AT THE HEART OF THE ROAD TRANSPORT INDUSTRY.

Call our Sales Team on 0208 912 2120

Problems of the

5th October 1934, Page 66
5th October 1934
Page 66
Page 67
Page 66, 5th October 1934 — Problems of the
Close
Noticed an error?
If you've noticed an error in this article please click here to report it so we can fix it.

Which of the following most accurately describes the problem?

HAULIER and CARRIER

The Predicament in Which an Owner-driver May Find Himself When He Purchases Additional Vehicles if He Has Not Properly Calculated His Costs and Profits

IEXPECT the previous article made a good many of . my readers think. If it did only that, it served a most useful purpose. Many is the time I have been told by inquirers that their establishment costs are either insignificant or non-existent. Sometimes, if it has been convenient, I have been able to show that such is not the case. In the previous article I think I made it quite clear that the number of hauliers who can carry on their businesses without establishment costs of considerable significance must be negligible.

I gave detailed figures which showed that, in the case of an owner-driver operating one vehicle, his establishment costs were likely to lie between R,1 and R1 10s. per week. Actually, in making any calculation of a profitable rate for haulage, there are four main items to be considered. There are the operating costs of the vehicle (including standing charges and running costs), overhead costs or establishment charges, sundry expenses to be debited against a particular job and, finally, profit.

In the case of an owner-driver using a 2-ton lorry, I have demonstrated that his operating costs cannot greatly differ from those set out in The Commercial Motor Tables of Operating Costs, and that his establishment costs may b.e from R1 to R1 10s. per week. I come now to the consideration of special expenses relating to a particular job. 1 cannot, for obvious reasons, state what those expenses are likely to be. They may arise from a variety of causes, such as the necessity of taking an assistant to help handle a difficult load, or because, with an assistant available, sufficient time may be saved to justify the expense.

There may be ferries to cross on the journey or tollgates to be negotiated. Other possible causes of expense will, no doubt, occur to readers. There are few hauliers who cannot recall occasions when they have had to put their hands in their pockets for something of the kind.

On the top of all comes the question of profit. It is still true that there are many owner-drivers who are satisfied with their drawings as wages, to the amount debited as operating costs, and who opine that no additional profit is needed. I dealt with certain aspects of that matter when discussing operating costs.

In particular, I would again emphasize that, if a man be satisfied with a driver's wages, he is far better advised to take service. with a good haulage concern. He

then avoids the responsibility of ownership of a vehicle, trouble in obtaining licences and the risks incidental to the management of a business. I think, however, that the most potent argument against this mistaken attitude is that it becomes impossible when a second vehicle is put into service.

Actually, there is a problem which arises before that stage is reached, namely, how to acquire a second vehicle, making the natural assumption that once a man has started ini the haulage business he expects to be able to expand and become, eventually, the owner of a fleet. There is not much opportunity of amassing the necessary capital for further purchases if no real profit is being made in the operation of the first vehicle.

But suppose that difficulty to be surmolinted. Suppose that someone, with faith in the business ability of an owner-driver, advances the capital for the second machine. Then will come the problem of fixing the rates for work to be done by the new vehicle. Clearly, those applicable to the first one, if they show no profit beyond the driver's wages, will not now be suitable, for, in that case, the second vehicle will show the owner no profit whatever.

On the other hand, it is clearly impossible to charge higher rates for the vehicle with the employed driver, while keeping to those originally in force for the owner driven machine. A general raising of rates to all existing customers is raTtely feasible.

The owner-driver who has been contented with no real profit is now in a most difficult position.. The cut rates which he has gleefully thought practicable, and which have made him a thorn in the flesh of his more businesslike competitors, now recoil upon his own head.

Now I think I have demonstrated that-there must be few, indeed, amongst haulage contractors, whether owner-drivers or not, who are not called upon to face considerable establishment costs, and that the acceptance of a driver's wages as profit is likely to bring problems in its train which will be most difficult to solve.

The next state of affairs which I must consider is that which is reached when the haulier, starting as an owner-driver, operates three or more vehicles. There is a mistaken idea abroad that, as the number of vehicles increases the total of establishment costs per vehicle decreases.

I shall show that that is an erroneous inapression, that in the early days of amassing a fleet the

tendency is for those costs to increase, and that it is ouly when a certain period in the growth of the business is reached that they begin to decrease again. I shall show that, whilst the total profit from, for example, three vehicles is naturally more than from one, the net profit per vehicle is less, but that when six vehicles are in service conditions begin again to improve. S. T.R.

Tags

People: May Find

comments powered by Disqus