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19th August 1966, Page 72
19th August 1966
Page 72
Page 73
Page 74
Page 72, 19th August 1966 — 3EALISTIC COSTING
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Which of the following most accurately describes the problem?

KANY inquiries received for advice on setting up in transport VI operation, whether in haulage or ancillary operation, only io often reveal little or no knowledge of costing or its undering principles. Alternatively, when advice is requested for :.tailed costing of a specific operation the paucity of information yen again reveals similar shortcomings.

To some extent the explanation derives from the fact that .ansport operation is largely a practical exercise and those•

ishing to set up in it understandably often have practical xpertise as their main asset. Thus, for example, this might be xpressed in driving ability or a flair for engineering and the epair of vehicles. While such ability is a valuable asset it by no neans constitutes a substitute for transport management.

Moreover, those with only a practical approach to transport iperation too often look upon all paper work as a waste of time.

_Ake any other exercise it can be time-wasting when either carried o excessor undertaken with no useful purpose in view. But, ust as with manufacture, service industries—of which transport s one—need to be carefully costed if the maximum benefit is to iccrue to all parties, namely the user and provider, and indirectly .he national economy to which the transport industry as a whole makes a vital contribution.

It is emphasized that the positive value of costing should not be overlooked. Unfortunately accountancy and costing are only

too often more readily associated with cheese-paring and all the negative policy which that term implies. But until an acceptable


ISuch legal requirements as do apply are contained in The I IMotor Vehicles (Construction and Use) Regulations 1963. No. 44 and 49. Here it is laid down that "heavy motor cars" Iand "motor cars"—which categories include goods vehicles I Iwith unladen weights below, including and over three tons— must have wings, i.e., mudguards, to catch, so far as I Ipossible, mud or water thrown up by the rotation of the wheels 1 Iunless adequate protection is afforded by the body of the vehicle, IThis, however, does not apply to the rear wheels of a motor I or heavy motor car when forming part of an articulated vehicle used only in connection with the carriage of round timber, a 1 vehicle in unfinished condition proceeding to a works for

completion, or to a works truck.


yardstick is provided—and often this can be done only through the medium of a reliable costing system—it is not possible to determine ways of providing a better transport service economically than the one which exists at present.

But before the stage of improvements in providing a transport service is reached, the newcomer to transport operation will want to know whether or not the project he has in mind is a reasonable proposition. In the case of entry into haulage obviously he would have to know whether there was likely to be sufficient traffic in the areas in which he intended to operate, not only in the short term, but also for a reasonable period relative to the life of the vehicles to be operated. Equally important would be the knowledge on which a reasonable decision could be made as to whether such traffic was likely to be profitable. Here again there would be an obvious need to be conversant with commercial vehicle costing.

Alternative choice

Alternatively, if the proposed venture was into C-licence operation, there would be, in all probability, the alternative of either hiring both driver and vehicle so as to provide the required service, or the vehicle only under some form of contract hire. But before a considered decision could be taken the likely cost of operating one's own vehicle would have to be ascertained.

Where no previous experience whatsoever was available, then obviously outside assistance from some source would be necessary. Such a source would be the COMMERCIAL MOTOR "Tables of Operating Costs", a new edition of which is available this month from our associated company, George Newnes Ltd., Tower House, Southampton Street, London WC2, price 6s. As its name implies, this publication contains details of the operating costs of a large number of goods and passenger vehicles in varying ranges of average weekly mileages appropriate to the type and size of vehicle concerned. In addition to providing invaluable assistance to newcomers to the transport industry, the successive editions of these tables do provide a useful and impartial yardstick for established operators who already have costing systems of their own and wish to make comparisons from time to time.

Moreover, as a result of frequent changes in trade and industry, both the flow of traffic and the actual type of material or commodity to be moved can likewise change more frequently than in former years. As a result, even established hauliers may be requested to provide a transport service involving the operation of a type of vehicle of which previously they have had little or no experience. Here again the availability of the tables should prove invaluable until such time as their own costing system had provided sufficient records based on their own specific operating conditions.

