Solving the Problems of the Carrier
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How Big a Fleet Should I Have?
Certain Aspects of a Practical Problem, Which is in the Minds of Many Enterprising Hauliers To-day
ONE thing leads to another! In the previous three articles I have been discussing three different types of haulage business: (a) One of 14 vehicles; (b) one of two vehicles; (c) one run by an owner-driver. On the face of it, it seemed as though the owner of two vehicles was best placed to make the most profit per vehicle. That leads to the question: What is the most convenient size of a haulage business, from the points of view of ease of handling and maximum net profits from the money put into it ?
I claim no originality for this subject: greater minds than mine have put that question. Eight of them did it recently in a booklet entitled, " The Road Carrying Industry and the Future." These men put it differently, however. They said they were searching for the " optimum size of the working unit." As the dictionary interprets " optimum " as .meaning "best and most favourable," it followed that the eight men were thinking about the same thing as I am. They were not, however, thinking along the same lines. Their proposals would have meant the elimination, by absorption, of all sniall operators on longdistance haulage. Moreover, if the said small hauliers did not " come quietly " they were to be compelled.
Conclusions That Were Indefinite Even these men did not arrive at a definite or positive conclusion. They wrote: " A suitable low limit, in the first place, might well be 60 tons unladen weight, which is, roughly, the equivalent of 10 maximum-load (that is, IS tons capacity) vehicles or, say, 20 6-ton capacity vehicles." The point to note about that statement is that the proposal is an interim one; it is, as it were, a temporary expedient. That would be the first step. When that had been taken, and our super-organizers, the arbiters of our fates and destinies, had had time to take breath, they would have proceeded
to think again. ITEM
It would then be quite clear to them that they had underestimated the optimum size of the working unit. Perhaps the new low limit would he fixed at 200 tons of unladen weight. The hauliers having only 60 tons would be found to be a nuisance; too small, not capable of being economically administered or of running regular services, and so on. And, in that way, monopoly would quite quickly have been achieved.
Now, that is not my idea at all. On the contrary, I think it will be a bad thing for this country if its road-transport system ever becomes thus disorganized. It is the flexible, quick and ready service that only small units can render which makes road transport so useful to trade and industry. Practically any trader who, in normal times, makes use of the services of hauliers will bear that out.
No: the problem, as I am considering it, has nothing to do with this super
disorganization of the industry. The Totals question is a practical one and was, indeed, put to me as a problem by a
haulier. He has a 'little business, owning half a dozen vehicles, with
Office Rent Office Rates Lighting and Power Heating .. Water Telephone..
Audit Fees Law Costs,.
Fines Travelling Expenses (Car. etc.) Clerical Wages „ National Insurance, Clerical Staff Directors' Fees Depreciation: Garage Fixtures Income Tax. and N.D.C.
Subscriptions to Associations Bank Charges ..
Ferries, Weighbridges, Parking Interest on H.P „ Printing and Stationery Insurance of Buildings „ Maintenance of tui !ding s Bad Debts Claims .._ ' Interest on Capital Postages A and B Licences Advertis:ng Goods in Transit Insurance Per Vehicle (8-tonners) Per Ton of Pa y-load Per Week
expand or not and, secondly, if he expands, what, should be the limit of that expansion. The limit, in his view, is set by the ability to control all the vehicles and to be sure of continuing to render that quality of service to his customers that has enabled him to build up his present business.
Observe the term quality of service: the maintenance of that is, for him, the first essential. It is possible, in view of that factor, to put his problem in other words. What he wants to know is how many vehicles he and his fellow. director can handle efficiently.
That question cannot be answered in a general way. So much depends upon the individual and the class of business. This man felt sure he could deal with a fleet double the size: he is wondering now whether he could cope with one comprising 20 vehiel6s. • In my view, knowing the man and the circumstances, he would be wise to stop at 12 machine.
. Problems of Seven Classes of Operator
It is of interest to .examine the problem, so far as it can be done in a general way, making such assumptions as will limit the. inquiry within reasonable bounds. One point which I may make at once is that the class of business is long-distance operation over a regular route. I will take seven cases: an operator with two ve'bieles, one with three 'vehicles and others with four, six, 10, 16 and 20 vehicles.
As the problem is stated, I. am hound to relate profit to the money invested. It is necessary, therefore, to begin by estimating roughly what amount of capital is involved in fleets of these seven different sizes, The first haulier, whom I will call Operator A, has two vehicles and, probably, very little in the way of supplementary equipment. A fair estimate of the value of his tangible assets is £2,000.
