With the road transport market becoming ever more competitive it is important to manage costs. If you work for a large company you could hire a procurement consulting specialist. For most of though in the transport industry we must apply our skills, knowledge and managerial common sense. I will attempt to cover the ground in a sensible fashion.
Vehicle costs can be split into two categories: Fixed Costs and Running Costs
- Fixed costs
The fixed costs of a vehicle fleet have to be met irrespective of the amount of work or mileage done. Whether a vehicle turns a wheel or not. This is about having the vehicle available, ready for work and ready to go. These costs are generally based on the passage of time rather than distance covered.
Costs would include; Vehicle excise licence, Operators licence, Insurance, Wages, Depreciation (@25% per year) or lease hire, and Administration.
- Running Costs
These costs are solely when the vehicle is running/operating or when being used. Fuel, tyres and maintenance. Unlike fixed costs which are pretty much set in stone with little or no room to manoeuvre except for perhaps the wage bill and cost of the vehicle running cost can be reduced by the implementation of vehicle management systems.
Fuel cost can be reduced by ensuring drivers are correctly trained and monitored; the traffic office can ensure that routes are selected on the best and most cost effective routes. See vehicle tracking systems.
Worn out old engines have less power and use more fuel than the new more up to date ones.
Tight systems to avoid fraud which, if allowed unchecked will eat into company profits.
Tyres are not factor into the cost when buying vehicles these are additional cost as the tyres wear with mileage.
Repairs and maintenance are a must. This will include the testing preparation and testing as well as the compulsory sixteen week safety checks. You can also include the momentarily lapses in concentration cost i.e. Driver accidents.
How these costs are met will depend on whether the company employs an onsite fitter with the wages, consumables like oil, equipment and a building to work from or contracts the work out but either way will include costs of spare parts.
Work contracted out. Could be charged by the km or an annual fee. The and vantage of a contract is that there are clear up front cost Whereas when kept in-house there is an amount of flexibility repairs and servicing can be worked around instead of planning and making bookings.
Wages. With 365 days in a year the working available days have to be deducted, so it’s less 52 weekends, Bank Holidays, annual holidays then there are days lost when the vehicles have to be maintained, tested and checked. That will lead to 250 days from the 365 anything more will mean paying overtime. Not to forget that there are not only driver’s wages but all staffs wages.
To conclude, a rigorous job costing system is required to improve fleet operations that will allow developing the business and departments that will target individuals and vehicle performance. This will highlight trends which can be acted on quickly; this will help in the day to day decision making linked to the pricing of jobs and long term business planning. Where such a system is being used effectively it can go a long way in motivating those who require quick results.
A good system is not only efficient but cost effective.
