Little Differences that ADD UP
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ABNORMAL conditions of operation which may be encountered overseas raise additional problems of costing, although they differ only, in degree from the problems caused by exceptional conditions in 'Britain. The higher costs experienced abroad do not always result solely from adverse road conditions, but may be equally,affected by a lack of adequate servicing and spares faCilities. Dependent upon the local labour market, wages may be unusually high, or the absence of skilled fitters may prohibit the establishment
of an efficient maintenance system. . .
When I discussed this problem with a member of the stall of an international company whose name is synonymous with efficiency, he exampled the high cost of running an African subsidiary's vehicles. Even with their wideexperience, headquarters were sufficiently disturbed by the figures returned to arrange for an investigation to take place, on the spot. The hard facts of local conditions, however, vindicated the returns which had been made.
In replying to requests from overseas readers, I would be attempting the impossible to try to arrive at an average operating cost per mile for their particular circumstances. Instead, I propose to detail the 10 items of operating cost in respect of two typical vehicles—a 5-ton petrol-engined platform lorry and an eight-wheeled oiler—and then note the effect on the total operating cost per mile as several of the items are separately, increased or decreased, as may be occasioned by exceptional conditions.
Tax Abolition
Incidentally, in addition to the more obvious and direct benefits, the abolition of purchase tax on commercial vehicles in last month's Budget has also facilitated, at least to some extent, comparison of operating costs as between homeand overseas-based vehicles.
Dealing first with the items of cost as they would apply in this country, the annual excise duty for the 5-tanner, assuming an unladen weight of 21-4 tons, would be £32 10s., or 13s. per week. As with the other four items of standing cost, this is calculated on the basis of a 50-week year, thus allowing for two non-revenue-earning weeks annually. Wages are reckoned at £8 19s. per week, inclusive of allowances for National Health and employers' liability insurance contributions, as well as two weeks' holiday with pay.
The cost of garaging is assessed at 10s. 6d. per week, whilst vehicle insurance adds a further 12s. 5d. Interest charges on the initial outlay at a nominal 3 per cent, amount to 12s. per week, making the total for these five items of standing costs £11 6s. 11d. perweek. (The items of insurance, interest and depreciation are slightly lower than those shown in The n30
Commercial Motor.' Tables of Operating Costs because of the reduction in initial price ensuing from the removal of purchase tax.).
Assuming the vehicle averages' 400 miles per week, the corresponding 'standing costs per mile would be: Licences, 0.39d.; 'wages, 5.37d.; rent and rates, 0.32d.; insurance, 0.37d.;' and interest; 0.36d., making the total 6.81d.
With petrol costing 3s. 9d. a 'gallon and a consumption rate averaging .12 .m.p.g., fuel cost per Mile amounts to 3.75d., whilst lubricants •are estimated to add a further 0.23d. At £160 per set and an expected life of 30,000 miles, tyres 'cost 1.28d. a -mile.. Maintenance, including both servicing and repairs, is calculated at 2.22d. per mile. _ Residual Value
After allowance has been made for the cost of the initial set of tyres and the expected residual value, the amount remaining to be written off would be £730. Based on a vehicle life of 125,000 miles, depreciation would amount to 1.40d. per mile, These five items of running costs would thus total 8.88d. per mile and the total operating cost 15.69d.
When " ' The Commercial Motor' Tables of Operating Costs" are being compiled it is assumed' that standard vehicles will be operated under average conditions. Even within that limitation, however, several arbitrary decisions have to be taken. Thus, readers sometimes have difficulty in reconciling their own .vehicle insurance costs with those, shown in the "Tables."
In an endeavour to ensure that the "Tables" are of value to as wide a range of readers as possible, goods-vehicle insurance is calculated on the basis of comprehensive cover for C-licence operation in medium-risk areas. As a result, the calculations shown up to the stage of total operating costs would be applicable to ancillary users. Thereafter, theminimum charges are intended for the use of professional hauliers and the difference between costs and charges is assumed to cover their additional expenses and profit margin.
The weekly insurance cost of I2s. 5d. for the 5-tonner is based on an annual premium of £31. Even if, in other circumstances, the initial price of the vehicle remains the same, the annual premium may vary from £82 10s. to £14 10s., dependent upon whether A-, Bor C-licence vehicles are involved, whether comprehensive or third-party cover is required and whether the vehicles concerned are based in areas designated as districts A, B or C.
If the premium paid was only half what was estimated here (£15 10s. instead of £31), insurance cost per mile at 400 miles per week would be reduced to 0.18d., making the standing cost (Continued on page 403)
6.63d. and total operating cost 15.51d. If double this amount were paid the insurance cost per mile would be 0.74d, and total operating cost 16.06d., as compared with the original 15.69d. per mile.
With the weekly mileage limited to a modest average of 400, running time alone should obviously not warrant overtime working. If, however, the number of collections and deliveries was high or if substantial delays occurred in loading or unloading, additional expense on wages might he incurred.
Where this amounted to 10 per cent., or approximately four hours' overtime, wages cost per mile would become 5.91d., standing costs 7.33d. and total operating costs 16.23d. Similarly. with 20 per cent, overtime, or around seven hours, wages would amount to 6.44d. a mile and total operating costs to 16.76d. Where the total hours worked averaged 55, or approximately 30 per cent, increase in terms of expenditure, costs per mile would be: Wages, 6.98d.; standing, 8.42d., and operating, 17.30d.
