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PROFITS on parcels I N the previous article I described the

24th May 1948, Page 47
24th May 1948
Page 47
Page 48
Page 47, 24th May 1948 — PROFITS on parcels I N the previous article I described the
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Which of the following most accurately describes the problem?

essential preliminaries to starting in business as a parcels carrier. Provision for efficient service, including reliability and regularity, is the first. I indicated some of the precautions the haulier must take to protect himself against loss through excessive claims for damage, etc.

As regards the problem of assessing rates and charges. I pointed out that the way to solution was the opposite of the usual. I suggested that the proper course ■...‘.as to apply a schedule of charges, already current in or about the neighbourhood and then to obtain sufficient business to ensure that revenue exceeded costs.

I also put forward some suggestions for obtaining—as well as retaining—business, the use of agencies, advertising. personal contact with potential customers and so on. never losing sight of the fact that the parcels earlier must have arrangements with others in similar businesses.

The next thing to consider is the size and type of vehicle which can be most profitably, used for this class of work. I should at this point reiterate that these articles are addressed to newcomers whose idea is to start as ownerdrivers. I am supposing that the most difficult hurdle, that of obtaining a licence to operate, has been overcome.

Most newcomers who fancy their chalices at this business imagine that the best way is to begin in a small way and work up, but that is not so. Instead of being able to save enough to buy a bigger vehicle, the operator loses so much with the small one that he has to sell it to pay his debts and then find himself a job.

Large Floor Is Required The reason why that happens can be deduced from what I have already stated: that in a parcels-carrying business the operator has to carry enough parcels, at what is to all intents and purposes a fixed scale of charges, to cover his costs and earn a profit. A small van will not carry enough

parcels to enable that object to be achieved, .

The days when a living could be earned, with a 1-ton or 25-cwt. vehicle or even 30-cwt. van, are now for ever past and gone. The smallest vehicle suitable for the purpose is a 2-tonner and I would recommend a 3-tonner. Remember. it is bulk—not weight-carrying capacity—that counts. Floor area is important. The parcels, with few exceptions, must be placed on the floor; moreover, there must be room for them to be sorted as the van goes along. 'I he bigger the floor the more effectively the work can be done.

A tilt body is satisfactory, so long as it can be entered from the driver's cab and closed at the rear by sheets. I am aware that the use of sheets for this purpose makes pilfering easy, but I am reckoning onthe presence of a vanboy. an

essential employee in this business, to stop that practice. Ease of access to the contents of the van, to facilitate collection and deliver2,.. k of prune importance.

Our next step is to discover what is going to be the cost of operation. I am going to give figures for both 2-ton and 3-ton vans. principalb, so that the reader can be made to appreciate how little is the extra cost of the larger machine. having in mind its much greater usefulness for the purpose in view,

The first difference is in respect of wages. For a 2-tonno the weekly wage, including insurances and holiday pay, is 1_=5 Sc, per week: for a ..)-tonner it is .€5 12s. The reader may object to the inclusion of driver's wages in costing an ownerdriver's vehicle. I have, however, dealt with this subject in .1 variety of wars On many previous Occasions, I ant noi going to repeat myself. .All I ask is that the operator should be businesslike. He must desire to make a success of his enterprise. He has not done so unless the return is sufficient to pay him his wages as is driver, plus a reasonable profit.

Vanboy Needed or Safety While we are on the subject of wages, let me deal with the vanboy. He is an asset. Apart from the fact that he can. if he will. earn more than his wages by speeding up the work of collection and delivery—and remember that if he earns only Is. per week over and above the wages, he is worth while—he can save the equivalent of those wages by preventing pilfering. Fl is wages will, with the usual allowance for insurances and provision for holidays with pay, amount to about 45s, per week. The total wages bill, therefore, will he £7 10s. per week for the 2-tonner arid

£7 17s. per week for the 3-tonner. •.

The initial outlay on a 2-ton van, properly painted and equipped for the road, will total £560. Four :VI in. by 6 in. tyres cost CC. so that the net cost of the vehicle, less tyres. is £518. If 1 allow C68 for what the vehicle will fetch when sold, £450 is the amount on which 1 must calculate depreciation. If I spread that stint over five years. it is equal to 90 a year, which is an average of rEi 1 6s. a week for that item. Interest at 3 per cent, on the original amount of £560 is £16 I6s. per annum. or 6s. 9d. per week.

i ant taking depreciation as a standing charge. because in the case of traffic of this kind, when the weekly mileage is bound to be los, it is the most satisfactory method of costing.

I can now deal with the remaining standing charges, First, tax is 12s. per week; the wages of driver and vanboy. with proportionate allowances for employees' insurances and holidays with pay, are £7 10s. per week. I take 7s. 6d. per week for garage rent and a like amount for insurance. The total is €10 19s, 9d, per week. say £.11.

I am informed that establishment costs in work of this kind can be said approximately to equal 50 per cent. of the standing charges, so that for establishment costs in this case we must add £5 10s. per week, giving a total of £16 10s. for fixed charges per week.

As to running costs, petrol consumption will be high; and with a 2-tonner an average of 12 m.p.g. is the best that can be expected. At Is. lid, per gallon the cost is 1.92d. per mile. Oil consumption is, other things being equal, pro rata to fuel consumption and for oil I propose to take 0,18d. per mile. I give tyres a life of 24,000 miles, as this is not work which is hard on tyres, and the cost on that account is 0.42d. per mile. Maintenance, which is usually heavy, because of frequent stops and starts, costs I.38d. per mile. The total of running costs per mile is thus 3.90c1., and that, at 200 miles per week, is equal to £3 55.

The total expenditure per week involved in operating a 2-tonner on parcels carrying, assuming an average mileage of 200 per week, is £19 15s.

