"Little and Often" Puts Up Costs
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LAST, week I discussed some of the factors which affect road transport charges. Basically, these are the 10 items of vehicle operating costs: licences, wages, rent and rates, insurance, interest, fuel, lubricants, tyres, maintenance and depreciation. The first five are standing costs and are incurred whether the vehicle operates or not. The remainder are running costs varying in total with the mileage run.
When more than one vehicle is operated there will also be establishment or overhead costs resulting from running a business as distinct from vehicles. All items which cannot be directly attributed to particular vehicles would come under this heading. After recording and totalling, it will he necessary to allocate them to individual vehicles according to the circumstances peculiar to each operator.
If vehicles are operated for hire or reward an addition to standing, running and overhead costs will have to be made if some of the contingencies inseparable from running a business are to be met.
Distribution costs and charges are, however, affected external factors as well as by the operator's own efficiency. Variation in supply and demand,, terminal facilities and trade customs, for example, all exert an influence on overall costs and charges.
Changing trends in customers' demands or distribution services also have their effect on transport economy. Post-war financial policies have, in many instances, compelled trade and industry to reduce stocks to a minimum and then demand replacements to be delivered not only in small quantities, but at more frequent intervals and at a fixed time.
Because this trend has been gradual, its full significance may not always have been appreciated. Its continuance, however, may so alter the pattern of distribution that the traditional siting of depots or factories may be affected where other circumstances—availability of labour, for example—do not conflict.
It is instructive to examine this trend in terms of cost as applied to the example quoted last week of a company engaged in basic food,production. In 1948, 60 per cent. of their weekly output was ordered by customers for delivery any day the following week. Ten years later 70 per cent. of their customers demanded delivery of smaller quantities on a specific day, and often at a stated time. On many occasions only 24 hours' notice would be given.
It has been customary for several basic industries engaged in processing raw materials to site mills or factories at the source—the mine, quarry or dock. In this particular instance, agricultural produce was collected from both surrounding and more distant areas during a main harvest period of approximately three months. Every 4 tons of raw material was processed down to 3 tons of finished product and then sent to places between 50-200 miles away.
When other factors were also favourable, it was obviously ['Mc to conduct the first processing v materials as near as possible to tource, thereby saving up to cent, on ultimate delivery costs, own, however, distribution is now affected by changing economic and so reducing, if not eliminating, iginal economic advantage of the t sites.
ection of raw materials necessiLverage hauls of 50 miles and loads ranging from 7 tons tons. To estimate the cost of collecting 1,000 tons and 'hag it to the factory I will assume that, on balance, ns is collected by 7-tanners and the balance by maximumight-wheelers (oil-engined. of course).
smaller vehicle will be estimated to weigh 3 tons 4 cwt. n and annual licence duty_ will amount to £38 15s., or . per week. As with the four other standing costs, licence s calculated on the basis of a 50-week year to allow 1:1 non-revenue-earning weeks. Wages are reckoned at 3d. per week, based on R.H.(64) Grade 1 rates with triate allowances for insurance contributions and holidays ay.
and rates are assessed at I ls. per week and vehicle ice at 16s. per vehicle, as applicable to ancillary opera' medium-risk areas. Interest adds a further 21s. per making the total weekly standing costs £12 9s. 9d.
lming that oil fuel is purchased in bulk at 3s. 10d. per fuel cost will be reckoned at 3.07d, per mile and nts at 0.25d. Tyre costs amount to 1.76d. per mile, ng an average mileage per set of 30,000. Maintenance stated at 2.1,0, per mile and depreciation at 3.15d., vehicle mileage life is 125,000. Total running costs are, re, 10.36d. per mile.
Total Operating Cost
addition of standing and running costs would give a perating cost per mile of 15.36d. or 14.11d. at 600 or les per week respectively.
ing to the maximum-load rigid eight-wheeler, licence ill amount to 48s. per week and wages to £9 19s. 10d., allowing for insurance contributions and two weeks' , with pay. Rent and rates are slightly increased to 13s. ek. Because of the increased initial cost and carrying y, vehicle insurance costs E2 4s. per week and interest 8d., making the total weekly standing cost £18 3s. 6d. ming that fuel is bought at the same price, the cost w be 5.11d. a mile as a result of the lower consumpore of 9 m.p.g. Lubricants are reckoned at 0.28d. per id tyres at 5.12d. Where the weekly mileage is 600. lance costs will amount to 2.62d. per mile, whilst ation adds 3.57d., making the total running cost 16.70d. e. If the weekly mileage is 800, the aggregate running II be slightly reduced to I6.46d.
operating costs per mile for the eight-wheeled oiler iount to 23,97d. at 600 miles a week and 22.33d. per 800 miles a week.
years ago the company were able to make all their I deliveries on one or other of these two types of Because of the demand for smaller quantities to be d at more frequent intervals it has now been necessary ide 5-ton oilers in the fleet.
lye weekly standing costs of this size of vehicle would :nee, 14s.; wages, 179s.; rent and rates, 10s, 6d.; cc, 13s. 7d., and interest, 18s. 3d.; total, £11 15s. 4d. onding running costs per mile at 600 miles per week ye would be: Fuel, 2.56d.; lubricants, 0.24d.: tyres.
1.41d.; maintenance, I.82d., and depreciation, 2.30d.; total, 8,33d. Total operating cost per mile is 13.04d. at 600 miles per week and 11.86d, at 800 miles per week.
When 500 of a total of 1,060 tons of raw materials were collected by the 7-tonners, approximately 71 trips were necessary. With an average lead of 50 miles, 7,100 miles would be operated. The operating cost for this class of vehicle has been shown to be 15.36d. a mile at 600 miles per week. The cost of collecting 500 tons by 7-tanners Would thus be £454 8s.
Similarly, the remaining 500 tons would be collected in 33 tripS (3,300 miles) by the 15-tonners at a total cost of 1329 12s, The 1,000 tons, would thus be cleared for £784, excluding, of course, the benefit accruing-from any traffic carried on the outward journeys.
Turning now to the delivery of the finished product, the 375 tons to be hauled by the 7-tormers 'would involve 53 trips. As the radius of distribution ranges from 50 to 200 miles, the average return mileage will be 250 and the total mileage covered 13,250.
It would be reasonable to assume that these vehicles would average a higher weekly mileage-say, 800. At the appropriate cost per mile of 14.11d., the total cost would be £779. Similarly, delivering the balance by 15-tanners in 25 trips would involve a mileage of 6,250 at a cost of £581 10s. Total delivery costs for the 750 tons would be £1,360 10s.
Now, however, the customer demands smaller quantities more frequently. Assuming delivery of the. 750 tons were equally divided between the 5-, 7and 15-tonners, the number of trips would be 53. 36 and 17 respectively, and the corresponding cost £617 14s., £529 2s. and £395 8s. The total of £1,542 4s. shows an increase of £181 14s. compared with the cost of delivery in larger quantities, equivalent to the addition of 4s. 10d. per ton.
In practice this additional cost may be increased still further by the influence of factors inseparable from day-to-day traffic office work. With a mileage radius of 50, all collections would normally be made within the day and the following day's arrangements could then be carefully allocated to achieve maximum efficiency. Deliveries, however, necessitate an overnight stop so that on average only half the fleet would be available for loading on any one day. Some under-capacity loading must therefore inevitably arise and moreover increase as the range of vehicles widens.-S.B.