strategy.
Depending on the type of the underlying S&T policy three types of
innovation strategies can be distinguished:
1. Offensive innovation strategy is characteristic of firms operating based
on business competition; it is typical of small innovative firms.
2. Defensive innovation strategy is aimed at maintaining a firm’s
competitiveness within its existing markets. The primary function of such
strategy is to enhance the efficiency of the “cost-result” ratio throughout the
innovation process. Such strategy requires intensive research and development
efforts.
3. Imitation innovation strategy is applied by firms with strong market and
technology positions, which do not specialise in pioneering the launch of
innovations into the market. The strategy implies copying primary consumer
properties - but not necessarily technical features - of innovative products that
have been introduced into the market by small innovative firms or leading firms.
156
Essential (benchmark) innovation strategies are now widely in use. They
target the development of competitive advantages and are therefore referred to
as growth strategies.
Essential growth strategies are divided into four groups:

Intensive development strategy;

Integration development strategy;

Diversification strategy;

Reduction strategy.
When implementing an intensive development strategy, a firm enhances
its potential by improving the use of its internal reserves and the opportunities
provided by the external environment.
There are three known intensive development strategies:

«An existing product in an existing market»: the strategy is aimed
at gaining deeper market penetration with a specific product;

«A new product in an old market»: a product innovation strategy,
involving the development of a product with a set of new consumer properties
for sale in an old market;

«An old product in a new market»: a marketing innovation strategy
addressing the sale of a familiar product within new market segments.
There are three integration development strategies:

vertical integration with suppliers;

vertical integration with consumers;

horizontal integration (cooperation with competitors within the
same industry).
There are also three diversification strategies:

Product engineering strategy, a product strategy addressing the
search for and utilisation of further opportunities within the business; the
strategy implementation pattern: new product – old technology – old market;

engineering and technology strategy assumes modifying the product
and technology; the strategy implementation pattern: new product – new
technology – old market;

