The Influence of Organization on Costs
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Reviewing Some Actual Operational Data, in Respect of Vehicles of Different Capacities, with the Object of Checking Costs and Rates
IN the previous article, I described, in detail, the return journey of a 12-tonner carrying in one direction 8 tons . 9 cwt. and in the other 8 tons 1 cwt. The distance each way was 230 miles, to which collection and delivery services (fot which the same vehicle was used) added 24 miles, making 484 miles in all. Four days were occupied and, in my view, the work was done at a loss. Full consideration ol the reason for using a 12-tonner in this way was postponed.
In the first place, it should he noted that a load c.f
8 tons, or slightly over, is particularly awkward. Few four-wheelers can carry it without exceeding the legal gross-weight limit of 12 tons.
The next size. of vehicle is a 10-tonner, of which there are not many about. II an operator with few vehicles has to choose, he naturally buys a 12-tonner, so that he can use the extra load capacity v hen he may require it.
The circumstances, therefore, are such that the operator has no alternative but to use his I2-tonner for the load. .
Another point that arises is the u4 of the vehicle for collecting and distributing the load (there were two pickups and two drops on the outward journey). With two parts to a load of 8 tons 9 cwt. there is really not much option. It would necessitate a 10-tonner in any event,
and that proposition has already been discussed. The • upshot is that it must be the 12-tonner or nothing, which leaves the question of rates open for discussion later. Here is another example. This time the vehicle is a 7-tonner, an oiler. The load, again, was machinery, carried over the same 230 miles route, for the same rate- 36s. per ton. . .
On Wednesday, the driver 'took this vehicle out at 7.30 a.m. to pick up a scattered load; one consignment weighed 3 tons 4 cwt. 0 qrs. 16 lb.; another, 1 ton 2 cwt.,' the ,third, 1 ton 2 cwt. 0 qrs. 21 lb. The total is 5 tons 8 cwt. 1 qr. 9 lb. It took him until 3 p.m. to load sp and return to headquarters. that is 7 hours, allowing for a break of half an hour for lunch, Four miles were covered during that time.
Effect of Journey Time on Rate of Travel
For some reason, not stated, the trunk journey was not commenced until 3 p.m. on Thursday,. the next day. The driver ceased work at 7.30 p.m., that is after 4i hours. The outward run was completed on the Friday, starting at 6.30 a.m. and finishing at 11.30 a.m. It is of interest to note that, splitting the journey in this way, it occupies only 91 hours, as against 11 hours when done in one.
Incidentally, another point of interest arises here. When the journey is completed in. 11 hours, the average. speed is practically 21 m.p.h. If it be tompleted in 9) hours, the average speed is M excess of 24 m.p.h.
During the remainder of Friday the load is diatributed to three points. Two new consignments, one of 4 tons 5 cwt. 2 qrs. 22 lb. and another' of 1 ton 19 cwt. 2 cps„ are picked up. The total load is, thus,. approximately 6 tons 5 cuk; 6 hours are needed for this delivery and collection, and the distance covered is eight miles.
On Saturday the vehicle, with its load of 6 tons 5 cwt., returns to headquarters, taking. 11 hours for.the trip. Os the following Monday, a single consignment of 5 tons 3 cwt. 3 qrs. is taken aboard. Loading occupies 3 hours and involves a coullIs of miles travelling. This load is conveyed over the same 230-mile route the next day, taking 11 hours.for the journey.
On Wednesday 51 hours are occupied in delivering tnis load and in picking up two consignments, one of 3 ton,. 12 lb. andone of 1 ton 10 cwt. 2 qrs. 4.1b.`:. a total qf 4 tons 10 cwt, 2 qrs. 16 lb. Three miles are covered on this work. The driver comMences his return journey at 12.30 p.m. and puts up for the night at .6.30 p.m., after having stopped an hour for lunch, so that his travelling-and working-thne is 5 hours. He completes the journey in
5 hours on the Thursday.
In eight days, this vehicle has covered 937 mites. The' actual hours worked total 57.
