This brief overview will explore some of the current key business challenges for Keretapi Tanah Melayu Berhad (KTMB) and the great growth potentials in the rail passengers & logistics business as well as some suggestions on feasible action plans by its Commercial, Corporate Planning and Business Development functions.
“When you have disciplined people, you don’t need hierarchy. When you have disciplined thought, you don’t need bureaucracy. When you have disciplined action, you don’t need excessive controls. When you combine a culture of discipline with an ethic of entrepreneurship, you get the magical alchemy of great performance.”
- James C. Collins, Good to Great
Preamble
It is a very common sight at most of KTMB train stations:
There are plenty of passengers and most of them are not that satisfied with the services offered. The services are not the most reliable and definitely not as friendly.
However, most of the passengers don’t really bother because they don’t have much choice, but some did take extra steps in voicing their dissatisfactions via the KTMB Complaint Board, most of which will fall on the deaf ears anyway.
But why all this? KTMB supposed to be a well known institution in the Malaysian history. Through out the history of Malaysia, the railway had played a key role in the development of the nation’s socio economy, primarily in the Peninsula Malaysia.
Since the first link from Taiping to Port Weld (Kuala Sepetang) in 1885 up to the early 20th century, railway tracks were expanded to span the length of the Peninsula from Padang Besar to Singapore.
The services are not the most reliable and definitely not as friendly.
In the 1990s, the name has changed from the Malayan Railway Administration (MRA) became Keretapi Tanah Melayu Berhad (KTMB) following the Railways Act 1991. KTMB ran its operations like a private corporation but still owned by the government via Ministry of Finance (MoF) Incorporated. Previously, there were some efforts by the government to fully privatise KTMB but were unsuccessful.
At the First Glance
As for the masses, the first attempt to look at KTMB information is via its official website.
Unfortunately, the KTMB website looks very outdated and not informative enough. There are very little information on the company status and its services offered. The website looks as if it’s not professionally done at all. For KTMB users and customers, the feeling when browsing the website will be quite similar to the unintelligible voice heard from the Public Address (PA) System at almost all of the KTMB stations.
In addition to that, for a company of the size and of importance like KTMB, people will be looking at the financial reports and past performances. However, they are only available for the year 2013, 2014 and 2015. To make it even more puzzling, these audited reports are dated at 2012 and 2017.
The other crestfallen thing observed is that even KTMB’s company vision and mission are very weak and even had glaring spelling and grammar mistakes.
Since in this day and age people will be first looking at the internet to find any information, it is imperative that the foremost thing KTMB Management needs to do is to totally revamp its website’s looks and feels as well as its contents. KTMB could try to emulate the best practices by the top railway companies of the world like Union Pacific and CSX of the United States as well as MTR of Hong Kong and others.
Lingering Issues
It is a public knowledge that KTMB for the past decades has been continuously plunged in a series of financial corporate setbacks.
To quote KTMB previous Chief Executive Officer (CEO) Datuk Sarbini Tijan who said that that the company is ‘technically bankrupt’, hence an urgent transformation is needed to turn the company around. According to him, there should be a KTMB wide transformation process with a top-down approach, beginning with the board, right down to the janitor.
The followings are the financial highlights for the financial year 2015 (FY2015). There is no information available for FY2016 and FY2017.
- Net Loss - 2015: RM226.25 million, 2014: RM43.48 million
- Revenue - 2015: RM515.8 million, 2014: RM498.9 million
- Staff Costs % - 80% of KTMB Revenue, Optimal ~ 20-30%)
- Status End of 2015 - Assets RM623.86 million, Liabilities RM1.92 billion
According to some reports, the prevalent low fares are among the main contributing factors for the losses. As a comparison the fares for the commuter service are currently 10.8 sen/km compared with 15 sen/km for LRT services.
The other main contributing factor for the financial loss viz.:
- High operational cost in maintaining its rail coaches and deteriorating infrastructure conditions and poorly maintained rolling stock and coaches
- High electricity and diesel consumption
- High portion of manpower costs compared to revenue but lower staff salaries and benefits thus resulting in high staff attrition rates
- Cargo services losses of about RM55 million per annum
This results in KTMB having a negative cash flow problems of more than RM200 million per year. KTMB without doubt will require a 180 degree transformation, it requires for a new blood of leadership to be brought into the company.
