Planning for Profit
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Small Vans Can Be a Problem
Though Costs Per Mile May Be Relatively Low, a Too-ready Authorization of Their Use Can Accumulate High Expenditure
THERE are over 4. m. goods vehicles operating in this country with unladen weights of less than one ton. The great majority, of course, are small vans running under C licence.
On a conservative estimate these vehicles represent an overall initial outlay of over £200m. Yet despite this very large capital outlay I doubt if but a small proportion of their users have any accurate knowledge of the cost of operating them. Even when averaging a comparatively small weekly mileage— say 200--the cost could amount to £750 or more per vehicle per year.
-Yet when every effort is being made to reduce costs in all sections of trade and industry, such very endeavours often result in an increased use of small vans. When employed on retail delivery there are several contributory factors. The increasingly high rents payable on shops sited in the centre of towns and cities make it imperative that the sales or productive area of such shops is increased to the maximum, which invariably results in stocks of goods being correspondingly reduced. This in turn n.xessitates, more frequent delivery of smaller lots. Whilst the overall cost of sales and distribution per unit may be reduced as a result of such a policy, due largely to. increased sales, transport costs must inevitably be increased.
THE increasing • mechanization of industry and agriculture has necessitated the provision of field engineers equipped with service vans available at short notice to repair such equipment in the event of breakdowns. Where a large industrial unit is geared to mass-production the relative cost of operating such vans is small when segregated to each particular occasion, but the accumulated expenditure over a year can be substantial.
When such maintenance is provided as a sales service there is an understandable pressure from such sales departments that journeys should be undertaken with little regard to economic operation. Where a fleet of such vehicles is large enough to justify the employment of a transport manager, who may also be responsible for operating larger vehicles, he will often he placed in the difficult role of curbing excessive demands for the use of small maintenance vans. On such occasions it is helpful to be able to give the exact cost in advance of such trips by reference to previously assessed operating costs.
The great majority of small vans are operated singly. or at least in small numbers. In such circumstances it is often a more economic proposition to arrange for the supply of such vehicles on contract hire. In this connection three successive articles in this series (June 9, 16 and 23) dealt with the advantages of hiring as compared with ownership.
AS an indication of the costs likely to be involved in operating even the smallest type of van, namely 5 cwt., the following estimates are given, alternatively with either 3or 4-wheel chassis. Although not so common as the 4-wheeled van. the 3-wheeled version does give some reduction in total operating costs. Its unladen weight would be around 8 cwt.. giving an annual licence duty appropriate to 3-wheelers. of £6. Allowing for a slight addition in respect of the fee payable for the carrier's C licence, the equivalent standing cost per week for licences would then be 2s. 6d.
Although it is appreciated that other than adult male drivers may be employed on this type of vehicle, the wage rates applicable to adults will nevertheless be used here so as to facilitate any comparison that may be made with the operation of larger vehicles on which the employment of adult drivers is a statutory obligation. Assuming that the van is located in a Grade 1 area as defined in the Road -Haulage Wages Council Regulations R.H.(70), the total cost to the employer of driver's wages is reckoned at £9 14s. 10d. a week. This amount includes contributions payable by the employer under the new Graduated Pension and National Insurance scheme and voluntary contributions to employers' liability insurance, which prudent operators make to replace the indemnity provided under the former Workmen's Compensation Act. Also included in this amount is an adjustment to provide for the cost of holidays with pay.
It will be assumed that the van is housed under cover and that the equivalent cost of rent and rates is bs. 9d. a week. Comprehensive insurance in respect of the vehicle when engaged on ancillary use is reckoned to cost £16 16s. per annum, the weekly equivalent of 6s. 9d. As with the other standing costs already enumerated, the weekly amounts are calculated on the basis of a 50-week year to allow for two weeks when the van may he off the road for major overhaul or on account of driver's holidays.