The running colts are, in round figures, 61d, per mile, which for 937 miles is nearly £25 Se. The standing charges add up to £10, plus another £2 for subsistence and oilier expenses. Allow £5 for establishment costs (a, modest figure) and we get a total expenditure of £42 8s,'
As against that figure there is revenue calculated at 36s. per ton on a total traffic of approximately 211 tons; that is £38 14s. According to my calculations, there should he a minimum 'profit of 15 per cent. on the outlay of £42 SS., so that the revenue should be little short of £49. To earn that the rate must be not less than 45s. 6d. per ton. The difference between the actual rate and the rate as it Should be is, thus, 9s. ad. per Lon-rather a lot.
Figures for a 6-tonner Engaged on a Straight Run
Now, here is a straight run on a 6-tonner. The pointto-point distance this time is 220 miles, to which must be added eight miles for digressions for collection and delivery. The round journey, therefore involves covering 448 miles. A load of -5 tons 12 cwt. was carried on the outward journey; it comprised one pick-up and three drops. Coming back the vehicle carried only 4 tons, two pick-ups and two drops. Each trip took II hours, so that 22 hours were needed for the complete double journey.
For running costs, it is sufficiently accurate to take 6d.
per mile; for 448 miles. that is El 1 4s. The normal standing charges are £1 4s, 3d. per day-Z2 8s. 6d. for the journey. Add 10s. 6d, for subsistence allowance inki expenses and El 10s: for establishment costa and the total expenditure involved in this two-day return journey is seen to be £15 13s, • The rate on this route was 30s per ton, so that the revenue comes to £14 8s.-again a deficiency. At 15 per cent, on cost, the profit should be at least £2 7s. ..ind the revenue £18, which is equivalent to 37s. 6d. per ton, . The same vehicle made a shorter trip, avaraging 330 miles in all-and taking 15 working hours-practically two days. The expenditure differs from the above example in respect of only diminished running costs with, perhap4, a small cut in wages. The former total .£9 10s. and the total cost is £14 approximately.
In this case, the rate is 22s, 6d. per ton. The outward load was 4 tons 10 .cwt. and the return 5 tons exactly. 'At the rate quoted the 'revenue is, therefore, £10' 14s. Actually it should be at least £16 and the rate. 33s. almost 50 per cent, higher than it was. Part of the reason for this uneconomic operation . appears to he lack of .fall loads. in nearly every one of the above examples :the vehicle is not loaded to capacity.
Here, as a test of the theory that underloading is the Cause of the seeming _lack of profitable earnings, is 'tu example. of Overloading. I will deal with it brie*, because this constantrepetition of detail is somewhat tedious. The vehicle is the same as in the last case, that 'is, it is an oil-engined. 6stonner.
In this example the total mileage covered on the round journey was 510, the time two working days. The outward load was 6 tons 14 cwt. and the return load 6 tons 10 cwt. The total tonnage,is, thus, 13.2 and, as the rate was £1 16s.,
the revenue was a few pence more than £23 15s. , Taking, as before, 6d. as being the running cost per mile, And adding the „amounts presilbusly noted in respect of this vehicle for standing charges, subsistence and estab
.lishment costs, the total expenditure on the journey is seen to be £17 4s. only, leaving a fair, almost a handsome margin of profit. Clearly, there is some point in the suggestion that underloading is one cause of lack of profit. It is of interest to summarize, the three journeys made by this vehicle. Each occupied two days, so that the three may reasonably be assumed to represent one weeic's work. The total cost was £46 17s. and the total revenue, £48 17s., an insufficient margin.
If the vehicle had carried full loads of six tons, in both directions on each of the three journeys, the cost would have remained the same, but the revenue would have been Increased. The cost would have been £46 17s. and the revenue £51 6s.; the margin of profit is, thus,. £4 9s:; which_ is a little frieze than 10 per cent, of the expenditure. The minimum should be 15 per cevt.
The only item in the expenses I have included in these calculations is that of establishment costs. I have assessed it at 15s. per ton of pay-load, ttat being, in my actual experience, a minimum for vehicls engaged on trunk services.
Now, even if I take into consideration, as regards this 6-tonner, the fact that it is one of two vehicles owned by a Small operator, whose establishment costs are very low, I cannot paint a better picture. If I assume his establishment costs to he no more than 5s. per week per ton of payload, and that, in my view,ls an irreducible minimum, the redUction in the above total expenditure of £46 17s. per week is only £3. bringing it down to £43 17s.
