The Problem
The Talyllyn Railway in Wales is an example of a once-successful tourist-oriented enterprise that contends with the challenge of the modern and more competitive tourist market. As the tourism industry grows, people are drawn to resorts and fun places that offer a novel experience and pleasure such that the passenger figures for the narrow-gauge railway have dwindled in recent years. This compounds the problem common to a narrow-gauge railway like Talyllyn, which requires huge capital expenditure and operational and maintenance costs but whose traffic density is severely limited because it could not increase its speed or load capacity. Mitchell & Eyres (2005) observe that since narrow-gauge railways are generally undercapitalized, many of them convert to standard-gauge tracks to avoid going bankrupt. Expanding the tracks of the Talyllyn Railway is not an option because it was declared a national preserve in 1951, one of the first preserved railways in the world. Thus, the best that Talyllyn Railway can do to improve its competitiveness and profitability is to adopt a management scheme like supply chain management.
Under the traditional concept of business, management is confined to individual functions within an organization, with only passing attention given to external factors. Globalization rendered this practice impractical as firms are confronted with the challenge of increased competition and regulation, fast-changing technology, and customer behavior. The advent of multinationals, joint ventures, business partnerships, and strategic alliances gave rise to supply chain management, which departs from the practice of managing narrow organizational concerns and instead integrates all activities in a network of suppliers or partners (Wailgum, 2008). This networked structure of a supply chain has gained recognition as the new organizational form, which is defined by Goddin (2002) as a group of semi-independent organizations with separate capabilities that collaborates their activities to serve one or more markets towards the attainment of a common business goal. Such a definition, however, indicates that supply chain management is only for large resource-rich organizations that operate across national boundaries and maintain relationships with diverse suppliers. This paper examines supply chain management (SCM) in both concept and practice to determine if a relatively small organization like Talyllyn Railway, which is engaged in domestic tourism, can improve its bottom line through SCM.
Background
The Talyllyn Railway is a narrow-gauge steam railway network that runs a 7.25-mile (11.67 km) line between Tywyn and Nant Gwernol in Mid Wales. It is only one of two steam railways in Wales and eight in England for a total of 10 in the whole of UK. Among the major competitors in the UK are the steam and narrow-gauge railways in Rudyard Lake, West Somerset, Launceston, Lappa Valley, Keighley & East Essex, East Somerset, Epping Ongar, Gwili, Gwynedd, Fairborne, Amerton, Barry Island, Cleethorpes Coast, and Eversham Vale. Many of these tourist facilities have been declared heritage railways like Talyllyn. From the time the Talyllyn Railway was started as the country’s first steam-powered railway in 1866, operation for this unique railway system has been a constant struggle because of under-investment (Mitchell & Eyres, 2005). In 1951, the railway owned and managed by the Talyllyn Railway Co. avoided imminent collapse when it was declared a national heritage to be preserved through volunteerism and operated as a tourist attraction (Goddin, 2002). In the process, the volunteer organization Talyllyn Railway Preservation Society was created to help the railway company run the trains for tourists. Thus, in a more recent year, 350 volunteers helped the company’s 13 full-time staff maintained the railway, along with half a dozen extra hands usually accommodated during the summer. Somehow, the railway managed to expand through donations and grants. For example, a £682,500,000 grant was received from Heritage Lottery in 2003, of which £1,170,000 was used to refurbish the Tywyn Wharf station and the Narrow Gauge Railway Museum. When the new station and museum were inaugurated, Prince Charles and the Duchess of Cornwall led the ribbon-cutting ceremony, which contributed to the popularity of the railway. Public interest for the Talyllyn Railway is sustained by the same kind of publicity generated by the Thomas the Tank Engine books published by the Skarloey Railway, and the television show Thomas and Friends produced by Rev. W. Awdry, which are both based on the Talyllyn locomotives. Reverend Awdry visited the line on a family holiday in the early days of preservation and became involved as a volunteer soon afterward (Mitchell & Eyres, 2005). Many of the stories in these materials come from real-life experiences at the Talyllyn, with some of the books containing full-page illustrations of the Talyllyn locomotives. The railway was even romanticized in a 1953 film by Ealing Studios titled The Titfield Thunderbolt about a group of villagers that continued to operate a line of a closed railway network. The film’s scriptwriter T.E.B. Clarke was inspired to write it when he spent a day at the railway in 1951 upon hearing its preservation, such that some of the early incidents in the preservation were part of the film. The popularity brought by media attention, however, does not translate to the volume of passengers required for a financially viable railway. In 2006, a total of 95,500 passenger journeys were made, which can stand improvement. As a result, the railway remains a single-track network and train personnel still use flags to signal incoming trains. There are loops at the train stops in Pendre, Brynglas, Quarry Siding, and Abergynolwyn and more loops need to be constructed at seven other stations.
