Where Blissful Ignorance in Haul
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IHAVE been asked, by a reader who prefers to remain anonymous, to point out the stupidity of certain transport operations. That folly is so obvious, to anyone with the most elementary knowledge of the economics of road transport, that I was, at first, doubtful of the need for troubling my numerous readers with a discussion of it. On second thoughts, however, I
decided otherwise. What is obvious tothe few, who know what vehicles cost to operate and what transport charges ought to be, is not, necessarily, so clear to those who are without that knowledge. After all, it is the obvious which is so frequently overlooked.
Moreover, the fact that the four examples which have been set before me for consideration in this article are, as it were, taken from life, the perpetrators being blissfully ignorant of the unwisdom of their proceedings, is, in itself, justification for this publicity. What one is known to be doing, others also are performing. The lesson, therefore, may well be worth the teaching.
• Operations That Are Wasteful •
I should state that the four operations to which I am about to refer are part of the routine work of a C-licence
operator near London. The work may just as well be done by hauliers, but, clearly, not at anything like the
prices which are involved. The point which I think my correspondent wishes me to drive home is that, in the present circumstances, they are wasteful.
The first example relates to a journey from London to a place which must be nameless; the important point is that it is just over 50 miles away, involving a round journey of 102 miles. The load is 3 cubic yds. of sand, for which the sender, this C licensee, receives 14s. per cubic yd., a total of 42s. per load. Some of the actual items of cost are given to me; the rest I assume.
I am told that the time taken is such that, as the days are at present, there is no opportunity for the 'vehicle to do any other work on the day that it delivers this load.
The actual expenditure on petrol is 14s. 7d. (14s. 8d. to me); the wage paid is 10s. I am not informed, but I am going to .assume that employees' insurance. is covered in that sum. If not, the case is even blacker. Taking the rest of the figures from The Commercial Motor Tables of Operating Costs, which, to-day, for obvious reasons, are low compared with actuality, and dealing with the standing charges first, the following are the probable costs; if they be not quite accurate they are
less than the real figures:—
The tax, per day, is 2s. 3d.; wages, 10s.; garage rent, Is.; insurance of vehicle, 1s. 6d.; interest on capital out lay, Is. That total, none of the items of which can seriously be challenged, is I6s. 9d.
• How Running Costs Are Made Up • Now for the running costs. Petrol, 14s. ad. (that is given to me); oil, I0d.—no point in arguing about that; tyres, 3s. '6d. If this operator can rely on getting 20,000 miles per set—set after set—and if he pays £35 per set, that is the actual cost for 100 miles of running. Maintenance at Os. ad. includes provision for all repairs, major overhauls, running repairs and incidentals, as well as the cost of washing and polishing, greasing and oiling, routine adjustments and repainting and varnish ing at reasonable, but by no means extravagant, frequency. Then there is 5s. 3d. for depreciation, which, at this mileage, is about 28s. per week, or between £72 and £73 per annum.
The total of running costs for this journey is £1 10s. 11d. The grand total of vehicle operating costs is £2 7s. 8d. That is the bare cost of operating the vehicle which conveys a load of sand for which this C licensee receives only £2 2s.
It might be thought that I have gone far enough in demonstrating the folly of this particular job of work. I do not agree. I prefer to drive the lesson home. The vehicle costs are not all. No C licensee, any more than any A or B licensee, can operate a fleet of vehicles, large or small, without incurring other expenses. What those expenses are, in any particular case, can only be ascertained.by accurate cost accountancy.
I do not know what they are in this case, but I am going to indicate what I know them to be in a similar case. This also concerns a C licensee. In his transport fleet there are 35 vehicles in all, as scheduled below. The , figures were presented to me by the transport manager of that fleet. He tells me that they are positively debited against his department as a fair proportion of the total overheads of the company. That, in my opinion, and in the opinion of anyone who really knows how transport costs should be assessed, is right.
• Details of Overhead Expenses • First, the items; it would be a grave breach of confidence to indicate the individual amounts, and I, therefore, omit them. They are as follow:—Stock-taking fees, national insurance, gas, telephones, stamps and cheque books, petrol-storage licences, depreciation on buildings, foremen, clerical, rates, general repairs, electric light, departmental travelling, general sundries, interest on cost of buildings, depreciation on plant, watchmen, insurance, works department, fuel, printing and stationery, advertising, interest on plant, wages for manager, and contribution to superannuation fund.
The actual total of the above expenses is £2,340. This sum is allocated as follows:—
Now, before I go any farther, I must emphasise once again that it is impossible to dogmatise in this matter of overheads; it is even dangerous to try to do so. Nor can an average figure be applied with any degree of safety. I am not really justified in trying to take a line through the foregoing data. If I do so, it is only because I wish to impress upon readers the importance of taking care, not merely to rnclude provision for overheads, but to ensure that every item is taken into account.
However, taking that line, I am at once confronted with the difficulty that the largest vehicle specified in the above list is a 3-tonner, whereas the one which I am told is used for the above job of haulage is a 51-ionner. If £99 per annum be the establishment cost of a 3-tonner, then, assuredly, a 5/-tonner will involve at least £150.
In actual fact, the amount might even be £300, if, for example, the number of vehicles be fewer whilst the overheads were greater, as might very well be the case. Suppose I take £150, which is approximately E3 per week or, say, 10s. per day. That brings the total cost of transport of these 3 cubic yds. of sand to £2 17s. 8d.
There is still the cost of the sand itself to be added. That, I am told, is 3s. per cubic yd., so that I must add yet a further 9s. to the above total. This means that the C licensee in question is obtaining £2 2s. for something which, delivered to the purchaser, costs him £3 6s. 8d.
• Revision of Policy Called For • There is clearly some need for revision of business policy here. Either the delivered price of the sand must be increased to not less than £1 6s. per cubic yd., or the customer must be requested to go elsewhere for his supplies. At present the vendor is making him a present of £1 4s. 8d. with every load.
To deal briefly with the second example. It is much like the first in its essentials of cost. The round journey is 105 miles, and the conditions are such that one journey occupies day. The cost may, therefore, be taken to be the same, viz., £3 6s. 8d. The load is 1,500 bricks, so that the bare cost of transport per thousand is approximately £2 4s. 6d.
That leaves this C licensee, who, presumably, is not doing this work for the love of the thing, with no profit on his work. If I add a minimum of 15 per cent. on his turnover, I find that he must get not less than £3 I6s. 9d. per load, which is equivalent to £2 10s. 7d. per thousand.
I should like to know what my brick-haulier friends think of that for a rate, and of the chance of obtaining it.