Allowing for "BAD LUCK"
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In Addition te3 Acknowledged Items of Operating Cost, Sums Should Be Set Aside by PrOvident Hauliers for Overtime Working, Driver's Road Expenses, Goods-in-Transit Insnrance and Contingencies : These May Total Several Pounds a Week
IWAS turning out some old notes the other day, when I came across a letter referring to " ' The Commercial Motor' Tables of Operating Costs." It was mildly critical of the Tables. and the writer's points are particularly appropriate today. The main criticism was to the effect that, in the opinion of the writer, the Tables did not show all the expenses to which a haulier is put in connection with the operation of his vehicles.
Now that is perfectly true. The view of this correspondent, an experienced haulier, was, however, very much at variance with that of most readers of these articles and users of the Tables. Their attitude is that the figures given in the Tables are much higher than their own costs; that the Tables, whilst being extremely helpful as a guide, cannot possibly apply to them, because they are sure that their costs are less and, therefore, that their charges can be less than those recommended.
I must say outright that those inexperienced operators who take that view of the Tables are woefully wrong, whereas my correspondent is right. One section of the letter put the whole case in a nutshell; "There is a number of items which may be the subject of some dispute, •hut as every concern operating lorries will have to pay them sooner or later, some allowance would be. advisable."
Case of Coach Owner
The Tables comprise the lowest common denominator of all the items of expense involved in the operation of a vehicle. That must be so, because these Tables must be designed to be of use to the greatest number of readers. In that connection it is essential to keep in mind such users as, for example, small traders, owning only one machine and using it to carry on their businesses and having no intention of making use of the vehicle as a direct source of livelihood. Another example, closely allied to the foregoing, is the small coach owner.
The operating costs of such users. especially those of the trader, are what I call net, in the sense that they are subject to the minimum of extraneous additions. Note that I do not say that there are no extraneous additions, but that they are small. The trader can take it that the operating-cost figures in the Tables, apart from the "Hauliers' Charges," cover practically all his outgoings relating to the vehicle. Indeed, if he is a careful man, avoiding all overloading.
o.3? excessive speed, employs a good driver and pays him a good wage, and if the work does not include overtime (there are many examples to which all the foregoing conditions apply), he may easily find his expenditure to be somewhat less than that set out in the Tables. What he will not discover, however, is any way to avoid any one of the items of which the Tables are principally composed.
The coach owner in a small way of business is nearly in the same case. There are many such men in rural areas who have built up profitable little businesses on recommendations alone, and have acquired sufficient custom to keep their vehicles reasonably well occupied throughout the year at moderately profitable rates. Thus their establishment charges arc as nearly nil as establishment costs can ever bc.
Modifying Figures The operating costs in businesses such as these arc nearly net, and the average is precisely that which is given in the Tables for the particular type and size. of machine with which the individual may be concerned. This is the class of people whose requirements the Tables exactly fill. They are lowest in the scale of users—no offence meant in any, sense of the word—and they are entitled to have their needs considered, especially as that consideration in no way involves hardship to others. It is for those who arc differently placed to realize exactly what is comprised in the Tables, and to modify the figures to suit their own circumstances according to their known expenditure on extraneous matters.
The Tables comprise the minimum of items of expense. None of them is in any circumstances avoidable. There may be others than those enumerated, but there cannot be fewer.
Now, reverting to the criticisms embodied in the letter which is. the subject of this article, there are four items put forward for consideration: overtime, which, my correspondent said, is inevitable IA ith large vehicles covering big mileages; driver's road expenses, such as for ferries, tolls and trunk telephone calls; goods-in-transit insurance which, as he stated, is essential for all haulage companies other than those employed in the cartage of materials of low intrinsic value, such as sand and ballast and building materials; and contingent expenses. The fourth of these items is .meant to cover expenses which are the outcome of breakdowns, accidents, trade depressions, General Elections, bad debts, snow, fog, and other weather conditions which militate against the smooth working of regular road services.
These factors are undoubtedly additional to the total cost of operation as set out in the Tables. They are not merely "bad luck," and even if those who experience these misfortunes insist on describing them as bad luck, that in no way diminishes the expenditure involved. They are indeed bound to occur sooner or later and it is definitely bad management if no allowance is made for them.