Fuel costs can vary for three reasons. First, the price paid per gallon could differ acccording to whether supplies were received in bulk, to the proportion purchased on the road and to the amount for quantity discount. Secondly, consumption could vary relative to the efficiency of both drivers and maintenance staff, whilst a lower rate of fuel tax, or its absence, would reduce the operating costs of some tisers.
In the original calculations, fuel cost per gallon was reckoned at 3s. 9d. If 3s. 10d. per.gallon were paid, the fuel cost per mile would increase from 3.75d. to 3.83d., making the operating cost 15.77d, per mile. Where 13 m.p.g. instead of 12 m.p.g. was averaged, the fuel cost would become 3.46d. and operating cost 15.98d. per mile. Omitting the fuel tax of 2s. 6d. per gallon applicable in this country, fuel cost per mile is reduced to 1.25d., and the total operating cost becomes 13.11d., compared with the standard figure of 15.69d.
All three of the remaining items of running costs—tyres, maintenance and depreciation—can vary substantially under exceptional operating conditions. Previously, tyre life per set has been reckoned at 30,000 miles. Where this figure drops to 20,000, tyre cost becomes 1.29d. and the total operating cost 16.33d. per mile.
Higher maintenance cost could result directly from increased cost of labour and materials or indirectly from lower overall efficiency. Where maintenance expenditure increased by 50 per cent., the operating cost of the 5-tonner would become 16.80d. per mile, rising to 17.91d. if conditions were such that maintenance costs rose to double the original estimate.
A vehicle life of 125,000 miles, or just over six years at 400 miles per week, has been assumed. Where, because of arduous conditions, this•was reduced to 75,000 miles, depreciation cost per mile would increase from 1.40d, to 2.34d. per mile, making the total operating cost 16.63d. If conditions were better than average, so that a mileage life of 150,000 could reasonably be expected, the operating cost per mile would be reduced from the basic 16.92d. to 15.46d. per mile. Repercussions on costs resulting from .varying conditions applying for an eight-wheeled rigid vehicle averaging 1,000 miles per week can be similarly assessed. In Britain an unladen weight of 7 tons 9 cwt. results in an annual licence duty of £120, or £2 8s. per week. Driver's wages, again based on R.H.(64) Grade I, and assuming the load carried comes within the range of 15-18 tons, will be £9 19s. 10d. a week, whilst rent and rates are a little higher at 13s. per week.
With an insurance premium of £104 a year, the cost per week will be £2 Is. 7d. Interest, again at 3 per cent., will cost £2 7s. 5d. As before, insurance and interest are slightly less than shown in the " Tables," because of the removal of purchase tax.
Converting the five items into costs per mile, as with the previous example, they read: Licences, 0.58d.; wages, 2.39d.; rent and rates, 0.16d.; insurance, 0.50d., and interest, 0.57d.: total, 4.20d. per mile.
Fuel is reckoned to cost 5.11d. per mile at 3s. 10d. per gallon and 9 m.p.g., with lubricants adding 0.28d. per mile. Tyres are reckoned at 5.12d. and maintenance at 2.38d. per mile. With the balance to be written off now at the reduced figure of approximately £2,190, depreciation cost per mile becomes 2.78d., making the total for the five items of running costs 15.67d. per mile. Total operating cost per mile is I9.87d.
In contrast with the previous example, overtime working could be substantial when averaging 1,000 miles per week. Let us examine the effects • of a working week of 55 hours, 66 hours, or 55 weekday hours plus 11 hours on Sunday. With allowances as before for National Health and employers' liability insurance contributions and holidays with pay, wages would cost £13 2s. 3d. for a 55-hour week—an increase of about 31 per cent. On a weekly mileage of 1,000 the wage cost per mile would be 3.14d., the total running cost 4.95d., and total operating cost, 20.62d. Similarly, if 66 hours were worked per week, wages cost per mile would be 3.97d. and total operating cost 21.45d. With a total of 55 hours during a normal week, plus 11 hours on Sunday, wages would be 117 13s. 9d., or 4.25d. per mile, giving an operating cost of 21.73d. per mile.
According to the area and type of operation, as well as the extensiveness of the cover required, insurance premiums could range from £50 to £200 a year. Where the premium paid was half that assumed as the standard, operating cost would be reduced to 19.62d., but would be increased to 20.37d. at double the insurance cost originally estimated.
Where fuel costs 3s. ltd. instead of 3s. 10d. a gallon, the amount would be 5.2241. a mile, and operating cost 19.98d. An improvement of 1 m.p.g. in consumption would reduce the operating cost to 19.36d. per mile. If no fuel tax were payable and consumption remained at 9 m.p.g., fuel cost per mile would drop from 5.11d. to 1.78d. per mile, bringing the operating cost down to 16.54d. Tyre mileage has been assessed at 30,000 and a reduction to 20,000 would raise the operating cost to 22.43d. per mile, but if 40,000 miles per set could be averaged, the figure would drop to 18.59d. Similarly, where arduous conditions or lack of facilities cause maintenance costs to be increased by half, operating costs per mile will amount to 21.06d., and to 22.25d. per mile if maintenance expenses are doubled.
With this class of vehicle a high mileage is naturally to be expected and 250,000 has been assumed. If this is increased to 300,000, the effect is to decrease the operating cost to 19.41d. per mile, or to I8.83d. at 400,000 miles. S.B.