Preparing an Estimate
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Continuing His Series of Articles Giving Guidance to Potential Entrants to the Industry, "The Commercial Motor" Costs Expert Describes Different Methods of Presenting Quotations to Customers to Accord with the Nature of the Traffics Offered
IN my previous articles, T dealt with four methods of making estimates for contracts. The first of these was based on time, the second on mileage, the third on time with a stipulated mileage, and the fourth on a combination of time and mileage.
Before proceeding further, I must issue a warning applicable to the fourth method. The procedure, when making the estimate, is to take the time and mileage figures from "The Commercial Motor Tables of Operating Costs." The operator is well advised when preparing his estimate to quote on a lump-sum basis, and should avoid making out the quotation on the basis of time and mileage.
For example, if the estimate of the charge relates to a job which will take 5 hr. and involves 40 miles of running, the haulier may well find that the charge should be 5 hr. at 7s., which is 35s., plus mileage at Is., which is 40s. The total is 75s. The quotation should be made out at 75s. If the operator is misguided enough to make out his quotation at 35s. for time and 40s. for mileage, the customer may assume that the charge is either one or other of these two amounts and be considerably disgruntled if he has to be told that the rate is the sum of the two.
I have given examples of the applications of the first, second and third of these methods. When referring to the third, I stated that it was the basis of charges for the hire of cars for town use. It may be useful to deal with that branch of haulagp even if it is hardly proper to refer to it as such.
Time and Mileage Charge A basic charge for this kind of work in relation to cars of 12 h.p. is made up, according to the Tables, of approximately 6s. per hour plus 9d. per mile. A practical application of those figures relates to the hire of a car for a period of 2 hr. with a maximum mileage of 10. The charge, according to the above figures, is 12s. for time and 7s. 6(1. for 10 miles at 9d. per mile. The total is 19s. 6d., and I should, in such a case, have recommended the operator to charge £1. For 8 hr. and a maximum of 50 miles, the charge should be made up of 8 hr. at 6s. per hour-48s. phis 50 miles at 9d. per mile, making 37s. 6d. The charge to be made to the customer is thus £4 5s. 6d.
Now let me justify those charges by assessing the cost B24 of operating the vehicle. As far as the running costs concerned, the items are: fuel and lubricants. 2111. per r tyres, id.; maintenance, Id.; and depreciation, 2d. total is 6id. For the standing charges take taxation, 4s. week; wages, £7; garage rent, 8s.; insurance, fl; inti on first cost, 9s. The total is £9 Is. per week.
If I assume an average of 400 miles per week, the of running costs only will amount to £10 8s. 4d.; that it 400 miles at 61d. per mile. The total operating cost week is thus £10 8s. 4d., the running costs, plus £9 is the standing charges, making £19 9s. 4d. Establish' charges are fairly heavy in work of this kind and I sill £3 10s. 8d. to make a round figure of £23 as the weekly of expenditure.
Weekly Profit Figure For the sake of argument, I will assume that the r on a venture of this kind should be £7 per week. ' means that the revenue per week must not be less than That is for a weekly mileage of not more than 400 a working week of 40 hr.
To obtain that revenue, the figures quoted earlier rec a little modification. For the 2-hr. period the ch should be 30s., for which the hirer is assumed to covered 20 mites: if he has not used the car for more 10 miles, the operator makes a little extra profit, I( mately by the way, as there must be a minimum chari justify the use of the car at all.
In the case of the 8-hr. hire, the corresponding fil according to the data just enumerated should be multiplied by 15s., which is £6. That includes mile to 10 per hour.
The reader who is interested may work out the II for the 12-hr. hire himself, but it should be understood the charges thus calculated relate to work done in daytime. Evening time is regarded as extra to the 41 and 400 miles per week. It is now necessary to appre that the vehicle has, during the day, already earned suffi to discharge the overheads and pay the standing cha so that it is now only necessary to provide for the run coats plus the wages of the night driver.
Probably the fourth of the methods of charging wh described will have the most interest for my readers, because it is the one which most directly applies to the conditions under which a jobbing haulier works, a man with perhaps one or two informal contracts which still leave him time to engage in occasional jobs during the week. He is, of course, always keenly on the look-out for opportunities which will enable him to fill up the full number of hours per week that are necessary to cover some of his fixed charges. It is then that this fourth method of assessing charges will be most useful to him.
According to this method, the haulier must get firmly fixed in his mind what his vehicle should earn per hour independent of mileage. He must also remember that his running costs are per mile. Then, when a job offers he can reckon how many hours he will take to execute the job and how many miles he will have to cover. From that he can make a fair estimate of his minimum charge.
I will take, as an example, a haulier operating a 5-6-tonner. He has contracts which will keep him busy two days per week and relies on odd jobs and occasional contracts to occupy the rest of his time.
In my previous article I showed that the basic figures to use when preparing a contract were 7s. per hour and Is. Old. per mile. (These figures refer to a 5-6-ton oiler.) The weekly revenue from that vehicle should be 44 times 7s„ which is £15 8s. plus Is. Old. for every mile run.
Revenue from Work
Now suppose that the two contracts upon which he is engaged each week take up only 24 hr. and 48 miles. Revenue from that work is only 24 times 7s., which is £8 8s. (for time), and 48 miles at is. Old., which is £2 1 Is. The charge must therefore be £10 19s., and, in the absence of any other work, that is the amount of the weekly earnings.
