Talk Morgan Forums Community The Malvern Arms Thames Tunnel

Its not just public sector procurement, Industry also has its moments....about 50 years ago a well known UK construction company entered into a large capital replacement project to replace a materials hopper facility running into many tens of millions. At the same time in a separate area dealing with transport was looking at replacing its aging fleet of trucks and investigated increasing the carrying capacity of its bulk carriers by raising the sidewalls of the truck beds.

Whilst both projects received approval by the same board, the detail submitted on the cap. ex's didn't identify the operational changes that justified the savings. Needless to say the new hoppers were built and the lorries replaced and quess what the higher sided lorries didn't fit under the new hoppers. So the bottom of the hopper bed had to be excavated and lowered to allow the lorries to access the hoppers.........................lack of joined up thinking more common than you think.

I worked for the Home Office (Directorate of Telecommunications) back in the '80s ... we bought new main transmitters for all the Police and Fire Service hilltop sites .... the wheeze then was to cheapen the deal by not having a warranty but relying on us engineers and the generous spares package instead (actually made sense as we were on the payroll) .... however the management were in the grip of 'efficiency savings mania' ... which included carrying the minimum stores stock for some book-keeping reason ... if something in stores hadn't been used in a year it was skipped .... a year down the road and the storemen were ordered to skip the entire spares package for the brand new transmitters as, because they were brand new, the spares hadn't been needed yet ... no amount of logic worked against the management dogma so we all 'worked late' one night and hid the all spares up in the false ceiling of the workshop 🙂

We also ran some very high power and wonderful old valve tech for which our spares stock was literally unobtainable at any price ... that went up there too.

The madness of desk-jockeys!!

K

K, We went through a similar process where I worked. at the time we were told that the company had to pay tax on all parts held as spares, fewer spares, less tax..!!! Whether true or not.. i have no idea. We kept the place running despite "management."

They won't pay tax on spares apart from on purchase but they will have to depreciate the asset reducing the EBIT and reducing free cash.
Accountants will want to minimise assets to maximimse cash & EBIT

We used 807's in our 1200W transmitters and they were getting very difficult to source prior to us automating with chip and Power FET technology, valves had soul but chips just make you fat.

Thanks for the heads up on financial arrangements around maintenance of a stock of spares John...

Your chat on valves brings back memories of binning KT 66 and KT 88 valves and amps that depended upon them... Time moves on..

I don't remember in my many years in the senior Finance positions personally wanting to minimise assets to maximise cash...........especially if you have an efficient stock turn ratio or sales to captal employed ratio. etc.......it was more the management team/corporate objectives may drive short term solutions to balance sheet measurements often for the sake of appearance and individual bonuses than sound custodianship. Everyone blames the accountants when often its the failings of the rest of the management team, that the accountants pull out of the mire.

Well known aspect of decision theory states, tell me how you will measure me and I will tell you how I react, in essence incentives like bonus payments set on achieving eg departmental budgets, profits etc will often distort management behaviour in such a way they then achieve the said target often taking tactical short term decisions at the expense of longer term opportunities

We were owned by venture capitalists. Cash was all vs the various covenants to secure the loans. Trust me minimizing working capital of any sort and cutting in their view idiotic preventative maintenance drove us. I was Operations Director EMEA.

John ... you might underestimate the amount of stuff the Home Office can accumulate ... we had a couple of Hundred Green-Goddesses sat perfectly maintained in a giant hangar 'just in case' 😁

Used to be a fun job every few years to PM and check all their radios 🙂

K

There were actually over 900 Green Goddesses maintained by the government for contingencies but they were all disposed of in 2004.