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PARCELS RATES
PERIODICALLY I receive inquiries as to the method of calculating rates for the conveyance of smalls. In nearly all cases these inquiries come from operators owning one or two vehicles, and they are concerned not so much with the trunk and depots aspects of the problem, but with what they should charge for collecting and delivering parcels of various sizes within a comparatively limited radius, usually less than 20 miles.
Hitherto, I have followed what seemed to me, with my limited knowledge of the internal organization of parcels transport, to be the most sensible procedure. I have indicated an approximate all-in cost for operating the vehicle, suggested that the operator obtains information as to the rates fixed and generally agreed by parcels carriers, applying those rates, and then judging from the quantity of business which accumulates whether the venture is turning out to be profitable or not.
I have always stressed that service to customers, rather than rates should be the basis of operations. If that service be good, and provided that there be business to be had, there should be no reason why profits should not accrue to a reasonably well-conducted parcels business run on these lines.
Fawkner Principles Applied I had an inquiry recently, not quite along these lines but sufficiently near for the same principle to be applied, and in my reply I gave the advice that I have just outlined. Nevertheless, I did reserve the pleasure of going into the matter as soon as possible to see whether I could not make use of the information embodied in that excellent work, the "interim Report of the Rates and Charges Committee," issued by the Road Haulage Association, and popularly known as the Fawkner Report. In what follows I have not copied the work of Mr. N. D. Fawkner, chairman of the committee, but have applied, so far as'I can, in two cases which I shall quote, the principles which are the basis of the rates schedules for smalls in so far as that interim report deals with nil% matter.
The inquiry related to two services. The first was in app-roximately the following terms:—A regular daily run from A to B—a distance of seven miles—serving the textile industry. Small parcels of textiles are collected from some 20M 10 manufacturers, all located within a three-mile radius of A. and delivered to 20 or 30 warehouses all located within an area of two square miles of B. For return loads calls are made on 15 to 20 suppliers of rams materials in B, and deliveries are made to the manufacturers in A.
In other Words, these is a fixed number of collections and deliveries to he madedaily, although the actual load collected and delivered may vasy,. The textiles areusually in parcels weighing from 15 lb. to *JP and an average of two parcels is collected at eachcalf Vissi deliveredin a corresponding manner. The vehicle used -IS ,a 2i-tonner.
First. I set out toaieerfahisthe basic -costs of operating
the vehicle and to derive from them appropriate figures for time and mileage charges. Fixed costs are set out below:—
On the basis of a 48-hour week, the earnings per hour to earn not less than £11 3s., must be 4s. 7fd., say, 4s. 8d.
As regards running costs, it is likely that fuel consumption will be comparatively heavy, because of the frequent stops and spells of slow running from point to point. I propose to assume that the fuel-consumption rate will be 14 m.p.g., and if this operator buys his petrol in bulk at is. 8d., the fuel cost will be approximately 1.4d. per mile. Add 0.1d. to that figure on account of lubricating oil and the result is lid. per mile for petrol and oil. Tyres, according to my reckoning, will cost Id. per mile and maintenance Id.
Assessment of Depreciation Depreciation can be. worked out as follows:—Take the initial cost of £500 and deduct £56 for a set of tyres, which leaves £444 net. In normal times 10 per cent, of the net cost is regarded as a fair assessment of the residual value, and equals approximately £44. Deducting that sum from £444, the assessment of depreciation becomes £400. On the basis of a life of 120,000 miles, depreciation costs 0.8d. per mile.
The mileage per annum is going to be small, which means that some allowance for obsolescence must be made. In the ordinary way I should double the mireage depreciation in order to cover that contingency, but from a knowledge of the vehicles commonly employed on this class of work, I must assume that not a great deal of notice is taken of obsolescence. It will probably be sufficiently accurate to take Id. a mile to allow for depreciation. That gives me a total net figure for running costs of 41d. per mile. The profit allowance of 15 per cent. is just over 0.625d., and I propose to take 5d. per mile as the mileage charge. Time and mileage figures for this vehicle are, therefore. 4s. 8d. per hour and 5d. per mile. The next thing to assess is the actual travelling time of the vehicle, exclusive of time spent in collecting and delivering parcels. At the beginning of the journey I am assuming mat three miles will be covered in the course of making collections, also that the average speed will be 4-5 m.p.h., in which case the time spent in travelling will be 40 minutes. Fhe point-to-point journey from A to, B, a distance of seven miles, will take half an hour.
At the delivery end B, I have estimated that two miles will be covered in making deliveries and at 4-5 m.p.h. another 30 minutes will be required. The total travelling time, therefore-I must again emphasize that it is exclusive of the time taken on collection and deliveries--is 1 hour 40 minutes on the outward journey. I think it will be safe to assume that the return journey will occupy the same time, so that we have a total of 3 hours 20 minutes travelling time, say hours.
Seven Hours a Day We have to make 20 or 30 collections at A as a preliminary to the main journey. Reckoning 21 minutes for each, an average of approximately one hour will be necessary. The same number of deliveries has to be made in B, so that another hour may be allowed for that work. On the return journey there are.,not so many collections or deliveries, and an approximate assessment gives j hour for each group. A total of 3f hours is required for collection and delivery in a complete day's work, and that period added to the 3f hours already seen to be necessary for the actual travelling time, gives us a total of seven hours.