But his all-in costs of operation, again I must refer to my previous article, amount to £9 10s. per week for standing charges, plus £3 for establishment costs in the same period; that is without turning a wheel. He is liable for that amount, £12 10s., but his earnings amount to only £10 19s. He is therefore operating at a loss. He has also, in the execution of the two small current contracts, run 48 miles, the actual cost of which is approximately 9d. per mile, or £1 16s. Altogether, therefore, he has to find £14 4s., which is £3 5s. more than he is earning. The need for additional work is thus self-evident.
Now suppose, while he is in that not very enviable position, that he is offered another small contract for the conveyance of oil in barrels from London to Lincoln and to bring back a load of empties. The distance is 270 miles and he estimates that the job will take two days. The actual time will probably be 20 hr., 18 for travelling and the rest for loading and unloading.
Little Extra Earnings
Twenty hours at 7s, per hour is £7. The mileage is 270, but at what rate? If he charges Is. Old. per mile, the minimum figure from the Tables, he will earn only the minimum profit stipulated in those Tables. The proper thing to do in a case like this is to endeavour to make a little extra profit on the mileage charge and I should recommend, as a first quotation at least, that the mileage be charged at not less than Is. 3d. At that rate, the mileage charge totals £16 17s. 6d. His charge, as quoted to the potential customer, will be £23 17s. 6d. Here is another example of the use of my fourth method. It is the calculation of the rate to be quoted by coupling together the rate per hour for the total time taken over the job, plus the charge per mile for each task involved. The sum of those two figures, plus overheads and profit, is the figure which should be presented to the customer by the haulier.
It is better to quote in that way and explain the method of arriving at the figures quoted rather than to put the hourly and mileage charges before the ,customer in the antidipation that he will prefer it that way so that he can see what he is getting for his money. Actually, the customer is seldom in need of the explanation suggested; he probably would not understand it anyway, neither does he serve any useful purpose by asking for it. His concern is the cost of the transport, and he rarely considers it worthwhile to ask how the charge is made up.
Another good example of the use of the time and mileage method of assessing a rate concerns the, carriage of bricks. The actual inquiry related to the conveyance of bricks over a 5-mile lead, and the operator proposed to use a 6-ton pelrol-engined lorry with a trailer. He asks: `' What should be the charge assuming that the trailer is used all the time?"
As usual, I have to make certain assumptions as the letter does not provide all the information I should like to have. There is nothing about the method of loading; nothing to indicate whether a mate is employed when the vehicle is used solo, as I am sure will often be the case, and nothing stated about the facilities provided at the unloading end of the journey.
Fixed Expenses
First as to the fixed charges. According to the Tables these are: standing charges, £10 15s. 6d.; establishment costs, £4; and minimum weekly profit, £7 5s. The total is £22 Os. 6d. Assuming a 44-hour week, the charge per hour should be 10s. The mileage charge, also taken from the Tables, must be not less than Is. 7+d.
I want to know something about the time needed per journey, especially the idle time, while the vehicle is being loaded and unloaded. As far as the terminal delays are concerned, most hauliers of experience have this information by them in respect of the various classes of material they are accustomed to move. In the absence of such information, it is usually available either from a friend in the business or, with approximate accuracy, from the man who has asked for the tender. The haulier will, naturally, be somewhat chary about the figures put forward by the customer and will most probably take the information with a grain of salt.
In this case, I am told, the bricks are collected from a brickworks and taken direct to the building site, and on inquiry I have found that in similar circumstances f hr. is requisite for loading and 2 hr. for unloading. That is for 10 tons of bricks. The 10 miles of running will take up another hour and the total time for the round trip is seen to be q hr.
Travelling and Terminals
The time charge-which must include travelling time as well as terminals-is 4+ times 10s., which is 45s, per load. The mileage charge is for 10 miles at is. 71d. per mile, which is 16s. 3d. The total is £3 Is. 3d., and for a 10-ton load that is 6s. l+d. per ton.
There are some special features about this method of charging: it is easy for the haulier to modify his rate at short notice whenever the conditions change, as they may well do. Suppose, for example, the traffic is diverted and the bricks taken to a new destination. Assume that to reach the new destination the lead becomes 9 miles instead of five. The haulier, with the foregoing figures at his disposal, can easily alter his terms accordingly. He has only the additional 8 miles to consider. The extra distance will increase his time charge by three-quarters of 10s. per hour, making it 52s. 6d. He must also add eight times ls. 7+d. to provide for the increase in the distance, and that is 13s. That makes the new mileage charge 29s. 3d. The total is £4 Is. 9d., or 8s. 2d. per ton. (The results arel to the nearest penny.) It may also happen that the haulier receives an offer of a load of machinery weighing lo tons to be carried from London to Birmingham, which traffic he is able to deal with concurrently with the bricks. On the assumption that the distance is 240 miles and that half a day is needed for loading and unloading, the round trip will take two days of II hr. each. The rate can be assessed in this way. For the total time of 22 hr., the charge will be £11, whilst the mileage charge will be for 240 miles at Is. 7+cl. per mile£19 10s. The total comes to £30 10s., or £3 Is. per ton, S.T.R. A35