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Wednesday, 7 July 2010

Parcels Costing on the West London Extension Railway (Let's Go Wild)

Now I won't bore you with a long history of the West London Extension Railway (WLER). Simply put it, was built, owned and operated by four railway companies, the Great Western Railway (GWR), London & North Western Railway (L&NWR), London, Brighton and South Coast Railway (LB&SCR) and my own, beloved, London and South Western Railway (L&SWR). It ran from Clapham Junction to Kensington (now Kensington Olympia) where it connected with the L&NWR and GWR's West London Railway and opened on the 2nd March 1863. Therefore, it can only be considered a fill-in company of little significance in the grand history of Britain's railways. However, with the South Western's involvement it did peak my interest. What, I mused, could the WLER's company files tell me about how the South Western's management? And so, I spent a day photographing the WLER company's files at the National Archives. Sometimes research doesn't go as planned and in the end I found very little of use. But, what I did find regarding the company itself was of more general interest to me (and others). I may not be able to use the information in my PhD, but it is worth relating the findings, small as they are, as they may be of a more general interest.

Ok, don't go to sleep, but it is all a matter of cost accounting. In layman's terms we don't know a great deal about how the Victorian railway companies made small everyday decisions. Large-scale decisions, those involving large capital investment, are broadly understood. When the railway companies built an engine shed, constructed a new type of locomotive or remodelled a station we roughly know why they did because of the large-scale nature of these projects. The rationale behind them are there to be seen in blaring neon lights. But then the history of Britain's Railways isn't made up solely of large decisions made by the directors and managers, it is made up of a mix of the big and the small. In fact one of the goals of my PhD is to try and create links between corporate thinking on the 'big' and the 'small' decisions and how both were formulated. Anyone wishing me luck?...I hope so. The way that small decisions were made is a very large mystery that noone has really approached up to this point because of a lack of information.

Further to this, the actual statistics railway companies used to inform decisions are also a bit illusive. We know that Locomotive Departments used a range of measures to monitor cost such as Locomotive Miles (the cost of locomotive operation divided by miles run by the locomotives), Carriage Miles (same as before but for carriages) and Wagon Miles (well, you get the gist). Yet, except in special cases (such as Terry Gourvish's study of Mark Huish's innovations on the L&NWR in measuring the cost of moving one ton or passenger, one mile) there is significant uncertainty as to how the non-Locomotive departments within most railway companies costed their operations. Indeed, in the case of the L&SWR the most I have found with regard to cost accounting (under which falls all figures such as ton mile) in the Traffic department was the cost of feeding horses in 1887 using the 'fodder per horse' measure. No doubt the horses were happy, but I am not.

It was therefore with some sense of wonder that I came across one decision on the WLER regarding parcels delivery using a completely a type of costing that I hadn't seen before. When the line was opened the board of the WLER formed an officers committee which was made up of the chief officers of the four companies that owned the company, as well as the superintendent of the line. The minute books of this committee are joyful files on two counts. Firstly, most minutes of railway companies' officers' committees have been lost as these committees did not discuss the 'higher matters' of company operation. This means that a lot of information on the day-to-day running of railway companies in the Victorian period has been lost. Secondly, the document is printed and for any pre-1900 historian (of any subject) not dealing with the handwriting of a possibly cranky or tired clerk is always a dream. Anyway, I digress.

From 1863 when the line opened the company collected costing data on the parcels delivery service at Kensington station. Indeed, as far as I can tell this all they collected costing data on. Why, I hear you ask? Well, I'm not precisely sure, but I will suggest a number of points that may explain things. Firstly, while costing data on parcels services hasn't been shown up in research on any other railways yet, this may suggest that the four companies involved may have actually collected this form of data and the only fact that I have found them in the case of the WLER is that the minutes of the officer's committee survived. However, a counter-argument may be that it was because the service was administered by the four companies that they felt it needed to be monitored more closely so that the expenditure incurred could apportioned to each company more accurately. While both positions have their merits, I will go with the former. This is because the costing that they worked out, the cost of delivery per parcel' was for the whole service. They did not divide the data up between the four companies, i.e. the cost of delivering a GWR parcel, the cost of delivering a LB&SC parcel and so on. Therefore, the evidence suggests that all the companies involved may have engaged in this type of costing and applied it to the management of the WLER. This, believe it or not, is possibly an important finding (everybody dance now).

So where did they apply this costing to decision making? On the 4th January 1864 the company set up the delivery arrangements for parcels at Kensington station. The rule they applied to the service was that any delivery that was within a mile of the station would be free, where as any delivery over that distance would be charged (at a rate I have yet to find yet). Initially there were three deliveries daily to the local area. In working out how the cost of operating the service would be apportioned between the four companies the company firstly credited the delivery account with the revenue generated. Then the companies each paid a portion of the cost dependent on what percentage of the parcels had originated on each of their networks.1 It was after this that the company worked out two cost measures, the gross cost of delivery per parcel (total cost of delivery service divided by the number of parcels) and the net cost per parcel (the cost of delivery after revenue had been factored in, divided by the number of parcels delivered). These figures were presented every half year to the committee. The gross and net cost of delivery are presented below for the period between the December 1864 and December 1870 half years. Please click on the picture to blow it up and get a better look.

