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Costs—Guide or Distortion?

21st February 1958
Page 57
Page 57, 21st February 1958 — Costs—Guide or Distortion?
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Which of the following most accurately describes the problem?

STATIST ICS must be positive, relative and indicative of what really happened, said Mr. A. T. Hills when addressing the London centre of the Institute of Traffic Administration last week on "Costs for Management."

Unfortunately, he said, slow progress had been made in the development and understanding of transport cost and performance statistics. Education in this matter was seriously lacking.

There were three broad groups of costs —the company's accounts, historical performance costs and forecast costs. Those • in the first group were becoming so complex, because of frequent taxation changes and the inflationary trend, that they no longer provided a ready guide to operational policy making.

Historical performance costs were of value only if produced frequently and quickly. By the skilful combination of these two groups, with experience, forecast costs could be produced which provided an incentive to better results and the establishment of targets.

Forecast costs had far-reaching effects and their use should be developed. They trained the mind to think with understanding and seek new approaches.

Dealing with labour costs, Mr. Hills emphasized that with the progress and development of welfare schemes and facilities as an additional charge on wages, these costs must be constantly examined.

The combination of many factors into one cost or cost statistics often distorted the time picture. One item might be efficient and another less efficient, yet the average could have a balancing effect or even suggest an improvement when in fact remedial action was required.

No Measurement of Efficiency

In questioning the use of such terms as overall cost per mile, per ton, per tonmile and per passenger-mile to indicate efficiency, he said that differing conditions --all in themselves efficient—could produce differing results. Whilst they had their uses in certain circumstances, they were not, Mr. Hills claimed, measurements of efficiency. There could be no standard sets of measurement phraseology; each organization had to devise its own, most appropriate to its class of work.

Referring to the introduction of the electronic cornputor, he said it was a first essential that the transport manager should have a precise knowledge of the measurement statistics required to enable him to advise the computor planner accordingly.


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