A Rural Haulier's Problems
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A Particular Case Which Demonstrates That the Generally Accepted Rule That a Rural Haulier's Costs are Above Average Does Not Alivcrys Apply I WROTE an. article, which appeared 'in the issue dated
1 August 3 last, dealing with •the differences in cost as between the city operator and the man who works in a rural area. The original idea was to demonstrate that rates,, so long as they' be based on cost plus profit, cannot be standardized in such a way as to apply with the same fairness throughout the country. I think I showed that taking &verage rates as being 100 per cent., then rural rates should be 82 per cent. and rates in London about 110 per 'cent. The actual figures for the particular case with which I dealt, the use of 5-ton lorries fimning 500 miles per week and carrying 50 tons per week, were average us. 101d. per ton, rural 10s. 1d. per ton and London 13s. 3d. per ton.
I have since had a letter atid, following it, a visit, from a haulier who, to put it mildly, .begs to differ. He is a really rural haulier and, as his letter showed, is engaged almost exclfisively in hauling for farmers ; his traffic seems to include everything from seed potatoes to livestock.
In his letter he says that he is engaged in the transport of coal, feeding stuffs, hay, straw and, in fact, all commodities
in which farmers are interested. He goes on to say that he operates three vehicles, a long-wheelbase 5-tonner, a longwheelbase 2-tonner and a 30-cwt. tipper. " In addition," he continues, " I have. three livestock containers—one for each lorry—for which I charge 7s. 6d. for loading, unloading and washing the containet.".
Readers who are not acquainted with details of, livestock conveyance might like to be informed that there is
a regulation which insists that livestock vehicles shall be thoroughly washed and cleansed after each journey. It seems to me that 7s. 6d, per trip, is hardly sufficient to cover the cost involved.
Having given me these somewhat scant particulars of his fleet, he Vies on to write about the question of costs. He suggests that average figures, or the figures quoted in the article in question, are not applicable in the circumstances familiar, to him.
Conditions That Accelerate Wear and 'Tear
In the first place he says that the roads in his part of the country are " shOcking.". The main road only is twotrack : the secondary roads, which are thbse which he uses in the main, are one-track wide only, with provision, occasionally, his passing.' Other roads-, of which there are plenty, are little better than cart tracks, he says. Since the war began little or nothing ha been done in the,way of repairs to any of these. roads and,as, a reSult, they abound in
potholes and deep ruts. • • " Moreover," he goes on, " in a trade like mine, lorries are as Often in the fields as on the roads and it is quite a common thing to have a lorry bogged for an hour or more, at the end of whic'h time the farmer's tractor has to be sent for to haul it off the field and on t6 the road again."
All these conditions, he concludes, which do not trouble the city haulier, ac'c'elerate the wear and tear of the machine and increase the cost to such an extent as to make ordinary figures, such as those in " The Commercial Motor" Tables of Operating Costs, inapplicable. He asked me to make some suggestions as to what his charges should'he.
In answering his letter, I suggested that as he was in a rural area his fixed expenses would be below the average. It was probable that that diminuti6n in standing charges and establishment costs set off against the increased running costs, might make it possible still JO apply the final figures in the Tables and that if he assessed his charges on that basis he would not be far wrong.
Some short time after I had answered his letter I was passing through his village and took the opportunity • to call upon him. .I discovered that he was not at all satisfied
400 with the snggestion I made and was glad to have the opportunity of discussing matters with me.
• First of all we went into the question of his establishment costs. It looked at though I was going to be on safe ground here because, referring to the figures for the rurah area in that article in the " C.M." dated August 3, he commenced by stating that his expenditure was nothing like so great as was set' down. I decided, therefore, to go into that aspect•of the matter forthwith.
"You can knock out the first five items altogether," he' .said.
The first .five items are office rent, office rates, lighting and power, heating, and water.
" I am sure you cannot do that," I answered. "You must have some expenditure at least in that way. You have to do some office Work and you must Spend something on lighting and heating and so on Son that account." "No I don't," he said. "1 do all my writing at home in the evening. It is done on the kitchen table. If it be winter the fire is lit anyway, and if there he need for a light there has got to be a light in that kitchen whether I am doing my accouhts or just reading a book." .
