Improving Predictability and Operational Control through Production Cost Transparency

Project Goals

The rail maintenance market is characterized by high competition and strong pressure on margins.
Under challenging economic conditions, the Lviv Locomotive Repair Plant (LLRP) — one of the leading rolling stock repair enterprises — initiated a business process reengineering program focused on cost transparency and operational control.

The project team was tasked with ensuring sustainable and profitable operations, maintaining the plant’s competitive position in the rolling stock repair market, and implementing a direct cost controlling model that minimizes deviations between planned and actual repair costs.

A key operational challenge lies in the variability of locomotive technical condition upon arrival for repair. Actual repair scope and costs often differ significantly from initial estimates, making traditional planning approaches ineffective.

At the same time, pricing for repair services is fixed in advance by the primary customer, limiting flexibility and increasing the importance of accurate cost forecasting and real-time cost control.

Project Description

At the start of the project, the plant already operated a digital environment supporting engineering, production execution, logistics, accounting, HR, and document workflows.
However, growing market pressure required a deeper level of cost visibility and controllability at the production-operation level.

Management and investors needed detailed insight into cost structure to support informed operational and financial decisions.
This required moving from retrospective cost analysis to real-time operational cost tracking, allowing deviations to be identified and addressed while corrective actions were still possible.

The objective was to track material and labor costs directly at workshop level, enabling continuous visibility into the current cost of each repair operation, rather than waiting for post-factum accounting results.

Operational cost controlling in production

The solution introduced order-based operational cost controlling, enabling full traceability of costs throughout the repair lifecycle.

Shift tasks and work orders are generated based on the current maintenance plan and network schedules.
Material consumption and labor effort are recorded according to approved engineering norms, with actual costs accumulated per operation and per repair object as work progresses.

This approach provides precise control over direct production costs and ensures that cost benchmarks are evaluated at decision time, not after execution.

By understanding which repair objects are profitable or loss-making, management can allocate remaining resources more effectively and adjust operational priorities in real time.

Key project factors

Results

Before implementation, the plant lacked a reliable method to assess actual repair costs and work-in-progress status.
Production accounting and cost accounting were disconnected, making it impossible to accurately evaluate order profitability or operational progress.

After the transition to order-based operational cost control, management gained real-time visibility into each repair object, including current cost, work-in-progress volume, and resource location.

Because cost calculations are generated at the level of individual operations and transferred along the production flow, managers can accurately determine the actual value of work in progress, its cost structure, and remaining resource requirements.

Advanced analytical capabilities enable scenario-based evaluation, including cost estimation for alternative repair types, sensitivity analysis to material price changes, and detailed drill-down into material and labor costs down to primary source documents.

As a result, predictability and manageability of production operations improved significantly, leading to higher-quality managerial decisions and a more resilient operating model aligned with European rail maintenance and industrial cost-control practices.