Costing Systems Can Fall Down
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Recording Without a Purpose is Merely to Indulge in Unnecessary Paperwork : There Should Be a Balance Between Accuracy and Irrelevant Detail
FVEN where the needfor an adequate system . of cost recording of commercial-vehicle operation is accepted and 4 .appropriate action is taken, periodical reviews of both its purpose and achievement are necessary. Conditions applying when the system was inaugurated may have changed, or Us very success may have made some recording no longer necessary.
For example, sufficient data may have been accumulated on maintenance costs to enable a reasonably accurate standard charge to be formulated for a wide range of jobs. Individual estimates would then be no longer necessary. No form, however well drawn up and originally useful, should be considered ,permanent. Frequent reviews of all types of form should be . made. Those which do not meet current needs ought to be discarded and others improved.
There are several interlinking purposes in commercial vehicle costing. Operating and maintenance staff first complete engineering records relating to journey mileage, material and labour. These in turn provide the information with which to compile coatings of individual vehicles.
However accurately these may be kept, two factors are necessary if they are to serve any purpose. There must be an objective application of the results obtained, coupled with adequate authority to put them into effect.
Having ascertained the operating cost of a vehicle, a suitable yardstick has to be chosen by which to judge whether this cost is reasonable or excessive. The established operator can rely on his past experiences With similar vehicles. Even so, it is advisable for him to measure up his costs periodically with
those of other -operators. • Readily Obtainable
Individually he may find it difficult to get this information. It is. however, readily obtainable, collectively, in "'The Commercial Motor' Tables of Operating Costs," price 3s. or 3s. 6d. postage paid. In this are summarized the experiences of many operators under various conditions with most types of goods and passenger vehicle.
For the newcomer to the transport industry these Tables are even more essential because he would otherwise have no means for comparing his costs in the early stages of operation. The . Tables are accompanied by a description of recommended recording systems, which provide an introduction to the principles underlying commercial-vehicle costing.
Having reached the stage where records have been compiled • and compared with other appropriate costs, I suggest it is ' at this point that many operators' recording systems either lose their original momentum .Er break down altogether. The 1344 indications of possible future economies which past recording has revealed are not investigated and much of the value of the system is lost. • One reason is the lack of time and staff to follow up suggested improvements. Alternatively, insufficient authority or status, particularly in ancillary operation, may debar the transport manager from making the necessary changes. It is, therefore, essential at the outset for those determining overall transport policy to recognize that the inauguration and maintenance of a recording system, and any subsequent reorganization to achieve. greater efficiency, must be considered as a combined exercise. Otherwise recording becomes useless paperwork and reorganization a series of temporary expedients based -largely on guesswork.
Professional Operator
Traders, in particular, might well decide that they have neither the staff nor the experience to provide for these two prerequisites of efficient transport operation, If so, they should contract their work out to the professional operator. Even after allowing for his profit margin they may then effect some financial saving in addition to relief from the daily worries inseparable from commercial-vehicle operation.
There are several methods of comparing vehicle costs according to varying circumstances. In all cases, however, long practical experience in operation is necessary if the right conclusions are to be drawn from such comparisons. Theoretically, of course, like should be compared only with like, but in many items of transport costing this is an unattainable ideal.
Circumstances, however, may still require some comparison to be made. In that event the emphasis—Or the reservation given to the conclusions then drawn—is almost entirely dependent on the experience of the operator, rather than the comprehensiveness of the recording system.
Comparison between the various makes of vehicle of similar type is . probably the most obvious example of the use of vehicle costs. Exceptin large fleets, however, the occasion tO make use of such information occursonly occasionally when vehicles are being replaced. Incidentally, it is the -policy, in these articles never to draw comparison between various makes, because so much is determined by the personal preferences of the operator. At first sight there may seem little point in comparing the operating costs of, say, a 5-ton and 7-ton platform lorry. Occasion could arise, however, where a 5-ton lorry might be ample in the initial stages of development, although there was every possibility of a larger vehicle being necessary later. The alternative cost of either operating a vehicle which was larger than necessary in the interim period or replacing the 5-tonner at the appropriate time could then be compared. • Readers will be familiar with the comparisons of operating costs of different types of vehicle with similar carrying capacity, such as rigid or articulated six-wheelers, lorries with drawbar trailers or eight-wheelers, which have appeared in this series.. A variation is to compare the • costs of operating the same chassis when fitted with a standard _body or one of the increasingly, popular bulk delivery type.
The latter example emphasizes the need for experienced judgment in addition to the possession of factual cost data. In addition to the difference in operating costs applicable to this vehicle when fitted with alternative bodies, an estimate would also have to be made of any. saving in overall cost resulting from delivery in bulk, offset, possibly, by increased empty running through restricted return loading, The most effective comparison of costs, however, is between estimated and actual operating costs. Budget control, as this is termed, is extensively used by larger organizations to promote efficiency. Because it is a continuous process, appropriate action can be taken .immediately to remedy any waste which such comparisons may reveal. This, of course, contrasts favourably with the less effective control resulting from comparison at longer intervals, such as half-yearly or yearly.
Fuel, maintenance and tyre costs are the three itenis of
operating costs which can bentost readily subjected;to budget control. First as accurate an estimate of each. item as possible is made, based on past. experience; The period ever which this is .taken should be long enough to balance out irrelevant fluctuations, but sufficiently recent to relate only to current vehicles and operating conditions.
The term of measurement commonly used for these three items, as adopted in the "Tables of Operating Costs," is the cost in pence per mile. Additionally, some operators may also derive benefit (particularly when comparing the relative merits of varying sizes of vehicle) by calculating the corresponding cost of these items per unit (ton, gallon, etc.) of traffic carried.
A specimen form suitable for summarizing vehicle operating costs in this manner covers a large fleet and each entry relates to vehicles grouped in a combination of makes and tonnage. Operators of smaller fleets could adopt this to record the costs of individual vehicles.
The form is divided into 11 main vertical Columns, with • several further sub-divisions. In the first column the make it recorded Under a sub heading indicating the carrying e.apauity. Then follow the number of vehicles in the group, the total group mileage and the average per vehicle.
Annual-. Average • Standing Costs are shoWn first as an annual average per vehicle and then as cost both per ton and per mile. Wages are similarly recorded per year, ton and mile. When mates are employed their. wages are also analysed arid etitered separately
from those of the drivers. • "." .
EStimated, or budgeted, costsare introduced -for the 'three items of fuel, tyres and maintenance,' arid are shown alongside the actual costs to date. Filially, the operating. cost is shOwn • in .tOtal, per ton and per mile, along with the corresponding budgeted figures.
Because much of this information is of value only if immediate action is taken, some users find it more appropriate to record it on a movable indicator board. Whatever method is used, two essentials remain. Correct evaluation of the cornpariSons shown • demand shrewd judgment based on both engineering and operational experience. When changes are obviously necessary, often in long established practices, a judicious balance of resourcefulness and tact is 'needed before cost recording can itself show a profit. S.B.