THE ADDED RESPONSIBIL IS OF THE BIGGER FLEET
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BEFORE proceeding farther with the history of the growth of a business of a small haulier, it may be as well to take stock of the position so far as we have gone. New readers should be told that this operator, starting with two vehicles, has, by stages, increased his fleet to six and, in the last stage towards that intermediate period of 'growth, has taken a partner with whom he is sharing prcifits on equal terms.
The figures for expenditure and net profit are set out in Tahie I. In the third column is set out what I might term a standard minimum profit which ought to he earned. It is calculated at the late of 20 per cent, on the actual working expenditure. In the fourth 'column are shown the profits which woad accrue assuming the rate per ton to be -30s., and in the 'fifth column, the profit assuraing the rate to loe, 82s, per ton. There are some interesting facts aisclosed by these figures. For example, the profit from the four vehicles, when operating at 80s. per ton, is actually Tess than that from three, and only a little more than the profit earned from two vehicles. Similarly, at 32s. per ton, the profit for four vehicles is •only a few shillings per week more than it is from three. These 'facts seem to indicate that the organization, whilst satisfactory -enough • for three vehicles, is not so good for four, and it was probably that which induced our haulier to take a partner when he enlarged his fleet from four to six.
The benefit is shoWn by the returns from the six-vehicle fleet, which are approximately tWice what they were from the four-vehicle fleet. They are not, however, anything like three times as -much as they were when only two vehicles were operated, which indicates that it does trot necessarily follow that the profits -earned by a haulier increase in proportion to the number of vehicles he operates.
Part of the reason for that has been given in the previous article inasmuch as, with !he two vehicles, the operator is concentrating his efforts and attains a high percentage efficiency of loading. As he enlarges his fleet he finds that it is not so easy to keep every vehicle up to the standard which he was able to attain when -he had two machines.
Profit Sharing Balances Out Increased Turnover
-Another point which arises from the study of these figures is that, whereas the total profit from six vehicles is reasonable, there is a disadvantage in that it has now to be shared 'between two partners. Indeed, taking the figures for haulage at -32s. per ton the original operator is getting only £35 per week, and he was actually earning :C87 per week when he had only three vehicles, and £30 10s, per week when he had only two.
It -is true that the expenditure, the work, and the responsibility of looking after -the fleet are shared just as are the profits. It may be, however, that the haulier thinks to himself that be might just as well have kept on his own with his three vehicles, He would have been earning as much, probably a little more, for himself.
However, the step has been taken and it is impossible to retrace it. The foregoing facts are, perhaps, more clearly illustrated in the three diagrams which accompany this article. In Fig, t the graph shows, in full line, the theoretical standard profit, in dotted line the profit when the rate obtained is 30s. per ton and, in broken line, the profit when the rate is 32s. per ton. This is interesting as showing -what a big difference the small increase of 2s, per ton makes to the conditions for, whereas, at 30s. per ton the profit, for the most part, falls below the theoretical standard, at 32s. per ton it is well above it, no matter what size the fleet.
Interesting from another anale is the graph in Fig. 2, in which the profit per vehicle is set out. It will be noted that the theoretical standard profit should be approximately the sarhe whether 'the number of vehicles in the fleet be two -or six, whereas, actually, it is much more per vehicle far the fleet of two vehicles than it is for any other number.
In this Fig., as in Fig. 1, it is demonstrated that the four-vehicle fleet is, on the face of it, the least profitable. The two-vehicle fleet is the most profitable per vehicle, *24 •
-but the returns have started to increase as the fleet has grown -from four to six and, 'it may be, that 'further investigation wig -show that, as the fleet grows Still -larger. thisupward trend of prcifit Will continue and 'serve to demonstrate that the -optimum size of -fleet has -not yet 'beets reached. In Fig, 3, the actual profit to the individual i3 shown. The broken line shows the total profit but that, of course, is halved when the six vehicles are in operation and
the partnership entered. •
As was stated at the close of the previous article, steps were taken, after realizing this state of affairs, still further to increase the fleet, A business controlling form vehicles was purchased. These vehicles were Of appropriate size and type, and they carried with them A licences covering operation over routes Of approximately the same' length and 'density of traffic as those with which the original vehicles were concerned. I can now relate what happened to this operator after he had taken this further step.
Having made arrangements to take over these four additional machines, bringing the -fleet strength up to 10, the partners went into committee of ways and means, to see what reorganization would be necessary in order to provide for efficient and remunerative operation.
The first thing they did was to check over the loadings and mileage of the six vehicles they already owned and had been operating for some little time. Almost -immediately, they came :across something which has possibly occurred to more than one rea"dei of these articles. It provides one reason for the favourable return first, from the operation of only two -vehicles and, seclondly, -for the much more favourable results from six vehicles as compared With four.
It Sifould he recalled that oar original haulier friend, when he ran two nehicles, was able to keep the weekly mileage of each up to 1,200, and the tonnage up to 40. With his third and fourth vehicles he was not so 'fortunate, as the corresponding figures were 1;600 mites, and 30 tons.