Clearly, the cost was rising up until December 1867, but after that point the cost dropped to levels far below any cost before it. So what changed? At the March 1867 meeting of the Officers Committee the December 1866 figures were presented and 'attention was called to the Gross charge of 4 ½d per parcel being very high.'2 But, no action was taken at this point. However, roughly one year later at the February 1867 meeting, the costs were presented and they had risen even more sharply. The officers requested that the Superintendent of the Line, Mr Grew, investigate whether the delivery agents, Messrs Horne and Chaplin, would 'reduce their charges if only two deliveries were made daily, instead of three; and if satisfactory terms are offered, to then make only the two deliveries.'3 The new proposal was agreed to by Horne and Chaplin and the two deliveries saved the company 20s a week (or approximately £52 per year.)4 This started on the 1st of April and while 'it was apprehended that many complaints would be made...after the first few days, they entirely ceased.5 As such the cost of delivery dropped significantly.

A number of observations should be made about this service. A report for the officers committee written by Grew after the service had started on the 4th of April 1864 noted that 'the number of parcels sent for delivery is increasing, but at present the receipts from them will not cover the expenses.'6 Indeed, the parcels delivery service never made any profit throughout its observed history. Despite revenue increasing, between the December 1864 and December 1870 half years it never made up more than two thirds of the costs that the four companies had to pay. Therefore, why did they continue the service?

I would suggest that even at this early stage of railway development there was an expectation that the company would provide a parcels delivery service in a certain way, and that the WLER was conforming to established industry paradigms. This assertion is confirmed by the actions that the company took, or did not take, in response to the figures presented of the cost of delivery per parcel and the overall cost of the service. Firstly, they did not change the charging structure for deliveries. For example they did not remove the 'free' service and consider charging for all deliveries irrespective of distance. Secondly, they did not cancel the service when it was not profitable. Thirdly, they made the simplest change possible by reducing the number of deliveries, doing nothing to radically alter the way they operated the delivery service. Fourthly, they did not change, as far as I am aware, the rates or those deliveries they charging for, a factor possibly influenced by charges agreed to by the different companies individually or through the Railway Clearing House (RCH). Lastly, they noted the public response to the changes that they made and were worried about the reaction. Therefore, the WLER's controlling officers, seem to have been constrained within pre-existing industry ways of working and the expectation that they would offer a parcels delivery service.

Therefore, while this blog entry has only focussed on one station, within one small company, it does suggest a number of interesting points. It has shown that more detailed costing of railway operations was being used within the industry to make decisions on company activities. However, these decisions were constrained by what were considered industry norms that were conditioned by the expectations that the public possibly had regarding the services that they would receive from a railway company. This also may suggest (exceedingly tentatively) that many of the problems of railway company profitability in the late 19th century that has been discussed by historians (Gourvish, Leunig, Aldcrodt may have been in part caused by those companies that were established later conforming to 'industry norms.' This may have in turn re-enforced these norms within the older companies who couldn't make radical changes to their services as the industry was built up around them. I can't however assert these last points on this data alone at all, but I hope with further research to discuss these issues in more detail in the future.

Vastly more research needs to be done on these WLER papers and I hope that you have enjoyed this delve into the more academic side of my work. Oh and another thing – I am not in any way studying the WLER, I looked at them for fun and interest. Sometimes I wonder about my life...nah, I kinda like it.


1The National Archives [TNA], RAIL 731/11, West London Extension Railway Company: Records, Principal Officers' Minutes (printed), Minute No. 20, 7th December 1863, Minute No. 28, 4th January 1864 and Minute No. 36, 1st February 1864.

2TNA, RAIL 731/11, West London Extension Railway Company: Records, Principal Officers' Minutes (printed), Minute No. 412, 7th March 1867

3TNA, RAIL 731/11, West London Extension Railway Company: Records, Principal Officers' Minutes (printed), Minute No. 509, 10th February 1868

4TNA, RAIL 731/11, West London Extension Railway Company: Records, Principal Officers' Minutes (printed), Minute No. 525, 26th May 1868

5TNA, RAIL 731/11, West London Extension Railway Company: Records, Principal Officers' Minutes (printed), Minute No. 547, 6th July 1868

6TNA, RAIL 731/11, West London Extension Railway Company: Records, Principal Officers' Minutes (printed), Report written by Superintendent Grew to the Principal Officers, 4th April 1864.

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