Operating Costs

Transportation Operations and Policy: Survey Course

Page 13 of 29 pages. Chapter: 4: Operating Costs

Operating Costs

Costing is a facility that provides essential information upon which transport management can base pre-determined operating decisions. For efficient and profitable operations such decisions must be based on factual information rather than on unfounded assumptions or, worse still, on pure guesswork. Operating costs differ dependent on transport mode. It was seen from Chapter two that the requirements to operate the four transport modes are different. The operating costs for each mode are discussed in subsequent sections.

Truck
The costs of operating trucks are high so that the operator to know exactly how much money he spends in owning and operating the vehicles. The costs can be divided, thus, standing costs, overhead costs and running costs. Discussion on each of the three items follows.

Standing Costs These are costs that are met even if the vehicle is idle. There are six elements comprised in standing cost, namely,

(i) Licences (Excise and operator’s licences)
(ii) Vehicle insurance
(iii) Driver’s wages
(iv) Rent and rates on premises
(v) Interest and capital employed
(vi) Depreciation of the vehicle

Overhead Costs These are costs not directly attributed to an individual vehicle. The categories of overheads are:

(i) Management
(ii) Office and administration
(iii) Workshop and stores
(iv) Branch depots
(v) Sales and publicity
(vi) Auxiliary fleet
(vii) Professional services

Running Costs

Running costs are those costs that are incurred solely when a vehicle is operating. They are nothing to do with the costs of owning the vehicle or with the expenses involved in running the transport business as a whole. It has already been shown that when vehicles are standing whilst awaiting or undergoing repair, or idle due to lack of work, nevertheless costs are incurred on a time basis, namely standing costs. When, however, vehicles are out on the road, or on site, whether working or just travelling to a pick-up point, whether carrying a load or running empty, they are incurring both standing costs and running costs. This section is concerned only with vehicle running costs that comprise the following four items:
1. Fuel
2. Tyres
3. Maintenance
4. Lubricants