Allowing for Demurrage
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When Delays are Caused to Vehicles at Terminals, the Operator is Entitled to Recompense for Earnings Lost as a Direct Result of Time Wasted
THE first of the three tables which accompany this article also appeared last week. This table i§, in a sense, a special schedule of operating costs, drawn up after a particular investigation of the books of about a score of operators who were interested in having rates and charges drawn up on the basis of cost plus profit.
It was one of the conditions of the work concerned that the schedule of charges should allow the operator to obtain a figure to cover terminals, that is time for loading and unloading, plus a rate for the actual mileage run. Among the things which had to be kept in mind was that there should be a higher charge per mile for the shorter runs, the rate to diminish as the radius of operation increased. Finally, provision was to be made to debit the customer for demurrage or any undue delays.
Before proceeding further; I should emphasize that there is no provision in the figures in Table I for profit.
There are two ways of assessing the cost per mile for any vehicle. Both of them take into consideration that it is necessary to provide for the time taken for the travelling as well as the actual mileage expenses. Here is one way. Assume that the running cost of a vehicle be 6d. per mile, and the vehk•le runs 15 miles in one hour, the total is 15 times 6d. (the running cost) plus the standing charge per hour which may be another 7s. 6d. The total cost of running that 15 miles is thus 15s., so that the total cost per mile is Is. Again I must emphasize that this is cost only and that there is no provision for profit. • The alternative method still involves appreciation of the fact that there must be a charge for travelling time. Take, for instance, a vehicle the standing charges for which amount to 6s. per hour and the running cost 9d, per mile. Assume that its average speed up to a radius of 20 miles is 12 m.p.h. 'f he time charged per mile is one-twelfth of the standing charge per hour and is, therefore, 6d. To that must be added 9d. per hour running cost, giving Is. 3d. per mile.
However, suppose that beyond the 20-mile radius the average speed can be increased to 18 m.p.h. In that case the travelling time is only one-eighteenth of 6s., which is 4d. The running cost, however, stays at 9d., and the total cost per mile is Is. Id.
That is the basic principle which was kept in mind when compiling the schedule of rates for which the figures set out in Table I were compiled. To arrive at the total cost per mile when carrying a specific traffic, it is necessary to know the average travelling speed, and in this particular investigation 1 reckoncd that the 30-m.p.h. 5-6-tonners averaged the following: for the first 5 miles of any journey, 10 m.p.h.; for the next 5 miles, 20 m.p.h.; for the next 5 miles and thereafter, 26 m.p.h., it being assumed that the legal limit of 30 m.p.h. was nowhere exceeded.
For heavier vehicles subject to the 20-m.p.h. limit, the average speed for the first 5 miles is taken to Ge the same as for the lighter vehicles, but beyond that as follows: from 5 miles to 10 miles, 15 m.p.h., and from 10 miles onwards, 18 m.p.h.
It should be appreciated that these slower speeds apply to every journey whatever its length. For instance, in the case of a journey of 25 miles, it is regarded as being composed of two 10-mile runs with 2f-mile distances at each end. It is in these 2f-mile distances that the slow speeds are experienced. Even if the slower-speed stretches be not at the beginning and end of the journey, there is sure to be a stretch of congested road mid-way between the termini.
Figures for 6-tonner
The next step is to make use of the data set out in Table I, taking into consideration these differing speeds in order to get some time and mileage figures for each type of vehicle. This I have done, and the information is set out in Table 11. To explain how I arrived at these time and mileage figures, I will take the case of a 6-tanner which, according to Table I, costs 7s. 11d, per hour for standing charges and 6.29d. per mile for running costs.
First, let me take into consideration the 5-mile radius in the course of which the average speed was assumed to be
10 m.p.h. The cost of travelling time per mile is thus one-tenth of 7s. 11d., which is 9.5d. To that must be added the running cost per mile, taken from Table I, which is 6.29d. (I have taken it to be 6.3d.). As the result, I get Is. 3.8d. per mile as the cost per mile for 5 miles of each journey.
For the next 5 miles of each journey, the average speed is 20 m.p.h. Dividing the cost per hour, 7s. lid., by 20, I get 4.8d. as the time charge per mile. Add that to 6.3d., the running cost per mile, and I get 11.1d. as the total. A similar procedure was followed in the cases of other average weds and lead mileages.
Let me take another example showing how these figures may apply in the case of a 14-ton lorry. Assume that it is making a journey of 4 miles out and home, 8 miles in alt, and that practically the whole of the distance is through a congested area.
The average speed is 10 m.p.h., and the time taken 48 mins., which means four-fifths of the 16s. 4d. per hour which is given in Table I. That is 13s. 1d., omitting fractions of a penny; to that must be added the running cost of 8 miles at 10.6d. per mile which is roughly 7s. Id. The total cost is thus 20s. 2d., which is a fraction over 2s. 6d. per mile as set out in Table IL I have given that brief example as a check on thz corresponding figure in Table II, which is arrived at in this way. First of all there is the 10.61d. per mile running cost (see Table I). To that must be added the time charge for one-tenth of an hour, that is to say one-tenth of 16s. 4d., which is is. 7.6d, The total cost is thus Is. 7.6d. plus 10.6d., giving 2s. 6.2d. as the total cost per mile.