engineering, technology and marketing strategy assumes the
following implementation pattern: new product – new technology – new market.
Reduction strategy consists in companies’ detecting and reducing counterproductive expenses. Such measures entail the acquisition of new types of
materials and technology and changes to organizational structure.
There exist several types of reduction strategies:
 Management (organisational) strategy: modifications to the company
structure, and consequently, elimination of select structural units;
 Local innovation strategy: production cost management associated with
modifying select enterprise units;
157
 Technology strategy: technology cycle modification aimed at reducing
manpower and general costs.
An innovation strategy, developed with the use of the product life cycle
theory, accounts for the phases that the product passes through. Sometimes the
innovation life cycle embraces several stages: initiation, ideation, approval,
stabilisation, simplification, decline, exit and destructurisation.
1. Initiation. This turning point is characterised by the appearance of a
budding new system in an old environment, which requires the restructuring of
all operations.
2. Ideation. At this stage a new system arises, largely mimicking the
systems it spurred from.
3. Approval. This stage sees the emergence and shaping of a system,
which starts competing on an equal footing with those created previously.
4. Stabilisation.Crisis summary: the system enters a phase, when it
exhausts its potential for further growth and approaches maturity.
5. Simplification. This phase marks the decay of the system.
6. Decline.Crisis summary: it is often at this point, that most vital
functions of the system show decline.
7. Exit. At this phase within the life cycle the system returns to its initial
state and prepares for transition to a new state. Examples include modifications
to the functions of the operated equipment or collapse of a firm, which has
separated from a transnational corporation.
8. Destructurisation. All of the system’s processes stop or it is utilised in a
different capacity, or it is recycled. The firm goes into liquidation; as a rule, this
means its conversion to other products.
According to the contemporary economic science, in each specific period
of time, a competitive production unit (a firm, an enterprise), specialising in the
manufacturing of products intended to satisfy a specific public need, is
compelled to work on a product related to three generations of technology –
obsoleting, dominant and emerging (prospective).
However, the following factor plays a determining role in the shaping of a
competitive science and technology strategy of an enterprise (a firm): the
requirement for investing into product development and assimilation arises well
before a tangible effect is achieved (e. g. the firm gains strong presence in the
market). Therefore, strategic planning of science and technology policy requires
reliable identification and forecasting of the development tendencies regarding
each generation of relevant equipment at all stages within its life cycle. It is
necessary to know at what time the generation of technology proposed for
assimilation is intended to reach the peak in its development, when a competing
product reaches the same stage, when it is feasible to start assimilation, when –
expansion, and when production recession kicks off.
It must be noted that innovation-based development constitutes one of the
principal focus areas of Russia's rail transport companies’ development.
158
The primary focus areas of the innovative strategy deployed by Russia’s
rail transport companies are listed below:
- development of transport and logistics systems and among them train
dynamic management systems, including solutions involving the use of artificial
intelligence;
- development and introduction of high-speed passenger traffic
technologies;
- development and introduction of heavyweight cargo traffic technologies;
- infrastructure and rolling stock monitoring and maintenance using
innovative high-efficiency technologies;
- introduction of innovative materials;
- energy efficiency improvement;
- deployment of innovative information technologies.
159
CHAPTER 7. HUMAN RESOURCES MANAGEMENT IN
TRANSPORT INDUSTRY
7.1.
DIGITAL ECONOMY CHALLENGES FOR HUMAN
RESOURCES MANAGEMENT ON TRANSPORT
The new paradigm of the Russian Federation development based on the
digital economy concept causes changes in all branches of the Russian economy.
It should be noted that the uniform conceptual framework of digital economy
has not been developed yet. Researchers, government managers, business
persons interpret the key principles and approaches of digital economy in
different ways. Nevertheless, most of experts agree that technologies,
automation and information systems are only the parts of a new paradigm,
though the most important ones. They are key drivers, methods of
implementation of the basic principles of digital economy in the social and
economic processes in the country and in the world. 4344
Transport as a key industry of economy has some features in human
resources management environment. These features allow us to claim that there
is a certain human resources management system within the transport industry.
So, there is a system of training and development for the industry – transport
education, covering educational organizations around the country and including
about 300,000 students. There are some specific requirements for the labour
organization in transport companies, staff assessment and certification
processes, the system of professional qualifications on transport. 45 Ultimately,
the concept of industrial labour market is considered in some researches. 46
The digital economy set a number of challenges for transport in general
and for human resources management practices within the industry in particular.
These challenges refer to demographic problems, changes in generations’
values, robotization, automation of production and service processes, new
requirements to the level and structure of the transport companies human
43
E-commerce on railways: textbook for railway transport universiries /I.A.Epishkin. – M.: FGOU
«Uchebno-metodicheskij centr po obrazovaniyu na zheleznodorozhnom transporte». - 2010. – 161 p.
URL: The Russian Railways company http://press.rzd.ru/
44
Lapidus, L.V. Big Data, Sharing economy, internet of things, robotization: look to the future of
Russian business / L.V. Lapidus // Prospects for the development of e-business and e-commerce
Proceedings of the III Inter-Faculty Scientific and Practical Conference of Young Scientists: reports
and speeches. 2017. p. 5-24.
45
Saratov, S.YU., Tikhomirov, A.N., Epishkin, I.A. Industry practice of introducing a system of
professional qualifications as a tool for implementing state policy in the field of legal regulation of
labour relations and vocational education / S.YU.Saratov, A.N.Tikhomirov, I.A.Epishkin // Law and
State: Theory and Practice. - 2016. № 4 (136). - p. 120-125.
46
Epishkin, I.A., Zbarskij, A.M. Industry labour market: modern structure, condition, dynamics/
I.A.Epishkin, A.M.Zbarskij // Railways Economics. - 2016. № 8. - p. 65-75.
160
capital.47 Experts also note such world trends of transport labour market till 2030
as reduction of physical labour based jobs, active "extinction of occupations"
and emergence of new jobs, growth of highly skilled jobs, importance of
engineering and digital competences at the workplaces.
The processes of HR-management in transport companies also need to be
digitalized as much as possible. HR-managers should foster technologies for fast
and convenient employee-employer interaction, introduce new methods of
training, selection and hiring employees based on the digitalization of traditional
techniques. Therefore, a promising solution can be the application of blockchain
technologies in transport companies’ HR-processes. Blockchain-based
technologies will allow to reduce the time for hiring employees, the assessment
of employees' competencies will be greatly accelerated, and even employees
with excellent reputations will be able to find a job very fast.
It is worth mentioning the Big Data technologies currently used in the
transport complex in both technological and economic processes. At the same
time, a number of researchers48 justify the possibility and necessity of wider
usage of Big Data technologies in the social and labour relations within the
transport industry. Smart analysis of the transport companies employees' data set
will make it possible to exploit the power of predictive analytics, to implement a
targeted approach to the social needs of human resources and to increase the
level of objectivity in taking HR decisions.
New generations of employees, or “digital” generations set challengeable
requirements to employer. One of the requirements of young workers is constant
digital communication with the employer. The largest transport company in
Russia, the Russian Railways, has been implementing the project “Employee’s
Service Portal”, which allows “digitalization” of internal corporate
communications and thereby attracting and retaining young professionals,
raising awareness and employee involvement.
Another challenge to the digital economy is the need to change the
methods of training and developing of transport companies’ employees.
Innovative methods of training techniques such as augmented reality, virtual
reality are widely implemented in transport sector, especially in aviation and rail
transport. However, not only new technologies for transport workers training
need to be implemented, it is necessary to change the contents and structure of
required competencies. The skills that will allow a transport worker to be in
demand in the digital economy include IT-competencies, managing complex
automated systems, the ability to get on with artificial intelligence. Herewith
47
Epishkin, I.A., Nikitin, V.N., Frolovichev, A.I. Not a single salary railway worker alive / I.A.
Epishkin, V.N. Nikitin, A.I. Frolovichev // Transport World. - 2017. T. 15. № 2, p. 210-225.
48
Fionova, K.V. The role of big data in improving the effectiveness of corporate social res ponsibility
of the company. XI International Scientific and Practical Conference "Science in the modern
information society.". 23-24.01.2018, North Charleston, USA.
161
effective employee in transport sector must be able to operate in high
uncertainty and quickly changeable environment.
The possibilities and feasibility of using digital economy technologies in
the human resources management system of the transport industry were justified
in a number of researches. The results of these researches underline the
necessity of transition to new, “digital” principles and methods. This transition
will ensure the advanced development of transport that aims at meeting the
needs of the economy and the population in quality transport services.
7.2. MODERN ISSUES OF HRM ON TRANSPORT
It is difficult to overestimate the importance of the transport industry for
the Russian economy. From a geopolitical point of view it is connecting large
territories and from the standpoint it can help develop the country's human
resources potential (for example, the Russian Railways has 1.2% of all
employed in the Russian economy49, and the industry as a whole – 2.1 million
people in 201450). That is why the study and development of human resources
management capabilities in the transport industry particularly is so interesting.
According to some forecasts, the prospects for the development of
transport infrastructure in the next few years are related to the Internet of Things
(IoT), which combines vehicles, video surveillance and security systems,
navigation (GPS), mobile applications and contactless data transmission
systems: Bluetooth, Wi-Fi, 4G / 5G, NB-IoT. The Internet of things in transport
is already in use, preventing congestion and accidents, but to a greater extent
only in large metropolitan areas. With IoT, manufacturers can detect defects in
vehicles and analyze driver actions.
It is worth noting the growing interest in cars and unmanned vehicles
(UAV). For example, Google (more precisely, its subsidiary Waymo) allocates
significant funds for testing robots and acquiring companies involved in the
development of unmanned cargo vehicles. Such giants as Apple, Amazon
(having bought Aurora), Uber and others also participate in this race
(Figure 7.1). In the report, there is no Tesla, because in 2018 it did not test
autopilot in California51.
In Europe, autonomous transport infrastructure is also being developed as
a part of the European INFRAMIX project, where it is initially planned to
launch mixed traffic from traditional cars and UAVs on road sections in Austria,
Germany and Spain.
From 2019, in the regions of Russia (Moscow and Tatarstan) they will
start testing unmanned vehicles of Yandex and KamAZ. Already, for such
vehicles, special traffic rules have been developed. Self-driving cars will be
49
The Russian Railways companyhttp://press.rzd.ru/
The UTmagazinehttps://utmagazine.ru/
51
HR and IT newshttps://vc.ru
50
162
denoted by the sign "A" - "autonomous driving." Data on the behavior of drones
on the roads will be collected within three years.
It is planned to test unmanned trains at the Moscow Central Ring (MCR),
which will help to reduce the waiting time of the train during peak hours. The
location of the train will be tracked both by the existing infrastructure and by
GPS / GLONASS signals, but without the participation of the dispatcher. The
signals will allow to determine the distance between the electric trains and adjust
the schedule of movement online. It is assumed that in the nearest future, trains
in the subway will also transmit information to a single server, which will allow
for real-time adjustment of the train schedule, reduction of waiting time and
informing passengers about alternative routes. For example, in London a similar
network of metro sensors has already been created, transmitting information to
the cloud center. The center monitors the underground infrastructure, including
escalators, elevators and rolling stock. At the first signs of a malfunction, a
signal is generated to take action.
Figure 7.1 – The distance traveled by cars without human intervention in 2018.
Source:
California
Department
of
Motor
Vehicles
https://www.dmv.ca.gov/portal/dmv/detail/vr/autonomous/disengagement_report_2018
163
This infrastructure contributes to the development of high-speed transport
and, in fact, defines it. For example, the transport project of Ilon Mask,
implemented from 2017 by Richard Branson (founder of the Virgin group) –the
Hyperloop vacuum train (the maximum speed reached at the tests – 457 km / h)
has reached the final stage of implementation. The world record belongs to the
Japanese magnetic-pillow MLX01 train, which in April 2015 set a speed record
of 603 km / h. Among the ordinary trains the leader is the French TGV, it
accelerated in 2007 a speed of 574.8 km / h. But it is worth repeating that the
development of high-speed transport is largely related to the improvement of
infrastructure. For example, our rather fast Sapsan, when the routes will be
modernized, will be able to go at a speed of 350 km/h. Although now the
operating speed of the train is limited to 250 km/h. By the way, the first train,
designed in England in the XIX century, developed an unprecedented speed of
38 km/h for that time.
Many other opportunities come from the use of machine learning and
artificial intelligence (neural networks), the Internet of things based on the
network infrastructure concept and an affordable high-speed Internet
connection.
In such conditions, road safety depends on the reliability of data and
process protection. Therefore, transport cybersecurity should include staff
training; management of identification and access tools, monitoring and
protection of cloud storage, including data leakage.
A promising trend also includes blockchain technology, which can be
used to create digital supply chains for goods and create constant databases of
all actions related to cargo and transportation. In Russia, the companies
Tradelens, Maersk and IBM in cooperation with Morsvyazsputnik and with the
participation of regulatory authorities, are preparing the opening of a project for
a digital trading blockchain platform for international shipments based on the
Greater Port of St. Petersburg.
Of course, the mentioned changes in the transport sector inevitably lead to
significant changes in the labor market:
• “Extinction” of occupations and job cuts by working professions;
• The birth of new professions and the increase in highly skilled jobs;
• Expansion of engineering and information competencies;
• Growing requirements for high qualifications.
However, summing up the results of 2018 and a number of surveys by
hh.ru and Rabota.ru showed that in our country:
1.
Business continues to "live for today." The managers began to
make balanced decisions and stopped responding brightly to political and
economic events. Many companies are limited to planning for a maximum of 3
years, so the selection of staff is based on the principle of employee demand
"here and now."
164
•
Salaries: 27% of employers increased and indexed employees'
salaries. They did not raise - 55%, lowered the salary by 18%. In 2019, no
significant improvements are foreseen (56% are not going to increase, 19% will
increase, 25% have not decided yet). Although, on the whole, there is a positive
trend in transport companies at the level of official inflation (Table 1)
•
Intangible bonuses: Every 5 companies abandoned all intangible
bonuses for their employees in 2018.
•
Awards: 58% of companies did not award employees for the year,
24% intend to reward some categories of employees, and only 18% will reward
all employees.
Table 7.1. – Dynamics of wages by activity in percent (2018 compared to 2017)
Industry
Change
IT
7.3
Pharmaceuticals, medicine
6.7
Marketing, advertising
6.0
Transport, logistics
6.0
Retail
5.5
Tourism
5.4
Finance, Accounting
5.3
PersonnelManagement
5.3
Production
5.2
Construction, realestate
3.8
Banks
3.1
Source: newspaper «Сompetency» http://hr-media.ru/rabota-ru-itogi-2018-goda-iprognozy-na-2019-god-zhivem-segodnyashnim-dnem/
2.
Use of HR analytics. HR begin to speak in terms of numbers and
explain what these numbers mean. According to the Rabota.ru survey, more than
56% of Russian companies began to use HR-analytics to some extent (24% of
their number do it on a regular basis), Figure 7.2.
165
Figure 7.2 – Rating of HR-metrics in the Russian Federation in 2018 (several options
are possible)
Source:
results
of
the
survey
rabota.ru
December
2018
https://www.rabota.ru/articles/career/trendy-rynka-truda-v-2019-godu-5232
3.
Automation and robotization. Automation tools are beginning to
penetrate into many areas. We see the replacement of people in the recruiting
bots, retail (automated cash zones in stores), increased ATM areas in banks,
automatic calling and informing system. But the full transition, most likely, does
not threaten us, it is the prospect of several decades. For example, if we go back
to the question of collecting used big data in HR analytics, then Excel remains at
90%.
166
Figure 7.3 – HR-analytics programs and its visualization
Source:
results
of
the
survey
rabota.ru
December
https://www.rabota.ru/articles/career/trendy-rynka-truda-v-2019-godu-5232
2018
4.
Recruitment and marketing. The recruiter need to understand and
use marketing tools: studying the audience, testing attraction sites, analytics,
copywriting in vacancies, and so on. And HRs begin to implement that tool to
gain the benefits (Figure 7.4).
Figure 7.4 – Development of HR marketing in your organization Source: Annual poll
of hh.ru
http://lmexperts.ru/news/2018-ozhidaniya-rabotodatelej.html
167
5.
Migration. Millions of cities pumped out personnel from all over
Russia, and in small cities it is not easy to find a stable job.
If we evaluate the results of the year and the prospects for the next year in
terms of the demand for specialists, then there will be high demand for lowqualified specialties:
• In the transport sector – for drivers, forwarders;
• In logistics – for warehouse workers;
• In production – for craftsmen and workers;
• In online marketing – SEO specialists, directors, e-mail marketers and
SMM specialists;
• In development – programmers, analysts, testers, product and project
managers;
• In the pharmaceutical industry, personnel will be required, starting from
production to pharmacists in pharmacies;
• Personnel shortage will continue in the IT and digital segment, where
there is a particularly lack of professional and knowledgeable employees in
almost all areas;
• As well as in various industries with high staff turnover and not
requiring high qualification (waiters, vendors, etc.).
However, a surplus of personnel will continue to be observed in the back
office (accountants, lawyers, economists). The banking sector, HR-segment,
construction and media will not feel very well.
Thus, we see that, there are problems in the Russian labor market that
hinder a more rapid transition to a digital economy, according to the VCIOM
survey52 they are:
•
High demand for highly qualified personnel for the “digital
breakthrough” will amount to 6.5 million people. by 2025;
•
A significant proportion of 35% of employees work in low-skilled
positions, which is about 10 million people inefficiently employed;
•
Lack of IT staff of approximately 1 million people;
•
91% of Russian employers say graduates lack practical skills and
83% recognize the level of training in universities as medium or low, which
requires additional expenses for training and adaptation of employees
(Figure 7.5);
•
Only 26% of the working population has good digital skills;53
•
And in addition to everything in the labor market, several
generations are beginning to actively collide: X, Y and Z.
52
53
VCIOM Russian public opinion research centerhttps://wciom.ru
NAFI research centrehttps://nafi.ru
168
Figure 7.5. – Top-10 employer plans for 2019 (it was possible to choose several
options in the survey) Source: results of the survey rabota.ru December 2018
https://www.rabota.ru/articles/career/trendy-rynka-truda-v-2019-godu-5232
Recall that the most of surveys involved mainly small and medium
businesses, but do not forget about the large holdings that implement ambitious
projects, and thus contribute to the penetration of global trends in the Russian
practice of HR. In this regard, it will be interesting to sum up the long term
trends of HR especially the international practice:
1.
The development of artificial intelligence, robotization and
automation. Research by Carl Benedikt Frey and Michael Osborne shows that in
the next 10 years around 47% of all jobs in the US will be lost to artificial
intelligence (AI) and automation54. Robots are becoming cheaper and human
skills are not keeping up with technological developments. This trend will
continue, and the replacement of humans in various jobs remains inevitable. HR
will be essential to ensuring that employees are provided with professional
challenges that maximize their creative potential, allowing them to contribute
more value than robots. Probably, the ROI metric will no longer be based on the
number of outputs.
An example would be the development of a bot by our compatriots (he
received the name Robot Vera), who conducts a preliminary call-down of
candidates and eliminates obviously unsuitable ones. A Social Talent study
claims that a recruiter needs to look at about 225 candidates in order to hire
one55.
Researching the experience of other companies, including non-transport
ones, you can take IBM as an example, which translates HR-processes into the
Digital format (with more than 400,000 employees):
•
using Checkpoint’s continuous feedback tool, the company has
completely revised performance management,
•
more than 200 typical questions from HR-related employees are
now answered by the intelligent chat bot CHIP,
54
55
The economist newspaper https://www.economist.com/
The Association for Talented Development https://www.td.org/
169
•
The traditional corporate learning management system was replaced
with a digital learning platform with a set of tools for sharing experience and the
ability to integrate external learning resources.
2.
VR and AR (Virtual and Augmented Reality). Already, virtual
reality technologies are used in training employees in the transport sector (for
example, Mercedes-Benz innovations received instructions for augmented
reality, Russian Railways use VR equipment to train young railway workers and
AR in worker training), but these are more like point centers. With cheaper
technologies, their application will expand and actively penetrate the HR sphere,
among them recruitment and training. This is where HR needs to redesign itself
to become more tech savvy. It’s a good way to make it possible to provide
effective solutions and offer the best ROI to the company.
In terms of recruitment, companies spend $3.55 for every new hire in the
US alone. VR and AR will become important tools for HR operations. For
example, VR will be useful for interviewing candidates. It will make it easier for
candidates to get to know the company and for the recruiters to assess, in real
time, the skills that the person is bringing onboard 56.
In terms of training, US companies spent $164.2 billion on training and
development in 201257. As we have mentioned above, for Russia training is the
most sought-after area. About 50% of those expenses arose from travel, facilities
and equipment. VR will provide 3D scenarios in which employees can fully
understand the information and principles taught during a training module.
For example, such a giant as Unilever already uses virtual reality
technology to select candidates for launch positions. This is not at all the same
as the traditional method of scanning resumes, organizing interviews and
validating candidates. Using algorithms and working with data helps to reduce
the proportion of unsuccessful hiring, since it as accurately assesses the abilities
and qualities of candidates.
3.
Structure "team networks" and remote job. According to the
FlexJobssurvey5885% of millennials prefer to work with the possibility of
remote communication. When organizations are looking for employees abroad,
work at a distance is inevitable. Companies will form teams for a short period to
work on a specific project. At the end of the project, the specialists switch to the
new project and the teams will regroup. The ability to work regardless of the
location of the employee will lead to a rethinking of the concept of office;
mobile devices will become office, training room and personal assistant.
•
organization's flexibility is not so much in the presence of teams, as
the speed of their formation and disbandment for the transition to work on
another project in a new group,
56
The Deloitte company https://www2.deloitte.com
The Association for Talented Development https://www.td.org/
58
The Flexjobsportal for job search and recruitmenthttps://www.flexjobs.com/
57
170
•
A continuously updated and easily accessible system will be needed
to group and analyze existing skills,
•
the need for the development of “network intelligence”: to have
systemic thinking and to show the skills of organizing interaction,
•
work in network teams will provide more opportunities to quickly
attract remote employees from different parts of the world without the need to
move or register in the company staff,
•
data exchange in these conditions becomes more open, so reporting
on the results of work will be available to everyone, but the requirements for
confidential information will reach new requirements.
For example, Chevron is already introducing new approaches to working
in teams. The previously created centralized analytics team was transformed into
a community of practitioners from 295 participants representing key divisions.
All interested specialists were given access to the forum where people
communicated, exchanged data, developed new standard reports and programs.
Such a learning and interaction environment has helped to establish
communication between departments and to come to common practice in
working procedures. After reloading HR analytics, Chevron uses standard
reports for various talent management indicators and the group provides
recommendations on different business issues.
4.
Personalization of Services. Some people are motivated and
inspired to achieve different goals in life: some want to be the best performers,
some want to innovate, others want to collaborate and have strong personal
relationships with their coworkers, others want to become leaders. The way to
approach each person’s needs can’t be the same. However, today’s workplace
policies apply equally for everyone, regardless of their differences. The reason is
that it’s too expensive to personalize services based on an individual.
Using HR-technology mentioned above and gamification, HR can truly
understand individual employees and design individual services. Gamification in
personnel management uses triggers and other tools to motivate individual
achievements of the best results. This approach creates a sense of play and
pleasure. In addition, you can strengthen the team and provide synergy from
cross-functional interaction.
To give one more example of the giant consumer goods Unilever in the
ways of personalization, the company create a 4-step digital process for graduate
recruiting and attracting talents by combining gamification and video
interviews:
1. Filling in a short online form of LinkedIn instead of a resume;
2. 20 minutes Skills Video Game Series;
3. Recording a video interview followed by a digital assessment and
ranking to determine whether a candidate is eligible;
4. Participation in the simulation “One day in the life of Unilever” in the
Discovery center of the company.
171
Each subsequent step of the applicant is possible only after the successful
completion of the previous one.
5.
A new way of thinking of the company and the candidate. The
reputational capital of a specialist will have a significant impact on hiring and
moving up the employee. The notion «Candidate-Experiences» is particular
important (for example, Deloitte, based on their study 59, the main theme of 2018
named the experience of the employee). The market is so lacking in qualified
specialists that the organization must “hook” each of them even if he/she has not
been hired.
An organized selection process, clear stages of hiring, feedback and
answers to candidates – all this makes an impression and remains in the memory
of a potential employee or client. The task of a modern company is to make sure
that any candidate can be invited at another moment to a suitable vacancy.
Companies also expect new skills from applicants: strong social involvement,
the ability to constantly learn, possession of digital skills. The concept of digital
skills is need to be more specified. Table 2 highlights the most requested HR
digital skills that will be essential in the nearest future. The time of feelings,
preconceptions and intuition in HR is gone; today, relying on hard data provides
a more accurate way to approach people and design the future workplace.
Table 7.2. – The most popular digital skills for HR
Scope of application
Characteristic
Social
Media According to a recent
study60, there are 3.5
Platforms
billion active social media
users worldwide. Of
these, 3.2 billion are
active users on mobile
devices, whichis projected
to increase year-on-year.
Social media tools such as
Facebook, Twitter, and
others
have
become
essential to business
networking, especially in
HR. As such, it’s essential
to know how to use them
for various purposes:
Human
Resources Familiarity with an HRIS
can
help
Information Software solution
streamline several HR
tasks and processes, and
reduce manual error as
59





