| Past
Issues |
February
2005 |
Market
related owning & operating cost estimates for a variety of
popular transport operations
Welcome
to the FleetWatch truck
operating cost schedule covering 15 different popular transport
operations representing a crosssection of typical transporter and
private carrier transport tasks.
The objective is to provide operators and shippers (consignors) with a reliable guide to transport costs relating to a wide crosssection of raw materials and finished products.
A thorough understanding of the assumptions and how they are applied is necessary, if the various cost studies are to be informative, beneficial and helpful. While
FleetWatch takes no responsibility for the accuracy of the estimates, considerable time and effort has been expended to ensure the various cost components are realistic and representative estimates of the various transport tasks contained in the schedule.
Assumptions
While many transport tasks are similar, few are ever identical. With this in mind it is important to bear in mind the aim and application of the various components that apply to a transport operation. These include:
Vehicle Type
Briefly describes the vehicle configuration contemplated for a specific task (eg –
4x2 rigid freight carrier with volume van body for medium distance delivery of FMCG
products).
Payload (tons)
The assumptions are based on typical optimal legal mass payload Market related owning & operating cost estimates for a variety of popular transport operations that can be achieved on any number of vehicles, bodies and trailers freely available on the local market. In practice, the actual payload will depend on the vehicle manufacturer’s specification and the road-ready unladen mass.
Deck length (metres)
The assumptions are based on typical optimum mass distribution for the assumed vehicle configuration and the contemplated task. In practice there are many wheelbase and axle capacity options to suit specific requirements.
Pallets
The assumption contemplates 1 000 x 12 000mm 4-way entry pallets.
Volume
Cubic assumptions are based on length, width and height of typical bodies applicable to the various operations. In practice this varies with measurements of specific bodies.
Annual Kilometres
Annual kilometres are based on typical operations. Annual kilometres of vehicles engaged in short and medium collect and deliver tasks vary considerably. Space limitations prohibit the inclusion of a wider variety of such tasks.
Working Days
A five-day week is assumed for the vehicles most likely to be involved in delivery operations. Larger rigs often work longer hours to meet the demands of long distance haulage.
Shifts
Shifts indicate the daily working hours of fridge units and tipper trucks.
Economic Life
Is based on 800 000 km as a
first economic life for the driveline. This is in line with vehicle
manufacturers maintenance contracts for standard operations over 48
or 60 month periods. The estimates do not assume that vehicles will
be replaced before, on or after the suggested date. Achieving the
economic life of the major components is an important element in
producing cost-effective transport.
Capital Cost – or First Cost
All estimates are based on the cost of new vehicles and equipment. The indicated initial cost of vehicles, trailers, bodies and auxiliary equipment (such as fridge units) is based on the current list price of such items. The prices quoted by leading suppliers are averaged and subjected to known fleet owner discounts. VAT is excluded.
Standing Costs (also known as fixed costs)
Standing costs are incurred whether the vehicle moves or just stands. When vehicles do not cover significant kilometres or work for long hours, standing costs will be high and difficult to recover. Our assumptions are:
Depreciation
All depreciation is straight line.
• Vehicles – 20% a year over five years. No allowance for residual value
• Auxiliaries – 25% a year straight line. No residual value
• Trailers – 10% a year. No residual value
Tyre values are not deducted from the initial price of vehicles and trailers prior to depreciation.
Cost of Capital
"There’s no free lunch" as the saying goes. Interest on the cost of vehicles and equipment is calculated at the prime bank overdraft rate (currently
11% a year) on the full amount. The calculation indicates the average interest paid per annum on the reducing balance over five years.
Vehicle Licences
Licence fees for vehicles and trailers are based on the current Western Cape tariff, probably the most expensive in SA.
Insurance
Insurance cost assumes the operator has a low risk rating. Premiums are set at
8 per cent of the purchase price (replacement value) for vehicles, equipment and trailers.
