A Question of Education
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N my previous article I commenced to tell of a discussion
I had with an experienced haulier. We were talking
about haulage in general and from -that had got on to an argument as to whether haulage, as a -business, differed from any other. In the course of the discussion my friend cited what he termed a favourable case in which, he said, the operatorkept an account of all that he spent,
suggested that records of that nature were not sufficient for the purpose of keeping the haulier from quoting rates that Were uneconomic. It was at that point that the article terminated.
"1 think," I said, "you are now being too broad in your approach to our particular difficulties. You should, in my opinion, qualify your reference to cost recording, which, to serve our purpose, must be of a specific kind. The' point I am going to stress is the very basis of my argument that the haulage business differs from every other. The difference almost entirely lies in the method of costing.
"You were saying that militant methods are not likely to bring about a cessation of rate-cutting and you stated that in the area in which you work no fewer than 86 per cent.. of operators were, owner-drivers or—even worse—families of owner-drivers."
"That is perfectly correct, and entirely eliminates the possibility of the rest of us being able to stick to our stabilized rates until the rate-cutters are frozen out. I believe that the only method which is likely to get us anywhere is the educative one.''
." What form of education have you in mind? What is the curriculum you would advise?"
"1n order to realize just what direction that education should take, it is necessary to consider for a moment what the fundamental factors are which govern the determination of rates and fares."
" In other words," I said, "tuition in cost recording, the special form of cost recording which differentiates haulage and sets it apart from all other businesses. I told you we should come back to it."
"The factors I have in mind are first, the cost of operating the vehicles.eMployed; second, the cost of operating the business; and–third. the profit to be earned."
Special Niture
." Rut," I interrupted, "we have already agreed that, and I have been trying to get you to realize that the costing must be of a special nature, including methods and items which would never be thought of in connection with any other kind of business."
"Now you are back again to your narrow view, just the thing I complained about in your article. I am trying to get you to deal in fundamentals. We can come back to your special requirements later. I repeat: it is necessary to take steps to educate all those who use commercial vehicles as a means for earning a living and those for whom the haulage is ancillary to appreciate what their vehicles cost them. .."
Again I interrupted. "You mean that we should also educate the C-licensee? "
"Certainly. We want the C-licensee to appreciate what it really costs to run a ffeet of vehicles, or even one vehicle. They would not be so likely to run their own vehicles if they really knew what they cost to run.
"Rut, as I was saying, there must also be an appreciation, and this also applies to the C-licensee, of the fact that there are other expenses besides those relating to the operation of the vehicles, to be taken into consideration."
"At the risk of offending you, I must again interrupt. To meet the requirements of the case", you must first estabc30 lish what precisely are the items to be included in the cost of operation, and what must not. Otherwise you will have difficulty in segregating the two sets of . figures and in separating cost of operation from establishment costs."
"Agreed, I shall corm to that later. Meantime let me emphasize that the third thing to be taught the haulier is what constitutes a proper and reasonable profit on his work.
" Now, 1 am aware that the reaction of the man in the street to all this is that I am making a mountain out of a molehill. He and quite a number of hauliers will be inclined to the view that there is little in all that. Even if a man were not well acquainted with these facts when he started -in business he would soon become aware of them and shape his activities accordingly. Nothing could be farther from the truth.
"It is the peculiar nature of the haulage industry, in so far as it appears to the newcomer, that its .initial costs make the beginner go astray, Those who enter the industry by way of the hire-purchase companies' portals are particularly liable to this error Jaundiced Eye "1 have previously mentioned the case of the ownerdriver. Perhaps in view of the special conditions I have mentioned,I am apt to look with a particularly jaundiced eye upon that type of operator. Nevertheless, he and his kind arc especially apt to fall by the wayside in the way I have in mind. For that reason 1 take his case first.
"As regards the cost of -operating his vehicle, once the initial outlay is over there is no immediate expenditure of any importance beyond that necessary for fuel, oil and garage rent. If the weekly mileage is not. large, these charges may be all that are necessary for the Arst 12 months. There will he no repairs in connection with a new vehicle which, in any event, will be guaranteed for the first six months. The damages arising from any accident will be met by the insurance company . .."
