Planning for Profit
Page 86
Page 89
If you've noticed an error in this article please click here to report it so we can fix it.
Swings and Roundabouts
The Commercial Potentialities of a Goods Vehicle Must Always Be Its Ultimate Criterion, Particularly When an Evaluation of Specialized Vehicle Operation is Being Undertaken
BOTH the adaptability and flexibility of the service road transport can offer to trade and industry have been, and remain, prime reasons for its continued expansion. The vast increase in the types of traffic offered, particularly by completely new industries in many cases, have made great demands on the resourcefulness of both manufacturers and operators of commercial vehicles. Additionally, what would in the past have been considered specialized vehicles, are now being included in the range offered by the quantity-producing manufacturers.
There is little doubt that this trend will continue, and that there will be increasing employment of commercial vehicles designed specifically for one particular traffic. Because of the potential growth of traffic which can be expected in the fuel, chemical and frozen-food industries—to mention only three examples—it must obviously be a trend to which many hauliers are giving increasing attention.
Whilst this potential may not be in doubt, the commercial implications for the road transport operator may not always be fully appreciated, especially if his previous experience has been limited to a more general type of haulage in which the platform vehicle has formed the backbone, if not the whole. of his fleet.
PIA T the outset it should be clearly understood, when the possibility of acquiring and operating a specialized vehicle is under review, whether the demand for this new service has come from the customer (or the sales or manufacturing department where an ancillary user is concerned), or -from the operator himself. This is an important point which may be overlooked. Obviously, if the idea of employing a specialized vehicle for a particular job is inspired by some economy in use which the operator hopes to obtain, then it would be equitable that the operator should bear whatever additional costs might be involved, both in the purchase and subsequent running of the vehicle, and recoup these by the additional revenue which its greater efficiency should ensure. Because of its universal use, today a tipper, would hardly be considered to be a specialized vehicle, although at the time of its introduction it would doubtless come into this category. In the majority of cases where a tipper is used, direct benefits would result to the operator in quicker turn-round and, where the trip mileage was small, additional tonnages per day could be moved.
Similarly, in contrast to the movement of petroleum products in barrels loaded on a platform vehicle, as was the original practice in the early days, the modern tanker must obviously provide many advantages to both operator and customer. It is, however, just at this point where benefits are to be derived by both parties that specialized vehicles, though excellent in design and use in appropriate circumstances, can prove a liability to the operator and, in extreme cases, of little benefit to the customer. Thus, gains may be obtained by one party only at the cost of additional expenditure by the other.
It is, therefore, most, important that, however attractive the technical details of any proposed vehicle may be as regards any special facilities for loading or unloading for example, it is essential that the claimed commercial advantages must be obtainable in practice. The exceptional conditions which may apply during a demonstration or trial run seldom apply in day-to-day operation. Even when commercial advantages are clearly established it will also be necessary to determine the proportion to which these benefits accrue to the operator and -customer respectively.
Whether the purpose of a specialized body is to maintain the commodity it carries in a particular condition or. alternatively, R52 to carry in bulk to avoid the cost of labour and materials in packing, the customer may well View the use of such a vehicle from a totally different approach than the operator. To the customer this form of .conveyance is probably merely an extension of the internal movement which takes place in the customer's factory, and a recent trend in modern industry has tended to increase the demand for this type of service.
WITH the increasing growth of manufacturing and trading Y! groups in recent years, rationalization of production has resulted, in some instances, in the concentration of one particular process at one centre, and the successive process at another. For example, in the brewing industry recent amalgamations have had the effect of centralization of the actual brewing at one centre from which the beer is transported in bulk to another for bottling. Similar rearrangements of production and distribution have taken place in other industries, with corresponding changes in the demand on transport services.
It is significant that in a trade report published on the possibilities of bulk traffic passing by rail, both parties realize that if specialized wagons were employed they must inevitably return empty. This would increase the initial outlay necessary to inaugurate such a scheme, because an excess of wagons would he required to provide a reserve until the original wagons were returned. Whilst this would be self-evident to experienced operators, it is important to note that both parties realized this was the situation. In negotiation with prospective customers for the inauguration of a similar service by road, there must be an equal recognition of both the advantages and defects of providing a service needing specialized vehicles. Otherwise the haulier may well find that he has taken on an unprofitable contract.