Description
Posting information about job openings
on the company’s pages and encouraging
employees to share them helps you reach
more candidates.
Checking out potential candidates’ social
media profiles and public posts can help
you determine whether they will be a
good fit for the company.
Using social media platforms to
communicate with employees and the
public about upcoming company events
improves employer brand visibility.
Filling out forms online and storing
documents electronically minimizes the
amount of physical paperwork you need
to maintain.
Automating payroll processes and other
Smagin I. I., Smagin V. I. Social adaptation of the population: life from crisis to crisis //In the book:
Sapinskiya reading: proceedings of the round table. Edited by J. Y. Radukov. Tambov, 2016. P. 222231.
60
Fionova K. V., Vorobieva V. G., Ivanova O. V., Matveeva A. S. Corporate social responsibility:
Guidelines for practical training in the discipline "Corporate social responsibility". – M.: Moscow state
railway University (MIIT), 2015. 30 s.
172
well

Talent
Acquisition Knowing how to use an 
Applicant
Tracking
Software
System or ATS can be
incredibly helpful for HR
recruitment and hiring



Cloud Technology
Understanding how to 
operate a cloud-based
applicant tracking system,
preselection platform, or
other HR software is 
important
since
everything is online these
days


Gamification
Techniques
Bringing a sense of 
competition and fun into
recruitment and other HR
functions
improves
collaboration, connection, 
and motivation


173
HR tasks improves your team’s
productivity and efficiency. This saves
both time and money.
Documents filed in a digital form are
easier to complete, manage and retrieve
on time. This helps to reduce compliance
problems.
With a social media integrated ATS, you
can post to multiple job boards, careers
pages, and social networking sites
through a single platform.
Automated resume parsing, candidate
screening, and interview scheduling
features can significantly reduce the
manual workload for recruiters.
Using smart filters helps you shortlist
qualified candidates faster, freeing up
your time and energy for interviewing
people and finding the best fit.
By
automating
job
postings,
communications, interview reminders
and other tasks, an ATS cuts down both
administrative and personnel-related
costs.
Centralization of HR and business data
makes it easier to access, organize and
manage everything from onboarding to
payroll, feedback and more.
Having candidate and employee data in
one location improves turnaround times
by
reducing
back-and-forth
communication between departments.
Cloud-based HR systems can help
improve
communication
and
transparency within the company. This
enhances employee engagement and
retention.
With policies, performance metrics and
best practices on the cloud, you can boost
consistency across the organization, even
in different locations.
Adding a game to your organization’s
careers page can enhance talent
acquisition by creating interest and
engagement among potential candidates.
Themed puzzles and games can also be
used to test whether prospective
applicants will fit in with the company’s
culture, values, and environment.
You can use gamification tools to
improve learning and development,
through knowledge sharing, networking,
and simulations of real-life scenarios.
Gamification techniques can help you
Talent 
Talent Management Using
Management Software or
Software
TMS
and
learning
management systems can
help
you
streamline 
hiring,
onboarding,
training and retention
processes


