REFINEMENT n Costing Methods
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By Alan Smith,
F.R.S.A. IN the first part of this description of the work of the Pointer group of companies, centred on Norwich (The Commercial Motor, May 8), I outlined the activities of the vehicles and described the way in which the punched-card system was applied.
It appeared to me that the speed with which analyses of costs could be performed allowed the company to apply a costing system rather more refined, for the purposes of greater accuracy, than I normally expect to find where the traditional clerical methods are used. It is possibly the case that some of the time saved in analysis is taken up by greater attention to detail in recording. Mechanization therefore seems to make it possible for costing -to be made a better instrument of management without, on balance, additional effort.
Details of the vehicles' costs and revenue are collated in a ledger which has a sheet for each lorry, with columns for each month. The first entries are for the value of the vehicle, plus any capital addition (a new engine, for example) depreciated at the rate of 20 per cent. a year on book, rather than initial, cost.
This is not done for any alignment with income-tax practice, but because it is thought that a more realistic figure is produced each year than if an equal proportion of the initial cost is allotted to each of five years with, thereafter, a notional debit. This method vitiates the comparison of a fairly new with an old vehicle.
The value of the vehicle for the year is divided by 12 for a monthly debit, and care is taken when a new vehicle is purchased that the whole of its value is not spread over that part of the year in which it serves. Thus, if a lorry is bought at the beginning of December, the full 20-per-cent. allotment is not debited for just that remaining month of the year. A 12th a30 of the allotment is put down, so that the effect is the same as if the vehicle were acquired at the beginning of January.
The next entries are tantamount to savings against the costs of the first and second overhauls that the vehicle will later have. Hours worked by the lorry are then detailed as between road and pit work, and site. and general-transport drivers. (Some site work may occasionally be done by general-transport vehicles.) An entry for any mate's hours supplements this information, and there is next a record for mileage and fuel consumed.
Actual outgoings on repair labour and materials are set down against the budgeted figure for this account, and there are the usual spaces for tax, insurance, cost of fuel and oil, tyres and overheads. The tyre figure is. not that of the particular vehicle, but of the group to which it belongs.
As explained, the fleet is classified on .a functional basis between the different groups of vehicle. Every year the total tyre expenses of each category are worked out to a cost per mile, and this figure is used for every vehicle in that group for the following 12 months.
The figure for overheads is dealt with similarly, a cost per hour for each group being determined. Manage ment costs vary between groups—for example, site vehicles require less direction than parcels vehicles. Therefore, if overheads were simply divided per vehicle over the whole fleet, or even according to payload capacity, the less penalized vehicles would subsidize the others.
When a vehicle is taken off the road. the overhead allotment is correspondingly reduced, so that if, for instance, it spends two out of a possible 26 working days in a month in dock ,for a repair, an appropriate proportion of the overheads is deducted. Depreciation is attenuated similarly.
Wages, too, are averaged, partly because they vary among men in the satue groups, and the debit on this account is . noted on the sheet, together with theother operating costs. There is a figure for the totalcosts incl tiding wages and another without.
Below this the revenue is put down, and then there are various calculations —miles per gallon, miles per hour worked and cost per mile including wages. The cost per hour is calculated both for the lorry only and lorry with driver, and mate if any.
All this information is capable of being processed mechanically, but normal practice is to analyse only certain categories, these including repair charges and performance statistics. Any ibm which can be seen from quarterly inspection of the ledger to fluctuate may be analysed if the procedure is not entailed in the usual drill. In this respect the company are able to find which kinds of vehicle are most suitable for different jobs.
Revenues are processed either weekly or monthly. The earnings of the transport and sand and .ballast undertakings are divided under five headings, and it is possible to ,com.pare, for example, the earnings' Of pit-based vehicles against 'those of general-transport lorries which are -partly employed to haul from the quarries. This-gives indications of when and where it May be eebnotnic to. alter the number of vehicles operating 'from apit..
Some weekly: information is again processed monthly, -.aocl is supplethented by informatiOn under other headings, including the revenue of the clearing houseand the tankers. Furthermore, there is a full analysis of internal accountancy, broken down among the constituent companies. In addition, each month there is an analysis of the work of the 50 workshop staff under the headings of time and materials. This can be done in half a day.
Mr. P. H. Pointer, head of the group, offered to make an analysis along any line I chose. I asked how much soft sand had been delivered last December. The 24 grades of sand and ballast have in common the letter A in their coding. Thus it was.straightforward to sort out from the cards representing traffic carriedall those relating to. sand and ballast. This occupied half an hour.
In a few minutes, the cards in group A concerning soft sand, .punched as • Al, had been sorted .out and were ready for the machine, which almost instantly gave the figure I selected, adding for good measure the tonnage collected by customers' vehicles.
Perpetual Inventory Time saved by mechanization not only .seemed to permit an extremely theirough method of costing to be adopted; but also allow other office procedures, to which it.is inapplicable. to be done more efficiently because of the lightening of the burden on the clerical staff. Log sheets are closely inspected•and kept in a cabinet available for instant reference, and there is a perpetual inventory of the large stock of spares for plant-and vehicles.
Previously, stocktaking was done annually and occupied a man for three months. Now he has 14 1,000-page books, each relating to one or a kindred number ol machines, and receives daily details of stock purchases and issues. At any time, the record is no more than two days out of date. It is an invaluable guide to the purchase controller, who can avoid wasteful over-stocking of any particular item or the risk of running dangerously short of others.
Pointer's have large workshop; equipped for all machining operations, although they often prefer to send out certain special tasks, such as crankshaft grinding, because the staff can he more gainfully •employed otherwise.
The workshops are being rebuilt and will have two floor levels. One will partly extend over the other to form a roof for the stores. The lower floor will have a 24-ft-long pit and two half this length for greasing. Flanking the central area will be a painting shop, departments for machining and engine and unit reconditioning, carpenters', smiths' and welders' shops and a washing and degreasing bay. The civilengineering company laid the floor for this project.
In the upper bay, which will have ground access by grace of a rise in the land, there will be seven pits. This will be a .department reserved for ,vehicles needing docking for repairs and overhauls, and easy access will be provided to the lower departments, such as the stores, likely to be closely involved in such work.
Radiators and springs, in fact, will be stored at this level, and the tyre store will extend over parts of both floors. The battery, electrician's and injector-reconditioning shops will be " upstairs," as will a canteen.
On a quick tour around the workshops I saw bodywork in course of construction. Pointer's build most of theirown tippers and "flats." but recently entrusted to G. E. Neville and Son, Ltd., Mansfield, the building of the bodywork of an eight-wheeled tipper intended for the haulage of coke. A lightweight aluminium body was needed, a field of construction better left to specialists.
In the lubrication bay, oil was being dispensed direct from the drums in which it was delivered. This is found to be cheaper than decanting the oil into a battery, largely because of the loss of lubri'cant Vrhich. clings to the sides.
A CalimaSter was installed in the injection shop.
At the fuel-dispensing point, the drivers help themselves, but there is an ingenious supervisory system. In a shelter overlooking the pumps sits from 3-8 pm. (the period during which the vehicles can be expected back from their day's work) one of the company's more senior servants, and he has two-way telecommunication with the point, where a microphone-loudspeaker is fixed. The drivers tell him how much fuel they have taken, and he records it against their names and the vehicle numbers.
At judicious intervals the drivers may be asked for the meter readings so that the cumulative totals of issues can be checked. In effect, the drivers check themselves, and since the system has been introduced there has been only a negligible—and readily pinpointed— amount of abuse.