"Here, wait.a minute. You are going altogether too fast for me. You haven't mentioned the cost of insurance, the tax or the levy. Where de, they Conte in? "
"Sorry, I should have mentioned that I include those items in what I call the' initial outlay '. Let me continue. He will not be involved in any expenditure on tyres and any idea of providing against depreciation will not have occurred to him.
"So far as items of operating cost arc concerned, therefore, the weekly outgoings, so far as this type of operator is concerned, will be small indeed. In the case of a 5-ton oiler running 300 miles per week they 'Will not amount to more than £3 12s. 6d., made up of £3 2s. 6d. for fuel and lubricants, and 10s. for rent."
"I'm afraid you're right. I would go further, and say that in all probability he garages the vehicle on a piece of spare ground near his home and thus reduces his weekly expenditure to £3 2s. 6d."
"So if he is being paid at the rate of Is. a mile, an impossible rate, as you must agree, he will he pocketing £11 7s. 6d. to £1I 17s. 6d. per week and will be thinking he has found a bonanza. At the very least he will regard the situation as satisfactory, and because, as I have stated, it is possible for him to carry on in that fashion for a year —until, in fact, the renewal of his licence and insurance premiums become due—he will see no reason for revising his prices and would certainly be astonished if he were told that his rates are ruinous."
"You have mentioned hire purchase. Would you agree that in such a case as this the restraining effect of having to pay for his vehicle month by month would be a help?"
" Up to a point, yes. But he is always liable to take this attitude. The hire-purchase instalments may take away a large slab of his so-called profits, but all, the while he is thinking: 'This is a bit stiff, but wait till I have finished, then I will make whoopee.' And there is always the chance that he may lose a week's work and find himself without enough money for an instalment. Then he goes out into the highways and byways and picks up any load he can find at any price he can get, in order to get the cash. Once he starts that game he is finished.
"And have not yet mentioned establishment costs, those expenses to which I have referred as the cost of running the business The peculiar difficulty about these, considered in their relation to the operations of the beginner, is that to him they are, to all intents and purposes, non-existent; at least, for the first few months of his business. Most beginners commence with a contract given to them by wellwishers, and so long as those initial contracts last and keep them busy they are free from the ordinary cares and expenses of running a business."
"And wouldn't you say," I put in, "that in many cases those so-called wellwishers have an axe to -grind; they get their haulage done at a low rate and thus add to the confusion we are trying to straighten out?"
"Undoubtedly. Quite often it is the wellwisher who puts into the mind of the newcomer the initial idea of starting in business on his own as a haulage contractor. Sometimes the wellwisher advances the money to help him to start. Mind you, I dotit suggest that there is any real evil intent on the part of the wellwisher. He is just as ignorant of the facts as the novice haulier himself.
The wellwisher probably pays his friend a rate only slightly less than he will have to pay another haulier in the district, another owner-driver at that, and in doing so is
quite free from any intention to harm anyone. After all, it is a purely business transaction and sometimes, in such cases, as you know 'anything goes '."
" You've still the third factor to consider, that of agreeing upon an amount of profit that is reasonable in a business of this kind."
"I'm afraid I cannot say much in respect of that subject; nothing can be done about it until the costs of operation, both of the business and of the vehicle, are properly appreciated at somewhere near their true value."
"All right. But you still haven't done what you promised
to do. Where is this practical, non-militant method of dealing with the problem? Scr far as Tam concerned, that is the crux of the matter, the discussion of a practical method of educating the beginner in these -details of cost of operation and the cost of running his business."
"To my mind, there are means ready to hand for making a beginning, if not for completing the task," I responded. " They are provided in ' " The Commercial Motor" Tables of Operating Costs.' In these Tables are average figures of cost of all classes and sizes of vehicle, calculated for numerous weekly mileages up to 1,000. They embody figures for establishment costs, which, although they may not invariably meet the cases of individuals, do at least remind him of the existence of such costs, leaving him with no excuse for oversight.
"Finally, the Tables show minimum charges which should be made for the use of any vehicle, those charges being set out in two ways, one giving the charges per week, the other, equally appropriate, charges per mile. In both, the importance of taking the weekly mileage into account is emphasized. In my opinion these Tables, properlyused and brought particularly to the attention of the beginner, are a wonderful medium for education along the lines I
have in mind." S.T.R.