How to Make a Charge
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/N my article in The Commercial Motor dated February 18, I set out some information relating to the timesi.taken for loading and unloading a variety of traffics. When a haulier is asked for a quotation that is the information he must have. The basis of rates assessment is time plus mileage. The time is made up of two parts: travelling time plus terminal time, the time spent in loading and unloading the goods plus, in many cases, delays because of congestion or other factors at either end of the journey.
It is rarely possible to discover what the delay is likely to be; only actual experience can tell. Travelling time can as a rule be assessed within certain limits of accuracy. The mileage factor, in most cases, can be discovered by reference to " ' The Commercial Motor' Tables of Operating Costs."
It has been suggested that it would be useful if I were to follow up that article by one showing how the information should be employed, taking the case of a small operator, new to the business of haulage. The reader who has asked for this to be done, himself a haulier of some experience, tells me he found the problem quite difficult This is because there are two unknown factors: the size of the vehicle to be put on the job, and the quantity of work which can be done per week by that vehicle. In dealing with a problem in which there are two variables the proper method is to make an assumption relating to one of them and deal with the matter on that basis, thereafter taking the other variable for granted and resolve the problem under those conditions.
Comparative Results
I propose then, in this case, to take a particular traffic and find out how the size of the vehicle affects the rate. By varying the amount of work that the vehicle is supposed to do per week and taking out figures for cost accordingly, I shall give comparative results.
For my example of traffic I propose to take hay in trusses of 4 cwt. which, with three men at work, can be loaded at the rate of 2 tons per hour. Unloading does not take as long, say about 3 tons per hour.
As a preliminary to assessment of the rate, I should state that of the three men only one is paid by the haulier. The farmers at each end of the journey are willing to send a couple of men over to help in both loading and unloading. If they do not, or if the men are not available, there is another headache for the haulier. For the time being I shall assume that the men are available and that there are no terminal delays due to shortage of labour.
For the vehicle I shall take, in the first place, a 5-ton petrol-engined machine. It can carry only 3 tons of hay, n32 that being all it can hold and still keep the load within bounds as. regards height.
The vehicle itself costs, according to the Tables, £9 4s. 8d. per weekfor upkeep alone; that is to say, for licences, levy, wages, rent and rates of garage, insurance and interest on first cost. It will be observed that there is no mention of any of the items of running cost. The vehicle has not yet, as it were, turned a wheel. If, therefore, the 5-tonner we are considering is regularly engaged, week by week, on work involving art average of 44 hours per week, the cost per hour is 1/44 of the above sum.
However, in the interim between printing the Tables and today, there have been, in effect, two increases of wages, one of 3s. per week and the other (not yet actually confirmed) of 10s. That means, in total, an addition of I4s. 6d. (covering extra expense on account of provision for holidays With pay, etc.) so that the weekly cost is about £10, equivalent to 4s. 61-d. per hour.
Waiting Time
If now I consider establishment costs and profit and assume, as I have been told to do, that the haulier aims at a profit of £7 per week and that his establishment costs are £3 per week, I find that is equivalent to another 4s. 61-d. per hour. The charge for waiting time must be at the rate of 9s. Id. per hour.
Now assume that the lead mileage is 10 (20 miles out and home). The vehicle will probably take an hour or so for travelling time. That accounts for another 9s. Id.
The total time for the journey will be 3+ hours, made up of 13 hours loading, at 2 tons per hour; 1 hour for unloading at 3 tons per hour, and a further hour for travelling.
There is, however, still the running cost to be taken into consideration. According to the Tables, a 5-ton petrolengined vehicle running about 400 miles per week will cost 8.87d. per mile. Corrections have to be made, however, on account of recent modifications in the cost of individual items, as follows; Petrol has increased by Id. per gallon, which means an addition of about 0.07d. per mile; lubricants are dearer by 0.01d. per mile; and tyres by 121 per cent., about 0.13d. per mile. That makes the current running cost per mile to be 9.08d. For the sake of simplicity I shall take that to be 9d.
For a journey totalling 20 miles, the total cost must proville for 31hours at 9s. Id. per hour, which is £1 I Is. 91-cl. plus the cost of 20 miles at 9d. per mile which is I5s.
The total charge must, therefore, be £2 6s. 91d. and that is for 3 tons, so that the rate must be 15s. 74d. per ton.
In a case,where the lead mileage is 20 (40 miles out and home), a similar calculation is required. This calculation
will demonstrate that the charge per ton for a lead mileage of 20 miles is not just double the charge when the lead mileage is 10. I have found that some correction of ideas like that is advisable.
First as to the time element. The times for loading and unloading will remain the same, namely I+ hours for loading and 1 hour for unloading. The travelling time for a 20-mile lead will not be just double the time needed for a 10-mile lead. It should be not more than 1 hours and the total time for the round journey will now be 4 hours. The total charge must therefore be for 4 hours at 9s. Id. which is £1 16s. 4d. plus for 40 miles at 9d., which is £1 10s. Grand total, £3 6s. 4d., or £1 2s lf-d. per ton, as against 15s. 73d. for the 10-mile lead.