make employees feel connected with
their team, so they are more absorbed
and motivated at the workplace.
With TMS-driven data, you can make
more strategic and informed decisions for
setting and achieving long-term HR and
talent acquisition goals.
By tracking employee performance
reviews and feedback as well as skills
and career objectives, a TMS helps you
identify and retain great talent.
Analyzing the data collected in a TMS
allows you to plan promotions, or
provide learning and development to
employees who need it.
Automating
data
collection
and
paperwork through a TMS speeds up the
onboarding process for new hires. It also
reduces time-to-hire.
Source: compiled by the author based on
https://www.digitalhrtech.com/technology-skills-every-hr-professional-needs/
In today’s world, technological skills are no longer a bonus, but a
necessity for every HR professional. New technologies are coming out on an
almost daily basis which means HR needs to be more agile now than ever
before.
The pressure on HR to become more strategic and innovation-oriented
will continue to increase. It is unstoppable. Unfortunately, there are many
companies who see their job as being “as usual”. But the world is changing
dramatically, and companies that want to stay relevant have to change. HR can
be and must be a pioneering force in the transformation process that will create
the workplace of the future. And this will be impossible to accomplish without
maximizing the use of HR technology, data management and cutting-edge
innovation.
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CHAPTER 8. DIGITAL ECONOMY IN TRANSPORT
INDUSTRY AND THE DESIGN OF TRANSPORT SMART
MANUFACTURING SYSTEMS
8.1. ANALYSIS AND ASSESSMENT OF THE NEED TO IMPLEMENT
ACTIVE INNOVATION MANAGEMENT IN JSC “RUSSIAN
RAILWAYS”
RZD innovation context
Detailed study of RZD's internal documents, such as The Strategy of
Scientific and Technological Development Through 2025, for Further Extension
to 2030 (RZD, 2016) and The Program for the Development of the ScientificIndustrial Complex of the Russian Railways Group for 2017-2020 (RZD, 2016)
formed the basis for the following reflections and conclusions on the prospects
for innovative development of the Russian Railways. Also, it was impossible to
consider the development of RZD in isolation from the understanding of the key
directions of the development of the Russian transport system formulated in The
Transport Strategy of the Russian Federation until 2030 (Government of the
Russian Federation, 2007). In addition, the use of ideas of basic frameworks for
the analysis of innovative processes in companies helped to structure this
analysis.
It should be noted that RZD is a technology company striving to use the
latest achievements of scientific and technical progress to ensure high efficiency
of the transportation process and provide services to cargo owners and
passengers. This, on the one hand, forces the company to constantly work to
find, analyse and apply innovative solutions in practical activities for all four
types of innovations: basic, sustaining, breakthrough and disruptive. This work
is systematized in the company and has a complex character. Research centers,
testing centers, and laboratories are functioning on Russian Railways in
cooperation with scientific and educational organizations. Design and
engineering divisions of Russian and international manufacturers of rolling
stock and equipment for railway transport is conducted on a multi-year basis.
The company's management develops concepts, strategies, roadmaps and all the
necessary regulatory and methodological documentation for the effective
organization of innovative management in RZD.
At the same time, the scale of the company, the high cost of the assets
used limits the opportunities available in RZD for internal investment resources
for the continuous applying of innovations. The role of the RZD top
management is to create such an organizational mechanism in the company that
would ensure a balanced development of the company while avoiding a serious
lag from competitors (automobile, water and air transport) and alternative
suppliers of rail transport and logistics services, including foreign ones.
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Being, in fact, a monopolist in freight and passenger transportation in
Russia, RZD should fully ensure the implementation of the strategy of the
Russian Federation for the development of rail transport. Strategic planning of
the Russian Federation concerning the development of railway transport
includes the following directions (based on Transport Strategy of the Russian
Federation until 2030):
- Efficient transport infrastructure;
- Availability and quality of transport and logistics services;
- High-speed and ultra-high-speed rail transport;
- Transit cargo and passenger services;
- High-level security of the transport system;
- Environment-friendly transportation;
- Digital technologies, robotic systems, new materials, and design
methods;
- Big data, machine learning, and artificial intelligence.
Despite the high importance of the Russian Railways for the transport
system of Russia and, undoubtedly, the support of the state, the company faces
many challenges in the process of introducing innovations: market fluctuations,
the high cost of transport equipment, slow construction and modernization of
railway infrastructure, the large territorial coverage of the railway network. At
the same time, there are varying levels of innovation readiness in different
company`s units. One more specific challenge reflects the need to use industry
science and business in the priority areas to encourage manufacturers of railway
equipment to supply innovative technical equipment based on the production
goals and needs of RZD.
In addition, RZD is the largest employer in Russia, which is associated
with a high degree of social responsibility when deciding whether to dismiss
personnel when introducing innovations (due to automation and robotization of
technological processes). Another, more important, limitation in the innovations
introduction is the issue of safety of rail transportation. For RZD this fact leads
to an extension of the duration of evaluation and applying of new equipment, as
well as to a narrowing of the potential partner`s circle in the field of innovation.
Currently, RZD interacts mainly with large, reliable, years of proven suppliers.
When working with small start-up companies, RZD now sees a lot of potential
risks both in terms of product quality and the ability of such companies to
provide a comprehensive, large-scale and long-term supply of innovative
equipment. However, this obstacle on the way of innovative development has
prompted Russian Railways to consider a different scheme of interaction with
start-ups. A specially created division in the RZD - the Center for Innovative
Development - constantly monitors the achievements of start-up companies and,
in case of potential applicability of innovations to the practice of Russian
Railways, this unit may become a venture investor. Thus, a start-up can be
integrated into the perimeter of RZD and its further development will be carried
176
out using the company's scientific, technical and development resources, subject
to the strictest observance of all restrictions which have been outlined above.
RZD innovation roadmap
Given the above characteristics of RZD, the simplified SWOT analysis of
the system of innovative development reveals the strengths and weaknesses of
Russian Railways that were formed in previous years, and the opportunities and
threats are determined on the basis of the forecast for the development of both
the Russian economy as a whole and the railway transport, in particular.
8.2. COMPETENCE APPROACH AS A BASIS OF EDUCATIONAL
TECHNOLOGIES IN THE FIELD OF TRANSPORT SECURITY
The processes of modern society informatization and those that are
closely related to all forms of educational activity are characterized by the
improvement and mass distribution of modern information and communication
technologies. Such technologies are actively applied to transfer information and
provide interaction of a teacher and a student in modern systems of open and
distance education.
At the current stage, the distance learning technology (educational
process) is a combination of methods and tools for teaching and administrating
training procedures that ensure the learning process to be conducted at a distance
using modern information and telecommunication technologies. In the sphere of
distance learning activities information technology should provide:
- delivery of the main volume of the material under study;
- interaction between students and teachers in the learning process;
- providing students with the opportunity of independent study on
mastering of the material studied;
- assessment of their knowledge and skills acquired in the process of
learning.
The use of the competence-based approach as the basis of educational
technologies can help to achieve the objectives effectively.
In a broad sense, the term “competence” means the terms of reference of a
person or institution, as well as the range of issues on which the person has
experience and relevant knowledge. Thus, one can say that competence is the
ability to act in situations of uncertainty. The competence approach has been
spread comparatively recently as a result of the search for new ways to
modernize Russian education. The resort to this concept is associated with the
desire to identify changes in education, the need for it arises due to changes
taking place in a society.
Key competences are universal ways of activity. When developing them a
person understands the situation and achieves the desired results in professional
and personal life in a particular society. Competence-based approach in
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vocational education forms a new model of a future specialist who meets the
conditions of the country's economic development and is in demand in the labor
market. This is consistent with one of the areas of training, designated in the
program "Digital Economy", which formulated the goals and objectives of the
new economic structure until 2025, namely the improvement of the education
system, which should provide the digital economy with competent personnel.
Herewith, the list of competencies is established on the basis of activity structure
analysis. Schematically, it might appear as follows:
Motives - goals - actions (external) - self-development (internal actions
and the subject result of activity) - subject (objective result) - long-term results
(consequences and effects of activity).
The basic competence model (BCM) is a regulatory document that
establishes a system of uniform requirements for the formation of continuous
and successive competencies' building during a person's life. The system of
uniform requirements includes:
- requirements for the structure and description of key and professional
competencies;
- requirements for the list and content of the key competencies of the
digital economy;
- requirements for the conditions of continuous updating of basic
competencies;
- requirements for the terms of basic and professional competencies
coordination.
The basic competence model (BCM) determines the levels of key
competencies formation, coordinated with the current levels of qualification as
cross-cutting competencies of the digital economy. At each level, key
competencies are substantively specified, mainly in the section «Generalized
Actions»: knowledge, skills, experience are determined, which are necessary to
acquire a certain competence at a given level of its formation. This ensures
continuity and consistency of key competencies development and the possibility
of their coordination on skill level with professional competencies.
The basic competence model establishes a single structure of key and
professional competencies based on a general theory of activity: values - goal
(subject) - actions.
The macrostructure components of activity define groups of basic
components, in particular:
- the activity component «motive» presupposes the presence of a
competence group of value choice;
- the activity component «goal» - a group of competences for planning
and organizing activities;
- activity component «external actions» - a group of competences for
carrying out activities;
178
- «self-development» component - a group of competencies of selfdevelopment and self-government of the subject in the activity;
- the activity component «subject» - a group of competences for
performance managing;
- the «implications and effects» activity component - a group of
competencies for assessing and accounting of the implications and effects of
activities.
Competence (form of activity) always has an object referred to. One of
these items is transport safety.
In the most general terms, the concept of «transport security» can be
defined as:
- The system of preventing, combating and suppressing the crimes,
including terrorism, in the transport sector;
- transport warning system of natural and man-made emergencies;
- a system of preventing or minimizing material and moral damage in
transport as a result of crimes and emergencies;
- a system aimed at improving the environmental safety of transportation,
environmental sustainability of the transport system;
- a system for achieving national security objectives in the transport
sector.
The large-scale spectrum of various natural, technical, and social reasons
determines a wide range of internal and external threats that weaken the
country's transport security. Illegal actions or intentions to commit such actions,
as well as natural or man-made processes, or their combination that obstruct the
realization of the vital interests of the individual, society and the state in the
transport sector, leading to or capable of causing the accidents in the transport
complex are considered to be the threat to transport security.
Transport safety is aimed at protecting: passengers, owners, recipients and
carriers of goods, owners and users of vehicles, the transport system and its
employees, the state economy and budget, the environment from threats in the
transport system. The systemic nature of transport security concept determines
the need for an integrated, systemic solution of the current problems in this field.
This is reflected in the professional standard "Transport Safety Specialist". In
accordance with the standard, the competences that underlie of the qualification
levels indicators are defined, which allow to determine the power and
responsibilities, the nature of skills and knowledge, etc. At the same time, the
following qualifications (specializations) due to the means of transport are
included in the type of professional activity «Transport Safety Specialist»:
aviation, maritime, inland waterway, rail, subway, road and city ground electric
transport, road infrastructure. All transport safety specialists, depending on the
specific tasks performed, may have different qualifications.
The concept of «transport security» has already been enshrined in Federal
Law of the Russian Federation No. 16-FZ «On Transport Security».
179
In accordance with this law, transport security refers to the protection of
transport infrastructure facilities and vehicles against acts of unlawful
interference. Art. 1 of this law defines an act of unlawful interference as an