ALLOWING for a nominal interest charge of 5 per cent. on the initial outlay, this would add the equivalent of 7s. 6d. a week. The total for these five items of standing costs would thus be £10 18s. 4d. Small vehicles such as this 3-wheeler would normally run only a comparatively small mileage and here this will be reckoned at an average of 200 miles a week. The resulting standing cost per mile is therefore 13.10d.
There are similarly five items of running cost of which fuel is usually the largest. In this instance it will be assumed that both the 3and 4-wheeler are fitted with petrol engines and that fuel is purchased in bulk at 4s. Id. a gallon, although it is appreciated that there could be a wide range of prices at which fuel is obtained by users of small vans.
The rate of fuel consumption for the 3-wheeler will be conservatively estimated at 38 m.p.g. but because of the relatively small mileage it is reasonable to assume, in addition, that a considerable amount of. stop and start work is involved. On account of this a nominal addition of 10 per cent, will be made to the consumption, resulting in a fuel cost per mile of 1.42d. Lubricants are reckoned to add 0.15d. and tyres 0.21d.
a mile. This latter figure is based on a cost per set of three tyres of £18 and an estimated mileage life per set of 20,000.
Maintenance, inclusive of washing, servicing and repairs, is reckoned at 0.98d. whilst derreciation adds 1.I3d. a mile. To arrive at the cost of depreciation it is first necessary to deduct the equivalent cost of the original set of tyres from the initial price of the vehicle, followed by a further deduction equivalent to the estimated residual value, which in this instance is reckoned at 10 per cent. In this particular case, however, there is a possibility that there may be an element of obsolescence due to the relatively low mileage. On this account, although the mileage life of the vehicle is estimated at 75,000, a nominal addition of 10 per cent. will be made to this item of cost. g:ving a final figure of 1.13d: a mile. The total for these five items of running costs is therefore '389d. a mile, with a resulting total operating cost per mile of 16.99d. Again assuming a weekly'average mileage of 200 the running cost per week Wonld be £3 4s. 10d. and the total operating cost per week £14 3s. 2d.
Dealing now with a 4-wheeled version of a 5-cwt. van, it will be assumed that the purchase price is £420. As with many of the smaller vehicles, the unladen weight is considerably in excess of the carrying capacity and in this case will be reckoned at 15 cwt. This will incur an annual licence duty of £15 or the equivalent of 6s. Id. a week, inclusive of a similar addition as before in respect of the carrier's lice ice fee. The total cost of wages to the employer would again be reckoned at £9 14s. 10d., but the weekly cost of rent and rates is adjusted to 7s. 4d.
THE annual premium for comprehensive cover whilst engaged in ancillary operation appropriate to this class of vehicle would be £18 12s., the equivalent of 7s. 5d. a week. interest charges on the initial outlay at the same rate as before would add 8s. 5d.. giving a total for these five items of standing costs of 111 4s, Id. As with the 3-wheeler, it will still be assumed that a weekly average of 200 Utiles is maintained, so giving a standing cost per mile of 13.44d.
It will again be assumed that fuel is purchased in bulk at 4s. Id. a gallon and with an increased rate of consumption for the 4-wheeler of 32 m.p.g., the basic fuel cost per mile would be 1.53d. But, as before, an addition of 10 per cent, will be made to this figure to allow for some margin for the stop and start work which the lower weekly average mileage of 200 implies. The resulting fuel cost per mile is therefore I.68d., whilst lubricants are reckoned the same as before at 0.15d. a mile.
A set of tyres for the 4-wheeler would cost around £27 and with a conservatively estimated mileage life of 20,000, the tyre cost per mile would be 0 32d. Maintenance is now reckoned to cost 1.09d. a mile and depreciation 1.23d., calculated in the same manner as with the 3-wheeler.
This gives a total for the five items of running costs for the 4-wheeler of 4.47d. a mile which. when added to the standing cost of 13.44c1.. gives a total operating cost of 17.91d. a mile. This compares with a corresponding figure for the 3-wheeler of 16.99d.