New Leadership at KTMB
On September 2017, KTMB has announced the appointment of Mohd Rani Hisham Samsudin as its new CEO, who has made few announcements on the measures and steps to be taken by KTMB to turn around the company including the efforts poised for the first profit after almost two decades of losses, namely:
- To stop the continuous losses in the company.
- Reviewing all contracts that were outsourced, and looking at the unprofitable routes.
- Acknowledging the major contributor to KTMB profit is from the passenger ticket sales and ensuring KTMB ETS (electric train service) as well as shuttle services between Johor Baru and Woodlands remains profitable.
- Capitalising on the cargo business for growth.
- Usage of KTMB land in the Klang Valley for property development especially in the Bangi, Shah Alam and Klang areas, so as to generate income for the company and reformulating KTMB business model to look beyond the railway service.
- Starting the transformation of working culture and attitude of all staff and addressing the union (RUM) so that KTMB will have common agenda to develop and grow the company.
- Introducing a performance-based KPIs for every staff members to measure and increase the productivity by improving revenue and reducing the cost per employee.
- Transferring process of KTMB’s assets and liabilities to Railway Asset Corp (RAC) as part of the Railway Network Access Agreement (RNAA), a move which is strongly opposed by RUM.
The effectiveness and the positive outcomes as a result from the company policy changes and revised business models by the new helm at KTMB leadership is yet to be seen. From the announcements made so far, the future of KTMB business looks promising. However, the public and the private investors have all the rights to be sceptical unless proven otherwise.
Railway Potentials in Malaysia
The railway as a form of transport for people and goods is the most efficient if compared to the other forms of transportation. The railway systems especially when electrified, will be more economical in terms of fuel consumption reduction, more environmentally friendly with potential reduced vehicle taxation based on lesser CO2 emissions, travel times will be faster as well as being much more safer. Studies made on comparisons between road and rail transportations, transporting cargo by rail is 6 times more efficient compared to road whereas and for passenger, railway is 20 times more efficient.
With the completion and the near completion of the Electrified Double Track Project (EDTP) from Padang Besar to Johor Bahru as well as the Klang Valley Double Track Project (KVDTP) will bring about socio-economic benefits to the overall economy and the nation as a whole. The better rail services will also benefit lower income groups as well as the rural communities.
In Malaysia, in terms of transportation, the railway currently has a market share of just 3% compared to road transport with 89%, whereas in the developed countries railway share is more than 30%. This over-reliance on road transportation is not entirely sustainable with known congestions on the PLUS and other expressways during festive and school holiday seasons.
EDTP and KVDTP completion will allow for development to be more dispersed as people working in cities can live outside. The better railway services will also benefit lower income groups and rural communities.
Moving Forward Recommendations
The followings are some of the recommended moving forwards action plans for KTMB:
- KTMB need to form a separate division or company to assume the roles and responsibilities like Network Rail in United Kingdom. This new entity will be separated from railway operations and will be focussing among others at:
- The efficiency of track renewals, particularly from engineering haulage and goods transportation perspectives
- Supporting on property projects (it is hereby suggesting that KTMB will discontinue the RNAA and keep all assets)
- Evaluating the internal requirements for traction and rolling stock and managing the procurement processes
- Reviewing the requirements for depots and new depot facilities
- Responsible for asset management ensuring that safe and economic processes are established to support the terminal operations
KTMB via KTM Kargo needs to revamp and improve throughly its haulage and goods services via the following recommendations to provide a multimodal transport service to meet customer needs. KTM Kargo need to be the leader of Malaysia’s Integrated Logistics Provider:
- Combined rail & road, a multi-provider service for all container transport especially well suited to the shipping of hazardous goods since it reduces risk
- Full train and end-to-end delivery, a managed end-to-end service using both fleet and chartered vehicles and if required piggybacking to manage large volumes.
- Some of the transformations which are needed for multimodal transport repositioning are:
- Competitive edge based on volumes and requirements, KTM Kargo need to offer a means of transport that is most competitive for business
- Expertise, KTM Kargo need to position itself as a single contact to businesses with precise information on their freight wellbeing and status
- Traceability, KTM Kargo to also provide online tracking services of customers’ freight in real time employing Intelligent Transportation System (ITS) and other Industrial Revolution 4.0 (IR4) business driven innovation applications.