illegal act (inaction), including a terrorist attack that threatens the safe operation
of the transport system, resulting in harm to people's lives and health, material
damage, or the threat of such consequences.
Ensuring transport security is aimed at sustainable and safe functioning of
the transport system. Transport sector professionals with the necessary
competencies can solve the given task.
8.3. FORECASTING AND ANALYTICAL COMPONENT OF
STRATEGIC MANAGEMENT OF DEVELOPMENT OF PRODUCTIVE
ECONOMIC SYSTEMS ON TRANSPORT
The strategic development of the production and economic system is a
complex process, closely related to the analysis and forecasting of economic
dynamics. From the point of view of the system approach, such management
involves a comprehensive account of the factors of the external and internal
environment, multi-criteria management tasks, high dynamics of ongoing
processes, as well as the variability of development criteria.
In the conditions of the development of a modern market economy, in
order to conduct production and economic activity effectively, a clear
understanding of the features of managing complex by corporate systems is
necessary. One of the founders of modern management, A. Fayolle, described
management as foresight, organization, stewardship, coordination and control.
At present, summarizing the many existing definitions of this concept, it is
possible to define production management as a process of planning,
organization, motivation and control necessary for assurance the effective
functioning and development of the production and economic system.
The management of transport enterprises is based on the following
provisions:
1. Organizations are complex socio-economic systems that are
characterized by the complexity of the internal environment, the multi-criteria
management tasks, the large dynamics of the ongoing processes, and the
variability of development criteria.
2. Organizations are open systems their effectiveness is defined by
adaptive capabilities.
3. Each system is unique in itself, so it is impossible to find a universal set
of rules and solutions to strategic tasks.
Under the sectoral production and economic system of transport (OPEST)
we will mean a set of means of production, objects of labor, labor, technologies
and methods for the transportation of goods and passengers. Considering the
180
elemental composition of OPEST, which includes many transport subsystems, it
is possible to distinguish its internal hierarchy and determine the relationship
and interaction of its components, which is reflected in the conceptual model
presented in Figure 8.1.
The upper system level
Requirements for performance indicators
Necessity in productive potential
Regulatory tasks on financial state
Constant improvement of responding to the social needs in the SPEST production and in reaching the highest efficiency indicators
Main target 1: SPEST development up to the level of
normative social demand of the productive capacity in
meeting the demands on effectiveness indicators
TRANSPORT PRODUCTION
Main target 2: implementing of targeted
standards of the transport strategy using the
full potential of transportation and high
quality of transport service
OPEST
Complex 1
Distribution of transport
resources
Correction
Complex 2
Economic and mathematic
model
Complex N
Freight and passengers
distribution
Capacity
Control and analysis of efficiency
effect
Correction
Finance
Analysis of productive capacity
analysis of the financial state
Final product
(transportation)
control and
analysis
Figure 8.1 – The conceptual model of OPEST
The effectiveness of the analysis of production and commercial activities
of the enterprise contributes to the wide usage of mathematical-statistical
methods. Mathematical methods allow to reduce the time of analysis, and more
fully cover the influence of factors on the results of activities, set and solve new
multidimensional tasks of analysis that are practically impracticable with
traditional methods.
Considering the perspectives of the development of OPEST in the longterm perspective, it is advisable to talk about a strategic analysis, which is based
on a systematic approach to the research of processes and expect comprehensive
assessments of the influence of diverse factors: general, particular and specific.
181
Tree of transport and economic
targets
Tree of targeted destinations
The complex of methods of strategic analysis is formed from “goals” with
corresponding assessments of the initial state of the OPEST to specific “tasks”
of strategic management with an assessment of the possibility of their
realization, representing in its structural plan a closed circuit (Figure 8.2).
The first and fourth blocks mainly reflect the traditional segment of the
strategic analysis system associated with the research essence of this process. In
turn, the second and third blocks include mathematical-statistical and
econometric methods of deepening the analysis, increasing its reliability as an
element, technology of management activities.
The success of forecasting as a specific type of scientific and applied
strategic analysis depends on the amount and quality of information about the
predicted process and object of management, the correctness of the formulation
of the forecasting task and the validity of the choice of its solution, the
availability of necessary computing means and computing apparatus according
to the chosen method. Due to the lack of these conditions, forecasting may
become impossible. The most important of them is the formulation of the
problem, since it defines the requirements for the amount and quality of
information, the mathematical apparatus and the accuracy of the forecast.
Aim sand evaluations
asse
Comparative analysis,
assessment of the activities
of OPEST.
Factor analysis of
productivity, by cost
element, by resources.
Mathematical-statistical
analysis of the activities
of OPEST, modeling.
The analysis of the
financial activities of
OPEST.
Report processing,
database formation.
Simplified matrix
model of the analysis
and evaluation of
OPEST activities.
Carrying-out of factor
analysis of the cost
price, the identification
of factors affecting the
profit.
Cluster analysis.
Modeling the analysis
of group homogeneity
subsystems of OPEST.
Discriminant analysis
to determine
bankruptcy.
Analysis of the
economic potential of
OPEST. Analysis of the
productivity of the
OPEST subsystems,
indicators of their
financial position.
Deepening analysis.
Acceptance of
managerial impacts
based on the analysis
and evaluation of the
activities of OPEST.
Acceptance action
based on the results of
the factor analysis of
the activities of the
OPEST.
Acceptance action
based on cluster
analysis. Decisionmaking on the level of
a crisis condition of
OPEST.
Diagnostics of the
condition of OPEST
and its subsystems,
development of
progress strategy.
UNIT 1
UNIT 2
UNIT 3
UNIT 4
Figure 8.2 – The main goals and tasks of the strategic analysis as a technological
element of the management of the strategic development of OPEST
182
Work with mathematical models in forecasting expects the
implementation of parameterization of models, which requires the preparation of
an information base. The quality of the available statistical information critically
affects not only the process of parameterization itself, but also the quality of the
model, as well as the results of the whole modeling process. At the same time,
the entire information statistical database can be viewed as a complex of
measurements of formalized characteristics. Unlike other areas of research, in
economics it is difficult to achieve high accuracy of measurements, despite the
presence of branched out system of statistical agencies and a complicated
methodology for collecting, processing and presenting data.
One of the reasons for this circumstance is the scale of SOPEST, which
requires the use of sampling observations, which consists in collecting partial
data organized in such a way that the received data can be considered
representative for the system`s characteristic in terms of the general complex.
The limited number of observations and fluctuations in the probability of the
sampling values of the characteristics lead to a sampling error.
Another reason is the fact that the necessity for aggregation of many
economic characteristics causes errors associated with data processing
(summation, rounding, balancing). In addition, in the process of aggregation,
there may arise inaccuracies in the assignment of some data to one enlarged
group or another for summation. This is connected with the lack of accurate
definitions and classifications of economic objects and their characteristics.
These sources of error are closely related to each other and affect each other.
Therefore, when investigating economic data, it is necessary to take into account
the values of these errors and determine their share in the meanings of the final
characteristics.
The forecasting process uses information about the dynamics of economic
characteristics, presented in the form of time series. The length of the period T is
limited by the practical possibilities of receiving information that satisfies the
following necessary requirements for the formation of time series:
- sufficiency from the point of view of model reliability and accuracy of
used statistical data;
- comparability of the methodology of the meanings of each characteristic
over time T (invariance of the volumes of the general and sample sets,
measurement or calculation algorithms, aggregation methods);
- comparability of the dimensions of the meanings of the measured
characteristic.61
There are many approaches to forecasting. The choice of prognostic
apparatus and its skillful use for forecasting is a rather complex problem, in
particular, in methodological terms, as evidenced by the lack of a single
generally recognized set of specific methods and procedures for forecasting.
61
Levitskaya L. P. Mathematical and statistical methods of strategic management of production
systems of the railway TRANS-port. M.: MIIT, 2009. – 95 p.
183
However, it should be noted that there is a significant similarity of forecasting
methods used by foreign and Russian specialists.
With all the fundamental differences in the directions in various sectors of
the economy, forecasting combines a single goal: to determine the nature of the
process in the future. Many methods of solving the forecasting problem have
one common idea: the detection of links between the past and the future,
between information about the process in a controlled period of time and the
nature of the process in the future.
Given the quantitative and qualitative characteristics of the information at
the disposal of the head, we highlight the decisions taken in terms of certainty
(reliability), uncertainty (unreliability) and risk (probabilistic certainty).
In conditions of stability and predictability of economic development
processes, forecasting is one of the main methods of justifying the adoption of
planned management decisions. However, in an unstable economic
environment, forecasting becomes a creative process in which the experience of
the Manager, his intuition, as well as the ability to perceive the signals coming
from the environment correctly play an important role.
Fundamental importance in the development of forecasts in the strategic
management system is the correctness of the initial theoretical assumptions of
the methodological basis of the forecast, the concepts of development laid in the
forecast, and the methods and models of forecasting used in accordance with
this.
The construction of models intended for practical use as a system of
support for management decision-making is oriented in the work on the solution
of "mass" forecasting tasks, for which the main thing is - the output, obtaining
specific results (development options) necessary to solve the problems of
strategic management.62
62
Levitskaya L. P. Economic and mathematical modeling of strategic management of repair
production. Dissertation of Doctor of Economics, 1998.:–М.: 1998.
184
CHAPTER 9. INTERNATIONAL COMMUNICATION
IN TRANSPORT INDUSTRY
9.1.
INTERNATIONAL TRANSPORT COMMUNICATION: GOALS
AND CHALLENGES
Transportation networks are one of the fundamental tools for human
society in our globalized world. The importance of an efficient transportation
network cannot be overestimated. Transport connects countries and facilitates
their economic growth. Transport communication goes along different lines:
freight and passenger transportation, infrastructure, equipment, enterprises,
safety, employment, energy consumption, environmental protection.
The aim of the sustainable transport policy is to ensure the internat ional
transport systems meet economic, social and environmental needs. Effective
air, rail, road and maritime transport systems require joint efforts of all the
countries concerned. The fundamental transport policy goals are based on such
pillars as mobility, innovation and international dimension.
Among the main challenges of the international transport systems are the
imbalance in the development of different transport modes in different
countries and differences in the technology used.
To promote air, rail, maritime transport at world level and meet the
challenges of mobility and sustainable development professional transport units
have been set up. They also aim at facilitating the sharing of best practices
among their members, promoting interoperability and creating new world
standards for the given transport mode.
It is obvious that successful integration of different national transportation
systems requires standardization. Co-participating players of different modes of
transport in different countries need to develop national and international
technical standards with the aim of standardization of construction, design,
production, use of transportation means and knowledge standardization.
Standardized knowledge, however, is among other factors based on
linguistic clarity that can only be achieved when experts try to standardize the
terminology of a certain field of a particular mode of transport. Much has
already been done along these lines.
The standardization bodies collect standardized terminological units to
use them as lexicological basis for standardization activities aimed at providing
technological standards.
Terminological work of standardization bodies is not a mere collection of
special vocabulary units but sometimes the creation of new terms as well. This
involves a detailed and comprehensive analysis of the discourse of a particular
field of activity, its description, and sometimes even the introduction of
completely new concepts into the domain.
185
It should be emphasized that terminology standardizing is quite
challenging due to terminological ambiguity and conceptual overlaps, i.e.
synonymy, polysemy or homonymy of terms. For instance, the English railway
term Diesel stands for two different concepts: 1. ‘Diesel locomotive’ and 2.
‘Diesel engine’. One can make a mistake when a single concept is designated by
synonyms which erroneously may be taken for different concepts. Thus, in
Russian and English railway terminology there are two different synonymous
terms contact rail and third rail to denote the rail which supplies energy to a
train.
Mistakes can also occur when the same term is used for two very different