In the case of the 3-tanner the corresponding figures are: Initial cost, 1660; tyres, £63; net cost, £597; residual value, £77, leaving £520 as the basis for depreciation; interest (3 per cent.) £18 16s. per annum or 7s. 6d. per week; depreciation over five years £104; or £2 Is. 6d. per week. Tax I2s.; wages, £8; rent, 7s. 6d.; insurance, 7s. 6d.; grand total of standing charges, £11 16s. Add 50 per cent for overheads, £5 18s., and fixed charges amount to £17 14s, per week.

For running costs take 10 m.p.g. for petrol, which is 230d. per mile; oil 020d.; tyres, 0.50d.; maintenance, 1.50d.; total, 41d. per mile. At 200 miles per week, running costs amount to £3 15s., so that the total cost of the 3-tonner is £21 9s.

Small Difference in Cost

The difference in cost, therefore, between a 24onner and a 3-tonner, is not more than £1 14s. per week. As the 3-tanner has a much greater capacity, I think the operator is well advised to choose a vehicle of that capacity in preference to a smaller one.

I am now going to refer to some figures given to me by a well-known authority on express parcels-carrying. I have used them before, but that does not make them any the less useful or effective in presenting information to new readers and those who would like to enter the parcels-.

• carrying business.

It is assumed that in the course of a day, an operator will make upwards of 30 calls for, say, 50 parcels for delivery to as many as 30 warehouses it should be appreciated that some delay for sorting purposes is bound to occur at each delivery point, moreover all the factories on the operator's list will require a call, even if they have no parcels for dispatch, and this call will take nearly as long as if a collection has been made.

Another matter of importance is the need for booking and the time which that takes; sometimes delays occur which prolong the time necessary per call. Some senders issue their own delivery notes, but some give none at all, relying on the carrier either to provide a consignment notebook or enter into the carman's book when collections are made. Consequently, a minimum of three minutes must be made for each call, irrespective of whether any goods be collected or not.

The following is a summary of what might well be a day's work by a vehicle engaged in work of this description: Thirty collections at 3 mins. each, I hr. 30 mins. Twentyfive deliveries, also 3 mins. each, I hr. 15 mins, Fifty-five collections and deliveries, 2 hrs. 45 mins.

That is the first part of the day's work. Then on return: Twenty calls at 3 mins. each, 1 hr. Fifteen deliveries at 3 mins., 45 mins. Thirty-five collections and deliveries, 1 hr. 45 mins.

It is thus seen that the total time for collecting and delivering, irrespective of travelling time, is 41 hrs. An average distance covered by a vehicle doing., the work described will be 30 miles per day, of which perhaps half will be spent on running from headquarters to the centre-of collection and delivery and back again, taking, say, an hour. The other 15 miles are spent in going from point to point on collection and delivery work, averaging 5 m.p.h., which is 3 hrs. There is thus a total of 4 hrs.' travelling time. The total time for travelling, collecting and delivering will be 81 hrs.

10s. an Hour Net Cost

According to the calculation of costs already made, and assuming that a 3-ton lorry be used, the net costs, including establishment charges, are £21 9s. per week, or, on the standard basis of a 44-hr. week, 1.0s. per hour. That cost must be made up in payment for parcels collected and delivered before the operator has covered his expenditure and, of course, he will want a revenue of at lent 2s. per hour in excess of that, if his business is going to show a reasonable minimum profit.

It is probable that the vehicle will be operated for more than 44 'hrs. per week. If it be, the operator will still need to make something in excess of 10s. per hour to show a fair return, and 12s. per hour can be taken as a minimum for revenue, if, therefore, the vehicle works 50 hrs. per week, the minimum revenue which must accrue is £30 per week.

1 must here emphasize two things, the first of which is the importance of the operator's appreciating that he must budget for an average expenditure of £21 9s. per 44-hr. week, or an average expenditure of 10s. per hour. This, in particular, is a case where it is vital that the operator does not judge his profits by the difference, in any week, between the actual expenditure and actual revenue.

If he does that in the early days when maintenance costs and tyre expenditure are low, and if he has not made any provision for depreciation, then he will seem to be making a profit when in reality he is making a loss.

• The other point is the one which I have already made, that it is not practicable to charge rates for parcels-carrying in excess of those prevailing in the district. What he has, to do is to obtain sufficient parcels to carry at the prevailing rates to bring in that minimum revenue of £30.

is. 3d. Per Parcel In the foregoing assessment of deliveries the total given is 40 in 81 hrs. That does not mean that only 40 parcels are delivered. There may be two or three or even more at some points of delivery and it is reasonably safe to assume that there will be at least 80 parcels. For 81 hrs. at 12s. per hour the operator must make 102s., 50 that his average revenue per parcel must be at least ls. 3d.

That is not unreasonable. A schedule which I have before me for ordinary charges for parcels begins at 8d. for a 3 lb_ parcel, rising as follows : 5 lb.' 10d.; 7 lb:, is.; 11 lb. Is. Id.; 15 lb., is. 2t1.; 20 lb., 2s. Id.; 28 lb., 2s. 4d. That, however, is a basic rate. A large amount of traffic will be light, bulky or fragile goods, which are subject to a 50 per cent. increase generally and more than that if the articles be particularly light and bulky. Such goods as prams, bicycles, crates which are light and bulky, dog kennels, furniture, poultry houses, sewing machines on stands, spring mattresses, typewriters and wheelbarrows should all be charged at 50 per cent. over, the ordinary rate.

It seems to me fairly obvious that the average amount received per parcel will normally be in excess of It. 3d. Therefore, provided that the operator can get the businessand he can always do that by giving good service-it seems reasonable to expect that in a thriving industrial area, there should be no difficulty in reaching the minimum revenue of £30 per week. . S.T.R.


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