Dealing With Part-Loads
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The Prospect of Profit is Closely Allied to the Weekly Mileage Run by the Vehicles, Yet How is the Haulier to Distinguish Between Classes of Traffic?
ANY potential buyers of the assets of British Road services were struck a fatal blow to their ambitions when they read The Commercial Motor published on December 11. The article on page 533, entitled "Advances on Asset Values Only," and the Editorial on page 516 made it perfectly clear that the, terms of the hire-purchase were such as to make it practically impossible, for a man who had access to only £800 or so to acquire one unit, Briefly, it appears that finance companies which are prepared to enter into this particular branch of hire-purchase • business are unwilling to offer more than two-thirds of the net amount of the value of the vehicle. No advance whatever is available in respect of the value of the A licence. The conditions which attach to the purchase of any buildings are different and easier, but I am concerned, in this article, only with the vehicles, such as they. are, and the A licences.
It is the hauliers themselves who are suffering from shock as the result of the disclosure of the terms. Two things are of importance in this ratter,• viewing the business as a whole from that angle... There is first the lack of appreciation of the fact that, the value of the A licence liecmairtly in the mind of the potential buyer. There is no security value in it certainly not enough tor the linanc,e company to accept as such. .
. That value can be, however, considerable, in the view'of the haulier, but is actually almost entirely dependent on the business acumen of the operator. He may be able to make it equal £1,000 per annum. On the other hand, another operator, ,without as much experience, may make it worth nothing. • Worse than that, the tyro will, quite possibly, fail to make good in this new venture of his and fail to maintain his hire-purchase payments so that the company may have to distrain and, 'subsequently, try to sell.the vehicle on a falling market, No finance company could possibly entertain a proposal which involved taking the A licence as security for anything. It is thus impossible for the average owner-driver 'to find his way into the' haulage business in that way. He may be-able to borrow from friends, or perhaps find some assets which would be acceptable to the finance company. Otherwise it seems as though there is no hope for him, at least at present.
Short Mileages Now 1 must turn to other matters. The probiem of short mileages is one thing which is to the fore in the minds of my correspondents, and coupled with it, the problem of the part-load.
Time and time again have I pointed out that the prospect of profit from an undertaking is closely allied to the weekly mileage run by the vehicle concerned. Not, I must hasten to add, that I mean that boosting the weekly mileage will turn a loss into a profit or even, necessarily, diminish or increase the profit which is being earned. The increase in mileage must be of the kind for which payment is received.
Take, for instance, the charges recommended in The Commercial Motor Tables of Operating Costs "; those relating to a 5-ton petrol-engined vehicle for example. If this vehicle is operating on a job which involves only 200 miles per week, the charge must be at the rate of 2s. 6d. per mile (to the nearest penny) if the owner is to cover his operating costs, establishment costs and make a reasonable minimum profit. If the vehicle is running 300 miles per week, a payment of Is. 11d. per mile will suffice; and if it covers 400 miles per week Is. 71d. 'is recommended as a fair and profitable rate.
c24 The jobbing haulier is faced with the problem of fixing fair charges when almost every job that he undertakes is different from all the others so far as mileage is concerned and as regards many other conditions as well. In some jobs a big mileage will be knocked up in a week; in another the lorry is standing most of the time, either waiting for a load, waiting to discharge, being loaded or being unloaded. The question naturally arises: how is the haulage contractor, when making his charges, to distinguish between the various classes of traffic, also, sometimes, the differences between one customer and another, for each has 'his idiosyncrasies?
Here is the gist of a letter from an operator who apparently entered the industry by purchasing a small and almost 'derelict haulage business, apparently in the belief that this haulage business is "money for jam.".
No Overtime • He describes his week' S work in the following terms. On the Monday and Tuesday of each week he is engaged on medium-distance haulage for customer A. The actual distance travelled on account of this customer is 80 miles each day,,a direct run of 40 miles each way. Owing to the time spent to loading and unloading the machinery which the vehicle carries, only one trip per eight hour day is _ practicable within the period of eight hours. There is no need fol. overtime.
There is as should be noted, a short run of 2i miles each way involved in running from the haulier's garage to the premises of the customer. There is thus five miles of dead running to be provided for, making the actual mileage 85 per
day. The total mileage for this customer is thus 170.
On Wednesday and Thursday of each week he collects goods from the docks for customer B. So great is the congestion, however, and so many the delays in connection with this particular work, that he.is able to make only two journeys of two miles each, out and home, per day. During these two days, therefore, the total mileage from the operator's garage to the docks and the actual haulage of the goods is 16.
On Friday, another medium-distance haul is run, 50 miles out and return, making with four miles of dead running 104 per day. For another client, D, he runs eight useful miles and four dead, making 12 miles run each Saturday. The total mileage for the week is thus 302, of which 22 are dead and will have to be paid for out of establishment charges, being therein referred to as "dead mileages." • Now, when this haulier makes out his accounts for these four customers, be will, on the assumption that he believes it possible to charge on the basis of miles run, use as the basis of his calculations the minimum of Is. 11d. per mile as mentioned already, taking the 300 miles as the basis for the calculation for each job. The charges, if so assessed, would be: to A, for 160 miles, £15 6s. 8d.; to B, for 8 miles, 15s. 4d.; to C, for 100 miles, £9 Ils. 8d.; to D, for 8 miles, 15s. 4d.
