APPENDIX 2 – THE COST OF LOSS OF STANDARDISATION
NOTE: This example is taken from a situation where it is proposed to expand an existing tractor
fleet of 10 No. identical tractors to a total fleet of 20 No. tractors.
The two options are to procure a further 10 No. of the same standard models, or procure 10 ‘non
standard’ units of a different manufacturer/model.
The organisation handles its own spare parts storage, and tractor repair. The purchase price of the
tractors is taken as £12,000.
ADDITIONAL INITIAL INVESTMENT
ITEM
STANDARD
MODELS
NON
STANDARD
MODELS
ADDITIONAL
COST
£ (STERLING )
ADDITIONAL SPARE PARTS REQUIRED FOR STOCK TO
MAINTAIN PRESENT LEVEL OF COVERAGE (BASED ON
1 STOCK HOLDING OF 10% OF REPLACEMENT VALUE PER
UNIT FOR 10 UNITS, AND 8% FOR 20 UNITS)
7,200
12,000
4,800
ADDITIONAL FLOOR SPACE, AND/OR RACKING AND BINS
2 FOR PARTS STORE
400
2,000
1,600
3 ADDITIONAL SPECIAL TOOLS REQUIRED
1,600
1,600
ADDITIONAL TRAINING
4 EXTERNAL – EXPENSES FOR 1 MECHANIC FOR 2 WEEKS
INTERNAL – 20 MAN DAYS @ £10/MAN DAY
INCREASED STOCKING OF LUBRICATING OIL (3 X 45
5 GALLONS
400 400
200 200
400 400
TOTAL ADDITIONAL INVESTMENT REQUIRED IF NON STANDARD UNITS
PURCHASED
9,000
(EXPRESSED AS % OF PURCHASE COST OF TRACTORS)
7½%
ADDITIONAL ‘ON-GOING’ COSTS (P.A.)
STOREMAN MADE UP TO FULL TIME ON STORES WORK
1 (I.E. ADD 2 DAYS/WEEK)
1,000
1,000
ADDITIONAL COST OF PROCUREMENT (MORE SMALL
ORDERS – LOSS OF DISCOUNTS, INCREASED COSTS OF
2 CARRIAGE) ESTIMATED AT 5% OF SPARES COSTS
(£20,000 P.A.)
1,000
1,000
TOTAL ADDITIONAL ‘ON-GOING’ COSTS (P.A.)
2,000
SOURCE: Developed from ‘The Specification of Agricultural Machinery for use in Developing
Countries, A. A. Metianu, Silsoe, for ODA, 1979’.
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