AT THE HEART OF THE ROAD TRANSPORT INDUSTRY.

Call our Sales Team on 0208 912 2120

"Is Our Business Growing too Fast?"

11th February 1949
Page 24
Page 25
Page 24, 11th February 1949 — "Is Our Business Growing too Fast?"
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?

Continues the Case of the Two Brothers, Who Ask :

POINT which emerged from my previous article was the com paratively high rate of charge for the 5-ton vehicle compared with the two others in the fleet—a 2-tonner and a 30-cwt. model. It seemed likely that this was due to my having apportioned the establishment costs on the basis of capacity in tonnage rather than in cubic capacity. I now propose to revise the figures so as to discover what difference, if any, that re-allocation of establishment costs would make.

It will be recalled that we had a total of £1,474 per annum of establishment costs. Assessing these on the basis of tonnage capacity made it necessary to allocate £865 to the 5-tonner, £346 to the 2-tonner and £260 to the 30-cwt. machine.

If the establishment costs be divided on the basis of cubic capacity. I have the figures of 1,000, 600 and 450 cubic ft. This gives the revised figures of £720 for the 1,000 cubic ft., £432 for the 600 cubic ft and £324 for the 450 cubic ft. The proportion on the biggest vehicle is less than previously, and the amount debited to the two smaller vehicles has increased. These figures are shown in the Tables IX, X and XI. They should be compared with Tables VI, VII and VIII. Instead of 4s. Old. per mile for the largest vehicle I now have 3s, 8id., but the 2s. 61d. per mile for the second vehicle has increased to 2s. 9d. Thus the difference in the charges for these two vehicles is not so great and is more in line with what one would expect.

So far, I have not diverted any of the establishment costs to help coVer whatever business is done in the way of storage. I made that omission deliberately because I wanted to stress its importance. My correspondent was unable to give me precise figures for the amount of storage business done; he thought it might amount to between 10 and 15 per cent. of his establishment costs. I have split the difference by taking l21 per cent. and have readjusted the figures accordingly.

In order to demonstrate how this should be done I must refer again to Table III, which was published last week, and is now incorporated in the first four columns of Table XVIII. This means that I have to deduct 12k per cent. from the net figures for establishment costs shown in the third column of that table. Before 1 do so, however, I must make some special provision for three items. namely: " Buildings" at £50, "A and B Licences" at £7 and Goods in Transit Insurance" at £39, and I will begin by deducting those three from the total of 11,474. That leaves £1,378. Twelve-and-a-half per cent, of that is £172, giving a new net figure of £1,206.

I must also include the £7 for "A and B Licences" and the £39 for "Goods in Transit Insurance." These items are definitely to be debited against vehicles only, and not against insurance, so that my total establishment costs for the vehicles is now £1,252. Dividing that again amongst the three vehicles on the basis of their cubic capacity I get £610 for the first vehicle, instead of £720; for the second vehicle £367.

instead of E432; and for the third vehicle £275, instead of £324.

Calculating the figures for charges on this new basis I have compiled Tables XII, XIII and XIV. These should be compared with Tables IX, X and XI. It will be observed that there is a further reduction to be made in the charges, although this does not affect the mileage charges in Table XIV. The mileage charges do not contain any provision for establishment costs. In my opinion, the figures in Tables XII, X111 and XIV are those which this operator should use.

To show how important this allocation of establishment costs of the

storage department can be, I have provided another set of Tables, XV, XVI and XVII., on the assumption that the storage proportion of the business is 40 per cent. and not 12i per cent. That has made a considerable difference in the rates to be charged for the vehicles. For example, 12s. 5d. per hour for the largest vehicle, instead of 14s. 9d. A comparison of these figures will show what a difference arises from the change in proportion of storage capacity.

My correspondent asked me if I thought that his business was growing too fast. I told him that, on the contrary, it was not growing fast enough. I advised him that he would be able to operate more cheaply and make lower charges if he had six vehicles instead of three. The big point is that establishment costs in a

ease such as this do not increase in proportion to the increase in the size of the fleet. Althnughl the fleet is doubled, the establishment costs increase by only approximately 30 per cent.