For 30 miles, the travelling time is 21 hours and the total, 41 hours, is to be charged at 9s. Id. per hour making £2 3s. 2d., plus 60 miles at 9d, which is £2 5s. Grand total £4 8s. 2d., or.,£1 9s. 3d. per ton, comparing with 15s. 73d. over a 10-mile lead and £1 2s. 1 Ifd. over a 20-mile lead. I stress these rates for the benefit of the newcomer who otherwise might make the mistake of thinking that the rate for a long-lead, like 30 miles, can be divided by three to get the rate for a lead of 10 miles. One third of £1 9s. 3d. is 9s. 9d., hardly more than the rate of charge per hour.
It may be as well to point out that the method of calculation is to take the time for loading and unloading, then that for travelling, and to charge at the basic price per hour, which should include establishment costs and profit as well as the standing charges. To that charge must be added the running costs of the lorry for the distance travelled, that is the total miles run out and home.
To take one more instance before varying the conditions of the problem, I will assume the lead distance to be 50 miles, so that the total distance, out and home, is 100 miles. In that case, whilst the times for loading and unloading are still the same, that for travelling can be 34 hours and the total time involved in the round journey is 6 hours, which, at 9s. Id. per hour, is £2 14s. 6d. The running cost at 9d. per mile is E3 15s. and the total charge must be £.6 9s. 6d., or £2 3s. 2d. per ton.
I do not think that hauliers will be likely easily to get the above rates, and there is little traffic of the kind we are discussing for distances beyond about 20 miles. It is nevertheless only right that I should point out that the conditions have assumed are quite favourable, particularly in regard to the times, which may with ordinary luck be cut.
Shorter Working Week
One thing must, however, be realized. I have taken the standard week of 44 hours, which I am bound to as the figures in the Tables are based on that. What is going to happen when, as is easily conceivable, the haulier is able to obtain, on an average, only 30 hours work per week for his machine? In that case his costs are proportionately increased.
The total of standing charges remains as before, namely £10 per week, and that amount spread over only 30 hours is 6s. 8d. per hour instead of 4s. 6441. For the sake of argument I will take it that the establishment charges are less, £2 instead of £3, and,that, having' in mind the shorter period for the week, the haulier is content with £5 per week profit instead of ET The total of these items, standing charges, establishment costs and profit, is now f17 instead of £20. The rate per hour, however, is now 1 Is. 4d. instead of 9s. Id.
Taking again the case of the 10-mile lead, the calculation of the rate per ton works out as follows: Total time, loading, unloading and travelling, 31 hours, £1 19s. 8d. Running cost, as before, 20 miles at 9d. per mile, 15s. Total charge, £2 14s. 8d. or 18s. 3d: per ton. In the same way the charge, when the distance between terminals is 20 miles, may be shown to be £1 7s. Id. to the nearest penny.
Probably a fair estimate of the working period of most haulage vehicles of this kind is around 36 hours per week. On that basis, with the standing charges remaining at £10 per week, the amount per hour on account of that item is 6s, 8d. Reducing the establishment ,charges to £2 10s. and budgeting for a profit of £4 10s. the total of those two, £7, leaves the incidence per hour at 5s. 3d., and the basic charge per hour at I2s.
Before proceeding to the discussion of the other difficulty which I said would arise in dealing with a problem of rates assessment, I should like to point to one or two facts which must be kept in mind by all readers. They are matters which, from time to time, have had reference, and which should be known to all who are acquainted with the Tables.
First of all it should be remembered that those costs which are given in the Tables arc average costs. That is to say, they are compiled from data which include not only figures relating to costs of vehicles which have put up good performances and have been economical in every department of operation, but also to those to whom the opposite applies-vehicles that, either because of the conditions under which they have to operate, or because of lack of care, are much more costly to run than would normally be the case.
It is therefore up to the reader to endeavour to obtain particulars of his own costs and, having got them, to apply them to whatever problems are discussed here, and to make corrections accordingly. Even when the reader may not have definite data to work upon, it may well be that he is aware that his actual expenditure is greater or less than is quoted in the Tables.
So far as running costs are concerned, that may apply to every item. His vehicle may consume more or less petrol than the average and his expenditure on fuel and lubricants may vary accordingly. He may be careful with his tyres, regularly examining them each evening and removing flints. He may check the alignment of his wheels often enough to ensure that he is not suffering from undue wear of his tyres because of faulty alignment and thus, on the whole, effect such economies as will reduce his tyre costs below the average. (I have known tyre costs to be halved by just that practice and no more.) On the other hand, the work on which his vehicles are engaged may involve him in taking his vehicles on roads where his tyres arc badly cut, so that his tyre bills are increased. His arrangements for maintenance may be more economical than is possible on the average, whilst as for depreciation it may be that, in the first place, he has bought a particularly good vehicle, and, by taking good care of it, extends its useful life beyond the normal period.
S.T.R.