WHEN considering the inauguration of a specialized delivery 1'V service, present and anticipated turn-round time require careful analysis. In a demonstration it may be shown that, where a vehicle of given size could be unloaded by traditional means in one hour, for example, the addition of specialized equipment reduced this to, say, 15 Minutes. As experienced operators will know, however, the actual time taken to unload is only part of the total turn-round time. Where the driver isdelivering to a new consignee he must first locate not only the premises of his customer, but possibly the particular entry or loading bay. He may then have to wait his turn along with other vehicles, eventually unload and possibly return to some other office in connection with the necessary documentation. The sum total, in terms of time for the whole of this exercise, may substantially exceed .the time taken merely to unload a vehicle by traditional methods. In fact, this latter period of time might even be only a small proportion of the total turnround time.
In that event the cost involved in providing a specialized vehicle would have to be offset by a comparatively small reduction in the overall turn-round time, and the results obtained would be not nearly so attractive as if the comparison were made on the basis of-loading or unloading time only.
The ideal for both industry and transport would be for the conveyance of the commodity to be planned from start of manufacture to finish at the customers' own premises. Whilst instances of this do already exist, particularly within the newer industries with their own ancillary fleets, it must be admitted that the great bulk of trade and industry of this country is long established, with many premises not suitable for ,complete mechanization in the handling of products.
Where no such facilities exist in a particular company, the haulier would have no problem, since he would continue to effect delivery in the traditional manner. for example in sacks, boxes or barrels, Some misunderstanding of the potential advantages might arise, however, where an old-established industry endeavoured to effect some measure of modernization of intake. For example, a hopper might be built to receive raw, material in bulk, whereas previously it had been off-loaded manually in whatever happened to be the traditional container.
Provided the hopper was of adequate size to receive the whole load of the type of vehicle normally employed, it would seem that both the 'customer and the operator should substantially reduce their own costs of both labour and time involved in unloading. If, however, that was the limit of their modernization the actual saving may prove to be deceptive. Because it previously took an hour to off-load a vehicle by traditional methods, a corresponding rate of removing the load from the loading platform to wherever it was required in the premises would be adequate. When a load is dropped in the hopper in a matter of 15 minutes, then the whole benefit of that saving is lost if the procedure entailed in removing the load to its ultimate destination is not also similarly accelerated.• Otherwise, if. a. second specialized vehicle follows the first it would have to wait one hour until the hopper were cleared before its load could be dropped, albeit in 15 minutes. In such a set of circumstances, and assuming deliveries were being made throughout the day, only the frst vehicle would derive any real benefit from a saving in time,. although admittedly the saving in labour-to the customer-would remain.
As an example of the effect of increased initial outlay on the total oPerating cost of a Commercial vehicle, I now give the relative costs of running a goods vehicle based on a 5-ton .oil-engined chassis, alternatively with standard platform body, tipping body or specialized body permitting bulk loading and unloading. .
TIFALING first with the standard platform vehicle, itis 1-"reckoned to have an unladen weight of 2 tons 17 cwt. and an annual licence duty of £35. This will be the equivalent of 14s. per week based on a 50-week year to allow for two weeks per annum when the vehicle may be off the road due either to driver's holiday or major -overhaul.
. Wages are reckoned to cost the operator £9 14s. 8(11 per week. This is based on the statutory minimum remuneration for an adult worker employed in Grade 1 areas as specified in the Road Haulage Regulation R.H (70). Additions are made in respect of National Health and employers' voluntary liability insurance contributions, as well as an adjustment to permit two ,weeks holiday with pay. It.will be assumed that rent and rate's in respect of garaging the vehicle will cost the equivalent of 10s. 9d. a week.
The cost of vehicle insurance is reckoned at 1.55. 9d. a week,.. .based on 'an annual premium of £39, whilst interest charged on an initial outlay of £1,250 at a iorninal rate of 3 per cent. adds -I5s. a week, -This gives a total of £12 10s. 2d. a week for these five items of standing costs and assuming 400 miles a week are .averaged, the equivalent standing cost per inile -would be 7.50d. . Where a rate Of fuel consumption of 18 m,p.g, applied and supplies were purchased in.bulk at 3s, lOid. a gallon, the fuel 'cost per mile would amount to 2.60(1. Lubricants add 0.24d. and tyres .1.23d. per mile. The latter calculation is based on a cost per set of approximately £160 and an estimated mileage life of 30,000: Maintenance is reckoned to cast 2.13d. per mile And depreciation 1.53d. This is obtained by first deducting the equivalent cost of the Original set of tyres from the initial price of the vehicle, with a further deductionto allow for an anticipated residual value. In this instance this will be reckoned at 121 per cent, of the initial price of the vehicle. The total running cost per mile is thus 7.13d., giving a total operating-cost per mile Of 1523d: The corresponding running cost each week when 400 miles are averaged would be £12.17s. 8d., giving a total bperating 'cost of £25_7s..10d. 'Dealing now with the 5,ton tippet. we will assume that the unladen *eight will be, probablya little higher,: say, 3 tons2. cwt., with the annual licence duty falling in -the next higher category, namely, €38 15s; This is the equivalentof 15s; 6d. a week. Wages rennin' the 'same at -£9 14s, 8d., as do rent and rates at 10s. 9d. a week.
