Watch Warehouse Costs
Page 58
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AMAJOR contribution on warehouse cosfings was a feature of the autumn conference of the National Association of Furniture Warehousemen and Removers held in London last week. The author was Mr. C. S. Elliott, White and Co., Portsmouth. Other papers on the establishment of a minimum price schedule on long-distance removals was given by Mr. R. S. B. Brewer, Brewer and Turnbull Ltd., Blackpool, and current licensing matters by Miss L. Hockley, Boardman's (Stratford) Ltd., London.
An innovation at this conference was for the opening session to start with short talks on area trade topics by speakers from the respective areas. Mr. P. F. C. Winwood, Mid-Southern area, put in a plea for a change in procedure to avoid the unnecessary expense of personal inspection of every small prospective removal job by two or more competitors whose total time thus spent could exceed the ultimate cost of the job.
The prime business of a remover was the selling of skilled labour, and transport was just a tool to facilitate that job; contended Mr. G. A. Bartup, WestMidland area. In similar vein Mr. A. R. P. Howes, Southern area, when discussing wage differentials, maintained that whilst " anyone can drive a lorry, few can pack a house-full of furniture into a pantechnicon ". Basic rates were intended to reflect the skill of the employee concerned.
In his address of warehouse costings Mr. Elliott said that it was first necessary to appreciate that though most depository costs were based on the actual gross or super measurement of the floor area, this total area could never be entirely used for storage. The average unusable or unlet space in a furniture depository was between 331 and 50 per cent.
To arrive at the net area, Mr. Elliott continued, four main deductions were necessary—namely passage space, operating space, waste space and unlet space. Elaborating on the four items he pointed out that passage space was not only necessary to provide maximum light and air and give as direct an approach as possible but the accessibility it provided directly affected the cost of labour in stowing. The average passage space required was between 30 and 40 per cent.
Waste Space
For operating space an average of five per cent of the total floor space was necessary. Waste space was a constant concern of all warehousemen, but nevertheless a recognized charge against revenue.
Whilst unlet space had not unduly bothered removers in recent years, Mr. Elliott reminded delegates that there could be a change of circumstances, With an adjustment relative to the operating space provided by unlet space, Mr. Elliott contended that a minimum figure of six per cent for unlet or idle space was necessary. Applying these estimates to four plans of depository floors the average amount of lost space totalled 501 per cent.
When computing all costs of maintain1544 ing a building as a furniture warehouse this percentage had to b. deducted from the area of the floor to arrive at the net cost per foot of storage space. The addition of administrative charges and profit would then give the charge per foot to be made to customers.
Nine Headings Mr. Elliott then dealt with warehouse costs under nine headings. These were: rent or interest on capital value of premises; rates; interest on capital employed; repairs and maintenance; insurance; electricity (or gas); water rate; compensation, and bad debts and housekeeping. Relative to rents the provision of a reserve for the dilapidations was an absolute necessity. It was essential to base costs on present-day values—" You cannot adjust existing storage contracts overnight ", Mr. Elliott added. When dealing with return on freehold property, the remover should look upon himself as a property-owning business. A fair estimate for both compensation and bad debts was five per cent of the rentals.
Regarding, housekeeping, much time was spent in tidying up a depository generally and it was essential that this non-chargeable part of warehouse staff's time must be a cost against the warehouse itself. In Mr. Elliott's opinion at least 50 per cent of the wages of one warehouseman and one assistant could be assessed as a minimum figure to maintain a warehouse of. say, 10,000 super feet. The average cost to build a warehouse was around 60s. to 80s. per super foot, gross value for rating being 3s. to 4s. per foot. An average rent or return on capital value was 3s. per super foot.
Discussing the effects of the 1963 rating revaluation, Mr. Elliott said that the average local rate in the pound was 9s., or 9/20ths of the rateable value. Under the rent items it therefore followed that the average rateable value was 3s. (as already calculated) less one-sixth, or 2s. 6d. per square fo.ot.
The total derived from estimates for the nine items of costs as specified was 6s. 51d. per super foot. Alternatively, with an allowance for 40 per cent loss of space, the cost per foot of stowing space was 10s. 9d., or 12s. lld. with 50 per cent loss.
Instancing stowage rates already being charged, Mr. Elliott said that 3s. per week per 100 Cu. ft. was a general charge out side London. This was equivalent to 15s. 7d. per annum for each square foot of actual storage Space ti'p to a height of 10 feet.
The part-load customer should pay only for a proportion of the mileage covered by the vehicle, provided that there was reasonable expectancy of obtaining further outward and return traffic, so assuring a fair profit on the entire trip. This principle, Mr. R. S. B. Brewer, Brewer and Turnbull, Blackpool, contended, was a prerequisite to the computation of a minimum rate schedule when speaking on this subject in relation to long-distance removals at the afternoon session.
As an example of this principle he suggested the following bases of apportionment of travelling charges. Allowing for the driver travelling alone on journeys over, say, 75 miles, full round-trip mileage would be charged for loads in excess of 1,000 cu. ft. Between 500 Cu. ft. and 1,000 Cu. ft. the charge would be three-quarters of the round-trip mileage with a reduction to half for loads under 500 cu. ft. Terminal charges would be pro rata to quantity—say, £2 per 100 cu. ft.
Referring to the Consumers' Association report on removal charges, and particularly to their wide variation, Mr. Brewer contended that this situation disclosed that removers had no confidence in their present methods of pricing. They were prepared to quote "Silly prices which may be dictated to us by the customers, or alternatively our competitors, whether they are right or wrong ".
A comprehensive rates schedule used by his company was circulated to delegates and in explaining its use Mr. Brewer pointed out that the basic mileage ranged from 10 to 600, whilst the cubic capacity went from 25 cu. ft. to 2,100 cu. ft. The amount of terminal charges was shown relative to each graduation of cubic capacity, although this charge was already included in the rate shown. From 100 cu. ft. upwards a minimum and maximum rate is shown. As an example the rates shown for 1,000 cu. ft. at 100 miles is £36 (minimum) and £50 (maximum), rising to £52 15s. (minimum) and £80 (maximum) at 200 miles.
During subsequent discussion doubt was expressed as to the general applica bility of such a rate schedule. Mr. A. R. M. Walker, junior vice-president, suggested that probably the four largest removal operators were, in aggregate. concerned with only 1/20th of the total removals of the country. Whilst this type of rate schedule could be appropriate to well trafficked routes, many N.A,F.W.R. members operated on .very different types of route.
The conference concluded with a survey of the background to carriers' licensing, leading to the appointment of the Geddes Committee, with particular reference to the removal industry, by Miss Hockley, chairman of the Licensing Committee.