Nevertheless, whatever the varying circumstances in which knowledge of commercial vehicle costing is required, and the manner in which it is to be applied, the underlying principles remain the same, and some overall comments have general application. One such comment which needs to be established at the outset is the need to adopt a right approach to the whole exercise of endeavouring to reproduce the many varying circumstances of transport operation in the exactness, or more correctly the apparent exactness of a costing table.

To the uninitiated a first glance at a costing table understandably gives rise to the belief that such an exercise is largely one of accountancy and arithmetic, which erroneously leads to the associated belief that there is one answer—the correct answer— and that all others are incorrect. This is an unfortunate and fundamental misunderstanding which should be avoided at the outset.

Limitless factors

Experienced operators in transport know only too well that the factors which can affect transport operation, and likewise the cost of providing such a service, are almost limitless. The situation is further eomplicated by the fact that many of these factors can arise spasmodically. Nevertheless, for administrative convenience, it is essential to have recourse to standard costings and likewise schedules of rates, even though all concerned know that .n day-to-day operation of commercial vehicles in present traffic-;ongested conditions, very little is "standard" or uniform, one day :o another.

Time and mileage are the two basic elements of transport veration, and these are reflected in the major division of the total cost of operating a commercial vehicle into the two major groups of expenditure, namely standing costs and running costs. Ever since the tables were first published in 1911, this fundamental division of operating costs has proved sound. It is particularly important that the significance of this division is fully understood by those examining this subject for the first time. Moreover, because of the ever-increasing delays due to either congestion on the road or unreasonable delays at terminal points, the proportion of non-productive time increases, despite all endeavour to achieve higher productivity from vehicle operation.

Standing costs are those items of expenditure incurred in operating a vehicle which arise as soon as the vehicle is commissioned and continue throughout its life while with the operator, regardless of the use to which it is put. The five items concerned are licences, wages, rent and rates, insurance and interest. As regards licensing, the overall level of excise duty payable is outside the operator's control, although the actual amount paid will be dependent either on the unladen weight of a goods vehicle or the seating capacity on a passenger vehicle. Accordingly, the type of chassis and body specified by an operator will directly affect the first item of standing costs.

Wages are reckoned as a standing cost, and for the purpose of compiling standard costing tables overtime working is ignored, although it would obviously be included in the costing of a specific transport service when all relevant factors, including the likely amount of overtime, were known beforehand. The third item of standing costs in respect of rent and rates urred in garaging a vehicle obviously can vary considerably :ording to the policy of the company concerned. But, as is 11 known, some operators do no more than park their vehicles the open with the resulting minimum expense as regards this 11. However, as with all items of operating costs, there can be interrelation between many of them and, in this particular ;tance, any saving in leaving vehicles out in the open which may 11 add to the cost of maintenance.

surance difficult to estimate Insurance of commercial vehicles is becoming an increasingly 'ficult item to estimate as more and more insurance companies .3 considering it more equitable to pay greater regard to an ,erator's accident record than any other factor. Accordingly, it becoming harder to assess what might be reasonably termed erage insurance costs. Nevertheless, some attempt has to be ade in the initial stages when a newcomer to the industry is ing to forecast his likely overall operating costs.

Finally, the fifth item of standing costs, namely interest, is also ore variable than it used to be because of the frequent changes the Bank Rate and associated interest rates. But as this item is relatively small one in relation to the total cost of operation, it particularly necessary for an operator to make a careful :rutiny of the wide range of commercial vehicles now offered by le manufacturing industry to ensure that he obtains the one best tted to meet the job in hand. In this respect, while the initial ayment obviously, is a major item it is a once-only transaction, rhereas any shortcomings in the vehicle ultimately selected will e accumulative with every mile run, and in the case of the irgest commercial vehicles this might ultimately run to 300,000 r more. • Next week consideration will be given to aspects of the five .ems of running costs.


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