On the other hand, operating in that way, he is sure to be getting half his traffic at least-probably more than halffrom clearing houses, in which case the rates quoted will be subject to a commission of 12k per cent. The quoted revenue of £48 17s. must, accordingly, be reduced by some 61 to 7 per cent. to £45 17s. to allow for this haulier's payments to clearing houses. His, net profit is,. therefore, £2 per week, as before.
Commissions Paid to Clearing Houses Balance "Establishments" Savings It goes to show that, in this instance, the commissions paid to clearing houses approximate to savings in establishment costs which accrue from the use of clearing-house facilities. In the above, however, I have assumed that only half the loads were obtained from clearing houses. If, as I believe Was actually the case, the whole of the traffic was obtained in that way, the revenue is reduced by 46 to £42 17s., so that the operator may be working at a net loss of £1 per week.
Here, to conclude this series, are figures relating to. a journey by a 15-tonner, an eight-wheeled maximum-load oil-engined vehicle. The journey is more interesting than some because it is a triple-loaded one. The vehicle covers 180 miles with its first.load of 15 tons, at 27s. 6d. per ton. It then travels 20 miles farther and, while the driver and mate put up for the night, is reloaded with timber for a 20-mile trip. The rate for the timber is not quoted. I shall assume 75. 6d. per ton.
Arriving at the terminus of the 220-mile outward run, the timber is unloaded (there is only l tons of it) and a fresh load of barrels-weighing 12 tons 10.cwt. is taken on board for the return journey.
Now, although the total mileage covered, including collection and delivery services, is only 458, the time this vehicle was in use for the journey tbtalled 38 hours.
Wages, includiug overtime, for the two men employed, will total £10 12s., and subsistence and expenses for two men, away foi. two nights; a further £2. The balance of standing charges will be £3 12s. Establishment costs may be set down as £7 15s. The total of fixed costs is, thin:, £23 19s. Running costs are 9d. per mile,which, for 458 miles, is £17 3s. 6d, The total cost is, thus, £41-2s. 6d.
For revenue, there is. 15tons on the outward journey, at 27s. fid. per ton, which is £20 12s. 6d. Add I ls. 3d. for the 11 tons of timber (hardly worth the trouble), and 121 tons on the return journey at 27s, 6d., which is £17 3s. 9d. The total revenue is 38 7s. 6d., a loss of £2 15s. on the journey. Even with a 15-ton load on the return journey, the total revenue is no more than £41 16s. 3d., just, and only just, exceeding the expenditure.
Job of Loading the Vehicle Takes a Whole Day to Complete Actually, the Case is, if anything, worse than I have pictured it. I have stated that the actual working hours necessary for the job totalled 38. It should be pointed out that the vehicle was taken out on the Monday at 8 a.m.; the whole of the day was spent in loading up. The actual journey commenced on Tuesday at 6.30 a.m. The vehicle reached the first unloading point at 2 p.m. and the time taken to travel the 180 miles was, thus, seven hours (allowing for a break of half an hour). The average speed was, thus, 25.7 m.p.h.
The steel plates were unloaded and the vehicle took a matter of two hours,to reach the next stop, about 10 miles away. (There is some doubt about this; presumably some of the time was spent in loading up the timber. There is no record of this on the driver:s log sheet).
Wednesday was occupied, first, unloading the timber, then picking up the return load of bairels, and, finally, in getting some 20 or 25 miles on the return journey. The delivery and collection service took 51 hours. A further three hours were needed to get from the final collecting point to the intermediate stopping place. The reason why that journey took so long was that the final place of collettion was a dozen miles or so on the tar side of the main terminus.
Thursday, from 5 a.m. to 12.30 p.m., a net travelling time of 7 hours was occupied in returning to headquarters. Again, 7 hours for 180 miles; that is equal to 25.7 m.p.h.
The point is, that this 15-ton lorry toqk four days to complete a journey which should have been completed In three days.' By taking four days, it was ,made impossible. to complete two round journeys per week, an essential accomplishment if a vehicle of that capacity and cost is to be operated economically. Ckf this aspect I shall have more to say in a later `article. S.T.R.