concepts in different modes of transport industry. Thus, British term coach is
used both in rail and road special vocabulary, but it’s meaning is different: in
road transport terminology the term coach stands for ‘intercity bus’, while in rail
terminology it denotes a ‘passenger car’.
Concept is an idea or mental image which corresponds to some distinct
entity or class of entities, or to its essential features, or determines the
application of a term and thus plays a part in the use of reason or language 63.
Concepts are achieved by abstraction of real world phenomena and
objects based on their similarity according to characteristics. Conceptual
standardization therefore is a necessary requirement for the standardization of
terms which denote concepts. The whole process of defining concept – term
relations is based on the concept orientation principle: the concept is the focus
point for terminological data structuring. Only after conceptual standardization,
terminological standardization can be performed, which includes structuring of
concepts within their conceptual context, the concept system.
Terminological standardization problems become much more complicated
when we deal with different national transport terminological systems, because
concepts and terms function differently in individual languages and language
communities, they largely depend on different factors: professional, scientific,
social, technological, linguistic, economic, etc. In other words, transport experts
from different countries, speaking different national languages form their own
professional language world view.
A complicated problem which can hamper international transport
communication is that concepts and terms used in different national transport
terminologies of a particular domain often can’t be mapped onto each other.
Formal similarity of terms used in national terminologies of different countries
does not necessarily mean that the concepts behind the designations are
identical. Let us consider, for example, the usage of the international term
wagon by railway men speaking different national languages. The analysis of
the material proves that the concepts behind are not identical. If in German and
Russian terminologies this term designates any car within a train, the British use
63
https://en.oxforddictionarie
186
the term wagon to denote a particular type of car which carries goods. It is of
interest to note that Americans do not use the term wagon at all, preferring the
term car.
Conceptual standardization therefore is a necessary requirement for the
standardization of terms which denote concepts. The whole process of defining
concept – term relations is based on the concept oriented principle: the concept
is the focus point to structure terminological data.
One should say that although Americans and the British share the same
national language - English, each nation has formed its own professional
language world view in transport industry. The differences in American and
British transport terminology resulting from differences in culture, traditions,
world view have caused national cognitive homonymy and synonymy. For
instance, the mechanism, which makes a train pass from one track into another,
is called points by British railway men, and the American experts use the term
switch; the locomotive at the train tail is nominated by the term banker in
Britain, and by the word pusher in the USA. A detailed analysis of the
dictionary definitions and discourse has shown that the railway term coach does
not refer to the same concept in British and American rail terminology: if in
Great Britain it nominates ‘a passenger car’, in the USA it refers to a specific
type of it – ‘sitting car’.
Thorough and purpose-driven investigation of the existing terms should
help to reveal relevant concepts as a means of representation for real transport
objects since they are closely linked to individual cognitive entities. Without
clear understanding which relations exist between terms and concepts the
language cannot be an effective tool for professional communication.
To avoid communication mistakes one should realize that terminological
standardization is an integral part of standardization.
It is obvious that without proper standardization of terminology of
different modes of transport, international communication of transport experts
from different countries cannot be efficient since differences in professional
language world view may cause misunderstanding and hamper international
professional communication.
9.2.
INTERNATIONAL COMMUNICATION IN TRANSPORT
INDUSTRY
Currently, the transportation and logistics industry in many countries
worldwide has been rapidly developing and is marked by improved quality of
customer service, creation of innovative transport products and emergence of
creative approaches to the transportation industry as a whole. Moreover, multiarea international communications serve as one of the main factors of such
integrated development.
187
Passenger rail travel is conducted both on domestic and international
basis. To ensure cooperation between different states and facilitate certain
arrangements on the transportation process technology, business operation, tariff
policy and other issues, the Agreement on International Passenger Traffic
(SMPS) was signed. It brings together ministries and central state bodies of the
member states to this Agreement, whose powers cover public railway system
issues. When its major provisions were formulated in 1991, the key parties
thereto were the Russian Federation, the Czech Republic, Estonia, Georgia,
Latvia, Lithuania, Mongolia, Poland, Slovakia and the Democratic People’s
Republic of Korea.64
The Agreement also defines the terms and procedure for transportation
documents registration, carriage payments processing, as well as allocates
responsibility between passengers and forwarders. As for the tariff policy, as
well as calculation and collection of carriage charges, it should be noted that
they (including ticket cost, seat reservation, as well as baggage and cargo
luggage fares) are calculated based on the rates set by the applicable tariff. Fees
are charged at the rates valid on the date on which travel documents are
purchased, while baggage fares are calculated on the day baggage is accepted
for transportation. That being said, the Swiss franc is the single currency of
mutual settlements between the parties to the Agreement. When transporting
passengers by rail, the International Passenger Tariff (MGPT) is applied, subject
to national legislation.
Regular meetings of the Committee of the Organization for Railway
Cooperation (OSJD) make it possible to elaborate conceptual decisions to
amend the regulatory framework governing the interaction between the
Agreement member states and specify validity term of certain provisions and its
changes (amendments).
Such international cooperation has allowed RZD OJSC to implement
many scheduled projects on international rail transportation, in particular to
launch transportation routes to the countries of Eastern and Western Europe
(Berlin, Nice, Paris, Prague, Warsaw, Tallinn, Helsinki and other cities).
Passengers pay special attention to the appearance of passenger
infrastructure in the cities worldwide, especially to railway station infrastructure
projects. However, approaches to the management of station assets may be
different. Thus, the following companies have adopted a unified management
approach towards their station networks:
DB Station and Service (Germany);
SNCF Gares and Connexions (France);
SNCB (Belgium);
64
The Agreement between the Railway Administrations of the Member States of the Commonwealth
of Independent States, Georgia, Latvian Republic, Lithuanian Republic and Estonian Republic about
Specific Application of Individual Regulations of the Agreement on International Passenger Traffic
(SMPS) – OP SMPS effective as of November 01,1951.
188
NS Stations (Netherlands);
JR (Japan);
Korail (Korea).
A differentiated approach towards the management of large and small
railway station complexes is peculiar for the Directorate of the Railway Stations
RZD OJSC, Adif (Spain) and FSI (Italy). Figure 9.1 demonstrates the number of
railway stations managed by the largest managing companies.
DB AG
(Germany)
5400
SNCF
SNCF
(France)
(France)
3000
3000
JR East
(Japan)
1660
Adif
(Spain)
1450
SBB
(Switzerland)
795
Korail
(South Korea)
614
SNCB
(Belgium)
567
RZD OJSC
341
Figure 9.1 – Number of railway stations managed by the world’s major companies
Currently, there is no single classification of station complexes, while the
classification applied by the European states is based on the price list and the
package of station infrastructure services for operators and passengers. 65 The
minimum set of mandatory services is determined for each class. Slovakia,
Hungary, the Netherlands, Austria, Belgium, Spain, Germany and France are
among those countries where the railway station component within the
infrastructure tariff varies depending on its class.
International negotiations in the field of railway passenger transport very
often lead to a discussion of the rules for the conduct of railway station business.
65
M. A. Schneider. Rynok prigorodnykh zheleznodorozhnykh perevozok: upravleniye i ekonomika
(Suburban Railway Transportation Market: Management and Economy) [Text] / M. A. Schneider, E.
A. Proskuryakova. – Moscow: NP-Print, 2012. – 288 p.
189
As a rule, the global management of railway station complexes is marked by the
differentiated approach to income from both spaces leased to third parties and
core activities by charging tariffs from transportation operators. As a rule, large
companies have regional representations that are directly subordinated to the
executive office and in charge of interaction in order to improve their production
and economic efficiency. The European practice is also characterized by the
consolidation of several groups of railway station complexes into a directorate
run by one decision-making company. Thus, the German model provides for
about 5,400 stations owned by 46 parent companies, while the French railway
station complex brings together more than 3,000 stations owned by about 30
parent companies.
Figure 9.2 demonstrates the global approach towards restricted sale of
alcoholic beverages at railway stations.
Country
Company
Belgium
SNCB
UK
Network Rail
Germany
DB AG
Spain
Adif
Italy
RFI
Russia
RZD OJSC
Sale is allowed
Sale is allowed in
restaurants and
cafes
Sale is prohibited
V
V
V
V
V
V
Figure 9.2 – Restricted sale of alcohol in different countries of the world
The communicative effect turns the adaptation of the principles of transitoriented territory development (primarily for urban agglomerations) into a vivid
worldwide trend. These principles are based on the harmonization of different
urban and suburban transportation modes with due regard to the priorities of the
city’s and/or region’s development. Japanese companies, in particular
architectural firms (Nikken Sekkei), were the first to lean towards this direction.
Later, this initiative was taken up by British companies that conducted a large-
190
scale reconstruction of the railway station complex located in their
agglomerations.
In recent years, digitalization of the railway infrastructure, including
railway station complexes, can be considered as a separate object of
international communications. Increased volume of the information technologies
applied is noted in strategic documents issued by virtually all major railway
companies around the globe. A special attention is paid to the use of Big Data
Analytics technology in order to generate individual proposals within a wide
service range offered to users (passengers). A high degree of social and
environmental responsibility, as well as a significant role in the urban cultural
environment is also an urgent priority within the context of international
cooperation. For instance, accessibility of railway stations in terms of creating a
barrier-free environment for all passenger categories, availability of information
and opportunities for communication with employees and management.
The Russian approach towards the management of railway station
complexes significantly differs from foreign options, which is due to possibility
to reduce maintenance and operation costs by provision of state subsidies and
tax preferences for railway station owners (within the geographical context of
the Russian Federation constituents).
Subsidies for the maintenance, operation and repair of railway
infrastructure as related to the station complexes are granted in the UK, France,
Germany, the Netherlands, Italy and Belgium. Tax privileges are provided only
in Russia, Japan and the Netherlands. 66 As related to its foreign partners, RZD
OJSC has a rather specific distinction: it focuses on the passenger as the main
railway station client and has no formal list of mandatory and additional services
rendered by carriers or operators. However, the attractiveness of railway stations
largely depends on regulatory restrictions on the sale of certain types of goods
and services, regardless of the payment mechanism for the right to use
commercial spaces at railway stations (absolute fixed fee or a percentage of
revenue/turnover). A typical case is the ban on the sale of alcoholic beverages at
railway stations, as well as near stops.
According to research by the International Union of Railways, railway
stations of 10,000 to 250,000 square meters have a different proportion of areas
leased to third parties as commercial property. The highest rate of commercial
space is noted in Tokyo (76%), Paris (38%) and Moscow (27%), while the
lowest is in Madrid (7%) and Shanghai (7%).
Safe operation and provision of services is one of the primary issues in the
field of international cooperation between transport corporations. In particular, it
concerns the rendering of services to passengers with limited mobility. In many
countries of the world, these services are provided directly by railway station
66
P.G. Yakovlev. Budushcheye v innovatsiyakh – zheleznodorozhny sammit IRS 2018 (Future in
Innovation – IRS Summit 2018) [Text] / P. G. Yakovlev, A. Yu. Efremov. // Zheleznye dorogi mira. –
2018. – No. 5, p. 17-22.
191
employees (UK, France, Japan, Russia, etc.), while in some states (Italy,
Germany, Belgium) these services are provided by employees of railway
operators. Entering into outsourcing contracts with individual companies is
another option to provide these services.
In this regard, the differences between the management and economic
model of the passenger railway complex operation in the Russian Federation and
most of the world’s transport companies are undeniable, but there is a
considerable potential for further development. To enhance it further, it is
advisable to continue establishing international communications with the
countries that enjoy the highest efficiency rate in terms of using the
transportation capacity of the railway infrastructure and railway station areas, as
well as best quality of railway passenger service.
9.3.
FIGHT FOR HIGH-SPEED RAIL
High-speed rail (HSR) is a type of rail transport that operates significantly
faster than traditional rail traffic, using an integrated system of specialized
rolling stockand dedicated tracks. While there is no single standard that applies
worldwide, new lines in excess of 250 kilometres per hour and existing lines in
