ANCILLARY USER
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versus
The Haulier
HERE ERE is a problem which often has to be solved by all types of commercial vehicle user. A contract of work -or a job which, although it comes fairly freqiiently is nevertheless to be regarded as occasional, is such that the vehicle is required on that job only for part of a week, leaving the vehiele free for other work or perhaps
even ,idle. . .
Given all the essential information, the solution, can 11.2 quite simple. • My trouble, as I have so often -stated in these articles, is that the data provided by correspondents is „ rarely complete, and requests tor additional information
figure, taking my own information
direct front "-lhe C:ommercial Motor"
Tables of Operating Costs.
Often enough, however, it happens that the operator cannot. give me that information even if he 'wished tn. Generally, this is because his mileage varies so much from week to week, that any figure he might be able to give would be of little use anyway. If I try to solve matters by obtaining his total mileage for a year I am, as a rule, no better off, because comparatively few hauliers SeelT1 to keep accurate figures of annual mileages.
As I never leave a question unanswered, it becomes necessary for me to adopt other methods of ascertaining the charges which should be made, or in the case of an ancillary user, the cost which would be incurred,
. More Cheaply Haulier' , the
is Often: -Suc the Long Formula for Assessing Cost
As the outcome of many years of experience of this class of work, I have evolved a formula, and generally reply to soch inquiries by stating the formula and applying it. I propose to set it down again, making it clear that it will bp useful to all users of transport who desire to know, as they occasionally do. what is the actual cost of an individual transport job, such as the conveyance of a particular product or batch of commodities to any given destination.
The method is also useful to the coach proprietor, who may desire to isolate the cost of a tour It will also be valuable to thc bus operator because it will enable him to ascertain the fares he should charge on any individual service so as to be sure that it will show a profit.
The ordinary business man, by which I mean the merchant or manufacturer who is not a haulage contractor—he is of course the ancillary user—will, perhaps, better appreciate the underlying principles of the method that I am about to describe, if I treat a vehicle and its operation as though they were a business in themselves. If I do that, I can the more readily make him realize the relative influences on total costs of the standing charges and running costs. To that end] am going to treat the standing charges as though they were the overhead costs of-the business (that of running a vehicle), whilst the running costs in a similar way may be likened to his own expenditure on raw materials. Regular readers will surmise that I am once more about to apply the principle of time-and-mileage costs and charges to these problems. They are correct, but only up to a point, for this time the method of use of the principle is a B16
little chfierent from what 1 have previously described. For new readers I. should state that, in estimating the
cost of a job of work of this kind the overhead charges, that is, the standing charges, must be calculated on a time basis, and the vehicle should be debited with these charges as an appropriate amount per hour. The running costs. which correspond with the merchant's own expenditure on raw materials, must be debited direct to the job.
In estimating the cost, therefore, and it must be borne in mind that costs must be used as a basis for charges, the total time per job must be charged at so much per hour, and the total mileage charged at so much per mile. The total of these two items, it should be noted, has been ascertained without reference to the total weekly or annual mileage covered by the vehicle. In that way I solve my difficulty of dealing with inquiries which do not quote mileage figures.
The method, and the new aspects of it, can best be illustrated by means of examples. I propose to take several, which I have selected so as to cover a variety of classes of work, and to meet the requirements of various types of user. I shall also deal with the question as to Whether a haulier has much chance in competition with a trader who is acquainted with his costs and can there fore compare them with the charges
Run which the haulier must make if he is to
earn a profit. Although it might seem that the haulier had not a chance in this direction, closer consideration reveals the fact that the haulier can, in 99 cases out of 100, compete with the trader in cost and convenience.
First let me take a simple case of a butcher who owns a 30-cwt. van and uses it in connection with his business. He will employ it regularly, for a part of each day on house-to-house deliveries and whenever he can manage it will send it to the market to collect meat.
The standing charges of a 30-cwt. vehicle, according to "The Commercial Motor" Tables of Operating Costs, amount to £6 13s. per week. The same source quotes 44d. per mile as ahe running costs of a vehicle of that capacity on the assumption that it covers about 300 miles per week.
Standing Charges 3s. an Hour
In the beginning, I am going to assume that the vehicle is in use for the standard 44-hour week. Some portion of that 44 hours is spent in standing at the shop front while meat for delivery is being loaded, and some of it in waiting in the market for a load to bring back to the shop. That does not matter. The point is, that the vehicle is in use for 44 hours in the week, and the standing charges—the overhead costs of running this vehicle—must be apportioned accordingly. They are thus equivalent to 3s. per hour, that figure calculated to the nearest penny.
Now let us suppose that the meat market is 10 miles distant from the shop, so that a journey to and from the market involves 20 miles of running. The total time entailed in bringing the meat from the market is made up of that occupied in covering the 20 miles and in loading and unloading. In the congested traffic which invariably seems to lie between the central market and the suburbs, it will not be practicable to exceed an average speed of 15 m.p.h., so that the time needed to travel the 20 miles will be 1 hr. 20 ruins.
It should not take more than half an hour to load the vehicle, including the completion of. the paper work involved,
and the butcher YAM probably have it unloaded in 10 minutes. The total time is thus two hours and at 3s. per hour the cost is 6s. Add the cost of the mileage at 4.1d. per mile which is 7s. Id., and we get a total cost of 13s. Id. If the load should be 26 cwt. it would represent about 6d. per cwt.
Butcher's Consolation
It is a fact that even the butcher has certain establishment costs which really ought to be debited 'against the vehicle, but it is extremely unlikely that he will be inclined to take them into consideration. He will comment that they must he small and therefore not worth his consideration.