Similarly, the running cost per week is £3 14s. 6d., giving a total cost of operating 200 miles per week of £14 18s. 7d. for the 4-wheeler, compared with £14 3s. 2d. for the 3-wheeler.
AMAJOR post-war development in commercial vehicle manufacture has been the extension to the range of vehicles to
which oil engines can be fitted. Originally considered as primarily for use with heavy vehicles, the application of this type of engine has now extended down to small vans with a carrying capacity as little as 15 cwt.
Whilst a major economy to be derived from the use of an oil engine is by way of reduced fuel consumption, there is also the advantage that consumption does not deteriorate when employed on stop and start work as is the case with a petroleagined vehicle. Additionally when such vans are operated • alongside larger vehicles, which would in any case invariably be fitted with oil engines, operators would probably find it inconvenient to provide fuel supplies specially for one or two small petrol-engined vans.
As an indication of comparative operating costs as between B60 petrol and oil-engined vans of similar carrying capacity, the following costs are given.
A 15-cwt. petrol-engined van would cost around 1530 and have an unladen weight of 1 ton 7 cwt. The resulting annual licence duty of £24 would incur an equivalent weekly standing cost of 95. 8d. As with the Iwo previous examples of 5-cwt. vans it will be assumed that an adult driver is emnloyed and that the overall weekly cost of wages, inclusive of insurance contributions as before, is £9 14s. 10d.
Appropriate to the increased dimensions, the weekly cost of rent and rates in respect of housing the vehicle is now reckoned at 8s. 5d. Because of the increased initial outlay and carrying capacity the annual insurance premium now amounts to £24, the equivalent of 9s. 7d. a week. Interest on the initial outlay is-again charged at a nominal rate of 5 per cent., amounting to the equivalent of 10s, 8d. a week. This gives a total for these five items of standing costs of £111 13s. 2d., or 13.99d. at 200 miles a week.
With petrol again purchased at 4s. Id. a gallon and a fuel consumption rate of 22 m.p.g., plus a 10 per cent. increase on account of stop and start work, the fuel cost per mile becomes 2.45d. Lubricants are reckoned to cost 0.18d. and tyres 0.43d. a mile, reckoned on a basis of an estimated mileage life of 22,000 and a cost per set of £45, Maintenance is assessed at I.52d. and depreciation at 1.53d. a mite, Total running costs for this 15-cwt. petrol-engined van are therefore 6.11d., giving a total operating cost of 20.10d. a mile and £16 15s. a week.
The initial outlay on the oil-engined version of a 15-cwt. van is reckoned at £662. Although the unladen weight would be a little higher at 1 ton 9 cwt., this increase is not sufficient to affect the licence duty, which remains the same at £24 per annum or the equivalent of 9s. 8d. per week. The next three items of standing cost also remain the same, namely wages 19 14s 10d.. rent and rates 8s. 5d, and insurance 9s. 7d. a week. Interest charges, however, are slightly higher because of the increased initial outlay and now amount to the equivalent of I3s. 2d. a week. This results in a total standing cost of £11 15s. 8d. a week or 14.14d. a mile.
With fuel oil costing 4s. 1 Id. a gallon and an estimated rate of consumption of 33 m.p.g.. fuel cost per mile will amount to 1.51d. As already mentioned, no increase is added on this occasion because of the stop and start work.
Lubricants are assessed at 0.20d. a mile, while tyres remain the same at 0.43d. a mile. Maintenance is now reduced to 1.26d. a mile, but depreciation is increased to 1.94d. a mite. In this conncction the vehicle mileage life is still conservatively asses:ied at 75.000.
This gives a total running cost of 5.34d, a mile or £4 9s. a week. Similarly. the total operating cost is I9.48d. a mile or E16 4s. 8d. a week, which latter figure compares with £16 15s.
for the petrol-engined version of this 15-cwt. van. .S.11.