The revenue from seven hours at 4s. 8d. per hour must he £1 I2s. 8d. In addition, there is a total of approximately 20 miles of running at 5d. per mile (8s. 4d.). The total revenue must thus be 41s.
The total of parcels collected on the outward journey will be from 40 to 60-assume an average of 50-and the aggregate on the return, about 15: Those 65 parcels must bring in a revenue of 41s., or 7.1d. each. . That is an average figure to be increased or diminished according to whether the parcels are over or under the, average weight. For the time being, I must leave the operator to judge for himself as to how far and to what extent he may need to modify the charge in that way.
The second service was, in fact, described as a regular parcels service based on A and serving main towns within 15 miles of the base. The same type of vehicle was used, but it was pointed out that there might be a large variation in the bulk and weight of parcels.
Charge for Travelling Time For assessment of rates, we may still use the figures already estimated, namely, 4s. 8d. per hour and 5d. per mile. The average mileage covered during the day will be 40 and, assuming an average of 10 m.p.h., , will take four hours. For the 40 miles at 5d. per mile we must charge 16s. 8d., and for the four hours at 4s. 8d., 18s. 8d.-a total of 35s. 4d., or 36s. That charge is for travelling time only, quite apart from collection and delivery times.
Assuming an eight-hour day, there are thus four hours left for collection and delivery. At an average of 2i minutes for either of these two functions, it appears to be possible to achieve a total of 96 collections and deliveries throughout the day.
If the theoretical assumption be made that these collections and deliveries are evenly divided, there are 48 parcels to be picked up and 48 to be delivered.
However, that is not really important. We have an aver age of 2f minutes for collections and minutes for delivery of each parcel, a total of five minutes, and for that time, at the rate of 4s. 8d. per hour, we must charge approximately 5d. per_parcel for collection and delivery only. If we do pick up something like 48 parcels per day, the charge against each package on account of actual conveyance must average 1-48th of 36s., which is 9d. The minimum charge per parcel of any size must thus be 9d. plus 5d., or Is. 2d.
In the case of bulky or heavy consignments, they will probably exceed the average of five minutes to collect andfdr deliver, and some assessment of time must be made in respect of these on a double count. First, they will reduce the number of parcels which can be collected and delivered in a day, thus absorbing more than the fair share of the travelling time available per parcel; secondly, it will take more than the average of 2f, minutes to collect or deliver, thus increasing the charge for collection and delivery.
is. 101d. Per Parcel What this charge must be, naturally, depends upon the variation in size, but the assessment of the charge can easily be made when the operator has some idea of the time taken. If the time be precisely double, then the calculation is not difficult, and the charge must be doubled, but if the average time is, say, four minutes, the cost must be increased in the proportion of four minutes to 2f minutes, that is, by 60 per cent. Instead, therefore, of charging Is. 2d, for a parcel which takes four minutes to handle, we must charge Is. 100.
Weight has not entered into these calculations, because, reading between the lines of the letter, I assume that all packages are within 20-30 lb., and it seems hardly worth while to make any difference of assessment in rates within those limits. If the operator, to appease his customer, thinks he ought to make a slight difference, he can do so by taking Id. or so off the charge for a 20-1b. parcel and adding Id, for the 30-1b. parcel.
By the same post as the foregoing inquiry came another closely allied to it, an operator who asked what would be a fair percentage to add to collection and delivery rates in London, as compared with the customary charge in Leeds.
II seems to me that it is not going to be easy to assess any addition on the basis of percentage. At any rate, could not see my way to do it without knowing more about actual mileages and the number of pa/vets.
I did suggest that the problem might conveniently be dealt with by adding a sum to the aggregate charges and thus, with a knowledge of the total of parcels to be collected and delivered a fair estimate of the extra charge, but not necessarily the percentage additional charge, could be made. suggested that the additional expenditure in London, compared with Leeds, might be taken to arise from wages, insurance, rent and rates and maintenance, but that the other items of operating costs would not be affected. There would also, apart from vehicle operating costs, be some corresponding increase in administrative expenditure.
Figures for a 5-tonner In this case, the size of vehicle used was not stipulated. and in order to be on the safe side, I have calculated the amounts on the basis of a 5-tonner. Here are figures which indicate the extra cost of operation in London, compared with a provincial city, such as Leeds.
In the first place wages would be £5 8s., against £4 18s.: insurance, probably £40 per annum, or 16s, per week, against £35 per annum or 14s. per week. For garage rent the operator would have to pay about 12s. 6d. per week in London, and 7s. 6d. per week in the provinces. Maintenance, I imagine, will probably be greater to the extent of £20 per annum, an average amount equivalent to 8s. per week. Finally, there are the administrative costs, which in London might easily be 20 per cent. higher than in the provinces, so that relating to a 5-ton vehicle, the overheads might approximate to £3 15s. a week, instead of £3 2s. 6d.
If these various items be added together, the total per week for the provinces is £9 2s. per week and in London, including 8s. extra for maintenance cost, £10 19s. 6d. The difference is thus £1 17s. 6d. To that sum must be added the 15 per cent, for profit Os. 6d.), so that the extra rate to be charged in London must be sufficient 'to provide an additional £2 3s. per week in revenue. What that means per parcel depends, as I have already stated, on the number of parcels delivered during eacti week. If there be 500, the additional amount is approximately Id. per parcel.