:ost control by vehicle or
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n fleet? by R. H. Grimstey, BCom, FIAC -IETHER road transport operations ould be costed by individual vehicles by total fleet depends more on methods n on fleet size. My aim in this de is to suggest ways in which fleet nagers can reach their real target exercising close control without the itrol systems being unduly expensive.
here are two points of view regarding ry truck: -Iow much does the truck cost?
iow much does it earn for the business?
msts
)st readers of CM will be familiar with nding and running costs, especially if y use CM's Tables. But let us look at the ns in detail, in relation to the allocation osts.
Licence. This is fixed according to the cription of the vehicle and there is no lenity in allocating this cost to each arate lorry. It does not vary according to ge so it presents no problem.
Insurance. Premiums begin with nations for each principal type and size orry, the whole being modified according the company's claims experience. If the lpany chooses careful drivers and avoids tecessary risks, it will squeeze a small cut n.emiums out of the insurance company
this will apply to all the fleet.
it the premiums will be further 5ified by no-claims discount and with it insurance companies this takes each icle separately. Accident repairs are not ays fully insured. For example, there be a voluntary or involuntary excess firing the company to meet the first £X, taps £50 of each claim. So not only is an dent-prone vehicle going to cost more in niums through losing its discount, but its repair bills are going to be heavy.
in element —the driver
first it seems that here is a definite ; for treating each truck individually, but is misleading. The accident record is ly a matter of luck, so that if lorry No. had been on a certain dangerous road wintry night instead of No. 264 it would been the one to meet with the accident the pattern of their costs for premiums repairs would have been reversed. aming that routine maintenance of all ks is equally reliable the main element in ding accidents, apart from luck, is the r. Unless each driver always keeps to same truck, which is very unusual in t companies, tying insurance costs to iidual vehicles is not accurate.
more reasonable to allocate accident ir costs and insurance premiums to ps of vehicles, a group being all of one kind of truck used generally for the same kind of work. This has the further recommendation that some makes of trucks are more expensive to repair than others and some makes are more accident-prone than others because of inferior road holding qualities or other weaknesses of design.
(c) Fuel. On this one there is every reason to keep records for each individual truck. Even with the same make and size the average fuel consumption varies quite a bit, and sometimes a sharp worsening of consumption draws attention to bad driving or to vehicle faults developing. Here is a point of liaison between using records for costing purposes and using them for actual supervision of the lorry.
(d) Depreciation and interest on capital value. This depends first on the cost of buying the truck and secondly on its working life, measured in miles rather than years. During the lifetime of the truck the depreciation is to some extent guesswork because its actual working life is forecast and is not bound to be accurate.
Experience narrows risk However, experience helps to narrow down the risk of error. The lorry is of a certain make and si7e. with a reliably estimated working life of say 200,000 miles for the sake of looking at an example. Prices have been advancing steadily at say 7 per cent, so that the oldest one still in the fleet, having been bought in 1968 cost £5000, while the price quoted for the one due to be delivered in 1972 is £6500. There is no reason to think the 1972 model will have a longer working life, because it is still the same design and quality.
Depreciation on the 1968 truck on its historical cost is 2.5p per mile, while on the 1972 truck it is 3.25p per mile (these figures may be slightly exaggerated, but in any event each company needs to work out its own depreciation according to its own usage of vehicles, and the trend of inflation is common to us all). It would seem reasonable for costing purposes to enter depreciation for all the trucks on the current cost price and ignore the accidental historical fact that some were bought at a lower price.
Separate records This problem of depreciation tied up with rising costs is a serious one which is puzzling the whole of the accountancy world.
(e) Repairs and tyres. I would say there is always a need for keeping records of these for each separate truck, They serve not only for costing purposes. for which an average for the type of lorry might be adequate, but
also for the likelihood of warranty claims and of maintenance records for legal purposes.
(I) Wages. The drivers' wages concern usage and output. They need to be compared frequently, perhaps even daily, with these factors, but they can be allied to the kind of vehicle without necessarily being listed against each separate truck. Mr A driving a 7-ton truck will produce the same results in any 7-ton truck on the same run, though in the slower, smaller models his results would inevitably have been less satisfactory.
(g) Establishment costs. Unless a particular truck or kind of truck is notoriously unreliable and causing much more than its fair share of supervisory work, the establishment costs may simply be allocated as so many £s per vehicle with some grading according to size. These establishment costs include the rent, rates, heat, light, etc, of offices, maintenance garages and storage sheds for the trucks, plus clerical costs and management salaries for those in charge of the fleet. (Alternatively the rent and rates for the actual vehicle garaging may be assessed separately, and the remainder of the overheads allocated by some agreed division.)
The overall position is summarized on the attached chart. Output is being measured for each separate truck, but total costs are being taken as an average for all the trucks within a particular group. A group must include only vehicles which are all of one size and kind and are operating under fairly similar conditions from the same depot.