Russia in excess of 200 kilometres per hour are widely considered to be highspeed.
The availability of high-speed rail is an indication of the development
level not only of the engineering status of railways but of high social and
economic advancement of the nation in general. Therefore the development of
high-speed rail is one of the strategic priorities of the Russian Railways.
According to "Railway Transport Development Strategy until 2030" one of the
main objectives of the government is to develop a set of technical regulations
and national standards in the field of high-speed and higher-speed railway
transport.67 This is why it is so important to examine the experience of
engineering, construction and operation of high-speed railways, especially in the
countries comparable with Russia territory- and population-wise.
It is well known however that it takes substantial time and quite an effort
to translate strategies into development plans, let alone into real projects. It is in
this context that a well-developed system of arguments and the activities of HSR
advocacy organizations in favor of high-speed rail may play a crucial role.
The United States operates over 26% of the world's rail lines (265,000
route-km), three times the number of Russian and four times the Chinese rail.
However in terms of high-speed rail China is a current global undisputed leader
accounting for almost two thirds (44,155 km in operation and under
construction) of the world's high-speed rail lines, while the United States' share
"Стратегия развития железнодорожного транспорта в Российской Федерации до 2030 года",
30.03.2011
67
192
is almost negligible (0,3%), for rail transportation in the United States consists
primarily of freight shipments, while passenger service, once a large and vital
part of the nation's passenger transportation network, plays a limited role as
compared to transportation patterns in many other countries. Meanwhile, the
high-speed rail is primarily designed to carry passengers.
Nevertheless, there is currently a heated debate underway in the US to
promote HSR, which is unfolding against the background of the international
boom in high-speed rail. Currently there are 800 HSR trainsets operating in
China, 800 in France, and 450 in Japan, while there are only 20 in the
US.68There has been a resurgence of interest in recent decades, with many plans
being examined for high-speed rail across the country, but current service
remains relatively limited.
The Midwest High Speed Rail Association was founded in 1993 in
Chicago, Illinois, to advocate for world-class 220-mph high-speed trains linking
major Midwestern cities and supports fast, frequent and dependable trains on
other routes that connect with 220-mph corridors to form a modern regional and
national rail network. And then in order to build widespread public, business,
and political support for a major investment in a national high speed rail
network a nation-wide US High-Speed Rail Association was established in
Washington D.C. USHSRA is an independent, nonprofit trade association
chartered to organize and mobilize the industry with a shared vision for a 21st
century, 17,000 mile national high speed rail system built in phases for
completion by 2030.
USHSRA believes that high-speed rail is truly a miracle technology that
could solve many serious problems simultaneously. The Association put forward
‘Top 10 Reasons to Bring High-Speed Rail to America’ to address the American
transportation challenges.69
1. Congestion relief. America faces serious congestion in every major
metropolitan region of the country, costing $124 billion per year in wasted time
and fuel. Road widening projects – justified by claims they relieve congestion –
have only made congestion worse across America. High-speed rail is
transformative and can reverse this situation – delivering 200mph transportation
for every train, every day – without delays or congestion.
2. Alternative to flying. High-speed rail delivers +200mph transportation
as an alternative to the flying nightmare, offering no hassles, no security lines,
no delays and plenty of room to work or play. Flight delays cost America more
than $31 billion per year in wasted time – a cost that high-speed rail can help
alleviate.
3. Safety. Approximately 43,000 people are killed every year in car
accidents in America and another million more seriously injured. High-speed
rail is the world’s safest form of transportation proven by decades of safe
68
69
http://ushsr.com/info.html
"High-speed rail: Now it's America's turn", by Andy Kunz, «Global Railway Review», 7 June, 2018.
193
operation. Japan was the first nation to build high-speed rail in 1964 and has
since transported 10 billion passengers without a single fatality! France has a
similar record with their 30 years of high-speed rail operations, as do several
other countries.
4. Energy / national security. The Association believes that America is in
deep trouble due to extreme oil dependency for 98 per cent of the national
transportation; consuming some 20 million barrels of oil every day, 70 per cent
of which is for transportation. Maintaining this enormous flow of oil requires
America to dig up oceans, protected national forests and the arctic tundra;
risking clean drinking water, health and safety – without forgetting the
expensive consequential wars. None of this is sustainable or desirable. Highspeed rail is the world’s greenest form of transportation and can be 100 per cent
powered by renewable energy, bypassing the entire global-oil-military-supply
chain. The California HSR system under construction in the Central Valley will
be powered 100 per cent by renewables.
5. Light freight solution. High-speed rail offers an alternative light freight
shipping infrastructure in combination with its passenger transport, lowering the
cost (and increasing reliability) of shipping light freight goods and perishables
throughout the country. This would replace the American inefficient light freight
shipping network – consisting mainly of long-distance trucks and airplanes –
which has an enormous carbon footprint and clogs the US highways.
6. Carbon solution. Transportation is the single largest source of carbon
causing climate change. The USHSRA claims that American transportation
system is the most inefficient on earth, with most of the country driving gasguzzling, single-occupant SUVs hundreds of miles a day around sprawling
communities. Whereas, on the other hand, high-speed rail can be zero carbon
transportation. A study conducted by the International Union of Railways
indicated that high-speed trains produced five times less CO 2 than automobiles
and jet aircraft.70
7. Housing affordability. High-speed rail helps solve the affordable
housing crisis by providing access to a wider housing market and taking
pressure off the high price ‘hot spots’ by levelling out pricing at the regional
scale. High-speed rail also spurs the development of additional rail systems
including light-rail and streetcars, thereby opening up additional possibilities for
affordable living and the ability to live without a car or less cars per household –
saving the huge expense of car ownership.
8. City revitalisation and sprawl redirection. High-speed rail redirects
regional land development patterns into Transit Oriented Development –
compact, walkable, mixed-use and focused around rail stations. Feeder rail
systems spur additional corridors of redirected development into compact,
walkable forms.
70
"Spanish High-Speed Rail". MassTransitMag.com. June 2008.
194
9. Economic development tool. High-speed rail has the power to attract
major real estate development around its stations, while also creating whole new
industries due to its extensive manufacturing needs. It will also initiate a
nationwide construction boom, followed by a new travel boom that will continue
for decades.
10. Job creator in manufacturing and construction. A national high-speed
rail system will create millions of well paid jobs building the infrastructure and
system components, managing the rail systems and operating the stations and
related real estate development. In a proposal to the U.S. Department of
Transportation, SNCF, operator of the TGV high-speed rail network in France,
estimated that a Midwestern 220-mph high-speed rail network would create
677,000 permanent jobs and 316,000 construction jobs.The total estimated cost
for the network is $68.5 billion.71Advocates for high-speed rail put that cost in
perspective by pointing out that the Interstate Highway System cost 450 billion
in 2008 dollars.72 Given all these incredible benefits, high-speed rail represents a
truly transformative proposition, worthy of major federal and state investment in
America’s bright future. Proof of such is evident all around the world where
high-speed rail has been solving problems and providing great mobility and
access to billions of people.
The activities of HSR advocacy groups along with higher jet fuel prices,
congested airports and highways, and increasing airport security rules have
combined to make high-speed rail a more attractive option for passengers. Highspeed rail development finally became a goal of the Obama administration
which came into office in January 2009.
The plans were developed for higher-speed rail and high-speed rail in
California, the Midwest, New England, Florida, Texas, Pennsylvania, the Pacific
Northwest, Colorado/New Mexico, and the Southwestern United States. In 2016
Amtrak awarded Alstom a contract for 28 Avelia Liberty trainsets to enter
service 2021.73
As of 2017, the California High-Speed Rail Authority is working on the
California High Speed Rail project, which is planned to link Anaheim,
Bakersfield, Fresno, Los Angeles, Sacramento, San Francisco, San Jose.
Construction is under way on sections traversing the Central Valley. Phase I will
be completed in 2029, and Phase II will likely be completed before 2040.74
The Texas Central Railway is a line being built from Houston to Dallas
with speeds up to 205 mph (330 km/h) that initially claimed it would transport
71
SNCF proposal for development of Midwest High Speed Rail Corridor
"Fact vs. Fiction | Midwest High Speed Rail Association". Midwesthsr.org.
73
"Amtrak awards Northeast Corridor high speed train contract"Railway Gazette. DVV Media UK
Ltd., 26 August, 2016.
74
"After two-year delay, construction on California's bullet train is set to start", by Ralph Vartabedian,
Los Angeles Times, 4 January, 2015.
72
195
passengers by 2021, but as of 2017 says it hopes to become fully operational in
2024.75 There are also higher-speed rail projects in various parts of the country.
However the activities of the succeeding president, Donald Trump, have
not yet been for a future uptick in high speed rail proposals. So the fight for
high-speed rail goes on, and the HSR advocacy groups provide the forum to
bring together the many players to develop coalitions and consortiums for
building HSR systems. Such a forum may take many shapes to include a range
of conferences, meetings, networking events, tours, and on-line media, and the
HSR proponents stand ready to make sure their voice reaches across the
spectrum including the Federal, state, and grassroots levels in the coming years
to ensure that high speed rail has the resources necessary to continue to be a
national priority.
9.4. BENEFICIAL INTERNATIONAL COOPERATION: LOW
VIBRATION TRACK TECHNOLOGY IN BIG CIRCLE LINE OF
MOSCOW UNDERGROUND
The transport industry in the modern world is at the forefront of scientific
and technological progress. The transport industry introduces many new
engineering technologies and developments.
Transportation is the activity of moving people or things from one place
to another, or the system used for doing this. 76
Role of Transport in Economic Development
Efficient transport is a critical component of economic development,
globally and nationally. Transport availability affects global development
patterns and can be a boost or a barrier to economic growth within individual
nations. Transportation investments link factors of production together in a web
of relationships between producers and consumers to create a more efficient
division of production, leverage geographical comparative advantage, and
provide the means to expand economies of scale and scope. Transport’s
contribution to economic development includes the following:
Network effects – linking more locations exponentially increases the
value and effectiveness of transport:
Performance improvements – reducing cost and time for existing
passenger and freight movements increase transport’s contribution to economic
growth.
Reliability – improves time performance and reduces loss and damage,
thus reducing economic drag.
Market size-access to wider markets adds to economies of scale in
production, distribution, and consumption, thereby increasing economic growth.
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196
Productivity – transport increases productivity gained from access to a
larger and more diverse base of inputs such as raw materials, parts, energy, and
labor, and broader markets for more diverse outputs.
In recent years the transport system in Moscow has developed
extensively.
In 2022, the Moscow Metro Big Circle Line will link up with the Moscow
Central Circle (MCC) railway after the new metro line between Ulitsa
Novatorov and Sevastopolsky Prospekt stations is completed, Head of the City
Department of Construction Andrei Bochkaryov said.
“The Big Circle Line will handle at least twice as many passengers than
the MCC. Lateral routes will link many city districts. Some of the line’s sections
will reduce travel time two- or three-fold,” Mr Bochkaryov said.77
Three more stations of Big Circle Line are being constructed now. The
entire line is supposed to be completed by 2022, reported Marat Khusnullin,
Deputy Moscow Mayor for Urban Development and Construction, at the start of
the year. The 70-kilometre Big Circle Line, the world’s most ambitious metro
construction project, will have 31 stations and three train maintenance facilities
units. To meet the deadline the builders should keep to fast-paced schedule, so
even winter holidays were shortened and underground work was resumed while
everybody was still celebrating. “Metro builders outdid themselves in 2018 with
their best results ever. They opened 17 underground metro stations. We have
never accomplished so much, building 33 kilometres of tracks and three train
maintenance facilities. Most importantly, we started working on our 2019
projects last year. We are set to complete 32 kilometres of metro lines, 14
stations and two train maintenance facilities before the year is out,” Mr
Khusnullin noted. Amazing working speed was also acknowledged by Sergey
Sobyanin, Moscow Mayor, in summer this year. “This line’s technology is
unique for Moscow, as the metro runs in the cross section of the first class
highways. This project has largely transformed New Moscow area” he said. 2
In Moscow, every day a huge number of subway passengers go to the
center to the Circle line and make a change twice there to get to the desired
station, located on a nearby radial metro line. Big Circle Line is aimed at solving
this problem. For instance, the trip from the station "South-West" to
"Kuntsevskaya" will take just 18-20 minutes with the help of Big Circle Line,
instead of the current 43 minutes. Big Circle Line will connect existing and