When the lead mileage exceeds 5 miles but does not exceed 10, the time charge diminishes for the mile is then covered in one-fifteenth of an hour and is thus is. Id. The total is then Is. Id. plus 10.6d., giving Is. 11.6d., again as shown in Table 11.
Finally, for the rest of the distance beyond 10 miles, the average speed is 18 m.p.h., and the time cost falls to 11d, per mile, the total cost becoming Is. 9.6d.
Running cost per mile .. ..
Total (Radius over 10 miles) • .. ...
The point is that for every type of lorry there are three different costs per mile to be taken into consideration, depending upon the length of the journey. It is important to emphasize that these are costs only. Profit must be added. Now, in considering profit I have always worked on the basis of three specific scales. For contract work, in which the operator is sure of a regular return, the rates should not be less than 15 per cent.
on cost. On work which is reasonablyregular, when the operator can expect to have, his vehicles employed week by week all the year round, the minimum profit should be 20 per cent. on the cost. For jobbing haulage and on season%I work, or any traffic which is to a certain extent intermittep so that the haulier cannot always depend upon doing'a:full week's work,he should earn not less that 25 per. -cent, on cost. For the particular traffic I have in mind, the work is fairly regular and the minimum profit to be provided for should be at the rate of 20 per cent, on cost
Adding 20 per cent, on cost to these figures for time and mileage, etc., as set out in Tables 1 and H, I get the charges which are set out in Table III. So far as the 14-tanner is concerned, they are 3s. per mile for distances up to 5 miles out and home, 2s. 4d. per mile for distances in excess of 5 miles but not exceeding 10, and 2s. 2d. per mile for distances over 10 miles.
It should be made clear that in all journeys the first 5 miles are charged at the 5-mile rate and the next 5 miles at the next lower figure, and so on. In addition. I have given the figure per hour for standing time to be applied in respect of fair times for loading and unloading. In the case of the 14-tonner, for. example, the standing time is charged at 19s. 8d. per hour. which is calculated by adding 20 per cent. to the 16s. 4d. standing charges per hour as set out in Table I. Similarly for all the other sizes of vehicle enumerated in the tables.
The figure in the last line of Table III relates to demurrage. This is a matter with which I have dealt from time to time in these articles, explaining how I think that it is not sufficient to charge demurrage at the normal rate for standing times only. Demurrage is excessive standing time and the operator is entitled to charge something over and above the ordinary rate because his lorry is standing idle when it could be earning money by conveying loads.
A vehicle can earn much more for its owner when on the move:Moreover, if a vehicle be delayed at termini, the result may cause disorganization of routine, the incurrence of extra expenses and probably loss of earnings.
It is not possible precisely to calculate what the charge for demurrage should be. The financial effects described above are incalculable. I think that the minimum charge for demurrage should be double the normal charge for loading and unloading times, and that is the basis of the figures which are set out in Table II.
The final step in compiling a schedule of rates for any
Charges Load capacity
Per mile (to 5-mile radius) .. ..
Per mile (5-10-mile radius) .. ..
Per mile (over 10-mile radius) .. ...
Per hour (terminals) .. .. ..
Per hour (demurrage) , . .. ..
traffic involves some knowledge or agreement as to the time necessary for loading and unloading. This information is essential for two reasons, first so that the loading and unloading times can be taken into consideration in fixing the rate, and secondly so that inthe event of the agreed times being exceeded demurrage can be chargeable.
Another important point arises here. Whilst loading and unloading times should be calculated per ton, demurrage must be charged at the rate for the vehicle as a whole. Take, for example, the case where the load of 1 ton is being delivered as part of a mixed consignment on a 14-ton lorry. If the agreed allowance of time for loading and unloading 1 ton be exceeded by 1 hr., the demurrage charged Must be-the charge for the vehicle, namely; 40s., as set down in Table III. Again, if the same vehicle be making a single delivery of 14 tons and the time allowance for loading 14 tons is exceeded by 1 hr., the demurrage charge is still 40s.
As an examphe. of medium traffic which is fairly easy to handle, given that the necessary lifting equipment is available and the goods are packaged, the claim for loading and unloading times might be as follows: loading, 10 mins. per ton plus 15 mins. to turn mind; for unloading, the same. The total standard allowance for terminals is thus 20 mins.. Per ton plus 30 mins, for turning round. By turning round I mean the time needed to get the vehicle into position, sheeted or unsheeted. have documents signed and go through the usual formalities incidental upon the collection and delivery of goods.
It-should be noted that this gives an average expectation of terminal delay periods. In favourable circumstances, the time needed may not he so much In unfavourable circumstances it may be more. As to what amount of latitude it is safe to allow with individual customers, only experienced operators can decide. As regards some terminal points, where it becomes evident that delays are caused by lack of interest and are unnecessary, the -application of the demurrage rates is likely to bring about a revision in methods and a saving in time.
Naturally, this step would be taken only after a little preliminary negotiation and some effort to bring about an elimination of the waste of time. It would not be wise to put in a claim for demurrage . without first consulting with the customer and obtaining a.promise of better co-operation in the future.-S.T.R.