Estimated Amounts
The amounts involved in those four items can be estimated as follows: (a) in the case of overtime, the equivalent of the wages as set down in the Tables; (b) driver's road expenses, quoted by my correspondent as averaging £3 per week; (c) goods-in-transit insurance, 3 per cent, of the gross earnings; (d) no figure is possible for the expenditure involved in the contingency allowance.
Estimates of the amounts to allow for these items are difficult. It is no answer to suggest that some of the amounts are small. Every one of the items quoted in the Tables is not of tremendous significance considered alone. Take the item "lubricants" for example. In the case of a vehicle covering only 200 miles per week and using oil at the rate of 800 m.p.g., the cost per week for oil, assuming that the price paid is no more than -8s. .a gallon, would be only 2s. per week.
However, we must make some attertmt to assess the cost if we are to arrive at the comparative importance of each of them in their relation to the budget of the individual haulier.
Payment of overtime, according to the experience of the correspondent whose criticisms we are considering, amounts to the nominal figure for wages as quoted in the -fables. If that is strictly true, the maximum amount involved could be as much as £8 per week.
Driver's road expenses average £2 per week per driver, year in and year out. The insurance of the goods carried is a matter the necessity of which is denied by some operators. They are, of course, quite wrong in taking that attitude and in the case of work obtained from clearing houses that insurance is forced upon them. Even if the hauliers do not pay it themselves, it is paid by the clearing house concerned and the necessary adjustment allowed for in the amount the haulier receives. The proper thing to do is to insure and to make known to customers that there is an insurance policy in force, using that fact as an advertisement.
Wide Divergence The amount varies, but I shall take the figure of 3 per cent. on the gross earnings, which is the quotation given to me. Naturally there is a wide divergence in the actual total per week, according to the value of the goods in transit and the size of vehicle employed on the traffic. To simplify the calculations I have taken a figure of 10s. per week in the case of a small vehicle and double that amount for a large one. These are average, I might say arbitrary, figures.
The fourth and last item, the allowances for contingencies, is absolutely incalculable. Some of it can be covered by insurance, although not one in a hundred hauliers appears to take that precaution. The loss of trade resulting from accident, as well as that which is the outcome of break!
downs, is to a certain extent insurable, but I cannot imagine that many small hauliers take the precaution of insuring against the losses arriving from trade depressions or from General Elections.
Bad debts are always a problem from which few businesses are completely free, and whilst we do not often have such tremendous. interference with road transport as . was occasioned by the heavy snowfall of a couple of years ago. scarcely a winter passes but there is sufficient snow in some parts of the country seriously to interfere with traffic. Similarly it is true to state that no winter passes without a few .days when the presence of fog holds up traffic.
Actually, however, the figure for item four is 'included in the Tables under the heading of establishment expenses. In this calculation of additional costs I am therefore going to omit this item,
Now let us see what is the total. For the-first item, over
time,' an average of £5 per week; for the second, driver's road expenses, 12; and for goodssin-transit insurance, 15s. per week.
Actually this total of extraneous costs is likely to arise only in connection with long-distance haulage but even so, allowing for a weekly mileage of 480, it is equivalent to nearly 4d. per mile: if the weekly mileage is 960, the total is just short of 2d. per mile.
Profit Into Loss
There is something there which, if ignored or overlooked by the operator when making up a quotation, may well cost him all his anticipated profit and may even turn that profit into a Ioss. Here is an opportunity for me once 'more to stress the point I so often try to make in connection with the Tables, namely their use as a check.
One part of the Tables gives figures for net cost of operation: that should be used as a check upon the 'operator's own data of cost of operation. The other, under the heading of "Hauliers' Charges," should be used in just the same way to check any quotation the haulier may be making.
If there is any discrepancy, try to discover the reason. In the case of the operating cost-figures, make sure that every one of the items is included. It may be that tyre cost or maintenance cost has been overlooked, or it may even be that depreciation has not been allowed for. If the quotation as assessed by the operator is substantially less than what the Tables recommend. check the establishment costs, for it may be that there is an omission which is one of the four items just described.
Check back and see what has been omitted. One thing I would wager at tong odds, is that the Tables are correct and the operator's quotation short of what it should be. And, if still in doubt, the operator has always, even if as a last resource, the invitation to write to me. S.T.R.