Bigger Fleets Mean Increased Overheads
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Solving _the Problems
• of the Cart*
MY haulier friend, having purchased an additional fleet ot four vehicles, which brought his fleet up to 10,
• soon found, as I showed last week, that unless he made some drastic alterations in his methods of administration, he wasgoing to derive no advantage whatever from his expansion. The crux of the whole business, as he and his partner soon realized, was loading. Unless each .vehicle be carrying-a minimum tennagelper week, and making three teturn journeys per Week, the profit earned was insufficient, having in mind the cost of operation.. •. "
Indeed, it immediately became apparent that, with no znore provision-for load finding than that available for the six machines," the profit earned by the 10 was-only the same, approximately, as what had been gained by the six.
Drastic alterations, destribed in the previous article, were, therefore, made. _The first result was an increase of more than 80 per cent in the, establishment costs, which rose from £1,800 per annum to £3,280. The position as regards net profits was, therefore, for a time, worse than before.
To' qiiote figures: With the original provision for load finding, i.e., all the organization concentrated at one eri1 of the route, profits were £75 to £105 per week for average rates per ton of 30s. and 32s. respectively. With the new organization, with offices, depot and staffs at two main termini, they fell to•£45 and £75 respectively.
• However, as time went on. the effect of the re-organization began to be felt—in two ways. The back loads increased and, because of the more effective supervision at the second terminus, the turn-round was accelerated. '
Before the improvement was effected there were four vehicles running an average of 1;200 miles per week and carrying 40 tons per week each; four vehicles running 1,000 miles per week and carrying, on the average 30 tons each, and two vehicles 800 miles per week and 20 tons each.
Alter six months or so,' this became seven Vehicles averaging 1,200 miles per week each, with 40 tons of traffic and three cunning 1,000 miles and carrying 30 tons.
Cost of Cperating Seven Machines
The operating costs of each of the seven vehicles comprised the following: Standing charges £9 per Week, driver's subsistence and expenses £2, running costs, at 6d. per mile, £30, total, £41. For the remaining three the standing charges averaged £8 10s., driver's expenses £1 10s., and running costs £25; total, £35.
• The total operating costs of the 10 vehicles thus came to £392. To that must be added the establishment costs, which were shown at the close of the previous article to be £6 lis, per week per vehicle, making £65 .10s. for the fleet. The total cost per week is, therefore: £457 10s. and a minimum reasonable profit is 20 per cent.. on cost— £91 10s. per week—so that the revenue must be, at least, £549 per week':
The tonnage carried is 350, so that the minimum average rate must be approximately 31s. fid. per ton. At 30s. per ton the ,profit is £67 10s. per week, lets about 45 for clearing-house commissions—£62 10s. At 32.s. per ton the profit is 4102 1.0s., or £97 net, The partners made a comparison, on a profit per vehicle basis, of the earnings with six vehicles as against those with 10. The former, at the 30S. rate, made 4:48, or £8 each machine, whereas, the latter made £62 10s. or £6 5s. per vehicle. At 32s, per ton the corresponding figures were £70, or £11 7s. per vehicle, as against £97, Or less than £10 per vehicle. " This won't f'fb,'! said one, " we're going backwards. Have we tbo many machines ?"
" It's the overheads," replied the other. " We could -run more vehicles ,without much of an increase in our establishment costs."
In the end, the latter view prevailed, and the partners began to look around for another business for sale. Eventually, they found one, with six machines, It had its disad• vantages, inasmuch as the routes over which the vehicles operated were new and strange to our friends.
Drawing a line through their previous experience, the first thing they deticled Was that they must open another
depot, this one at the new--.and third—terminus. They• calculated that, by. getting hold of a good traffic manager and agent, giving him a fair salary plus a small commission on traffic obtained, as well as reasonable expenses, and providing him with a small office, they need spend no more than 4800 per annum at that end, but they allowed for £I,000, including extra charges involved at headquarters. That incleased the total of establishment costs to £4,280, which is equivalent to 2267 10s. per vehicle, or £5 7s. pei
week, or 13s. 4irl: per week per ton pay-load. As this compared with £6 Ils, per week, and 16s. 6d. per ton, when 10 vehicles were operated, they felt that something at least had been gained.
Unfortunately, another snag arose. The route over which the new vehicles operate necessitated the negotiation of Shap, in Westmorland, and it was utterly impossible to make three return journeys per week on that service, apart from the fact that much of the traffic was to and from the docks, where delays Were numerous as well as vexatious.
To offset that, however, there was a.:n -improvement in the rate: Over this route it is 35s. per ton. Moreover, it was easier to ensure full loads in each direction, .