The Concept
Like most narrow-gauge railways elsewhere, the Talyllyn Railway was originally built in 1866 by industrialist Sir Henry Haydn Jones only for carrying loads between Bryn Eglwys and Tywyn in the mid-Wales hinterland. After it was declared by law as a national preserve in 1951, it started operation as a tourist attraction largely on a volunteer basis through the Talyllyn Railway Preservation Society (TRPS). Through grants and donations, the railway expanded its rolling stock, built new stations, and purchased new locomotives and carriages. The 1960s were described as a period of consolidation for the railway as the number of passengers rose, attracted by a 1957 BBC feature. According to Hart (2006), the Talyllyn Railway now receives about 50,000 visitors yearly who take the 52-minute train ride at 15 mph. All shares in the railway are held by Talyllyn Holdings Ltd., which was recently granted charitable status. Its chairman sits on the board of directors, together with 3 others named by the TRPS and 2 directors appointed by the family of Sir Henry Haydn Jones. The Talyllyn Holdings perform the business activities that the railway as a preserved heritage cannot do such as running the car park at the Wharf station. It is believed that the bottom line of the railway can be improved if this unique management setup gives way to supply chain management, which would integrate all management activities.
Hausman (2003) defines supply chain management as the art and science of improving how organizations find the raw materials for making a product or service and deliver it to customers. The key is to monitor the supply chain so that the process is efficient, costs less, and delivers high quality and value to customers. This involves such activities as planning, sourcing, monitoring, delivery, and return. Insourcing, the firm must choose the right suppliers that would deliver the goods and services to be inputted in its product with all things considered such as price, delivery, and payment processes. Monitoring refers to the need to measure the quality levels, production output, and worker productivity, while delivery involves logistics such as a network of warehouses and carriers to bring the product to customers. As for the return, it is a network for receiving defective and excess products and providing satisfaction to complaining customers (Hausman, 2003).
Supply chain management is in effect the strategic networking and handling of interconnected businesses involved in the provision of a product or service to customers (Johnson & Pyke, 1999). All activities involved in product sourcing, procurement, and conversion need to be managed well, including logistics and collaboration with all partners in the supply chain such as suppliers, intermediaries, third-party service providers, and customers. Supply chain business process integration involves collaborative work between buyers and suppliers, joint product development, common systems, and shared information. According to Simchi-Levi, et al. (2007), operating an integrated supply chain requires the continuous flow of relevant information throughout the stakeholders.
Statistics
The higher prices of crude oil have increased the attraction of railways as a cheaper, cleaner, and safer mode of transportation. According to Hart (2006), railways in 2006 expanded their revenues by 35 percent. In the case of Talyllyn Railway, however, it could not increase its share of the newfound popularity of railways because of the handicap mentioned above. The standard gauge railroads can b easily upgraded to cope with the heavier traffic but the narrow-gauge railway like Tallyllyn is stuck with its low-speed locomotives. The narrow-gauge railway is between 610 and 760mm and is thus restricted in its carrying capacity. Railways with bigger carrying capacity measure up to 1067mm gauge and their trains run at 100 mph or faster.
The Talyllyn Railway is promoted as the Great Little Trains of Wales. Most of its 50,000 yearly visitors are volunteers who spend their time clearing the trackside, cleaning the locomotives, stoking the boilers, or driving the trains. The total number of these volunteers reached 3,500 in 2006 and they come from all walks of life and ages. The original locomotives from the 1860s still run alongside the more modern rolling stock.
According to Larson & Haldosson (2004), supply chain management can address the need for the competitiveness of enterprises like Talyllyn Railway. When a firm does not have the resources to match its competitors, it can face any business challenges by establishing an upstream and downstream arrangement that would process the acquired inputs into outputs and then pushing these for downstream distribution with selected supply chain partners. For example, AB manufactures bicycle chains for bike assembler XY while MN produces parts in the cycle chains supplied by AB to XY. Let us say XY contends with an increased demand for bicycles and requires 40,000 units of cycle chains from AB. Without an SCM strategy in place to coordinate the work of the three companies, MN will never know how many parts of cycle chains to produce to meet the requirements of AB. In effect, both AB and MN will be saddled with high stock inventory or even lose business with XY (Larson & Haldersson, 2004). There is always a tradeoff between inventory and customer service (Hausman, 2004), such that if a firm increases its level of service, this necessarily results in a higher level of inventories. However, effective supply chain management can enable firms to raise their levels of customer service without incurring an increase in inventory levels by enhancing service levels with the use of less finished goods as inventory. This means unifying the two functions of inventory and service so that no separate functional groups fight for either lower inventory or higher service (Hausman, 2004).
The Solution
For Talyllyn Railway, the appropriate primary partners in supply chain management are the Talyllyn Railway Preservation Society, the Heritage Railway Association, and the Tourist Railroads and Museums. This railway network is a tourism-oriented enterprise animated by volunteerism, which is represented by the three non-profit organizations and so railway operations must be closely coordinated with them. They attract train hobbyists and enthusiasts to the steam railway. The possible secondary-level partners in the supply chain are such firms as the Dotto train manufacturer and Veit Group, which makes steam generators. Based on the tenets of SCM, a firm like Talllyn Railway Co. needs to take a hand in the manufacture of quality trains to ensure that passengers ride in comfort and safety. The railway company also needs to integrate its work with hotels, travel agents, and tour operators, who are responsible for bringing customers to the railway. In the matter of returns, the railway cannot afford to neglect the environment.
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