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TOMORROW'S LOAD

28th October 1966
Page 71
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Page 71, 28th October 1966 — TOMORROW'S LOAD
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Which of the following most accurately describes the problem?

-Ep OA p transport is an industry in which the small operational .11‘ unit predominates; public haulage operators with fleets of only five vehicles or less constitute 85 per cent of all such operators. There are advantages and disadvantages in this. Road transport owes much of its success to flexibility to which the efficient small unit has substantially contributed. But the potential advantages of large-scale operation can be substantial provided that executives of sufficient calibre are available to direct and organie successfully.

One aspect which can be overlooked is that the very flexibility commonly associated with an efficient small unit can give rise to a misapprehension. Whether tht small unit is an owner-driver or a fleet of a few vehicles, there is a short line of communication between order and delivery. In larger organizations several departtnents would be involved including the traffic department and the engineering or op( rating department. The misapprehension can arise within the small unit that, because it is not large enough to have such departments, the functional distinction is likewise either irrelevant or non-existent.

Additionally, a high proportion of owner-drivers and operators of small units have been attracted to the industry by a particular interest or knowledge of its practical aspects—say, driving and vehicle maintenance. As a result, however efficient they may be in either Or both of these aspects, they may underestimate the true value of the traffic function of commercial vehicle operation.

Anyone setting up shop hardly needs to be told that a commodity requires selling. But where a service like transport is on offer the need for selling it may not be appreciated.

Items of operating costs I commented recently on the grouping of the 10 items of operating costs into standing and running costs. Just as the fundamental elements of a transport service stem from time and mileage, so these are reflected in this grouping of operating costs. Standing costs arise and continue to arise throughout the period the vehible is in the operator's possession—whether it is operating or not. Accordingly such costs are expressed on a time basis such as per hour, per week or per year. Running costs, on the other hand, are incurred only when the vehicle is operating and are commonly expressed as a cost per mile although they can be expressed as, for example, a running cost per week when the actual mileage or the likely average weekly mileage is known.

But, as I said earlier in noting the distinction between engineering and traffic aspects of operating, the 10 items of operating costs grouped into standing and running costs come largely within the province of the engineering department or function, although admittedly traffic considerations will have a bearing on operating costs.

So far the items of costs have been directly related to the operation of specific vehicles. There are also, however, se items of expenditure which—although they cannot be dir related to the running of specific vehicles—are neverth inevitably incurred in the running of a transport busines department. These are overhead or establishment costs and include a substantial number of items.

I do not intend to consider overhead costs in detail in article, but I think it pertinent to record that many items incl in overhead costs can he attributed to the traffic department w one exists as such, or the traffic function where this is inch along with general management expenses.

Overhead costs might be overlooked Because they occur spasmodically it is possible that s overhead costs might be overlooked and so go unrecorded v formulating charges. To avoid this I recommend that some gr, ing of the items should be undertaken. Suggested headings w, include expenditure incurred under: Management, office, ga and stores, warehouse, branch depots, sales, professional serv auxiliary fleet and sundry items.

Elaborating the items which could be included under heading of sales there would be sales representatives' sala commission and car expenses, publicity, entertaining and gratui The larger the organization the larger the range and amoun overhead costs—because it could justify and obtain econo advantage from several functional departments. The owner-dr or small fleet operator may not have the departments but he performs their functions in some degree or other. It is particul. important that he should not lose sight of this fact because, h ever performed, functions such as come under the heading "sales" must obviously be vital to his current and contint success.

In the many inquiries I receive about how to start up in haulage business it is rare indeed for any mention to be made a how the intending operator proposes to canvass customers there is any mention at all of this highly important aspect of tri. port operation it is limited to the statement that he expects to obi cient traffic from one or two local customers in his area to fy his venture. So he may overlook the need and value of a inuing sales policy towards the objective of a wider and 3asing range of traffic.

is policy is to be recommended at all times, and is specially ificant now when it is Government policy to encourage expanin some industries at the expense of others through such ia as the Selective Employment Tax. In many commercial ures a policy of spreading the load is well tried—and transport ) exception. But the distinction needs to be made that variation roes of traffic may not be sufficient to ensure that a haulier has east some insulation from the effects of temporary or local .ession in particular flows of traffic: It should also be his policy Ibtain traffic from completely differing industries.

Icashire depression a stark example or example, a particular industry may well require fuel and c raw materials to be delivered along with packaging and other nary materials, while at the other end of the pipeline would irushed products in a variety of guises. Overall, therefore, there Id be a wide range of traffic. But there would be no economic ince because that range depended on the fortunes of one istry. The stark example of the severe depression which over( the Lancashire textile industry, and with it associated haulage tractors, is a case in point.

further disadvantage can arise if a new operator depends on 1 one or two customers for most of his traffic. Not only he then be too economically dependent on those customers the industries they represent but also that very dominance largely determine the whole pattern of his operation. In fact .e is the danger of a vicious circle arising, with the operator

giving more and more of his time to the main but restricted source of his living, and becoming more and more dependent on them.

Undoubtedly in the early stages it might seem an imprudent exercise to incur expenditure by trying to obtain new but relatively small flows of traffic so as ultimately to be in th( more satisfactory position of having a sound range of traffic. To some extent such an exercise would be yet another example of putting long-term advantages before possible immediate gain.

Major ports an advantage Although in many instances the geographical location of an operator's first depot would largely result from his own place of residence; where this is not so many of the major ports are a source of a wide range of traffic which could be to a haulier's advantage.

In any discussion as to the relative advantages of small or large units engaged in transport operation it is seldom that an attempt is made to define just what constitutes "small" or "large." But it will be generally accepted that in the fortunate case of continuing expansion there will not necessarily be a particular point at which it is recognized that the transfer from small to large has been accomplished. Yet often halfway in such development, operational demand will so fully stretch the capacity of an organization that the urgency surrounding the movement of today's and possibly tomorrow's loads will swamp longer-term considerations, including the setting up of a sales force where this does not already exist.

It is a continuing exercise for all successful transport operators to .try to reduce their operating costs. But however important this may be it is still only a means to an end. That end is to ensure that the expenditure to be deducted from the total revenue earned is as small as possible so as to give an acceptable margin of profit or balance to make possible future developments. But equally important is the exercise which ensures that the resulting revenue is as large as possible. The loaded vehicle which can ensure this can only be the result, over the long term, of a consistent and deliberate sales policy put to positive effect.

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