Because of the higher initial costs, namely, £1,350, the
insurance premium will be a little higher, with a resulting cost a week of 16s. 1(1. Similarly, the weekly interest charged will now be 16s. 2d.. giving a total standing cest each week of £12 13s. 2d. In order to facilitate comparisons between the three vehicles used in this example it will be assumed that the average weekly mileage 'remains' at 400, although' it is appreciated that. in some types, of tipper work,: this•nray no: apply. Al this figure the standing cost per mile would be 7.59d.
At this weekly average. mileage it will be, reasonable to assume that them will not be an undue use of the tipping gear, so that the medium-distance trips involved should not cause too substantial a reduction in the rate of fuel consumption. It will be assumed to be 15 m.p.g., giving a fuel cost per mile of 3.12d. The cost of lubricants remains the same at' 0.24. per mile. whilst tyre costs are again assumed to be the same at 1.23(i. per mile. Here, again, in some types of tipper work, wear on tyres can be exceptionally heavy, but to facilitate comparison it will be assumed this is not the case in this instance.
NEVEIR:FHELESS. some addition must be allowed in respect of maintenance, which will now be adjusted to 2.66d. per mile. Due to the higher initial cost and also to the possibility Of a lower residual value-now adjusted to 10 per cent.-the cost of depreciation is increased to 1.69d. per mile. This gives a total running cost per mile of 8.94d. and a total operating cost Of 16.53d, per mile. Correspondingly, the running cost each week is £14 18s. and operating cost £27 its. 2d.
For the third example it will be assumed that the special vehicle to facilitate loading and unloading in bulk will cost a total, of £2,250. i.e., £1,000 more than the standard platform vehicle. There will also be an addition in the unladen weight. which in this instance will be reckoned at 15 cwt. This gives a total unladen weight of 3 tons 12 cwt., incurring an annual licence duty of £46 5s. The equivalent cost each week is 18s. 6d, Wages again remain the same at £9 14s. 8d., as do rent and rates at 10s. 9d. For the same reason as with the tipper, namely,_ the increased initial value, the cost of insurance will be increased to 18s. 9d. a week and interest to £1 7s. This gives a' total standing cost of £13 10s. 8d. a week, or 8,12(1 per mile.
Therate of fuel consumption will be reckoned fractionally lower than the standard platform body, and at 17 m.p.g. the fuel cost per mile will be 2.75d. Lubricants are again reckoned at 0.24d. A slightly higher tyre rating will be allowed for because of the increased unladen weight of the vehicle, with a resulting tyre cost per mile of 1.34d. 'Some allowance must also be made for the maintenance of the specialized body. thereby increasing this item of cost per Mile to 2.84d.
THE more specialized a vehicle becomes the more likely is the ultimate resale value to be lower. This factor, coupled with the greater initial outlay, results in a depreciation cost per mile Of 3.00d. The total running cost permile is, therefore. 10117d. and total operating cost 18.29d. The total running cost each week is £16 19s. and the total operating cost each week. when 400 miles are averaged, becomes £30 9s. 8c1.
Compared with the total operating cost a week of £25 7s. 10d, for the standard platform 5-tonner, the corresponding amount of £27 I Is. 2d. for the tipper shows an increase of 8.64 per cent. on the original cost. Additionally, the cost 'derived for this particular tipper does not, as already explained, provide any allowance for the exceptionally arduous usage to which many tippers are subject. Similarly, the figure of £30 9s, 8d. for the cost of operating the special bulk vehicle shows an increase' of 20.13 per cent, over the corresponding cost when a platform vehicle is used.
Since it must be assumed that no additional load per trip can be carried in any of the three vehicles, it follows that any additional revenue earned to offset the higher costs of operation per mile must be obtained by an increased number of trips each day or week. This automatically implies some further addition in the running cost each week, although the standing cost will remain the same. Alternatively, where no additional revenue were envisaged by being able to accomplish more trips, hen the difference between the three amounts Would 'be an indication of the additional charge an operator would be justified in asking from a customer, after due allowance had been made for overhead costs and profit margin. S.B.