Management matters
Page 70
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Co-operation in costing: an American revelation
SINCE the first report of the Prices and Incomes Board three years ago, when it recommended that the Road Haulage Association could do more to promote greater accounting responsibility, much discussion has taken place as to how this can be promoted in the industry.
Now I think the time has come—I will explain my reasoning later—to take a look at *hat progress has been made in the United States in the publication of operating costs and financial results in—to use their own term—the trucking industry.
The PIB made its recommendation with, in particular, the small haulier in mind. It said the RHA could promote accounting responsibility by giving its members comparative information on the relationship between cost, turn-over, capital, profit margin, etc., in comparable parts of the industry. Each member could then judge his performance by the achievement of the others.
However, the PIB recognized that the heterogeneous nature of the industry did not make this kind of comparison easy. But this was a type of service given by trade associations in other industries where there was a large number of small firms with a wide variety in the nature of the business conducted. The report added that the RHA had accepted the points made by the Board.
Since then, as I said, there has been much discussion on promoting greater accounting responsibility—both internally by co-operation between operators and externally by engaging professional advice such as that available from Inter-Firm Cost Comparisons.
Change needed On May 17 I reported on the paper given by Mr. G. A. Bartup, director of Trevor Williams (Removers) Ltd., Hereford, at the annual conference of the National Association of Furniture Warehousemen and Removers in Leicester. He emphasized that a change in the costing system used by re
movers was vitally needed. But this, he contended, could not be a "do-it-yourself" operation—experts would have to be called in for their advice. There was a need to instigate costing research and, Mr. Bartup suggested, thoughts should be directed to provide a uniform accounting system.
The problem of achieving greater operational efficiency by having available more comprehensive and accurate costings is not, of course, limited to the UK. It is therefore a useful exercise to examine the progress made in grappling with this problem elsewhere.
Slow progress
It could reasonably have been hoped that by now the European Economic Community would have assembled and published road transport operating costs so as to provide an invaluable guide to operators in the member states. But progress in all aspects of transport co-operation has been slower than was hoped.
Therefore we must look at the situation in the United States.
As a recognized leader in the adoption of the competitive system in industry and commerce one might, at first, reasonably doubt whether such a society would be prepared to exchange any information with their competitors. This attitude is in fact a stumbling block to the development of similar schemes in the UK. But paradoxically, for a country dedicated to free enterprise the American trucking industry is in some respects more regulated than in the UK. Particularly does this apply to the disclosure and publication of costs.
The extent to which such publication has developed is shown in the publication of the 277-page Trinc's Blue Book of the Trucking Industry by Trine Associates Ltd., Washington DC 20005. It gives vital information about the largest trucking firms in the United States including balance sheets, revenues, expenses, equipment, manpower, ton-miles and inter-city statistics.
The 1967 edition, which incidentally is the 23rd year book, is based on selected information from the annual reports filed with the Interstate Commerce Commission by Class I and Class II Motor Carriers of Property for the year ended December 31, 1966. Resulting from the Motor Carrier Act 1935, each regulated motor carrier holding inter-state operating authority is required to file a calendar year report of operating results and financial condition.
Quoting from the introduction to this book, carriers with gross annual revenues averaging more than one million dollars over a three-year period (Class I) and carriers with gross annual revenues averaging between $ 200,000 and one million dollars (Class II) file comprehensive reports with many supporting schedules such as the balance sheet, statement of income, operating expense, and related inter-city freight statistics. Companies with gross annual revenues averaging less than $ 200,000 over a three-year period (Class III), file brief statements of income and expense plus a balance sheet if revenue from motor carrier operations exceeds $50,000 annually.
From only a first examination of the contents of the comprehensive book it is not surprising to read that even the computer application to data preparation and printing is in the continuous process of improvement so permitting, as one example, the derivation of "unit costs" of operations for selected general freight carriers and to enable the handling and storage of a substantially increased amount of data for all carriers.
Alongside, a random extract of one page from this year book is given as an indication the amount of information readily available to subscribers to this year book. The contents include five pages of explanatory notes followed by a description of the geographical and territorial groupings. There then follows the summary tables, sections on management and control, basic accounts and statistics and an index of about 3,000 carriers.