Wages
Driver and assistant wages vary considerably across the country in terms of vehicle size, task complexity, region, metropolitan operators and remuneration packages. All assumptions include an allowance for company contributions but exclude overtime and bonuses. Where applicable an assistant has been included as a casual, daily worker.
Variable Costs
Variable costs (also known as running costs) are incurred when the wheels turn. These include:
Fuel
A major cost item in all transport operations. Where annual kilometres exceed about 120 000 km a year, fuel is usually the largest expense. Fuel consumption is calculated according to a formula that assumes the vehicle is always fully loaded, travels at an average speed of approximately 80% of the speed limit in the case of highway operations and 75% of the urban speed limit. The formula takes into account an assumed maximum power demand expressed as a percentage of maximum available kW/hrs for each task. A similar approach is used in calculating the fuel used by fridge units. The price of fuel is based on the pump price in
Gauteng for diesel with 3% sulphur. Bulk rebates are ignored.
Top-up Oil
Is based on five percent of the fuel consumed.
Repairs & Maintenance
The assumed cost of maintenance is based on current vehicle manufacturer and FML maintenance contract rates, expected economic component life and industry experience. The assumptions take into account the complexity of each task including typical operating conditions such as roads, topography, traffic density etc. Repair and maintenance costs for the tipper and fridge operations are calculated in hours.
Tyres
Tyre life is based on typical casing life currently experienced in the various operations. Major tyre supplier tyre management programmes offer excellent data to establish achievable tyre performance.
Unforeseen
An amount of R 5000.00 a year is allowed to cover any number of unexpected and unforeseen expenses.
Exclusions
The estimates do not include toll fees, vehicle tracking, engine protection or other optional equipment. No allowanc is made for administration or overhead expenses. The variation in operator approach to such costs excludes the inclusion of a sensible amount to cover these aspects.
Summary
The summary expresses operating costs under numerous headings including tons, ton/km, pallets, pallet/km, metres of deck length and cubic metres. It is important to note that all calculations assume a fully loaded vehicle.
Ratios
Management ratios provide an excellent insight into the high capital and operating cost of vehicles, especially when not properly managed. However, correctly selected vehicles that are decently driven and timeously maintained offer cost-effective transport to shippers and the prospect of a commercially acceptable return for the operator...
To gain optimal benefit from the estimates, readers should ensure they are familiar with the assumptions. Please bear in mind that the estimated capital cost of prime movers and trailing equipment do not include non-standard or optional equipment such as ABS braking or air suspension. Please revisit the assumptions to gain full understanding of the various elements.
Fleetwatch thanks the truckers and fleet managers for their respective valuable input in completing the update. Their suggestions motivated a number of subtle tweaks to the format and its content.
|
COMMENT
Harking
back to the comment that appeared in FW, November 2004,
indicating an increase in year-on-year freight transport
costs of approximately 22%. The assumption was based on an
expected rise in the fuel price in both December 2004 and
January 2005. However, as we now know, the fuel price
decreased in each of these periods. Consequently the
change in freight transport costs seem against the
background of FW’s published model is approximately 15%
or 8% when fuel expenses are excluded. Several significant
amendments have been applied to the FW Operating Cost
Estimates. These include:
-
Addition
of a five-axle articulated, 34 cubic-metre end-tipping
vehicle. The 4x2 rigid end-tipper has been
deleted.
-
Based
on the fact that most vehicle manufacturer maintenance
contracts appear to be limited to around 800 000 km
over a 48 or 60 month period under standard operating
conditions we have adjusted our estimated first
economic life accordingly for the various operations
included in the estimates.
-
Estimated
trailer maintenance costs have been brought into line
with current maintenance contract rates recently
introduced by leading trailer builders. These
estimates do not cover off-road operations if not
specified.
Readers
are reminded to gain a full understanding of the
assumptions that are used to determine the various
estimates and bring into line any items that vary from the
operator’s actual experience. The estimates are posted
on the FleetWatch website shortly after publication
in the magazine. |