prospective radial lines at a distance of up to 10 km from the existing Circle
line, which will allow to unload the existing routes– the first (stations inside the
Circle) and the second (the Circle line). So that many city districts will be
connected by lateral routs.
The first ideas of Big Circle Line construction date back to 1985.
However, due to lack of resources and for other reasons, the project had not
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Official Website of Moscow Mayor (www.mos.ru)
197
been started for 25 years. The decision to start the construction of Big Circle
Line was made by Moscow mayor Sergei Sobyanin in 2011. The work was
started in November of the same year. The construction of Big Circle Line of the
capital's underground is the world's largest project in the field of metro
construction. Engineers face a lot of complex construction problems every day
because nothing like this has ever been built. Solving these problems is
considered to be impossible without international cooperation and sharing
experience with foreign partners.
The latest technologies are used in the construction of Big Circle Line, in
particular, the ballast-free way Low Vibration Track, developed in Switzerland.
A Swiss Sonneville AG is the LVTsystem developer and patent owner. JSC
RZDstroy is the sole licensee to LVT system production and track installation
within the Russian Federation. JSC RZDstroy certified LVT system for use on
the high-speed railway lines and combined freight and passenger routes in
Russia and launched its own LVT blocks manufacturing line at the facilities in
the city of Syzran. Sonneville AG, the developer and licensor of LVT, provides
designs, technical know-how and support for successful installation of LVT
system in railway projects throughout the world.78
These tracks look different from the usual railway tracks. They are built
from top to bottom: first, rails are mounted on individual rail supports instead of
cross ties, which are put on rubber boots with resilient block pads. Thus, the
impact force of the train wheels and the degree of recoil of the rail is weakened.
Resilient block pads are essential elements of the construction. The level
of vibration from the passage of the train is reduced due to the fact that the
system has low natural frequencies.
The mounting bolts are spring-wrapped to secure most effective noise and
vibration attenuation. Elements fasten among themselves by means of steel
brackets. It gives elasticity and strength to the structure.
Rail supports are placed on a concrete slab, which is held on springs. That
structural feature guarantees the decoupling of the track from the surrounding
concrete. Due to this, the trains pass on the rails smoothly. So Low Vibration
Track shows excellent structure-borne noise reduction.
Low Vibration Track has a number of advantages. First of all this
advanced technology allows to reduce the noise level by about 10%, on average.
It is reduced from 80 to 72 decibels. This can be compared to the sound of man
laughter. Secondly, the vibration in tunnel structure will be reduced. The service
life of the track laid with the use of vibration-absorbing technology is about 40
years until the overhaul. The cost of its maintenance is 20% cheaper compared
to the maintenance of old structures, which can be achieved thanks to the longlasting system components. The following can also be named among the
benefits of LVT-System: the highest system flexibility; efficient installation;
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Official Website of Sonneville AG (www.sonneville.com)
198
very high track accuracy; easy access to all components, if necessary; high
electrical insulation effect; the best aerodynamic properties; flexible
arrangement of track drainage, also in the track axis; installations also possible
in the centre of the track.
Low Vibration Track Technology is used not only in the construction of
new stations and metro tunnels, but also for upgrading the existing
infrastructure. This technology has been applied to update the existing tracks in
Moscow metro since 2014. 40 stations of 11 metro lines are already renewed
with the help of LVT technology. The upgrade of track infrastructure in
Moscow metro is still in progress. Quiet and smooth train movement will be
rendered at seven more stations until the end of 2020.
For the first time in Russia Low Vibration Track Technology was used by
JSC RZDstroy in 2013 during the work on the North Caucasus railway: the
tunnel's size was increased so that two-storey cars were able to pass.
A further example of the use of innovative Low Vibration Track is
construction of tunnels on the Tuapse – Adler link. The LVT-system has been
proven as the ideal solution for a track used by very high-speed traffic where
highly accurate track geometry is required, on inner city lines due to its lower
noise levels, and in tunnel construction where it restricts vibration attenuation.
For the purpose of construction and upgrades of Olympic rail projects, each of
these factors was important. However, another advantage of the LVT-system
was that without a ballast section, tunnel systems No 6 and 7 could
accommodate Tpr-gauge required for EP20 electric locomotives hauling doubledeck passenger coaches.
Swiss Low Vibration Track Technology is very popular worldwide. It has
already been applied in Europe (Russia, Denmark, Spain, The UK), Asia
(China), South America (Brazil) and North America (The USA).
Using modern technologies and the world’s best experience for the
implementation of innovative projects is a spectacular example of mutually
beneficial international cooperation.
Constructing high-speed lines and upgrading railway infrastructure in the
greater Moscow area is being under way. The experience gained from the
preparation works for the Sochi-2014 Winter Olympic Games, in which the
railway industry was one of the key stakeholders, once again shows the
importance of effective teamwork and team-oriented efforts that utilize expertise
from both domestic and international partners.
Applying modern technologies and the world’s best experience for the
implementation of innovative projects is a bright illustration of mutually
beneficial international cooperation.
The railway community will continue to follow “fair play” principles
when developing and deploying innovative technologies as well as in
improvements to manufacturing processes that will facilitate enhanced mobility
for people all over the world in the coming years.
199
INFORMATION ABOUT AUTHORS
Yuri Sokolov, Doctor of Economics, Professor, Director of Economics and
Finance Institute, Federal State Institution of Education “Russian University of
Transport”
Paragraphs (1.1, 3.1, 4.1, 4.3, 4.4)
Ilia Lavrov, Candidate of Economics, Assistant Professor, Deputy Director of
Economics and Finance Institute, Federal State Institution of Education
“Russian University of Transport”
Paragraphs (1.2, 3.1, 3.2, 4.3)
Victor Podsorin, Doctor of Economics, Professor, Professor of the Economics
and Management in Transport Department, Economics and Finance Institute,
Federal State Institution of Education “Russian University of Transport”
Paragraphs (1.3, 2.1)
Elena Ovsyannikova, Assistant of the Economics and Management in Transport
Department, Economics and Finance Institute, Federal State Institution of
Education “Russian University of Transport”
Paragraph (1.3)
Natalia Tereshina, Doctor of Economics, Professor, Head of the Economics and
Management in Transport Department, Economics and Finance Institute,
Federal State Institution of Education “Russian University of Transport”
Paragraphs (1.4, 1.5)
Vladimir Zhakov, Candidate of Economics, Assistant Professor of the
Economics and Management in Transport Department, Economics and Finance
Institute, Federal State Institution of Education “Russian University of
Transport”
Paragraphs (1.4, 1.5)
Olga Efimova, Doctor of Economics, Professor, Deputy Director of Economics
and Finance Institute, Head of the Economics, Industrial Engineering and
Management Department, Federal State Institution of Education “Russian
University of Transport”
Paragraph (1.6)
200
Eugene Baboshin, Candidate of Economics, Assistant Professor, Assistant
Professor of the Economics and Management in Transport Department,
Economics and Finance Institute, Federal State Institution of Education
“Russian University of Transport”
Paragraph (1.6)
Maria Danilina, Candidate of Economics, Assistant Professor, Assistant
Professor of the Economics and Transport Management Department, Economics
and Finance Institute, Federal State Institution of Education “Russian University
of Transport”
Paragraph (2.1)
Oleg Evdokimov, Candidate of Biology, Assistant Professor of the Economics
and Transport Management Department, Economics and Finance Institute,
Federal State Institution of Education “Russian University of Transport”
Paragraph (2.2)
Elena Ivanova, Candidate of Technical Sciences, Assistant Professor, Assistant
Professor of the Economics and Transport Management Department, Economics
and Finance Institute, Federal State Institution of Education “Russian University
of Transport”
Paragraphs (3.1, 4.2)
Vladimir Belozerov, Doctor of Economics, Professor, Professor of the Transport
Economics Department, Faculty of Economics and Management, Emperor
Alexander I St. Petersburg State Transport University
Paragraph (4.3)
Oksana Averyanova, Candidate of Economics, Assistant Professor of the
Finance and Credit Department, Economics and Finance Institute, Federal State
Institution of Education “Russian University of Transport”
Paragraph (4.4)
Dmitry Macheret, Doctor of Economics, Professor, Head of the Transport
Infrastructure Economics and the Management of Construction Business
Department, Economics and Finance Institute, Federal State Institution of
Education “Russian University of Transport”
Paragraph (5.1)
201
Pavel Tsypin, Candidate of Economics, Assistant Professor, Assistant Professor
of the Transport Infrastructure Economics and the Management of Construction
Business Department, Economics and Finance Institute, Federal State Institution
of Education “Russian University of Transport”
Paragraph (5.1)
Aleksey Razuvaev, Candidate of Economics, Assistant Professor of the
Transport Infrastructure Economics and the Management of Construction
Business Department, Economics and Finance Institute, Federal State Institution
of Education “Russian University of Transport”
Paragraph (5.1)
Alexander Poltava, Candidate of Technical Sciences
Paragraph (5.2)
Zoya Mezhokh, Doctor of Economics, Professor, Head of the Finance and
Credit Department, Economics and Finance Institute, Federal State Institution of
Education “Russian University of Transport”
Paragraph (6.1)
Irina Akimova, Candidate of Economics, Assistant Professor, Assistant
Professor of the Finance and Credit Department, Economics and Finance
Institute, Federal State Institution of Education “Russian University of
Transport”
Paragraph (6.1)
Lyudmila Kochneva, Candidate of Technical Sciences, Assistant Professor,
Assistant Professor of the Finance and Credit Department, Economics and
Finance Institute, Federal State Institution of Education “Russian University of
Transport”
Paragraph (6.2)
Margarita Ishhanyan, Candidate of Physical and Mathematical Sciences, Deputy
Director of Economics and Finance Institute, Assistant Professor of the Finance
and Credit Department, Assistant Professor of the Mathematics Department,
Federal State Institution of Education “Russian University of Transport”
Paragraph (6.2)
Lyubava Shishova, Candidate of Economics, Assistant Professor, Assistant
Professor of the International Financial and Management Accounting
Department, Economics and Finance Institute, Federal State Institution of
Education “Russian University of Transport”
Paragraph (6.3)
202
Irina Semina, Candidate of Economics, Assistant Professor, Assistant Professor
of the International Financial and Management Accounting Department,
Economics and Finance Institute, Federal State Institution of Education
“Russian University of Transport”
Paragraph (6.4)
Irina Dedova, Candidate of Economics, Assistant Professor, Assistant Professor
of the Finance and Credit Department, Economics and Finance Institute, Federal
State Institution of Education “Russian University of Transport”
Paragraph (6.5)
Ilya Epishkin, Candidate of Economics, Assistant Professor, Head of the Labour
Economics and Human Resources Management Department, Economics and
Finance Institute, Federal State Institution of Education “Russian University of
Transport”
Paragraph (7.1)
Victoria Smagina, Candidate of Economics, Assistant Professor of the Labour
Economics and Human Resources Management Department, Economics and
Finance Institute, Federal State Institution of Education “Russian University of
Transport”
Paragraph (7.2)
Andrey Shobanov, Candidate of Economics, Assistant Professor, Assistant
Professor of the Labour Economics and Human Resources Management
Department, Economics and Finance Institute, Federal State Institution of
Education “Russian University of Transport”
Paragraph (8.1)
Larissa Kargina, Doctor of Economics, Professor, Head of the Information
Systems of the Digital Economy, Economics and Finance Institute, Federal State
Institution of Education “Russian University of Transport”
Paragraph (8.2)
Olga Sergeeva, Doctor of Pedagogical sciences, Professor, Professor of the
Information Systems of the Digital Economy Department, Economics and
Finance Institute, Federal State Institution of Education “Russian University of
Transport”
Paragraph (8.2)
203
Liana Levitskaya, Doctor of Economics, Professor, Professor of the Economics,
Production Organization and Management Department, Economics and Finance
Institute, Federal State Institution of Education “Russian University of
Transport”
Paragraph (8.3)
Mikhail Strokov, Candidate of Economics, Assistant of the Economics,
Industrial Engineering and Management Department, Economics and Finance
Institute, Federal State Institution of Education “Russian University of
Transport”
Paragraph (8.3)
Larisa Chernyshova, Doctor of Philology, Professor, Head of Linguistic
Department, Economics and Finance Institute, Federal State Institution of
Education “Russian University of Transport”
Paragraph (9.1)
Yana Podoplelova, Senior Lecturer of Linguistic Department, Economics and
Finance Institute, Federal State Institution of Education “Russian University of
Transport”
Paragraph (9.2)
Vyacheslav Kaydash, Senior Lecturer of Linguistic Department, Economics and
Finance Institute, Federal State Institution of Education “Russian University of
Transport”
Paragraph (9.3)
Natalya Zalomova, Senior Lecturer of Linguistic Department, Economics and
Finance Institute, Federal State Institution of Education “Russian University of
Transport”
Paragraph (9.4)
Polina Yakushkina, Candidate of Linguistics, Assistant of Linguistic
Department, Economics and Finance Institute, Federal State Institution of
Education “Russian University of Transport”
Paragraph (9.4)
204
Russian University of Transport
CURRENT ECONOMIC
AND MANAGERIAL ISSUES
OF TRANSPORT INDUSTRY
Edited by Professor Y.I. Sokolov
Monograph
Printed from the provided finished materials
in the FSUE Publishing House «Izvestia»
127254, Moscow, Dobrolyubova str., 6.
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Passed for printing 28.02.2020
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Circulation 500 copies