To Own or To Hire?
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rHE contentious issues which are now being discussed and decided, relative to the transfer from contract-A to open A licences, should not be allowed to bemuse the practical id economic advantages and disadvantages associated with
e ownership or, alternatively, the hiring of commercial hides. Whilst several of the recent licensing cases concerning hides already on contract-A licence were relative to medium long-distance operation, there remains a high proportion of hicles operating under carriers licences which are limited to tail delivery, or similarly restricted work. It is in this field, particular, that potential operators should consider carefully e merits of both ownership and hiring before committing emselves to capital expenditure.
Repeated inquiries which are received for advice before aking such a decision indicate that it is a problem which is ing given increasing attention from trade and industry. In e initial approach to this problem it should never be overDiced that however large and efficient a transport department organization may be, it remains fundamentally a service to ide and industry. Paradoxically, in the very striving for eater efficiency it could well be that a transport department comes, albeit imperceptibly, no longer ancillary to the mann:luring or sales department it was set up to serve. The danger such a situation arising is all the more likely when large ms have already been committed on the purchase of a fleet vehicles.
The tempo of modern industry is another factor which has be considered relative to the operation of commercial hides 'Because transport is inevitably interwoven with the ae factor, its operation and control has always been an exact; business. This is doubly so today when ever-increasing mands on industry for greater output necessitates strict time ieduling throughout the process of manufacture and subseent warehousing and distribution.
In such circumstances, transport management can never be a rt-time job and any trader or manufacturer entering into nsport operation under such an impression may soon find tch of his time diverted away from his primary responsibility. le to the modest returns which transport operators generally ye to accept, an ancillary user in such circumstances may imately find that he has been spending the greater proportion his time on the less profitable section of his undertaking.
‘PITAL INVESTMENT
En a similar context, many large and efficient manufacturing ;anizations with adequate capital reserves to purchase a fleet vehicles if they had so wished, have decided that hiring is best policy even if the hiring of vehicles whether on itract or day-by-day, should cost a little more than what is iwn to be likely when running their own fleet. This is because returns likely to be obtained by a similar amount of capital .ested on the manufacturing side of the business would ariably be greater than any benefit derived from the operan of an ancillary fleet of vehicles, no matter how efficiently t.
3ut as with so many generalizations there are several excepns when the outright ownership of vehicles engaged in the carriage of goods can be justified. The urgency of a particular traffic and the absolute necessity for strict personal control from the moment of collection to final delivery is a common reason, whilst the ratio of transport costs to that of the finished product is another.
The size of a manufacturing company or trading organization would naturally have some bearing on whether or not it would prove profitable to operate one's own vehicles. This alone, however, is seldom the primary factor on which a decision is reached. The geographical location of centres of manufacture and ultimate sales areas and, additionally, the location of depots and warehouses may prove to be of much greater significance in assessing whether an economic balance of traffic movement could be achieved.
As mentioned earlier, however, the urgency of a particular traffic—fish, horticulture and other perishable foods are obvious examples—may be such that return empty running must be virtually accepted as inevitable. Similarly, sales policy, and particularly problems which can arise in the collection of cash from customers, can also dictate that ownership of vehicles is desirable, although uneconomic from the point of view of balanced traffics.
BREAKDOWNS
Persistent and possibly an increasing number of breakdowns of ancillary vehicles is often a starting point for reviewing the merits of hiring as opposed to owning commercial vehicles. When new vehicles have originally been acquired there will no doubt be an interim period when such breakdowns seldom occur, thereby giving the illusion of an efficient transport department. Freedom from breakdown over a longer period coupled with operation at economic cost, however, is achieved only by careful forward planning of maintenance based on extensive practical experience, Relative to maintenance, the labour problem is particularly acute due to the high wages offered by manufacturing industries. Whilst this problem still remains even for the contract hire specialist of medium or large size, he would at least have some nucleus of staff at any one time despite a comparatively rapid turnover, if in fact that should be the situation. With a small ancillary user, however, who possibly employs only one or two fitters he may find that he has no maintenance facilities whatever during the interim period between staff leaving and their ultimate replacement.
Dependent upon the age of the vehicles operated, this temporary lack of maintenance facilities may not imply the cessation of operations. but ultimately the cumulative effect of servicing tasks left undone could prove very expensive.
