When One-Way Loads Pay
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When Traffic is Scarce a Haulier's Knowledge of Relative Costs Can Indicate the Best Compromise that Can be Made in Difficult Circumstances
LAST week I. discussed some aspects of return-load traffic as exemplified by C-licence operation. I pointed out that the often-repeated criticism from those outside the transport industry that far too many vehicles operated partloaded or empty was an incorrect assessment resulting from a lack of appreciation of all—if, indeed, any—of those factors which sometimes compel operators to do so.
I use the word " compel " deliberately, as obviously every operator, whether running under A, B or C licence, is pleased to return-load all traffic whith can both legally and profitably be carried. In the case of the ancillary user, however, especially where urgent traffics are involved, he has to consider carefully the benefit of return traffic in terms of reduced overall cost per ton, as opposed to any lowering of transit times and reliability on the outward traffic which such return loading might incur.
Precisely because the professional haulier is in the transport industry to earn a living, he is even more anxious to back-load his vehicles with profitable traffic, as confirmed by the higher loading factor usually associated with vehicles operated by hauliers, as compared with ancillary users. In other respects, however, the haulier's problems associated with back-loading differ from the C-licence operator's, in that whilst the range of potential return traffic would normally be greater, there would, overall, probably be a greater degree of day-to-day variation in both availability and quantity. \ It is in an endeavour to offset these two difficulties that much time and energy have been spent in building up an appropriate organization either as part of the operator's own company or, as in the case of clearing houses, as a separate entity, so as to provide return loads more efficiently.
Difficult Decision
Whether or not a small haulier makes usc of such organizations, or whether he chooses to act independently, in neither Luse is any real problem_ presented when ample traffic is available. The more difficult decision has to be made when there is a shortage of traffic and a choice has to be made between running part-loaded or keeping the vehicle in the garage.
I therefore propose to give some figures of relative operating costs so as to underline the principles which should be taken into consideration when making such a decision. It must be clearly understood, however, that the figures shown are intended to refer to a quiet spell in a haulier's activities and it is most certainly not suggested that this can form the basis of long-term operation.
For the purpose of the exercise (see the accompanying table), a popular type of six-wheeled articulated oiler has been chosen, with a payload capacity of 10-12 tons. With an unladen weight in the 41-44-ton category, the weekly cost of licensing would be El 6s. 10d., whilst wages, applicable to a grade I area as specified in R.H.(62), would be £9 4s. 10d, for a 44-hour week. Wages include allowance for two weeks' holiday with pay and national and employers' liability contribu tions. Rent and rates are assessed at 15s. per week arid insurance at £3 10s.
Assuming the cost of the vehicle to be £2,500, interest at 3 per cent, would amount to El 10s. a week. As with the other five items of standing costs, interest is calculated on a 5G-week year, thereby allowing for two non-revenue-earning weeks annually. Total standing costs are £16 6s. 8d. a week.
The largest of the five items of running costs—fuel—is estimated at 3.64d. a mile, based on a cost of 4s. 3d.. a gallon and a consumption rate of 14m.p.g. Lubricants cost 0.26d. and tyres 2.40d. a mile, assuming a life of 40,000 miles, whilst maintenance is charged at 2.20d. a mile.
Reiterating that the whole of these calculations are based on the assumption that they refer to an occasional period, the vehicle's annual mileage is estimated at 37,500, or an average of 750 per week overall. Making due allowance, therefore, for the cost of an initial set of tyres and the ultimate residual value, depreciation is calculated at 2d. per mile, making the total running cost 10.50d. per mile.
Because the possible variations in length of journey, terminal times arid rates are so multitudinous, the choice of operating conditions on which to base the comparison must obviously be arbitrary in the extreme. Assuming that this small independent haulier is engaged in long-distance operation, I have grouped the weekly mileages relative to an average daily mileage of 150.
Extra Mileage
A return trip of 300 miles would necessitate at least one night away from base. Where a return load is collected, it has been assumed—again admittedly arbitrarily—that an additional 100 miles would be involved before the round trip was completed. This additional mileage could, of course, be caused by having to proceed from the first delivery point to the point of collection of the return load, or when returning to base after delivering a return load, or it might result from a combination of both.
The same principle applies in the groups 600-700 miles, it being assumed that the former figure would result from a minimum of four days' operation. It has already been said that the haulier is experiencing a period when traffic is short and, therefore,an 800-mile group is not included, as this would have implied two outward and two return loads during the week. Cost relative to 900 -miles per week, however, is shown to cover the occasion when three loads of traffic are available during the week, but in one direction only.
In the accompanying table these five mileage groups are shown in the first column, followed by the respective running costs per group, based on the previously calculated total running cost per mile of 10.50d., ranging from £13 2s. 6d. for 300 miles to £39 7s. 6d. for 900 miles.
