Evolving a Schedule fin' Parcels Charges
Page 78
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THE PROBLEMS OF ARRIVING AT EXACT COSTING METHODS
THE difficulties of charging for parcels traffic was the subject of a paper given by Mr. S. R. Vigor, commercial officer of B.R.S. (Parcels), Ltd„ to members of the Institute of Transport at Bournemouth last week.
He made particular reference to the Fawkner Report which dealt with this subject, although it was never finalized. Mr. Vigor considered that it would be of assistance to all concerned if a similar inquiry were continued in an endeavour to obtain a basic formula because, at present, there was no standard approach to parcels rates. Such calculations had to be based largely on trial and .error, and experience gained by practice over a period.
Whilst the cost of doing a particular job was known, it was also necessary to know the correct proportions in which to allocate such costs to the various rates on tonnages. The heavier the package the more realistic it was possible to be.
Mr. Vigor then commented on the recommendations of the Fawkner Report. It was first necessary to accept the fact that many of the costs must be arbitrary and, moreover, that the whole of costing was to some extent governed by competition. He was therefore surprised at the number of companies able to give an exact percentage of increase on specific rates, whenever there was an adjustment of tariffs.
Basic Sub-divisions The Fawkner Report, he said, had recommended a sub-division of all parcels traffic operating costs as follows: collection or delivery costs, depot working and trunk ing. To these Mr. Vigor added transhipment costs, contingencies and the application of the tariff. He emphasized that no matter what schedule of charges existed there still remained the problem of applying these charges.
Dealing first with collection or delivery, there was a further sub-division of costs. It was first necessary to obtain the daily operating cost of the vehicle which was considered most suitable for the job on hand. This would include driver's wages, running costs and standing costs, together with any overhead costs connected with the vehicle.
The next step was to take the basic " day " and deduct from it any time which the driver spent in a depot on work connected with the vehicle and its load. Then an estimate could be made of the running time to and from the depot between the rounds, and also the time in running between points of call after the start of the round. Average speeds were then obtained over various distances so that it was possible to ascertain the time the driver spent as actual running time. This was deducted from the total day's work and the resulting "balance of time" was available as an indication (i44 of the time spent by the vehicle standing at traders' premises either to collect or deliver traffic.
The object of this exercise was to assess the proportion of costs to be allocated to each point of delivery and so arrive at a cost per minute. An analysis was then ,made, again on average, of the time factor spent in collecting or delivering different weights of package and there was a definite pattern of time for making a collection or delivery which increased with the weight of the consignment and the number of packages in that consignment.
Collection Takes. Longer An unusual factor evidenced by the Fawkner Report was that collection took longer than delivery, which Mr. Vigor considered was possibly due to having to get consignment notes from the customer. But as the weights got heavier the pattern was reversed so that it took longer to deliver one ton than to collect. Mr. Vigor suggested that companies dispatching these larger consignments had adequate facilities available which did not necessarily apply to those receiving them.
Consequently, having obtained the weight, average number of packages and the time factor relative to those weights, it was possible to calculate the cost of the vehicle standing at each of the premises. But that implied that the balance of time had been properly used. Unfortunately, since publication of the Fawkner Report traffic conditions had worsened substantially, so the results so far obtained would be of little use unless allowance wasmade for these changing conditions.
Another development which was proving a serious problem to the parcels operator was the construction of more and more very tall buildings. As a result the driver was often faced with the insoluble problem of not being able to park his vehicle adjacent to the building, whilst at the same time being refused permission to use the lifts. This development was substantially reducing the productivity of a driver's round and proving a costly addition to the operator's expense.
The package having been collected and delivered to the depot, it had to be checked, sorted and handled across the platform. There was also the cost of rent, lighting and heating and it was suggested that depot costs could be divided as between variable costs which fluctuated according to the varying number and weight of the packages, and the fixed cost.
It was recommended that the variable costs should include all labour costs including the checking, sorting, handling and preparation of documentation together with a proportion of rent, lighting and heating. This cost was then apportioned by weight on the basis of the average weight of package handled. Appropriate adjustment was then made for costs of packages of other weights.
In assessing fixed costs there was no difference in the costs of pricing packages of varying weights, and the same applied to accountancy, collection of accounts, bad debts and office administration.
Mr. Vigor doubted whether it was fully appreciated just how expensive was the service provided by the parcels operator in connection with proof of delivery and claims inquiries. An estimation had shown that this could cost from 10s. to II in clerical time per inquiry. Whilst some of these P.O.D. inquiries wer6 justified, there were many where the trader was at fault, for example where a consignment was wrongly addressed or where a customer had in fact received a consignment but had failed to record it. This fixed charge at an average size of depot could be substantial.
Trunking Costs Having obtained the collection, delivery and depot costs, it was then necessary to ascertain the trunking cost. This depended upon the type of vehicle employed which in turn could be influenced by the traffic carried and the return loads available. In the Fawkner Report, calculations were made on the assumption of a 75 per cent. loading for the round trip. But whilst all these costs might be appropriate to one particular depot, at other depots it might be necessary to employ a transhipment point because it was not economical to operate a vehicle between any two existing depots.
In an organization whichshad, say, 100 depots or more-, some of them must be relatively small. These could seldom make up half a load, let alone a full load, for every other depot in the organization. It was therefore necessary to have transhipment points. There could, however, be no regular pattern and they resulted in additional costs which had to be borne in mind.
Having evolved such a tariff, the problem of applying it remained. Mr. Vigor said operators were always going to be in trouble if this was published in a form .showing the varying weights vertically and mileages horizontally. . It was only practical to formulate such a tariff on a group basis indicated by letter symbols. Otherwise there would be the inevitable tendency for customers to exploit mileage/ tonnage rates to their own advantage and for carriers to cream away the easy type of traffic. Mr. Vigor added that there would always be such creaming by local carriers, which inevitably meant that other services had to carry a high proportion of the remaining costs.