It is also difficult for an operator of a small fleet to provide, economically, equipment with which to undertake s,imple servicing. This is because it is unfortunate that the capital outlay on air compressors and lubrication equipment, which is virtually essential once it is accepted that something better than the hand grease gun is required, is relatively high. The small operator is thus placed in the dilemma of either having to accept the comparatively high capital outlay or be content to pay the high labour cost involved in undertaking servicing largely by hand. Even if this latter course were adopted it would still presuppose. that driVers would be sufficiently skilled and conscientious to ensure that the various tasks had been
carried out satisfactorily. • In addition to the problems of capital outlay and recruitment which must inevitably arise when organizing motor vehicle maintenance, the necessity to ensure that work has, in fact, been satisfactorily carried out requires the existence of an efficient control and recording system. As this would be in addition to whatever system was employed in operating the vehicles, only the largest ancillary users would have both the time and experience, to set up and keep such a maintenance system. But without it, the standard of reliability of the vehicles must inevitably, if not immediately, deteriorate and with it the standard of service which the transport department should have provided.
An industrialist or trader would naturally have expert knowledge of the product he handled, including the conditions under which it was necessary for it to be transported and the frequency of delivery relative to comparable services provided by his competitors. Beyond that stage, however, it would be by no means certain that he would have the experience to determine correctly the type and size of both chassis and body which would most economically carry his goods wherever he wanted.
VEHICLE SELECTION
The larger ancillary user can afford to employ an experienced transport manager who could competently advise on vehicle selection, but for a large number of smaller users this would not be the case.' Once the wrong type of vehicle had been purchased, no amount of efficient. operation and maintenance could reverse an uneconomic decision. In contrast, the professional operator, whether haulier or contract hire specialist, would have the necessary experience to make the right selection both in his own and customers' interest. With the wide range of amotor vehicles now available, the possibility of making a wrong choice should not be too readily discounted.
Probably even more difficult than the selection of the right type of vehicle is the economic size of a fleet. Even such long-established industries as breweries have to contend with seasonal fluctuations in traffic and there must be few, if any, users who do not have to deal with uneconomic ebbs and flows at some period during the year. Whilst this has been a long-standing problem of transport operation generally, it has become more acute during post-war years for several reasons. Two of the main ones are the substantial, if uneven, rise in national productivity, coupled with a highly competitive labour market, as a result of which it becomes impracticable to vary one's labour force to any extent relative to changing traffic requirements. When an industrialist or trader is faced with this problem of determining the economic size of a proposed ancillary fleet, the access which he would naturally have to advance information as to possibly.. expanding sales would be invaluable. But, nevertheless, after the most careful estimates have been made and vehicles purchased, it is highly probable that in the light
of subsequent operating experience some adjustment to tl original estimate as to the ideal size of fleet would have be made. This expensive period of trial and error would ha, been avoided if a policy of hiring vehicles had been adopte Unfortunately, even if an efficient costing system had al: been set up at the time the fleet was acquired, it would extremely difficult to determine just what such a period trial and error had cost the trader or industrialist, but it nu well more than offset the apparently greater cost of hirii vehicles, if in fact this was the case.
Prominence has been given to the ancillary users' habit " creaming the traffic ". This implies carrying a convenie proportion of the more remunerative traffic and hiring out t remainder. Whilst such policies are undoubtedly adopted 1 some users, the extent to which this is done can be ow emphasized. Many C-licence operators can, in fact, instan examples of loads which they have carried on their ov vehicles which have been totally uneconomic, and which cou not have been carried within the limited time available by al other means.
Also, as mentioned earlier, many drivers of ancillary ust are concerned with the handling of cash and, in addition, substantial measure of their company's goodwill depends up, such drivers' relationships with customers. In these drew stances the introduction of outside drivers at irregular intem could have serious repercussions on both immediate and futu sales. Because competition is so keen in many distributi trades, any saving which a transport department could sht to be obtainable by using their own vehicles to move, ss 75 per cent, of their total traffic, and hiring for the remaind would be more than offset by objections raised by the sal department.
, In such circumstances, the advantages of a trader employi his own drivers and operating the vehicle under a C licenc whilst the ownership and responsibility for its provision al maintenance, is undertaken by a contract-hire specialist, a substantial. in many respects it can be held that the best both worlds is thereby achieved. The trader retains col piete control of the driver, since he is his own employi together with the day-to-day operation of the vehicle, whi he has the assurance that he has the support, experience a: resources of an organization set up precisely for the purpr•of maintaining vehicles both efficiently and economically.
Whilst the reasonable profit which a contract-hire special must necessarily include in the charges has to be met by trader, customers, it should not be overlooked that if he is any sizeable way of business he will undoubtedly enjoy t benefit of fleet discounts on the cost of vehicles, subseque equipment and spares which would not normally be availal to an ancillary user or, at least, not at similar high rat Coupled with the more efficient employment of garage equi ment and labour because of both a greater throughput and t existence of a strict maintenance schedule, these. factors shot] give the contract-hire specialist the 'opportunityto qUote COI petitive rates to his customers compared' with the cost
operating their own vehicles. S.B.