Problems of the
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HAULIER and CARRIER
A Striking Example of the Way in which Some Hauliers Overlook Vital Items of Cost Accounts.
AT the moment of writing this article the daily papers are full of news about a Stock Exchange sensation. I gather that proceedings have been taken to stay any dealings in the stocks and shares of no ' fewer than seven different undertakings, and that this action Is the outcome of a series of fluctuations in the market value of the shares in those concerns, culminating in losses totalling some £8,000,000.
It is idle to State that the matter is one which is of concern only to those who are in possession of shares in the companCes that are concerned, for that is not so. The repercussive effects of that type of collapse are such that hardly any business man can entirely escape them. At the same time, I shall not devote this, or any other article of this series, to endeavouring to discover how far the average haulier is likely to be concerned. I am using the incident,. indirectly, to draw a moral,
Invaluable Guidance for the Haulier.
It is more than likely that many of my readers— those who have not of late been snaking such ample prefit from their own businesses as they have thought themselves to be doing hitherto—will, on reading of these occurrences, console themselves by reflecting that even the giants of the commercial world slip sometimes and discover that their well-laid schemes have gone a little awry. Hauliers of that mind will be saying, "Well, if people like that can go wrong, there is some excuse for me." Now, that is where I disagree. These highly placed financiers have not had the benefit of the tuition that is provided for readers of The Commercial Motor. They do not have explained to them, week after week, the methods whereby they may calculate their prices and so order their businesses as to avoid the pitfalls which await the unwary. Being without such guidance, there is, in my view, some excuse for them, and, of course, their losses are, after all, only in proportion to the magnitude of their dealings. Their failure, had their commitments been only of the dimensions of the average haulier, would have passed entirely unnoticed by the committee of the Stock Exchange.
I expect that not a few of my readers will be rather surprised at this miniature tirade, this storm in a teacup which I am raising about the troubles of others. I had better explain myself.
It is the outcome of an inquiry with which I have had to deal this week. It comes from an old reader of these notes, one with whom I have been in correspondence, again _and again, for nearly a year. He is not, therefore, in a position to state that he has not read any of the warnings which I so frequently give, anent the importance of not overlooking any of
the items of operating cost. So far back as last December he wrote to rae for a further copy of The Commercial Motor Tables of Operating Costs, saying that he had mislaid his previous copy. At the same time I gave him some figures concerning the running of his 5-ton lorries.
Cost of Operating a Five-tonner.
During June of this year I had an inquiry from him, also about the cost of operating 5-ton lorries. He had a contract, he told me, for the use of a vehicle of this capacity. It involved a mileage of 100-120 miles per week. The petrol consumption, he advised me, was from 25-28 gallons per week, and the oil consumption a little under a gallon for the same period. The work upon which he was engaged with this particular vehicle was regular, occupying 5i days per week and 81 hours per day. The wages of the driver amounted to 65s. per week and there was no need for a second man. At the time of writing, he informed me, his price for the contract amounted to 55s. per day, but there was a risk of a competitor offering to do the job for 50s. He wanted to know if he could lower his price sufficiently to meet that competition and still make a reasonable profit.
I replied that, in my opinion, the contract was only
Just paying at 55s. per day. The gross profit, I advised him, was then only £4 1s. 6d. per week. At 50s. per day that gross profit would diminish to 12 14s., which I considered to be insufficient.
Now comes the "supplementary question," and,. for the first time in my life, I have sympathy for those B39 of His Majesty's Ministers who are so inclined to resent such questions. My correspondent says, "I should be greatly obliged if you would state how you arrive at your figures. The actual cost of working the lorry is as follows (the figures relate to a week's running) : "Petrol, 30 gallons at Is. 4d. per gallon, £2. Oil, a gallon at 3s. 3d. per gallon, 3s. 3d. Wages, ±3 5s. Garage, 10s. Insurance 10s. Sundries, 1s. 9d. Total cost of operation, £6 10s.
"The revenue, at 55s. per day, 5,1 days per week, amounts to £15 2s. 6d. per week, so that, on the basis of cost given, the balance-gross profit-would appear to be £8 12s. 6d.
"I quite appreciate," he continues, "that there are still other items to be taken into account, but, taking them at, say, £1. 12s. 6d. per week, there still remains a net profit (the italics are his) of about 17 per week."
• I will state my reply. The items of cost of operation of a 5-ton lorry, according to the basis of calculation, are as follow (I am assuming that the weekly mileage and the petrol and oil consumptions are still as stated in your previous letter. The figures relate to a period of one week) :-Petrol, 36s.; oil, 5s.; wages, 65s.; tyres, 10s.; maintenance, 20s.; depreciation, 20s.; licences, 22s.; rent and rates, 13s.; insurance, 10s.; and interest on first cost, 20s. The total is, therefore, £11 is. per week. Deduct that amount from the revenue for the same period, namely, £15 2s. 6d. per week, and the balance, which is gross profit, is £4 is. 6d., as was stated in my previous letter.
"You will obsetve," I added, "that although my figure for the cost of petrol is a little lower than yours, those for oil and garage rent are slightly higher, and the sum of the three is practically the same. The items you have overlooked are tyres, maintenance, depreciation, licences and interest on first cost. "You must also note," I pointed out, in conclusion, "that these figures are for the operating cost only of the vehicle. There is no allowance for the expense of running your business."
Now, what is to be done with a man who goes so far astray as this in his reckoning? That he should overlook "interest on first cost" might be understood: there are still many who refuse to regard that as an item of expense. That he should omit to take depreciation into account is also, to a lesser extent, understandable. Motor lorries, like ourselves, age imperceptibly, and he may have imagined that it was going to last his lifetime. (It is of good make.) There is much less excuse for his overlooking "maintenance," unless he imagined that he had covered that in the is. 9d. he set down as "sundries." What, however, is to be done with a man who overlooks the cost of tyres and, more inexplicable still, fails to remember the cost of licences? The last-named item alone accounts for 22s. per week of his profit."
Readers of this paper have no excuse whatever for omitting to take note of any of the items of operating cost of their vehicles. They have but to put themselves to the trouble of writing a postcard to the Editor, and to the expense of the penny postage stamp, which will frank that card to 5-15, Rosebery Avenue, London, E.C.1, and they will receive, by return of post, a copy of The Commercial Motor Tables of Operating Costs. Those Tables give average figures for the cost of operation of every type and size of commercial-motor vehicle. Their principal use does not, however, to my mind, lie in the figures that they give, but in the fact that they enumerate all the items of cost which must be taken into account in assessing that cost. With the figures there may be disagreement. Indeed, there should be disagreement with them, for it is always to be hoped that the costs of the individual are better than the average which is set forth therein. S.T.R.