It is easy to see the absurdity of this: all that is necessary is to compare the accounts sent in to B and C. B has the use of the lorry for a couple of days for which he is charged 15s. 44, 7s. 8d. per day, no charge for mileage. C, for one day's use of the vehicle, must pay £9 I ls. 8d.. He is, therefore, paying approximately 26 times as much as B for the use of the lorry. It is, of course, the charge to B that is wrong, for, as reference to the Tables shows, it costs. the owner £8 12s. 10d. per 'week for standing charges alone, hence, so long as he is working for B. he is losing money. His standing charges alone amount to £1 1 is. 4d. per working day. His loss therefore must be 16s, on account Of standing charges a day: he has other • expenditure, the running costs of 16 miles and the establishment expenses for one day.
Suppose we, consider the charge on a time basis only; letting out the lorry at so much per day: in that case, in
• order to make his profit at a reasonable rate, the charge will have to be reckoned to include running costs for approximately 50 miles per day and charge for that 50 miles at the fate of not less than ls. 11d, per mile.
On this basis tin charge to his customers will have to be for'A, £9 I Is. 8r1.; for B, £9 Its 8c1.; for C, £415s 10d.; ad for, D; £4 15s. 10d. . • Now this method, although it compels clients with low • mileagei,.. such as B, to pay their fair share, is almost as unfair as the other, as it is perfectly obvious that it costs more to run the lorry 100 miles a day than it does to keep it standing in the docks; moreover, obviously A and C get more value for their money than B and D.
• Another way to work the charges out is on the same principle as that which applies in the case of London taxicabs, Where the meter registers according to time or mileage, .whichever is the greater. It would be easy to work out a. schedule of charges for each different size of goods vehicle on the same lines and, in a good many cases it would be found to work quite well. In practice, however, it is likely to lead to disputes. The best way to deal with the problem is perhaps the time and mileage system which has been described so often in these pages. Some operators, however, Prefer to calculate the charges per hour for the number of hours worked, adding to that a mileage charge. That Method too has its faults, as the following brief description shows.
The difficulty is that, the taxicab method of working out the charge is not practicable because of differences of opinion as to the mileage which ought to be covered in the hour, and it was to eliminate that ground for disputes that I prepared the following method.
First let it be appreciated that, as a general rule, the standing charges and the establishment costs remain unaffected unless some unorthodox factors are present, such as the payment of a bonus to drivers, or the working of unusual periods of overtime.
The establishment charges vary between one operator and another (a) because they vary according to the number of vehicles in the haulier's fleet; (b) in respect of the situation of the operator's premises, whether it is in the country or in a town; (c) according to the class of traffic,. as there is more expense in connection" with the haulage of machinery than there is when the traffic is sand and ballast or coat.
With several machine's, the -establishment charges, being spread over a greater .nufnber, may naturally be expected to be less per vehicle-mile. The. total, however, increases rapidly as the fleet enlarges so that it is not much more
economical to own a' big fleet. .•
For the sake of simplicity I will assume that the weekly total of these charges for the 5-tonner, which I have taken as a suitable example; .ameant to £4 10s. Let us take it that the operator Wishes, to earn, a. minimum profit of £4 10s per week. In that way I can assume that the external expense, standard charges: and. proficarriount to £9 per week, to which must be added the regular standing charges relating directly to the operation of.the, vehicle itself, £8 125. I0d., making a grand weekly total of £17 128..10d.. That total is an indication of the minimum total earnings Per week taking no account of mileage run. A very useful figure is the amount of these charges' per hour..." Reckoning on a 44-hour standard week, the hourly charge is seerrto be 8s.
The running cbst of a petrol-engined 5-tonner running 300 miles per week is given in the 'Tables as 9.81d. If lid. per mile be charged in addition to the' time rate of 8s. per hour, there will be a profit' of a little more than Id. per mile over and above that which is already covered in the time rate. This, therefore, fixes out charge for a 5-ton lorry al 8s. per hour plus lid, per mile for every mile run. Now let us apply' this method and these figures to the four examples quoted above.
I propose to assume an eight-hour day with four hours on a Saturday, total per week 44 hours. The charge to A will be, for 160 miles in two days, £6 8s. for time, plus 160 times lid, per mile, £4 1 ls. 8d.'; total, £10 I9s. 8d., say £11. Previously it has been shown that if the charge against A were to be made on mileage alone, it would amount to £15 6s. 8d., and if on a flat rate Of 50 miles per day, whatever the work, £9 1 ls. 6d., It was demonstrated that the first was too high and the second too low. According to thil scheme we have presumably struck the happy medium. For customer B the lorry was engaged for two days bui ran only eight miles. The Charge should be £.6 8s. for time plus 7s. 4d. for mileage, a total of £6 15s. 4d., whereas. previously, on the mileage chart it was 15s, 4d.; on the time charge, £9 lls. 8d. C's bill for 100 miles per day • would be £12 15s. 4d. and D's for eight miles per day at ls. lid., which is 15s. 4d., plus four hours at 8s., £1 12s.; total £2 7s. 4d.—S.T.R.