The Price of Maximum Availability
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THE increasing use of cars for business purposes has resulted in added responsibility for many transport managers of ancillary fleets. Several factors which have a bearing on what staff car policy is ultimately adopted have been discussed in the two previous articles in this series. In many cases the cars will be used by representatives and salesmen located individually over a relatively wide area, or even throughout the entire country in the case of large national organizations. This necessitates a different approach to their control and maintenance than would apply to an ancillary fleet of commercial vehicles which would normally be located at one, or at most, a. few depots.
Because of this probable widespread location maintenance, in particular, presents not only a special problem in itself but can often be a determining factor in the staff-car policy as awhole. Thus, in order to minimize difficult maintenance problems that would otherwise arise, annual replacement of staff cars is more commonly practised than is considered acceptable in connection with commercial vehicles.
Closely tied to the need for limiting maintenance is the necessity for the maximum reliability—and therefore availability—of the staff cars provided. Whilst it can be justifiably claimed that this is a prerequisite of any vehicle, it is particularly important in the case of staff cars for two reasons. One is the importance and urgency of the work to be undertaken by the executives or representatives for whom the car is provided; the other is the difficulty, if not impossibility, of immediately providing a replacement should the occasion arise. With a commercial fleet this situation would be met by a proportion of spare vehicles being available to replace those undergoing scheduled repair. But in the case of staff cars, often located singly over a wide area, even if a spare car was available, substantial dead mileage could be involved, as well as a lengthy period of lost time for the representative concerned, before the changeover was completed.
It should be borne in mind that maximum availability and maximum reliability, although closely connected, are not virtually synonymous terms in this context. Whilst the unscheduled breakdown still cannot be completely eliminated from transport operation, a very high standard of reliability is regularly being maintained by many operators of commercial vehicles,, particularly those with large fleets. This standard has been achieved by carrying out elaborate and well-proved preventive maintenance schemes.
Even so, and although such withdrawing of vehicles for maintenance purposes is on a scheduled basis, their non-availability for service has nevertheless to be accepted and, incidentally, for increasing periods the longer the vehicle is operated. Where a sufficient number of vehicles is operated to justify the setting up of comprehensive maintenance facilities such a system can prove, an economic proposition.
These conditions, however, seldom apply in the case of staff cars, and the acceptance of a higher depreciation cost incurred by more frequent replacement is often the best compromise, bearing in mind that the loss of an executive's time can far outweigh the cost of operating a car. Having determined on a policy of frequent replacement of staff cars, the actual length of this reduced period has to be determined. Whilst ultimately a period both economic and convenient to a particular operator should be arrived at on the basis of all available information, as stated in previous articles, it is misleading to commence consideration of this replacement policy on the assumption that there is one particular point at which it is, beyond all question, most economic to change vehicles. Even if, in theory, such a contention could be proved to be valid, its practical application might well prove insurmountable where large numbers of staff cars were involved.
THREE PHASES OF LIFE Considering the maintenance of modern cars it might be convenient to group the overall life into three periods. The first of these would be when servicing only, as set out in the manufacturers' recommended schemes, would be all that was required to keep the vehicle on the road. Subsequently there would be a spell when in addition to these servicings, some minor repairs and replacements would probably become necessary. In the third and final period major repairs would become necessary, involving engine replacements and complete overhauls. Obviously, the minimum time when the vehicle is not available for service will occur in the first period, so that a policy based on annual replacement should then achieve the important objective of maximum availability.
With this basic assumption as to replacement, the four examples of the likely cost of operating staff cars 15,000 miles a year are now given, relative to a nominal size of engine capacity of 1,000 c.c., 2,000 c.c., 3,000 c.c. and 4,000 c.c.
Dealing first with the smallest car, it will be assumed that the average price is £555. As opposed to the standard practice when dealing with the operating costs of commercial vehicles, depreciation will be reckoned a standing cost because of the decision to replace annually. But as there will be no driver's wages involved, the number of standing costs remains at five items, with running costs reduced to four.
With the annual licence duty costing £15, the standing cost per week will be 6s., allowing for a 50-week year. Because of the rise in land values and rating, as a result of recent revaluation, rent and rates in respect of garaging this car will now be reckoned at 12s. a week.
INSURANCE BY NEGOTIATION The amount of premium required to provide insurance cover for motor vehicles is increasingly becoming dependent on individual negotiation based on particular fleet users' accident records: For the purpose of this example the comprehensive cover, inclusive of a commercial travelling surcharge, will be reckoned to incur an annual premium of £48 12s., or 19s. 5d. per week. Interest on the initial outlay at a nominal rate of 5 per cent would add 1 ls. id. a week.