The vehicle operating costs of a small haulier will be practically the same as those of a butcher. He, however, in calculating the rate that be must charge the butcher, has to take two additional items into consideration: establishment costs, which he cannot possibly overlook, and profit.
In the case of a vehicle of the capacity under consideration, an average figure of 22s. per week applies which is 6d. per hour. The percentage profit for which he must budget should not be less than 25. He must therefore add to his standing charges first, 6d. per hour for establishment costs to make a figure of 3s. 6d. per hour, to which is added 25 per cent. for profit, making 4s. 6d. per hour.
He must also add that 25 per cent. to his running costs, and the figure he must use instead of 41d. which applies in the case of the butcher is, therefore, 511d. per mile.
The haulier's charges will thus comprise two hours at 4s. 6d., plus 20 miles at Sid. He must therefore ask the butcher for 18s. 2d. to do the job which the butcher himself can do for 13s. Id. The butcher, therefore, realizes that for a 26-cwt. load his own cost is 6d. per cwt., whereas he has to pay a haulier 8d. The haulier reading this will, quite_ wrongly, come to the conclusion that his case is hopeless. If he be in the position of wanting the job very badly he may go So far as to cut his price to that of the butcher's cost of 6d. per cwt.
In the meantime, I will suggest that even if the price were to remain at 8d. the haulier's case is anything but hopeless. This is the reason: if the butcher can find time with his vehicle to do the work himsellhe will do it in any case without having recourse to the assistance of a haulage contractor. If he cannot do it himself he will have to turn to the haulier for -help, and must be made to appreciate that the haulier cannot do the work unless he is to make a profit out. of .it. Generally, the butcher will not be in a position to do it himself, because the collection of meat from the market may clash with his customers' deliveries.
To give another example, take the cost of a 2-ton van owned by a cabinet maker. I am going to assume that he wants to know how much it will cost him, using his own vehicle, to convey some furniture to a house 20 miles away.
If he refers to "The Commercial Motor" Tables of Operating Costs (in all these cases I am assuming that the trader or haulier has not yet arrived at a proper knowledge of his own costs) he will discover that the standing charges of his 2-tonner amount to £6 15s. 9d, per week. On the assumption that the week is the standard one of 44 hours, then he may take it that the vehicle is costing him 3s. Id. 'every hour, and he must take that amount into consideration when assessing any job of haulage. In addition, of Course, there are the running costs, which, according to the Tables,
are 41d. per mile. It is interesting to note how slight is the difference in cost as between a 30-cwt. and 2-ton van,
In estimating the cost of the job the cabinet maker must first of all make up. his mind as to how long the vehicle will be engaged on it. I shall assume that it takes half an hour to load the furniture into the van and an hour to unload it and deliver it to the house. Furniture makers and furniture removers will bear me out when I say that it is. the delivery at the house that presents the unknown factor in respect of time. The period covered in travelling will be two hours-an hour each way-so that the total time is 31 hours. At 3s. id. per hour this equals 10s. nil. The 40 Miles at 4id, per mile amounts to 15s, 10d., so that the total cost to the cabinet maker is £1 6s. 71d.
A haulier quoting for the same work would have to make a higher charge to enable him to cover his establishment expenses and profit. If I take it that his establishment cosis amount to 7d. per hqur, then his.fixed charges are ls. Rd. per hour. Add 25 pet cent, to that for profit and we get an 'hourly charge of 4s. 7d. The running cost of Cid. per mile is also subject to the 25 per cent, increase for profit, which brings it up to 6d. (The reader will appreciate that in adding these profit percentages there is no point in being strictly accurate as the conditions themselves are likely to vary from those quoted.) Three and a half hours at 4s. 71 is equal to 16s. and 40 miles at 6d. is 20s., so that the total is LI 16s.
For a third example I am going to assume that a timber merchant wishes to deliver a couple of standards of soft wood to a point 100 miles away, using a 5-ton lorry. In his own woodyard he can load the two standards in half an hour, but he estimates that it will take an hour to unload at the other end. The running time will be 7.1 hours in all, so that the total time needed for the job is 9 hours.
If 1 take it that he is .using an oil-engined vehicle, then his standing charges per week will be £7 1 Is. and his running costs Sid, per mile. Using the same method of calculation as in the previous example, it can be shown that his time cost for the journey is £1 I Is. 6d. and that his mileage cost is £4 his. 8d., a total cost of £6 3s. 2d.
Haulier 40 Per Cent. to the Bad
The haulier's cost of operation will be the same, but he must, as in the previous examples, provide also for establishment cost and profit. So far as the standing charges are concerned, I suggest the addition of Is. per hour for establishment costs making it 4s. 6d., and 25 per cent. on to that gives us 5s. 9d. as the hourly charge. The mileage charge of 51d., plus 25 per cent., is it For time the haulier must therefore charge for 9 hours at 5s. 9d., which is £2 lls. 9d. For mileage it will be 200 miles at 7c1., which is £5 16s. 8d. His total charge must therefore be £8 8s. 5d., practically £4 5s. per standard. It is of interest to note that, in the case of the •butcher, the haulier's charge is 33 per cent, more than the butcher's own cost. In the case of the cabinet maker the haulier wants 40 per cent, more, and for carrying the timber 29 per cent. more than the merchant's own costs.
There is, as I have said, a method whereby the haulier can legitimately cut down his rate almost to that of the respective merchants, but that aspect of the matter, and some more examples of the application of the formula, I propose to deal with in a subsequent article. S.1.R.