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Determining What Services Cost: Cost Analysis Outside Manufacturing



85th Annual International Purchasing Conference & Educational Exhibit

New Orleans, Louisiana
May 2000

Author(s):

Session DP - Worksheet 1
 
Worksheet 1      
Cost Model for SIC 421, Trucking and Courier Services
     
Operating Expenses (millions $)      
       
  Expense Share Selected Proxy
       
Trucking and Courier Services 167,202 100.0%  
       
Payroll 52,438 31.4% Composite Labor Cost Measure1
Benefits 13,795 8.3% Employment Cost Index, Benefits
Purchased Fuel 13,777 8.2% PPI, Diesel Fuel
Purchased Transportation      
Leased or Rented Trucks 28,148 16.8% PPI, Truck Rental and Leasing
Railroads & Airlines 6,175 3.7% Composite Measure, PPI Rail Rates, PPI Air Cargo Rates
Lease and Rental 3,148 1.9% PPI, Leased Property
Insurance 5,717 3.4% PPI, Property and Casualty Insurance
Maintenance and Repair      
Parts 4,694 2.8% PPI, Motor Vehicle Parts
Equipment 4,771 2.9% PPI, Trucks and Assembled Components
Depreciation 9,289 5.6% Selected Interest Rate
Other Operating Expenses2 25,250 15.1% Composite Measure
       
1) Average Hourly Earnings, Trucking and Employment Cost Index, Managers and Administrators
2) PPI Commercial Elec Rates, PPI Communication Services, PPI Advertising, PPI Office Supplies

Where: PPI, Producer Price Index

Source: U.S. Census Bureau’s Transportation Annual Survey: 1997

Table 4, Trucking and Courier Services – Components of Operating Expenses

Worksheet 2                
Prices and Costs Compared, SIC 421, Trucking and Courier Services
 
Year over year change                
  1998:1 1998:2 1998:3 1998:4 1999:1 1999:2 1999:3 1999:4
 
Trucking and Courier Services 2.2 2.2 2.6 3.1 2.9 2.8 2.8 2.6
 
Total Costs -0.1 0.1 -0.1 -1.3 -1.1 1.8 3.2 4.9
Payroll 4.2 3.9 3.1 2.5 2 2.6 2.6 3.3
Benefits 2.3 2.6 2.6 2.4 2.2 2.5 2.8 3.4
Purchased Fuel -24.7 -23.1 -24.9 -30.2 -26.8 8 36.4 53.7
Purchased Transportation                
Leased or Rented Trucks 0.1 0.1 1.4 -0.5 -1.6 0.4 -0.9 0.9
Railroads & Airlines -2.4 -2.2 -2.1 0.1 1 2.2 2.2 0.8
Lease and Rental 4.2 1.8 1.8 1.5 3 4.1 3.7 3.7
Insurance 1 1 0.7 0.5 0.6 0.7 1 1.1
Maintenance and Repair                
Parts -0.6 -0.4 -0.4 -0.4 -0.5 -0.6 -0.5 -0.4
Equipment 1.2 1.4 0.9 1.4 1.2 1.1 1.1 0.9
Depreciation 5.4 4.9 4.3 3.8 3.4 3.2 2.9 2.6
Other Operating Expenses 1.9 1.8 1.5 0.2 -1 -1.4 -1.7 0.1

Margins Narrow – After Two Good Years

Prices and Costs, 1995:4=1.000

Year Over Year Change

Diesel Prices (right) Drive Cost Movement

Worksheet 3      
Cost Model for SIC 737, Computer Programming, Data Processing, and Other Computer Related Services
       
Operating Expenses (millions $)      
  Expense Share Selected Proxy
Annual payroll 41,979 51.1% Composite Labor Cost Measure1
Employer Cost for Fringe Benefits 7,261 8.8% Employment Cost Index, Benefits
Taxes and License Fees 394   Not modeled
Depreciation and Amortization 4,762 5.8% Selected Interest Rate
Lease and Rental payments 4,633 5.6% PPI, Leased Property
Telephone & Other Purchased Communications 1,941 2.4% PPI, Telephone Communications
Purchased Utilities 478    
Electricity 391 0.5% PPI, Commercial Elec Power
Fuels 44 0.1% PPI, Gasoline
Water, sewer and Other Utilities 43 0.1% CPI, Water and Sewerage Maintenance
Purchased Office Supplies 1,186 1.4% Composite Office Supply Measure2
Advertising Services 1,065 1.3% PPI, Advertising Services
Purchased Repair Services 1,183    
Buildings, structures & related facilities 214 0.3% PPI, Building Cleaning and Maintenance Services
Machinery, equipment and other 969   Not Modeled
Cost of Purchased Legal Services 627 0.8% PPI, Legal Services
Cost of Purchased Accounting, Auditing and Bookeeping Services 278 0.3% PPI, Accounting Services
Cost of Data Processing and Other Computer Related Services 1,096   Not modeled
Other Expenses 17,793 21.6% Composite Measure3
(incl inventory storage, shipping costs, non-employee insurance)  
       
Total 82,217 100.0%  
       
Data from:
1992 Census of Service Industries, SC92-S-2, Subject Series
Capital Expenditures, Depreciable Assets, and Operating Expenses
Table 7 Operating Expenses by Type and by Kind of Business
1) Average Hourly Earnings, Computer Programming and Data Processing,
and Employment Cost Index, Mangers and Administrators
2) Various Office Supply Related PPIs
3) PPI Warehousing and Storage, PPI Freight Transportation Arrangement Services, PPI Property Insurance

Worksheet 4                
Cost Detail, Computer Programming, Data Processing, and Other Computer Related Services
                 
Year Over Year Change                
  1998:1 1998:2 1998:3 1998:4 1999:1 1999:2 1999:3 1999:4
                 
Total Costs 3.8 3.7 3.7 3.1 3.2 3.8 3.3 3.3
Payroll (Labor) 5.7 5.9 6.1 5 4.6 5.2 4.4 4.6
Benefits 2.3 2.6 2.6 2.4 2.2 2.5 2.8 3.4
Depreciation 5.4 4.9 4.3 3.8 3.4 3.2 2.9 2.6
Lease and Rental Payments 4.2 1.8 1.8 1.5 3 4.1 3.7 3.7
Telephone & Other Purchased Communications -0.8 -1.3 -1.2 -1.5 -2.4 -1.4 -3.1 -2.7
Purchased Utilities                
Electricity 1.6 1.6 1.1 0.2 0.1 -1 -0.7 0.5
Fuels -25.6 -21.6 -27.1 -28.2 -16.9 14 39.6 53.2
Water, sewer and Other Utilities 4 4.2 3 2.6 2.5 2.2 1.9 1.9
Purchased Office Supplies 1.9 2.6 2.2 0 -2 -2.2 -2 0.7
Advertising Services 2.4 1.5 1 1 1.7 1.8 2.1 2.2
Purchased Repair Services                
Buildings, structures & related facilities 1.4 1.1 0.8 0.8 1.3 2.3 3 2.7
Legal Services 3.6 3.9 3.8 2.9 2.2 2.3 2.4 2.7
Accounting Services 2.1 2.5 2.1 2.8 3.5 3.5 3.6 3.5
Other Expenses 0.3 0.2 -0.2 0.1 1.6 2.3 1.8 0.8

Computer Services Costs Moderate – As Labor Cost Escalation Slows

Year Over Year Change

Though Rising Benefit Costs Hint at Potential Trouble Ahead

Year Over Year Change