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'orses for Courses
Page 185
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SELECTION OF A COMMERCIAL VEHICLE MUST BE MADE WITH AN EYE TO LIKELY OPERATING COSTS
MANY of the problems arising from the operation of commercial vehicles can be conveniently considered under the two fundional groups of engineering and traffic. In this context engineering implies the provision and maintenance -of the vehicle, with the traffic department being concerned 'with its efficient use in the conveyance of goods or passengers.. Correspondingly the selection of a commercial vehicle likewise can be considered under these two headings, but with the distinction that the type of work which the vehicle is to do— that is, the requirements of the traffic department—must be considered first, after which selection can be made on whatever vehicles are available and likely to meet these requirements.
Because the range of commercial vehicles now offered by the manufacturing industry is so wide it becomes all the more necessary for the prospective buyer to make a fair examination of alternative models before making a final choice. As the majority of prospective buyers of commercial vehicles at the Scottish Motor Show will be professional operators it is unlikely that they would make an outright bad:' buy. But even a choice only marginally
below the most suitable obtainable for a particular job could detract appreciably from subsequent profits. This is because, in contrast with the choice of many private cars, a commercial vehicle (at least in the heavier range) is likely to be operated for a longer period of time or a greater mileage. Consequently the accumulative effect of only a marginal deficiency compared with the optimum available ultimately could add up to an appreciable addition to operating costs before the first owner of the vehicle disposes of it.
Economic Aspects Dealing, therefore, with the economic aspects of selecting a commercial vehicle, it is useful to re-examine the items which go to make up the total cost of operating a vehicle and, in particular, the proportion of those items to the whole.
A suitable example for this exercise would be the popular 7-tonner fitted with oil engine and averaging 600 miles a week. Both in carrying capacity and mileage this example would represent a fair average in the total range of vehicles available. Assuming it was fitted with a standard platform body the initial outlay on the example chosen would be £1,409 and the total cost of operating the vehicle 600 miles a week would be £45 as. 6d.
Turning now to the individual items the first of the five standing costs to be considered is the licence. In this example the unladen weight is reckoned at 3 tons 4 cwt., so incurring an annual licence duty of £69 15s.—which, incidentally, includes the 50 per cent increase imposed earlier this year.
Lasting Advantage
.Based on a 50-week year to allow for two weeks when the vehicle would be off the road for major overhaul or driver's holiday the equivalent cost of licences per week would be I 8s. 9d. Compared with the total of £45 it will be seen that this is a relatively small proportion, although the actual incidence of an annual payment of £69 15s. is heavy when renewal ultimately becomes due. Nevertheless, when selecting a new commercial vehicle, if genuine and lasting advantage can be obtained by the purchase of additional equipment or possibly specialized type of body then, within reason, some addition to the unladen weight which might thereby arise could be more than absorbed by the additional revenue accruing from extra journeys made or goods carried.
The largest of the 10 items of operating costs of a commercial vehicle is the driver's wages. As the minimum remuneration payable is subject to statutory requirements c4 in the case of Aand B-licence operators and is virtually so for C-licence operators, the amount payable is largely outside the control of the operator apart from bonuses or other additional payments.
Accordingly, in considering this item of operating costs in relation to the choice of a vehicle, the operator will bc concerned with the potential productivity of the driver in such matters as cab comfort and ease of access, particularly where multiple collection and deliveries are concerned. Admittedly, any savings thereby derived tend to come within the category of "not quantifiable ", and therefore can be discounted by those so minded. Nevertheless, with the item of driver's wages forming such a large proportion of the total operating cost, any overall savings which can be achieved in this direction obviously must be taken.
Essential Exercise
Both in this context and in other circumstances it should not be overlooked that although the costing is an essential. exercise for an efficient road transport operation, even costing is not an end in itself but a means to an end. Accordingly, whilst reduction in operating costs is to be desired, the ultimate requirement is to at least maintain— if not increase—the margin between revenue and expenditure. This fact has to be continually borne in mind when choice of a vehicle is under review.
c44 An increase in operating costs arising from additional equipment or, in this case, type of cab, might deliberately be accepted in reasonable expectation of increased productivity and therefore revenue. Such deliberate acceptance of an increase in operating costs is, however, a very different matter from unscheduled increases in operating costs.