Operator 13, with three vehicles, has probably one or two items in the garage, a few tools, .a small tyre inflator, and some meagre office equipment. • We can take it that his capital will approximate to E3,150.
Operator C, with four vehicles, has rather more garage equipment and still more furniture in his office, hut we can put him down at £4,250.
Operator D, with six vehicles, has invested a little more in garage equipment.. He has a battery charger, a bigger compressor, probably some high-pressure greasing tools, as well as tyre-inflation equipment. His office is a little more ambitious in style than the other, and his capital can be taken at £6,600.
Operator E, with 10 vehicles, has quite a big office and a fairly well-equipped garage. We can take it that his capital approximates to L11,000. • Operator F has two offices, more garage equipment than any of the others and, with his 16 vehicles, his assets are; probably, worth £18,000, Operator G, with 20 vehicles, has much more equipment and office furniture and his capital is, probabey.. in the region of £24,000.
Influence of Overheads on Profits One factor at least which has a bearing on the profitable operation of a fleet is the amount of the overhead expenses. I have, therefore, drafted a schedule of• establishment expenses, which will approximate to what these various operators are likely to spend under that heading.
I will not say, especially in . thecase of the smaller operators, that I have the actual figures in such detail, because I do not think I. have ever come across an operator with so few vehicles who has found it worth while to go into these so closely.
I have, however, the figures for the totals of expenditure on establishment costs, and I have allocated them amongst
the several items in such a way as seems to to be reasonable, always providing that the total I reach is the same as that in the figures which I have had before me fromitime
to time. • Let us take Operator A. He has no office at all. He probably does most of his clerical work at home when he returns there in the evening or, more likely, at the weekends. His travelling expenses are comparatively low, because he usually takes the opportunity when he wants to move from place to place to jump on one of his lorries which is going that way. It will be noted that he draws £3 per week for himself as manager, and as he does all the clerical work himself he has nothing to pay for wages of clerical staff. He has no employees other than his drivers and, of course, their wages are debited against the machine in the vehicle operating costs, which are quite distinct from establishment charges.
In the case of Operator B he has found it better to keep the documents relating to the operation of his fleet on the premises, so that he can refer to them more readily, as is necessary when three vehicles are to be looked after instead of two. That introduces some small amount under the headings of office rent and rates. The amount is small, 'because it is only a nominal one; the office is really a partitioned-off, space inside the garage. He still finds it possible to manage without a clerk and, in this case, allows himself approximately £3 10s. per week as manager.He has not much need to travel, and when he does, follows the procedure of Operator A. He does, however, spend £10 year on advertising in the local papers, which the operator with two vehicles has not found it necessary to do.
Operator C, with four vehicles, has to engage a little clerical assistance. He cannot do all the work himself, and has found that if he spends too much time in the office he is unable to supervise his men sufficiently to ensure that he gets the maximum work from his vehicles.' He, therefore, has to spend a little moreon office equipment, although his office is still a partitioned-off section of his garage and the rent and rates do not amount to much. For travelling he has bought a little car, not paying much for it, and it is in that direction that most of the £120 per annum travelling expenses are incurred. He takes £5 per week out of the business as director's fees. Operator D is, in a sense, in another category., because he finds that six vehicles are too much for one man and that he cannot get the sort of help that he would like from his staff. He has taken a partner. They are still managing with an office inside the garage, but they employ a clerk.
They share a little car between them, so that travelling expenses have not jumped up to any great extent. He is spending a little more on advertising, using local papers at both ends of his regular route, so that, actually, his expenditure on that item is £50 per annum. Each partner takes £5 per week as his direct remuneration as joint manager.
Operator E,. with 10 vehicles, has found it necessary to take a real office, and that costs him £150 a year in rent and rates. The clerical staff is increased to three, and the two directors are, each drawing E8 per week as salary.
An Office at Both Ends Operator F, with 16 vehicles, has taken the step of opening another depot. What he does is to have a fairly good office at headquarters, with three clerks, and has built a little office into the garage at the other end of the journey and installed there a semi-clerk, semi-manager at £250 a year. There are still two directors; they are drawing £12 each per week. It should be noticed that the expense of getting business has grown. Travelling expenses account for £300 per year, whilst £100 per annum is spent on advertising. •
Operator d, with 20 vehicles, has gone a step farther. He has taken some premises in a third place, so that he has a headquarters office and two partitioned-off offices and garages. He is employing a much larger clerical staff, which costs £1,200 a year, whilst travelling expenses have jumped to £500 per annum and advertising to £250. There are three partners in this business, but they are taking only
£10 per week each as their direct remuneration. S.T-.R.
(To be continued.)