Spasmodic use continuing expense
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SERVICE vans are often something of a contradiction in many transport fleets. Even in large organizations justifying large and efficient maintenance depots with every facility, the department's own service van often seems to get little attention. A similar lack of attention is noticeable with all too many delivery vans employed by the retail and distributive trades.
The reason in both cases is similar. The priority given to the main purpose of the exercise—whether maintenance in the one case or trading in the other—is virtually absolute. In the first instance the worst consequences of neglect of proper maintenance can often be retrieved by last-minute diversions of skilled staff but such action is rarely within the command of the trader. As a result it is generally accepted that the average condition of small delivery vans does not measure up to the condition of heavy goods vehicles.
Sooner or later failure to provide adequate maintenance will have results plain for all to see. Moreover, the increasing statutory control of the mechanical condition of commercial vehicles will compel many operators of small vans to alter their whole approach to maintenance.
Such action, however, will not necessarily have the same salutary greet on the operator's approach to ascertaining the true cost of running service or delivery vans. Precisely because he looks upon them as a means to an end, the value of costing their operation as a separate exercise is regarded as of minor importance if not dismissed altogether. If pressed on this subject, he claims because of the vital necessity to have such a vehicle available anyway, the results revealed by any such costing exercise will not remove the nitial need. If that contention is correct then the vehicle will continue be operated as before, whatever the results reveal.
Unnecessary paperwork is an expensive luxury and never more ;o than today. But in these stringent days no aspect of business activity should be virtually "taken as read" and the cost of operating ;ervice or delivery vans is no exception. While admittedly the need br them may be justifiable, until costings are available it is mlikely that any ideas as to better and cheaper methods of noviding such transport are likely to arise. Additionally, if the true most of operating such vehicles is shown to be unexpectedly high a eview of what originally was considered to be an essential service nay be forced upon management. Then it might well be revealed hat the distinction between "essential" and "departmentally ;onvenient" can be thin, to say the least. Urgency can be the product )f laxity earlier in the day. In the case of the trader and his van there is a greater interrelation between failure to provide proper costing and a concurrent failure properly to maintain his vehicle. Unless the trader is in an unusually fortunate financial position which permits premature vehicle replacement, the failure to make adequate financial provision for the time when major repairs are needed often results in having ultimately to choose between the lesser of two evils. These are risking the consequences of running a vehicle in an unroa.dworthy condition or taking it off the road for an appreciable period for expensive repairs.
As to the former of the two alternatives, because he looks upon his vehicle as being so ancillary to his business, the trader often has little knowledge of the many regulations affecting road transport. Indeed he scarcely accepts that his vehicle comes within the orbit of the road transport industry.
But whether or not he does adopt this attitude the interrelation between efficient operation, regular maintenance and a proper system of costing remains and ultimately cannot be avoided. Likewise the ratio of standing time to average weekly mileage is a prime factor in the ultimate costing of whatever service is provided. In some types of transport operation, of which the fire and ambulance services are extreme examples, the mere availability of vehicles, though not used, could still be considered to constitute a service by virtue of the assurance given to those concerned should an emergency ever arise. To a lesser degree some trades, by tradition or modern competitive developments, might be reconciled to giving a standard of delivery service which would be considered unreasonably high in other trades or industry. But to have such ready availability of vehicles for immediate dispatch on receipt of urgent instructions necessitates the standby or underemployment of vehicles for some part of the day however well their operation is organized.
Vehicle scheduling emphasizes another distinction made by many operators as between small delivery vans and the larger vehicles of their fleet. For the latter type of vehicle detailed scheduling is accepted without question as the best means of obtaining maximum utilization and so lower costs per unit delivered.
But such an approach to small delivery vans is seemingly rejected on the score that because they are small vehicles their costs of operation must also be small and hardly worth bothering about. This is an erroneous approach because, to mention only one aspect, the proportion of the cost of providing the driver to the overall cost of operating the vehicle is higher than with the larger vehicles at the outset.
If superimposed on this comparison, the proportion of standing time, that is to say non-productive time, is higher with the small delivery van, then this disparity to the disadvantage of the small delivery van becomes even greater.
30 cwt. van costs To highlight the effect of relatively spasmodic uSe of a vehicle on operating costs as well as the proportion of labour cost I now give details of the cost of running a 30 cwt. van as might be used by a trader or, alternatively, as a service van.
Assuming it has a diesel engine and is fitted with a standard van body the unladen weight would be around 2 tons 3 cwts. so resulting in an annual licence duty of £49 10s. As with the other four items of standing costs it would be assumed that whatever the average weekly mileage the vehicle will be off the road for the equivalent of two weeks per annum for major overhauls and the driver's holiday. Accordingly the equivalent cost of licences per week amounts to 19s. 9d. including the small proportion in respect of the C-licence fee.