It will be assumed that a drop of 20 per cent will occur in the value of this 1,000 c.c. car over the first year. This amount of £111 would be the equivalent of £2 4s. 5d. per week, so giving a total of £4 12s. I Id. for these five items of standing costs. With an average weekly mileage of 300 (i.e. 15,000 a year) this would give a standing cost per mile of 3-72d.
It will be assumed that premium grade petrol is used and purchased at 4s. 104d. a gallon. With an average rate of consumption of 36 m.p.g. being maintained, the fuel cost per mile would be 1-63d. Lubricants arc reckoned to add 0-139d.
Owing to the annual replacement special consideration will have to be given to the item of tyre costs. It will be assumed that replacement of the initial set of tyres is not necessary during the first year, but some allowance is made for accidental damage. Reckoned at the equivalent of one tyre only being affected, a tyre cost per mile of 0-16d. is allowed.
As stated earlier the cost of maintenance during the first year will be limited to manufacturers' recommended services. During recent months the period between servicing has been generally increased with the result that a reduced number of services are now necessary in the first year. These will now be reckoned to amount to an equivalent cost of 0-77d. per mile. The total for the four items of running costs is therefore 2.65d. or £3 6s. 3d. a week. The addition of standing and running costs gives a total operating cost for this 1,000 c.c. car when averaging 300 miles a week of 6.37d. per mile, or £7 19s. 2d. a week. As there might be occasions when it is convenient to have these same costs exclusive of fuel (because the driver himself pays for this item) the total operating cost will then be 4-74d. per mile, or £.5 18s. 6d. a week.
Adopting a similar procedure for the 2,000 c.c. car, licences would again amount to 6s. a week, and rent and rates-slightly higher-to 13s. Insurance would be increased to the equivalent of £1 7s. 6d. per week owing to the higher initial outlay£710-and the larger size of car. For the same reason interest will be increased to 14s. 3d. and' depreciation (now at 22.5 per cent over the first year) to £3 35. 11d. a week. Total standing costs are thus £6 4s. 8d. a week, or 4.99d. per mile.
With a reduced rate of consumption of 30 m.p.g., the fuel cost now amounts to I-95d. per mile and lubricants 0.13d. On the same basis as before tyres are estimated to cost 0-17d. and maintenance 0.87d. This gives a total running cost of 3.12d. per mile, or £3 18s. per week. Total operating costs are now 811d, per mile or £10 2s. 8d. per week. Without fuel the equivalent amounts are 6-I6d. per mile, or £7 14s. per week.
The initial cost of the 3,000 c.c. car is reckoned at £1,355. The cost of licence remains at 6s. a week, but the remaining four items of standing costs are increased to the following amounts: rent and rates 14s., insurance £1 12s. 9d., interest £1 7s. 2d. and depreciation (now at 25 per cent), £6 15s. 7d. per week. This gives a total standing cost of £10 15s. 6d. per week or 8.62d. per mile.
Fuel is now reckoned to cost 2-441d. per mile, assuming an average of 24 m.p.g., while lubricants add 0.18d., tyres 0-22d. and maintenance 0-91d. per mile. Total running costs therefore amount to 3.75d. per mile, or £4 13s. 9d. per week. Correspondingly total operating costs for this 3,000 c.c. car when averaging 300 miles a week are 12-37d. per mile, or £15 9s. 3d. per week. Without fuel these amounts become 9-93d., or £12 8s. respectively. • Finally, dealing with the largest car, the 4,000 c.c., the initial price is estimated to be £2,440. Licences are again 6s. a week, whilst rent and rates are increased to 15s., insurance to £2 8s. 6d. and interest to £2 8s. 10d. per week. Because of the limited market for this type of car the reduction in its value in the first year is estimated at 27-5 per cent, giving a depreciation cost per week of £13 8s. 5d. The total standing cost is therefore £19 6s. 9d. a week or 15-47d. per mile.
At 18 m.p.g. the fuel cost per mile becomes 3-25d., whilst lubricants add 0-25d., tyres 0-31d. and maintenance 1-00d. per mile. Total running costs are then 4-82d. per mile, or £6 Os. 6d. per week, The total cost of operating this 4,000 c.c. car 300 miles a week is therefore £25 7s. 3d., the equivalent of 20-29d. per mile or correspondingly £21 6s. per week, or 17.04d. per mile without fuel.