Now, the two vehicles brought into the pool by his partner were as well run as his own a two: -each covered 1,200 miIes per week and carrie 40 tons. The importance of this lies in the fact, that it costs comparatively little more to run 1,200 miles per week than it does 1,000, whereas, the gain in revenue, when 40 tons are carried instead of 30, is considerable, being as much as 331per cent, if the' same rates apply throughout.
Actually, the total cost per week for -a vehicle covering 1,200 miles in that period is £48 12s.., as against £40 125. for the other, a difference of .06 per week., The revenue from 40 tons At 323. per ran 'is £64 as against £48 for 30 tons, a difference of £18 so that, by spending £6, the net increase it profit is £10 per week.
Even if the rate be only 30a. the difference is £15—a balance of £9 per week extra profit.
To emphasize this impoatant point, let me assume, for a moment, that •the rate is neither 32s. nor 30s. but 27s. In that case the revenue from the vehicle tarrying 30 tons per week %amid be £40 10s—showing a loss of 2s per week, whereas, that from the better-run vehicle would be £54, showing a net profit of £7 8s. per week. In other words, this variation in operating efficiency might well make alt the difference between profit and los.s.
This discovery, together with a comparison of the results obtainable from the fleet (a) when it comprised tvvo 'vehicles, (b) when there were four, and (c) when there were six, decided the Partners that strenuous efforts would have to be made to develop the loading side of the billiness, even at some little extra expense. The need for this step was made more imperative by the fact that the business just acquired, in bringing the number of vehicles from six to 10, was discovered -to have been rather liaci.13,-managed, .so that the road ratio expected to be at once available for them was likely to be poor.
On further 'discussion it was alecided that, as the shortage of traffic usually occurred on the return journeys, some better means for obtaining traffic from the other end of the main route was desirable: The partner, thereupon. agreed to take up his quarters at that end and td devote himself energetically to the task of finding fresh traffic.
In the meantime, however, before this-and. other measures to improve the erganization could materialize, possession of the additional four vehicles 'had been -taken, and they were put on service tca the maximum possible extent with the traffic then -available,: This meant that, of the four, two were running 1,600 mites per week each, and carrying 30 tons per week. The other two were making only two round journeys per week, totalling 800 miles each, and carrying 20 tons each—these being average figures.
However, the establishment costs remained, in sum, the same tor the new fleet of 10 vehicles as for the old one of six, excepting for one or two Small items, They would be substantially increased advai the reorganization had been effected, but that was not yet. Actually, the total was £1,800 yet annum, which is equivalent to £3 12s, pe: vehicle, or 95.. per ton of pay-load per week,
Mileages and Tonnage of the 10 Vehicles
The situation now is: 'Four vehicles running 1,200 miles çsr week and Carrying 40 tans each; four vehicles running 1,000 miles -per week And carrying 34) 'tortseach, and two vehicles running 800 miles per week,. carrying 20 tons each.
The respective costs are as follow: For the 1,200-milespee-week vehicie—standing charges £9., -driver's expenses and subsistence £2, -establishment costs £3 I2s. Total Of -fixed charges £14 12s. per week, POT the 1,000-milesper-week machine—standing charges IS 105., driver's expenses and subsistence £1 10s., establishment-cost £3 12s., total £13 12s. For the 800-miles-per-week vehiCle—standing charges £8, driver's expenses and subsistence 21 5s., estab. lishtnent charges £3 12s., total £12 17s.
The total fixed charges for the fleet amount to £138 I0s. per weak. The running coats throughout are fid. per mile and, as the total mileage is 10.400, the expenditure per week is sure to be £398 10-s. The totat tonnage is 320, so that the cost per ton is very nearly 25s. If the rate be 30s., the gross profit is £80 per week, and if it be 32s., £112 per week. From these amounts, commission on clearing-house traffics must be deducted, leaving about £75, and £105 respectively.
It might not be too bad if these figures could be maintained but, unfortunately, they cannot. The clerical staff is not sufficient to deal with 'the work add, because of lack of supervision at the outward -end of the journey, the loadings, and mileage of the better-run vehicles, fall.
The reorganization is, therefore, put in hand. It is unfortunate, of course, but inevitable that the extra expenditure must precede the-gain in traffics, but there it is. The following increases take place : Office rent and rates, lighting and heating, £140; telephones, £40; travailing expenses, £150.; -clerical wages, including those of a depot 'manager, ender the partner at the oatlying terminus, £650; directors' fees, £300; small increases in other items totalling £200..
The additional expenditure is thus £1,480, and the establishment -charges now amount to £3,280, instead of £'1,600. The additional expenditure per week is £29 12s., and the figarres for profit are reduced accordingly. If I ignore the odd ahilangs, that means that the 10 vehicles are now earning only 245, at 30s. per ton, and £75, at 32s. per ton. less in the first case, And slightly more in the second, than
when the fleet totalled no more than six vehicles. . Incidentally, the establishment costs, in round figurenow amount to £6 lls. per week per vehicle or 16s. 41d. pet ton of pay-load. S.T.R.