Assessment of the likely amount to be paid by the employer in respect of driver's wages is particularly difficult in this instance because the driver of a 30 cwt. trader's or service van might well be so employed part-time in conjunction with some other job. Alternatively several part-time drivers might use the vehicles. An arbitrary figure of £12 4s. 3d. is assumed, inclusive of insurance contributions and an adjustment to permit holidays with pay.
Rent and rates incurred in garaging this van are reckoned to cost the equivalent of £1 Os. 3d. a week. Vehicle insurance is assessed at 11 s. a week while interest charged at a conservative rate of 7+ per cent on the initial outlay of £990 amounts to £1 9s. 9d. a week.
The addition of these five items of standing costs gives a total of £16 5s. a week. On the basis of the present basic 41-hour week, as laid down by the Road Haulage Wages Council, the equivalent standing cost per hour would be 95.12d.
Dealing now with running costs, the price paid for fuel presents a particular difficulty in respect of delivery vans such as this because of the wide variety of prices which an operator might pay. In contrast to the professional haulier he could, on occasion, even buy at retail price but for the purpose of this assessment it will be assumed that diesel oil is bought in bulk at 4s. 7fd. a gallon. Also assuming that an average rate of consumption of 25.5 m.p.g. is maintained the resulting fuel cost per mile for this 30 cwt. van would be 2.18d.
Lubricants are reckoned to add 0.25d. and tyres 0.66d. a mile with the latter calculation being calculated on a mileage life per set of tyres of 25,000. Maintenance, inclusive of washing, servicing and major repairs, adds I .72d. a mile.
Depreciation To calculate depreciation it is first necessary to deduce the balance to be written off. Starting with the initial outlay of £990, the equivalent cost of the original set of tyres is first deducted since tyres are dealt with as a separate item of running costs. Because the type of work undertaken apparently justified a new vehicle in the first instance, it is considered reasonable to presume that in order to maintain whatever level of service was considered necessary throughout, the operator will ultimately sell the vehicle as a "runner" and likewise benefit from some residual value. Assessing this at a nominal 10 per cent and assuming a mileage life for the vehicle of 100,000 the depreciation cost per mile would be 2.21d.
If the van averaged 400 miles a week, or 20,000 miles a year, this basic assessment of a vehicle life of 100,000 miles would then be equivalent to a five-year life. However, if substantially lower weekly mileages are averaged then at some point allowance must be made for the factor of obsolescence as a result of which a vehicle becomes outdated before it is actually worn out.
Just what allowance is made in such circumstances depends to some extent on the competitiveness of the trade or industry in which the van is engaged. For that reason it must be largely an individual assessment. Here, however, it will be arbitrarily assumed that where the weekly falls to 200 an addition of 25 per cent is made to the basic cost of depreciation with a 50 per cent addition at 100 miles per week. As a result the variation in depreciation cosh per mile would then read:— 400 miles a week 2.21d., 200-2.76d and 100-3.32d.
There is also another variation in running costs per milt according to the average weekly mileage run. Because washing anc servicing is undertaken weekly by many operators regardless a the actual mileage in any particular week the maintenance cos. per mile will increase, although the expenditure incurred in tin major proportion of maintenance costs (general repairs) will stil bear direct relation to mileage run.
The addition of these five items of running costs gives th( three totals of 9.46d., 8.02d. and 7.02d. at 100, 200 and 400 mile: per week respectively. The further addition of standing costs tt running costs gives total operating costs per mile of 48.46d. 27.52d. and 16.77d., again at 100, 200 and 400 miles per wee! respectively.
Cost nearly doubled Therefore in round figures, compared with the operating cost per mile at 400 miles per week, the corresponding cost at 20 miles per week is not far short of double the cost while at 100 mile per week the cost is almost trebled. This is because the tota standing costs of £16 5s. per week has to be met no matter him, limited the mileage might be in any particular week.
There might be some examples where low mileages of the orde of 100 miles a week might be evenly spread throughout both th working week and the working day. But in most cases low weekl; mileages of that order are more likely to be representative c spasmodic use with whatever mileage is run being accomplished a average speeds.
Put another way, if only half the working week was utilized i operating the van, then it could be contended that half th standing cost per week (£8 2s. 6d.) had been incurred in merel ensuring that a vehicle was standing by at the ready to meet an urgent demand.
There are several circumstances where such an approach t vehicle operation may be justified. But it is important that th decision as to whether or not it is in fact justified should be base on a true knowledge of the cost involved.