The third item of standing costs is relatively a matter of local concern—namely, the rent and rates arising from the garaging of the vehicle—and accordingly is of relatively little significance when the choice of a vehicle is being made.
Insurance of the vehicle will be affected by several factors, including the carrying capacity of the vehicle and the amount on the initial outlay. But as with the previous items the proportion of the total operating costs arising from insurance is relatively small.
Readjust the Rate
When compiling the current edition of The Commercial Motor Tables of Operating Costs it was considered necessary to readjust the rate of interest charged on the initial outlay on a vehicle to 7-1per cent. This was because of the increase in the Bank rate and current difficulties in the financing of such purchases. But even so, the interest charged at this rate on the initial outlay of £1,409 represents £2 2s. 3d. of the total weekly operating cost of £45 for the 7-tonner. Whilst the need to finance a purchase still remains and indeed can be a major difficulty, particularly for the small operator, the fact remains that the interest on that capital is not a large proportion of the total operating cost.
So here again, if additional equipment or, for example, a specialized body seemingly can provide opportunities for increased revenue by way of a greater tonnage moved, then relative to the interest chargeable on the increased initial outlay such additions would he justified.
Five Items
The total for the five items of standing costs for the 7-tonner averaging 600 miles a. week is therefore £19 14s. 6d., of a total operating cost of £45. By definition standing costs are incurred whether the vehicle is operated or not, so that the greater the mileage run the lower the standing costs per mile and accordingly its proportion of the total operating cost per mile.
To some extent this inherent principle of commercial vehicle costing does mitigate against the use of specialized vehicles or bodies if their use implies a loss of usage through lack of versatility. As with many other aspects of vehicle operation the inter-relation of the 10 items of operating costs does mean that with many, alternative features there are both advantages and disadvantages economically.
There may well be compelling reasons why a specialized body, for example, is necessary, even although it is known beforehand that because of its very construction it will have more limited use than the versatile standard platform bodies. But even when that choice• is made recognition must be given to the fact that the operating cost per mile inevitably must be higher because of the lower average mileage per week and per year. Indeed, ultimately the full mileage life of the chassis might not be realized because of such limited use and because subsequent replacement with a more versatile body would not always be a practicable proposition.
Dealing now with the five items of running costs, fuel is by far the largest despite the advantage provided by the oil engine in this respect. When 600 miles a week are averaged it amounts to approximately 20 per cent of the total operating cost, so, obviously, any specification in the selection of a new vehicle which can have advantageous effect on this item should be taken. It must be admitted, however, that most effect on the item of fuel cost is likely to arise from the type of operation in which the vehicle is engaged and the standard of driver employed. To a large extent this applies to the two items of lubricants and tyres, although here again the right choice of matching the vehicle to the job on hand must be the prime factor in keeping these three items of cost to a minimum.
Complex Items Probably the two most complex items of cost to deal with in relation to the choice of vehicle are maintenance and depreciation. The former, unfortunately in an adverse context. is much in the news recently following the Ministry of Transport's increasing interest in the fitness of commercial vehicles.
Apart from the practical and technical aspects of maintenance, and even when an operator is fully aware of the pr6blerns involved and is prepared to make adequate financial provision to resolve those problems, the prospective buyer of a new commercial vehicle often can make alternative choices which have direct bearing on maintenance and depreciation. In short, he can buy cheaper and replace more often, or vice versa.
The obvious fact that both policies are adopted by large numbers of successful operators—and indeed •both policies by the same operator—indicates that it is often another example of choosing 'orses for courses.
Many of the factors involved which could determine such a choice will be peculiar to the operator concerned. One such factor, which is not only important now but which will become increasingly important in the future, is the availability of competent staff should the operator intend doing his own maintenance, or access to efficient outside maintenance within a reasonable distance.
On the traffic side, the competitiveness of the industry in which an ancillary user might be engaged could have a direct effect on such a company's replacement policy and, in turn, on maintenance and depreciation.