Allocation of Costs
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HOW EXPENDITURE OF A I,000-VEHICLE ANCILLARY FLEET IS EQUITABLY APPORTIONED
)EVISINC a policy of control for a fleet of more than 1,000 ancillary vehicles so that they work efficienfly and economically for a dozen or more iling and service departments Is a major exercise in If. Putting theory into practice is an even bigger rcise—and a never-ending one in the bargain.
Int even if these two undoubtedly high hurdles are cessf ally surmounted another important job still remains be done. This is the equitable allocation of the total t of running a large mixed fleet of commercial vehicles the various divisions of the organization concerned.
kt the outset this latter problem may seem a relatively [pie one to resolve, but in practice an inappropriate thod of allocating costs can create rather than iron out iculties. When allocation is arbitrary it can engender fficieney if some departments do not have to pay all ir true transport costs. In such conditions the departnts concerned could—knowingly or otherwise—improve ir own profitability and productivity at the expense of essive transport demands when measured in terms of e cost to the overall loss of the company.
deafly, any method of apportioning the cost of ancillary asport should have the beneficial effect of encouraging all the departments using the transport services provided . to make a clear distinction between those transport requirements which are convenient and those which are really essential. As in many other walks of life, the payment of a fair price ensures that a true distinction is made. In contrast with a system of cost allocation which is too arbitrary it is possible—with the best intention—to go to the other extreme and set up an admittedly accurate system which constitutes a major exercise in itself. As such, important though a correct allocation is, the resulting increase in administration work could seldom be justified As an example of a system which avoids either of these two pitfalls, that operated by the Royal Arsenal Co-operative Society Ltd., with its transport headquarters based at Woolwich, London SEI8, justifies examination. First, however, it is necessary to briefly go over the operational problem involved before dealing with allocation of costs.
indicative of the size of this Co-operative Society, annual turnover is approximately £30m., whilst the area covered is virtually the whole of south London and adjoining areas from north-east Kent to Haslemere in Surrey. The structure of the Society is quch that under the general manager there are the trading departments and service departments. The former includes departments dealing with foods, bakeries, dairies, electrical, furniture and furnishings, clothing, footwear, jewellery and fuel. In the service section are the works, engineering, transport, radio and television. laundries, travel and funeral departments.
Most of these departments have their individual transport problems and some have vehicles directly under their control. Thus, of the total Society's fleet of more than 1,000 vehicles, around 500 of these are electric vehicles employed on milk delivery to Society members who total. incidentally, 389,000.
Day-to-day Control
Basically it is the policy of the Society to give direct day-to-day control of vehicles to those departments whose volume and regularity of work justifies this procedure. The central transport department provides either vehicles with drivers, vehicles without drivers or even drivers only as the occasion and fluctuation of traffic demands, By this procedure the Society's overall demand for transport. despite the fluctuations inseparable from the retail trade, is economicallv married with the minimum employment of vehicles and men.
In discussing the methods of control and costing employed by RACS, transport manager Mr. J. L. Binnie told roe that a comparatively recent refinement to their system was for his department to have the benefit of computer facilities for the analysing and apportionment of transport costs. Actually the RACS already have a computer to deal with the complex accounting necessary to keep track of all the multitudinous financial transactions of their 389,000 members.
Operational Efficiency First and foremost Mr. Binnie considers that his most important and continuing task is to fight ever increasing costs" and to do his utmost to absorb as much of the increase as possible by improvements in operational efficiency. But having recognized this as a first priority. this did not mean that costing was of such importance that it was virtually an exercise in itself. Even in this sphere objectives had to be achieved with the minimum expenditure of time and effort. This was allied to the fact that his department, as a non-trading department, added nothing directly to the Society's revenue, which was all the more reason why the transport service provided, however efficient, must be at the minimum of cost.
In keeping with the objectives for which the Co-operative movement stood. RACS were one of the first (36 retailing organizations to work a five-day week; this in turn provided more problems for the transport department and those trading departments operating their own vehicles. But here again it was necessary, so far as possible, to absorb any resulting increase in transport costs.
Approximately 150 vehicles are directly under control of the transport department, based at either Woolwich or Mitcham. Orders received from trading and other service departments are allocated at the Woolwich transport headquarters. As already mentioned, this can involve vehicles with or without drivers or drivers only. The drivers concerned subsequently complete a record sheet from which cost allocation is subsequently made. This sheet is in addition to the statutory log sheet.
Record Sheet
Briefly describing this record sheet, the heading allows for the entry of the date, the time of docking on, leaving garage and clocking off, together with the vehicle number and driver's name and number; also with those of the attendants where carried.
The main section of this sheet is concerned with the load carried. The first column gives details of the journey or district served, the second the department concerned, whilst the times of arrival and departure are also given. The maximum weight of the load carried is then recorded with a description of the goods and the number of passengers delivered. Then follows the all important column for signature on receipt, with a further column for any special remarks.
At the foot of the sheet provision is made for brief comment as to any vehicle or tyre repairs required, together with a report on the condition of the vehicle both on taking over and handing back. Entry of the mileometer readings completes the details recorded on this sheet.
Computer Code Numbers
The installation of the computer has precipitated the use of code numbers for the very many departments and shops controlled by RACS, and this procedure is naturally of vital importance in the apportionment of costs. Additionally the transport costing system is so arranged that a unit of cost per type of vehicle is worked out as a tariff per hour. This varies largely according to weight and is, of course, adjusted according to whether a driver anchor attendant is provided.
Commenting on the use of the computer, Mr. Binnie said that whilst acknowledging the undoubted advantages it provided, care had to be taken that over-complicated records were not thereby encouraged. Thus, if the tariff of charges were changed too often the departments using the transport service would not so readily know in advance what their likely costs would be.
This tariff of charges was sufficiently flexible to provide for a mixed fleet of commercial vehicles ranging from 5 cwt. vans to 10-ton artics. Additionally, the size of the overall scale of operation necessitated bulk delivery of milk overnight, including the use of fork-lift trucks together with the working of artics between the docks.
Collation of Information After the collation of information from the driver's record sheet the subsequent data provided by the computer of transport costs indicates in the heading the department concerned—grocery, dairy. abattoir and so on—with the appropriate code number. Underneath are columns giving the type, truck number. date, hours, rate and total value of the service provided. Mention was made earlier
A the travel department, and because the peak periods of :he coach drivers differ from those in the other retail iepartments, there can be an interchange of drivers with :orresponding charges rendered on that account only.
Despite the complexities of the Society's overall business, Jetailed and apportioned transport costs are available both :o the department concerned and the general transport lepartment within two to three weeks. With a day-to-day raffic-movement problem of the size with which RACS have to deal, it is self evident that any attempt to centralize control of such movement would be virtually impossible. Accordingly vehicles have been directly allocated to the several departments on a substantial scale—the major portion of the overall fleet, in fact. Nevertheless, because of the system of accountability employed, the various departments concerned are encouraged to operate their allocated vehicles to the best advantage at the minimum cost.