In the third column is shown the tOtal operating cost. This is made up of a combination of the respective running costs, the total weekly standing costs of £16 6s. 8d., together with establishments costs of 15 and an averaged allowance for overtime and subsistence payments -of £5.
It has been necessary to average overtime and subsistence because the amounts could vary in every instance. For example, it might even happen that a driver of a vehicle doing only 300 miles in the week would require more subsistence payments than his colleague who had covered 600 miles. In the first instance, the driver may have been waiting two or three days for a return load, whilst in the second case, no undue delay may have been encountered.
Although the vehicle has a load capacity greater than 10 tons, tonnage has been calculated on units of this amount because traffic is short. Moreover, in line with this assumed dearth of traffic, where a return load is available, it has been assessed at 5 tons only. The resulting carriage charges shown in the fifth column are calculated on a rate of £2 5s. per ton. Obviously, any figure given as the rate would be very much a generalization, but it does not affect the comparison between the various mileage groups.
In the last column the deficit which the haulier. would incur on the basic cost alone in each instance of operation is shown. Thtis, when covering 300 miles a week and carrying 10 tons in one direction, the total operating cost would amount to £39 9s. 2d., against which he would receive £22 10s. Therefore, having made no allowance whatsoever for a profit margin on either standing or running costs, there would still be a loss of £16 19s. 2d.
Despite having to run an additional 100 miles in order to collect and deliver .only 5. tons on the return journey, the deficit is reduced to £10 1s 8d. if such an operation is undertaken. If two round trips of 300 miles each constitute the total week's work, with • only two loaded single trips, total operating costs would amount to 152 I Is. 8d., compared with receipts of £45. If a part-load of 5 tons is available on one return trip but not on both, the loss is reduced to 14s. 2d.
.Loss Incurred Where three round: trips are accomplished during the week; giving a total mileage of 900, but with only three -loaded single journeys, revenue would exceed operating cost by 11 15s. I0d. A. however, the total operating 'costs in this instance are £65 14s. 2d., a 20 per cent, profit margin would normally be allowed, amounting to £13.2s. 10d. There would, therefore, be a loss of £11 is. 1041. when compared with
standard charges, as distinct from bare costs. .
It has been assumed, however, that this is a slack week, If that were not the case, even in the last example shown in the table, where operating costs are covered, the haulier-would be taking on all the responsibility and risks .,.of a business with no reward other than a. driver's wage, if in fact he were a driver..
Where an occasional slack period is encountered, the
operator will be faced with a known loss of £16 6s. 8d. if the vehicle does not turn a wheel throughout the week. This amount is, of course, made up of the five items of standing costs previously itemized. Where the operator is not an ownerdriver, it has been assumed that it would be impracticable to lay off a driver for a week. With this figure in ffiind, the amounts of loss shown. in the final column, of the table. are put into propet perspective, although they are still deficits on operating costs. alone, to which must be added between. £8 and it 1 if an allowance for -profit is included..
The small .haulier operating from only one base would normally have prior interest in traffic emanating from his own area. It may well, be that he has built up a good part of his business on the traffic -offered by local traders and Manufacturers. During slack periods, therefore, particularly if outward traffic were consigned to-destinations from •which •return loads were unlikely, he would, have to balance the maintenance of his goodwill against some admittedly uneconomic empty running. Calculations made on the lines of the figures in the table would assist in assessing just what loss was entailed.
When traffic is scarce, one of the more difficult, yet common, decisions a transport manager has to make is just' how long to keep a vehicle away from base in an attempt to avoid returning empty. When it is known that successive outward deliveries are available, but return traffic, for at least the time being, appears to be virtually non-existent, it could well prove less expensive deliberately to adopt a short-term policy 'of fitting in the maximum number of outward loads possible during the week.
Alternatively, in 'endeavouring to achieve the text-book ideal of no empty running, it could well be that, afterhis first delivery, a driver might then spend two or three days fruitlessly canvassing for back-loads before returning with only .half a load and 400 miles "on the clock as A week's Work.
IMportaut Factor
In making the decision whether or not to return to' base, the probability of traffic, rather than . mileage, is the most important factor. Whilst obviously mileage is expensive, without traffic the haulier cannot remain in business. Where traffic does not seem to be forthcoming and the driver is at such a distance that he could legally return home the same day, it would in many cases probably, be the best decision.
It is significant that tippers, which normally have the fastest turn-round time, have probably as high a percentage of empty running as any other tYpe of vehicle. Admittedly, this is because many of them are engaged on very short leads, but there are hundreds of tippers, now, operating over much longer distances--opencast-coal deliveries, for example.
Nevertheless, despite the Minimum of loading and unloading time involved, return loading is an exception. The -reason, I suggest, is invariably the certainty . of traffic at the. outward loading point, and operators find that to arrange for a maximum tonnage in one direction is a. better proposition, on balance, than problematical. as distinct' from' -pre-arranged,
return loading. S.B.