At any rate, they persevered and, after a few months, when things had settled down and the new agent had. found his feet—the partners went into.figgres again. In the first place, they hadbeen able to keep'up the standard of operation and the efficiency of loading of the 10 vehicles still operating over the original route from A. the headquarters, to B, 200 miles to the south. The profit from that service was now increaseda little, by reason of the cut in overheads per Vehicle brought' abdui by the increase in the fleet from 10 90 16 vehicles.
-Whereas, before, the establishment costs were £65 108, per week, for the 10 naachines, they were now reduced to £2 10s. The net profits from that part of the fleet grew, therefore, to 275 10s. from 252 10s., -at the 30s.• rate and 2110 at the 32s, rate. On the whole, that was satisfactory. Now for the new fleet.
The best that could be achieved in the way of running was an average of two round journeys per week per vehicle. Sometimes, as the result of an unusually quick turn-round at the docks, one was able to make 2/ trips, but that performance was certain to be offset by another when, because of extra delay, only one-and-a-half trips was completed by another of the fleet. The weekly mileage, per vehicle, was thus no more than 800-.
The standing charges were £8 5s., the driver's subsistence and expenses RI 5s. • The running costs per mile, however, went up by Id. to 6/c1. This was because of the heavier going over the hilly route, involving, not only increased fuel consumption, but more wear and tear of transmission, brakes and tyres. The total running costs for 800 miles were, therefore, 221 13s, 4d., and the total operating costs per vehicle 231 3s. 90. Add establishment expenses of 25 7s. and we get 236 10s. 4d. as the total weekly expenditure per machine.
The average loading was 25 tons per week per vehicle and., so, at 35s, per ton, the revenue worked out at 243 15s,, leaving a net profit of £7 5s. per vehicle (ignoring the odd coppers). That is 243 10s, from the fleet of six machines. There were no clearing-house commissions to be deducted -the depot manager was good enough to save that.
The total profits from the 16 machines were thus, from £119 to 2153 10s., that is from 27 8s. 90. to 29 12s. (approximately) per vehicle.
A study of these results produced mare heart-burning. " When we had six vehicles," they said, " we earned from £8 to 211 7s. per week per vehicle.We increased the fleet from six to 10 vehicles and. our earnings per vehicle dropped to from £6 5s. to £10. Now that we
.have 16 machines we get only from 27 Sc. .9d. to 29 12s."
" There is another way of looking at it," said one partner. " We are making more money altogether. With six vehicles we divided from 248 to £70 between us: with 10 we split from £62 10s. to 297, and now we share from 2119 to 2153 Ns." • " 1 admit all that," replied the other, " but my complaint is that my theories have proved all wrong. I always 'thought that the more vehicles I had the trigger the profit, taking into account the number of vehicles."
"What you mean," said the first man, "is that you thought that if you doubled the size of the fleet you would earn more than double the profit."
New Route a Mistake " Where we made the mistake, this last time," said one partner, " was in striking out on a new route, especially the one we did. We should have stuck to the old one."
" We couldn't gel the vehicles for that," was the reply. "Competition was too keen. If we expand again now it will have to be over another route.
And so it was, Calling the first route A to a and the second A to C, the third was from B to D, a route similar to the original, both as to traffic density and road contours, also 200 miles long. The business they bought this time comprised four vehicles and the goodwill, in the shape of routine traffics, was almost up to their original standards.
They had to provide another depot at D, but as there were only four vehicles to look after, and the work was easy, they managed to keep the cost down to a little more than 2700 per annum, bringing their total establishment costs to, in round figures, £5,000 per annum. That is 2250 per annum per, vehicle, or £5 per week and 12s. 6d. per ton of pay-load.
Three of the vehicles on the new route were doing. threejourneys-1,200 miles, 40 tons-per week and the fourth, 2/ journeys-1,000 miles, 32 ton. The operating costs of the three comprised standing charges 29 per week each, driver's subsistence and expenses, 22 and running costs
230, •a total of £41 per week. The fourth vehicle cost 28 155. for standing charges per week, .21 155. for driver's expenses, etc., and £25 running costs, the tfital being £35 10s. per week.
The total of operating costs for the four vehicles was, thus, £158 10s. Add establishment costs, and we get £178 10s. The revenue, at 30s. per ton, was £228, and the .profit, 249 10s.-more than 212 per vehicle. At 32s. per ton the revenue was £243 4s., and the profit 264 14s., or 216-odd per vehicle.
" This," said one partner, " was the business we .ought to have bought at first, and then stopped." The total profit from the 20 vehicles now runs --from 2168 10s. to 2217 4s„ which is from 28 8s. 6d. to 210 17s. per vehicle, still less than from each vehicle of the fleet of
six, but, apparently, it satisfied the partners. S.T.R.
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