Problems of the
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HAULIER and CARRIER S.T.R." Interviews a Haulier Who Appears to. be Losing on the Swings What He Gains on the Roundabouts ,O 0 NE of the reasons why it is so necessary to check rates on a proper basis of cost is that, without some approximate knowledge, costly misconceptions are likely to arise. I called on one of my haulier friends the other day, and in the course of a conversation with him as to the progress he was making I found that, whilst on some work he appeared to be making a reasonable profit, he was throwing it all away on another job.
Yet, had the conditions been slightly different, he might have been making a profit on all of the work. A little knowledge, not so much of his actual costs, as of the way in which time and mileage are inter-dependent and equally essential in calculating a profitable rate, would have avoided the loss. Most of the work upon which this man was engaged was of the jobbing class. Much of it was town work, but now and again he took a run into the country with a load. This is a common form of employment for hauliers, and it is on that account that some reference to this man's procedure and .his mistakes is so important.
I had called to see him on request. There seemed to be some prospect of his losing one of his regular contracts to a competitor who was cutting his rate. Before doing anything in the matter be wished me to check his costs and charges to discover whether it might be possible for him to lower his rates and still earn a reasonable profit. The vehicle that he was using was a 1-tom-ter of well-known make, somewhat aged, perhaps, but recently thoroughly overhauled by the manufacturer and in excellent condition.
"What are your charges?" I asked.
"We charge 4s. per hour for the town work and Gd. per mile run for work which takes us out of town," he replied.
Is the vehicle fully occupied?"
"Yes, generally speaking."
"How much of the work is town work and how much out of town?"
"It varies, and I don't think I can give you definite figures for the proportions," he answered.
"Perhaps you can tell me what your average weekly mileage is?"
"It varies considerably, but usually lies somewhere between 200 and 300 per week."
" Perhaps it will be as well, then," I suggested, "if I take those two lirniting figures and see what results we' get. Have you any idea of what 'yourown costs •of
operation really 'are?"
"I have some figures which will be a help," he answered. `_I paid £240 for the lorry, a set of tyres last's me about 20,000 miles and costs £30. The tax is £20 per annum, the insurance premium £20 15s. Bd., and I pay the driver £3 a week."
"That's something to be going on with, at any rate," I said, " but, funnily enough, you have left out the item which most owners mention."
"What's that?"
"Petrol consumption."
"Oh yes, of course. The average is 15 m.p.g. and I buy at la id. per gallon. I use a quart of oil a week and pay 1s. 3d. for it"
"What about maintenance?"
"Tin afraid I've not kept proper figures for that."
" You won't mind,, then, if I take them from The Commercial Motor Tables of Operating Costs?" think that would be a good idea."
" Well, then, I make out that your actual costs are : petrol, 0.g7d. per mile; oil, 0.07d., if you do 200 miles per week, or 0.05d. if you do 300. If we divide £30, the
cost of a set of tyres, by 20,000, we get 0.36d. as the cost per mile for tyres.
"That's rather interesting," I continued. The Com mercial Motor Tables give 0.35d. Now we are going to
take the figure of 0.55d. per mile for maintenance from the Tables. There still remains depreciation. You gave £240 for your lorry, less £30 for tyres, £210. If you depreciate that over 150,000 miles, which I think is fair, you get 0.34d. That, again, compares closely with the figure from the Tables--0.36d. The total of running costs is 2.19d. per mile for a 200-mile week and 2.1.7d. per mile for a 300-mile week." (The figure in the Tables
That means I'm running the lorry just about as I ought to rim it, does it?." he asked.
• "It means that your figures are average and, considering that agreat deal of your work is short-distance haulage in and around town, I think you are, generally speaking, to be congratulated on the results. Your running-cost figures are quite good. Now for the standing charges. The tax, £20 a year, is Ss. a week ; insurance, 8s. 4d..; wages, £3; garage rent—you didn't say anything about that!'
"No, the reason is that we have a large warehouse, part of another business which my brother and I run. We keep the lorry, there and don't reckon to charge for garage accommodation ; the warehouse space is not required for anything else."
"But suppose your other business became more active and you wanted that warehouse space. You'd have to find garage room then, wouldn't you?"
" Yes, certainly" "In that case, what would you do : increase your rates to meet the extra cost, or allow your profits to diminish accordingly?"
" Hni.! I shouldn'ttlike to have to do the first and I should netwantto do the second."
"No, I see your-point, %it if we want to get at a fair basis or costs and charges we ought to include something for garage rent. Suppose I say 5s. a week—or 4s. 8d., which will make the total even money?"
"Very well."
"There is now only interest on first cost to consider, and for that we will.
take ,8s. The total of your standing 'charges is £4 4s. per week. I think you ought to add at least 16s. a week for establishment costs, so that there are £5 a . week fixed charges before you are making a real profit. If your vehicle does 200 miles a week, you must add 200 times 2.19d. (36s. Ocl.) to that £5, and £0 16s. 6d. is your total cost under those conditions. For 300 miles a week add 300 times 2.17d. (54s. 3d.), making £7 14s. 3d. •
Now at 4s. per hour yotir total revenue for a 48hour week is £9 12s., which means that if you are running 200 Miles a week you are making £2 15s. 0d. per week profit, and if you are running 300 miles a week your profit is Et 17s, 9d. That is not bad, as things go, for a 1-tonner. It looks as though you are making over £2 per week on the 4s.-an-hour job, but not so nauCh when operating for 0d. a mile."
" How's that?" he asked, I mast reserve for my next article the answer to that question.