" Surely," I replied, " that is not quite true ; there must be some, expense from time to time when you work later than you would do if you had no office work." "Well I doi:it think -so," 'he: said.
I, don't think you ca get away with'it,as easily as_ that," I went .on. " I ,suggest you let me debit £5 a year to .the extra lighting and .heating, due to the fact that you do Use the house for an office."
Modification on Telephone Charges " All right, but I agree only under protest. As to telephone charges (the next item on the list) your allowance of £13 is not quite sufficient," he continued. " My average is about £15 per annum."
" Good," I answered, ",£15 is the figure we will take. What about the next item, audit fees? ", •
" My auditor charges me .£4 4s., per year,h he said.
" Right; we will put that dOwn. And law costs, the next iteni? "
" Nothing at all. I don't think I have had a lawyer's bill to pay. since I first started the business:" • "
You are a lucky man.' What about sundries?"
"I see you havegot £12 10s. down for that," he pointed out. "Well, 1 don't think I spend £1 a month on odds and ends-'" he hesitated.'
" Shall We say £10 a year? "'I said.
" Yes.," he replied, " I Will pass that."
" Fines are the next thing.'' " Nothing at all We have no trouble with the police around here. They help as a matter of fact and in any case how am I going to exceed the speed limit on the roads I have to traverse?" " All right," I said. " The next item is your travelling expenses. That includes the cost of a ear for going ahdut the Country looking after jobs. and your man, etc." "As to that," he answered, "'you are well' below the mark with your £50 a year.. I cannot do it for that. I am always having to rim about to this job and to that, to see what. can, be -done ta, set a, lorry out of a, hole and to see a farmer because he says I am letting him down on his seeds or other traffic when, as, a matter of fact, it is nearly ahNais that the goods haven't arrived at the station. I cannot run my car on less than £12O .a year."
This started me 'worrying again, because I could See that his establishment costs were not to differ so. much from my figures after all.
"Right," I said. "let us carry on. The next item is clerical wages." •
" I have already told you," he replied , " that I do all my own clerical work at home. I do not need to pay anyone to do it."
" But," I said, " who answors the telephone when you are away? You are obviously out a lot from what you said about the car."
" Oh, the wife sees to that," he said.
But doesn't'she ask you for a bit extra over and above her housekeeping money? "
" Good gracious, no, and don't you go putting ideas into her head. You are not going to put this down in the paper, an.. you? "
I certainly am. But the wife doesn't read 'The Commercial Motor,' does she? "
" She always reads S.T.R.'s article," be replied.
" Well," I answered, " it is going down. I don't think you ought to be able to get. away with a thing like• that."
"In that ease,". he said, "I shall have to look out for this article and lose the. issue before she sees it. Anyway.", he went on, " you are not tO put _anything down for clerical wages. I diM t pay them."
" In that case, Of course, there will be nothing to debit against National Insurance for clerical staff and we an go on to the directors'• fees."'
"IF I am not -worth £3a week ," "Well, there," he said, " I alloW myself' £150 a Year, not the miserable £100 that you have put down in that article. If I am not Worth 43 a iveek for looking after this business I arti not worthanything.". " That's O.K. by 'me," I replied, still, at the :back of my mind, thinking that up goes another item of his establishment costs.
" The next item is depreciation of garage fixtures. What have you got for that? " .
" I have just• got the old petrol pump," he said, " which should be written-off by now, and nothing else but a jack or two,--say £2 a year." So £2 a year we put down, "Subscriptions to associations COMB next," I reminded
him. • "I don't pay subscriptions to any association," he said. " I don't believe in 'it."
" Weil, you are wrong," I quickly replied. " but we will not discuss that now. We must •get on with the fob. The next item is hank charges."
Yes," he said, "I think that what you lave. got down there, £5 a yea-r,is about right. There is nothing to set down for ferries, or weighbridges: or parking, because there is nothing of that kind here and I don't buy My lorries , on hire-purchase, so there is nothing for interest in that -con nec Lion."
What about printing and stationery? " I asked.