Lessons Learnt from MTR Hong Kong
Based on a study made on the good business practices by one of the most profitable railway company in the world i.e. MTR of Hong Kong, the followings are some recommendations for KTMB to emulate:
- KTMB Leadership and Management in their effort to turn around the company should start making commitment and act more rationally with more motivation, and take all their commercial and entrepreneurial decisions to create wealth for the company and ultimately benefitting the society. Firstly by re-creating its corporate mission, vision, policies and operating practices, creating a culture of continuous improvement and commitment to excellence.
- KTMB Board should be governed by an independent board, members of which are drawn from leaders of various sectors of industry and academia.
- Performance of this entire KTMB team shall be regulated through a variable pay mechanism set against a pre-defined set of safety, customer satisfaction, efficiency and profitability targets.
- KTMB need to re-establish its Property Division who shall be responsible for property development and non-fare revenue aspects of the business. The railway-property model shall be an associated to the objective of better integration of city and transport planning. A close coordination with the Ministry of Transport is required.
- The profits generated from these property developments can help offset the capital investments in new railway lines and extensions as well as the replacement and enhancement of existing assets and networks.
- KTMB must put its operational excellence as top priorities. Such commitment shall be embodied in its corporate vision of keeping customers first and achieving commercial prudence.
- KTMB needs to emulate other top global railway companies by ensuring resource allocation and capital investment will be done only through the annual budgeting exercise and will be reviewed extensively all the way to the top to ensure all investments meet overall corporate goals and objectives.
- For long term financial planning and asset management, the KTMB also maintains at least a 20 years forecast, which is reviewed and updated yearly (MTR is doing 50 years forecasts).
- KTMB needs to always consider technological advancements and issues of obsolescence with the ultimate aim is to improve the process flows so that delivery of services can be expedited or streamlined.
- KTMB needs to develop stringent procurement policy and cost control mechanisms, which will be designed to achieve a good balance between efficiency and control, and to obtain best value for money in the procurement of goods and services. This obviously will reduce many forms of corruption practices.
- KTMB needs to consider the current forms of digital advertising and other innovative formats, apart from billboards and advertising panels.
- Some of the available space at KTMB stations and tunnels can be leased out to mobile phone operators to offer connectivity to passengers or maybe install solar panels to power operations, and even sell energy back to the grid. Revenue is generated while offering a better value and convenience to the customers.
- KTMB needs to fully exploit the role of its stations as the hubs for the community. Some suggestions could be in the forms of exhibition spaces in the stations are leased out to credit card companies, charity organisations and for other promotional activities.
- KTMB needs to practice a Continuous Improvement and Commitment to Excellence and pledge to always set a target higher than previous achievements and to strive to meet these new challenges as well as emulating the best practices from other top railways around the world. An example to maybe invite the American Public Transport Association, to carry out regular safety audits and it obtains various quality certifications from ISO.
Summary and Conclusions
It is without doubt that KTMB needs a rebranding and a major revamp in its organisation.
KTMB future road map, revised corporate plans, business improvement plans and others will have to examines internal capabilities and take full advantage of external opportunities that will allow KTMB Leadership and Management to guide the business out of its current lingering financial situation and bring it to another level and able to compete and contribute to the development of the new Malaysia.
This revised corporate plans shall also contains actions that are needed to accomplish company objectives as well as supplying a map to benchmark progress at regular timelines. KTMB needs to revise its vision statement by defining its roles and responsibilities as well as its objectives, which will guide ALL its internal decision making, maintain its business focus and giving a sense of purpose to its business. In addition, KTMB needs to also redevelop its mission statement which will outline how it will achieve its business and transformation plan. Ideal revenue streams: 1/3 Passenger, 2/3 Freight, plus others (property, parking, distribution, advertising etc.)
KTMB needs to also be wary on all its resources and scopes by taking cognisant of all its activities, programs, divisions, employees, tangible and intangible assets, finances and anything else that is relevant to its vision and mission. This will give KTMB a clear picture of where it is now and where it want to go.
KTMB need to also create a listing of KTMB Corporate Objectives and how these objectives will be measured. This will help employees and other stakeholders know where KTMB is heading and what needs to be done. In addition, corporate strategies also need to be developed and listed such as developing new products and services or entering new markets (property markets etc.) as well as the approach KTMB will use to get there.
These actions will help KTMB to connect back with its clients, employees and all the stakeholders. By clarifying who KTMB is, what are its offers and what differentiates it from others, KTMB will be able to better communicate its values.
