Nov

Truck Operating Benchmarks – August 2016

2015-11-06 13:59
Max Braun, FleetWatch correspondent and transport consultant.

Welcome to the FleetWatch truck operating benchmarks for August 2016. The schedule covers a variety of typical primary and secondary distribution trucking operations published since February 2004.

The objective is to provide operators and shippers (consignors) with a reliable independent guide to trucking costs incurred in the transportation of raw materials, semi-finished and finished products.

A thorough understanding of the assumptions and how they are applied in developing the benchmarks is necessary if the various benchmarks 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 components are realistic and representative of the hypothetical transport tasks contained in the schedule. Updated estimates are published quarterly. However, the schedule is continuously monitored and updated monthly.

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 – 4×2 a rigid freight carrier with volume van body for medium distance delivery of typical FMCG products).

PAYLOAD (TONS)
The assumptions are based on typical optimal legal mass payload 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 manufacturers’ 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 1000×12000 mm 4-way entry pallets. The mass of pallets is not taken into account.

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 delivery 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. The imminent implementation of driving hours must be taken into account to ensure compliance with the regulations.

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 may 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
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. VAT is excluded.

STANDING COST/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 10.5% 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, among the most expensive among the nine provincial governments.

INSURANCE
Insurance cost assumes the operator has a low risk rating. Premiums are presently set at 7 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 120000 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 500 ppm sulphur. Bulk rebates where they apply are ignored.

TOP-UP OIL
Is based on five per cent of the cost of fuel consumed.

Comment
by Max Braun

AS AUGUST 2016 dawned we welcomed a 42 cpl reduction in the wholesale diesel price and received the good news that the oil price dipped down to just over US$42 strongly sported by a hefty improvement in the strength of the Rand. As cosy as it makes us feel, recent ongoing price volatility should not lull us into complacency that circumstances will not revert rapidly and unexpectedly.

Currently fuel represents 39% for 7-axle super-links covering 200 000 kmpa before overhead expenses and toll fees. 6-axle 30 pallet Reefers fuel costs are at almost 34% over 180000 kmpa.

More worrying is the standing cost per day at:
R3754 for the 7-axle super-links
R4114 for the 30 pallet Reefer
R2194 for a 6 pallet insulated volume van

The useful life cost for each of the above is R12,6 mn, R15,7 mn and R6,4 mn for the three configurations respectively over 4, 5 and 6 years in service respectively.

No case was found to change any of the other operating costs at this time mainly due to the prevailing economic slack and fierce if not irresponsible competition to hang on to market shares.

NOTE
The FleetWatch truck operating benchmarks offer shippers and operators the opportunity to fine tune these estimates to suit their specific transport operations or needs. Where particular elements differ from your operations, simply make the necessary adjustments.

If, however, you require more information to complete your benchmarks, contact Max Braun at maxbraun@iafrica.com for some assistance.

Download the full article here.

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