Look at Table XVIII, which showsin the fifth, .sixth and seventh columns what the establishment costs are likely to be if this operator has six vehicles instead of three. Take the items one by one. Estimator's car: The cost of operating this will certainly not be doubled. It might conceivably rise to £140 instead of £100. Directors' fees: Here. I think, an increase of from £1,000 to £1,200. per annum would meet the case. Office wages: There Would need to be an increase in he staff emplod, and that iterh I think would Amount to, say. E520 instead of £375. t he next four items—Directors' personal accident insurance, office rent, office rates, office gas, electricity and heating—will be the same as before.

Subscriptions: These, I presume, are subscriptions to associations and would naturally increase, but not by 100 per cent. The amount would probably be in the region of £30 instead of £20. Advertising: More would be spent on this, of course, but certainly not twice as much. and I have taken £65 instead of £57. 1 have doubled the amount for

A and B licences and goods-intransit insurance because 'I think they would increase pro rata. 1 have added a little to the cost of buildings, but that, of course, goes to storage and not to vehicles. The total is £2,609; instead of £2,040.

I have assumed that the subsidiary business remains unaffected and takes the same amount—not the same percentage—of establishment costs es before. Deducting the previous total of £566 from the grand total I get £2,043 as the net figure, compared with £1,474. Working in the same way as before, but this time assuming that 15 per cent, of the business is now storage—I take it that with an increase in the vehicle .capacity there would be a greater proportion of storage business done than previously—I get" as a new figure for the establishment costs of haulage £1,700.

The capacity, of course, is now doubled. I have two vehicles of 1,000 cubic ft., two at 600 cubic ft. and two at 450 Cubic ft. and dividing the establishment costs I now get only £415 per annum against the biggest vehicles, £249 against the medium size, and £224 against the smallest. These figures are appreciably less than those for a threevehicle fleet and make possible a corresponding ['eduction in charges. One way of showing the difference is to compare the 12s. per hour in Table XXI with the 14s. 9d. per hour in Table XIV, that being the figure I recommend as being applicable to the operator's business as it now stands.

Note, however, that the charges per mile and per week are also much less. Taking again the largest vehicle at 200 miles per week; whereas the present charge should, be 3s. 5d. per mile it would be reducible to 2s. 100. ill the event of the fleet being doubled in size. The charge per week would come down from £34 2s. to £28 15s.

Finally my correspondent asked me to work out for him, on the basis of my recommended figures, what he should charge for certain different classes of work." First, he cited a local removal of 10 miles occupying 10 hours.

I am taking, as an example, the largest of the three vehicles for which, according to Table XIV, he must charge at the rate of 14s. 9d, per hour and flit. per mile if the speed be five miles per hour or over. To that must be added the charge for any additional labour employed over and above that of the driver. If I assume that he has four men altogether and that the three additional men are paid at the rate of, one at 3s. Id, per hour, and two at 2s. 10d., then he must charge for 10 hours at 8s. 9d., which is £4 7s. 6c1„ plus the profit on labour, t4s. 6d., making £5 2s.

in all, His total charge is thus seen to be £12 14s. 6d.

Ihe next example' was a distance removal involving 100 miles travelling and 20 hours' work. There were to be three men loading but only two travelling. Again l take the largest-size vehicle. First comes the standing charge, 20 hours at 14s. 9d., which is £14 15s. Next the running costs, 100 miles at 6d., £2 10s. Now for the labour. There is one man who does not travel, and I am taking it that he works for eight. hours and that his wage is 3s. -1d. per hour, which gives me £1 4s. Sd.

The other two men who travel wifi have to be paid 20 hours at 2s. 10d., which is £5. 13s. 4d; The total of those two figures is £6 18s., to which must be added profit on the labour, £1 8s.. giving a total of £8 6s, The grand total is £25 lls., without allowing for such expenses as subsistence allowances, garaging of the vehicle, and so on. S.T.R. 62,1

Tags


comments powered by Disqus