"Goodness me," he retorted, " I have never •had any printing and stationery. -I bought a sixpenny scrap book from Woolwortha about two years ago and I am still using'
it. It had 200 pages in it" .
So we put nothing down for printing. and stationery, nothing for insurance of buildings, but he agreed to £4 10s. per annum for maintenance of the Shed in which he houses his three vehicles, He. would only agree to Z.'S:per-annum
for postages and that left'only,A and B licences at i9s:_
"Now," I said, " that is the lot. Let us add it Up." 1N Inch we did, and got the total of £323 4s,per annum.
• " Now," I pointed out, " we want to divide this amount between three vehicles."
• "That is £108 apiece, isn't it? " .
• " No," I said. • " You. cannot do it that way: You have got to spread it out amongst the vehicles according to their.pay-load capacity:" 1-low do you do that? " he asked:
" Well," .1 said, yon have Si tons of pay-load alto
gether, and if we divide this £323 by Si-, we get, as near as snakes 'no matter, £.38 per annum per -ton of pay-load. Taking a 50-Week year that means approximately 15s. per ton of pay-load per week. That -is £3 15s: per week for the 5-twiner."
Here, we both, of one mind, turned to look at the figures in the article to‘whieh I have already referred, and found that, according to those figures, the establishment costs for a 5-tonner in a rural area were CI 12s, 8d. only. .
" Do you mean to tell me," he said, " that my establishment costs are so much more than those for the man you were talking to in that article? "
It seems so," I said, " hut, of course, in that case there were eight vehicles and you have only three, and you see your establishment costs do not come 'down in proportion to the number of Vehicles." " Obviously they do not he answered, ." and what about the other Vehicles? " , " Well the 2-tonner," I replied, will have to be
debited with -30s. a week and the 14-tonner with £1 2s. Oil„ per week,and that is sharing the esMblishme.nt costs amorigst them according to the load they, carry.
" I am still worried about having to debit my big vehicle with £3 15s. a week establishment costs. Why -should not the £6 75, 6d be divided equally?
"The answer to that is simply that you would-be badly overloading the 1-i-tonner and the. 2-tonner by debiting them with £2 2s, 6d. each per week on account of estab
lishment costs," • " Yes, I see that, but „" and he hesitated, " feel that £3 15s. is a lot of money. How do--you get at that iTlea of dividing these costs according to payload? "
" I didn't get at it, as you put it; It is the usual procedure with most hauliers, hut it is fairly easy to see the logic of it.
Price Per Ton as, a Basis for Rates
" Take the simplest aspect, that you are trying to work out your costs so as to get at rates on the basis of a price per. ton. Clearly, if your suggestion were to be adopted that the amount be divided equally between the three vehicles, then the rate per ton on the 1&-ton vehicle, which in any case, you must remember is bound to be higher than the rate for a load carried in a 5-tonner, is going to he increased out of all proportion.
'' Assume that you carry 30 tons a week On the 11-tonner and you will do it with £2 2s. Gel. per week establishment costs; that means that you have to charge very nearly Is. 6d. per ton on account of establishment costs alone.
"-Now, in the same proportion, the 5-tonner would carry 100 tons per week and the cost per ton on account of establishment charges would be less than 6d.
" According to my method, that is to say, allocating E1 2s. 6d. per week to the 30-cwt. vehicle, then if it carries 30 tons per week the charge per ton on account of establishment costs is 9d,
"-So with the 5-tonner carrying 100 tons per week. Tliedebit on account of establishment costs is again 9d,, so that all the three vehicles are being treated alike and that I think, is justification of the method. Drin't you agree?
"1 ao. You are probably right, but what I amworried about is how to reduce my establishment costs per vehicle." '" There-are two ways, neither of which appears to be . open to you at the moment.' One is to reduce the total of your establishrmint c---osts, and I do not see how you can do that The other is to increase the size of your fleet without adding to your' establishment costs. I imagine, situated as you are, you will find it difficult to get additional licences
even if you could find work for the vehicles." .
" I see," he said with a half-sigh. " I-suppose I shalt 'have to accept things as they are:' S.T.R.