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Is It Better To Own. or To Hire?

29th December 1944
Page 32
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Page 32, 29th December 1944 — Is It Better To Own. or To Hire?
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Which of the following most accurately describes the problem?

Considerations Relative to the Economics of Owning and Hiring Vehicles as Applied to the Ancillary User

0 OMB time ago I commented on the difficulty of solving problems when the data given in the inquiry were insufficient and vague. I have before me a letter which, for paucity of information and vagueness, sets a 'new high" (or is it a "new low "?)

"Does it pay to run a fleet of six 5-ton lorries on 'C' licences? " it runs. " An article in The Commercial Motor' would be greatly appreciated, as most of those which are written deal with ' A '-licensed machines. Personally. I think it does not pay. An article, please."

It is signed with three illegible initials over the words " Transport Manager," and there is no indication as to whence it comes In other words, it is an anonymous letter, so that I could, if I chose, quite justifiably ignore it. If I do not, it is because I appreciate that, from the point of view of the ancillary user, the comparative merits cf owning or hiring his vehicles is of some interest.

I propose to deal with the subject iu a general way. If this inquirer desires something more explicit and more directly related to his own particular problems, he must do two things: give me some precise information as to the kind of work his six vehicles are doing, or are to do, with details of weekly mileage, length of journeys, number of journeys per week and possibility of loading his vehicles both ways, and provide his name and address. None of this information will be disclosed.

On the general aspect of the problem much might be written, for the solution turns', in almost every case, on conditions. All that I propose to do now is to state the pros and cons of the two methods of dealing with the transport of goods of a merchant or manufacturer.

Some Advantages of Ownership First, let us consider the advantages of ownership. Perhaps the outstanding one is that of absolute control of the vehicles. Most contracts for haulage, it is true, give almost complete freedom to the hirer, but there is just a shade of difference which, sometimes, is sufficient to turn the scales in favour of ownership. It is, nevertheless., itnpoftant to keep in mind in this connection that only a small proportion of the work done by hauliers for ancillary users is under direct contract.

Secondly, the cost of operation of owned vehicles is likely to be less than that of hired machines. It has to be admitted, however, that there is some justification for argument here, as the .cost depends upon such a variety of conditions. It is fairly accurate to state thaethe ancillary users' costs can, in favourable cases, be less than the expense of hiring transport.

In the case of owned vehicles, the drivers are actual employees of the owner and, in those circumstances, are inclined to take a more personal interest in business affairs than are the employees of a haulage contractor. When deliveries are made direct to customers this factor may be an important one.

When the ancillary user is a manufacturer of goods which are listed in a variety of different lines, it is almost impossible to train a haulier's driver to become so familiar with the goods as to be able to handle deliveries and collections to the complete satisfaction of the hirer. That is the opinion of manufacturers who fallinto this category.

Here, too, the problem of the salesman-driver arises. If the ancillary-user's business be one which calls for the employment of salesmen as drivers, it is probably better for him to operate his own fleet, and keep personal contact with his salesmen. Friction and disagreement might arise if the salesmen employed by the ancillary user were, in some degree, supposed to_be responsible to a haulier fOr the way in -which they used the vehicles. • In this same connection must be mentioned' that class of

delivery in which, although the driver may not actually operate as a salesman, he, nevertheless, effects his deliveries in such a way that there is some advantage to the ancillary user in the personal contacts made. The advantages of hired transport can be defined in such a manner as to serve to illustrate the disadvantages of ownership.

It has to be recognized that, to-day, road transport-is a highly specialized industry. It can be effectively and efficiently handled by only an expert. The ancillary user is a specialist in some other trade, in which direction he is best advised to devote his energies, and to turn over the conveyance of his goods to a specialist in transport. The result will, in all probability, be directly economical; the work will, most likely, be done better and the vehicles will be more wisely chosen and better kept, with less liability to be off the road because of defective or deficient maintenance.

Contracting Reduces Responsibilities

The elimination of inconvenience is an important factor. The contractor relieves the user of all the responsibilities involved by the Traffic Acts, and 'the thousands of regulations issued under them, He takes from the owner the incubus of dealing with drivers' hours and records; he takes care of insurance, registration, routine matter involved whenever an accident occurs (including making clairns,on the insurance companies), and he deals with legal formalities, These points, alone, are causing many ancillary users to turn their minds to this problem of hiring versus ownership.

" When the business of the user is such that wide fluctuations in tonnage occur, as in the case of seasonal business, the problems which arise can be treated by the contractor with the minimum of trouble to the user, and with a considerable diminution of the corresponding fluctuation in cost. To cover peak periods of tonnage, such conditions must, in any event, be met by hiring.

Distribution from a variety of centres and depots, inevitable in some trades and involving decentralization of control, adds considerably to the difficulties of the ancillary user who endeavours to operate his own transport A haulage contractor; however, can take such troubIss in his stride. He is organized and equipped to deal with them as a matter of course.

In the event of _a. breakdown occurring to a vehicle, or when machines are laid up for major service operations, the onus of providing spare vehicles falls upon the haulage contractor. He is in a favourable position to deal with the 'problem economically, because he has a " float " of spare machines upon which he can draw. For an ancillary user to keep spare vehicles, to the same end, would involve " disproportionately high costs.

The ancillary user who employs a haulier avoids labour troubles with drivers. Should they arise they are no concern of his. The contractor must deal with such troubles in a way that does not seriously affect his contractual obligations. I am aware that; in the usual form of contract, there is a clause which is worded with the object of relieving the contractor of such obligations in the event of a serious strike.

Perhaps the most important factor, and one which cannot be dealt with simply by way of discussing the pros and cons of the subject, is the size of the fleet. This affects the question, inasmuch as it determines whether it is economical to operate the vehicles without much expenditure in respect of additional clerical staff and without engaging technical assistance.

Briefly, and, of-course, approximately, as individual sets of conditions are of importance in this connection, the situation as rewards the size of the fleet may be described in this way. It is assumed. that there is no serious fluctuation in tonnage from year to year.

If fewer than a dozen vehicles be operated, it is likely that it would be economical to own. Under those conditions, the clerical work, admittedly something of an incubus, can be dealt with as a part-time occupation by someone in the general office, provided he be given a little training and instruction in essentials. The maintenance can be entrusted to a garage-foreman and assistant.

With fleets larger than this and up to about 50 vehicles, it is usually preferable to hire. In such a fleet, theft is hardly justification .for the engagement of an expert staff. On the other hand, there is too much Work involved foril to be within the capacity of the clerical staff.

When the number of vehicles in the fleet exceeds 50 the question becomes an open one. In a transport department of such size, there is justification for the establishment of

an organization to deal with it. In some cases,individual circumstances, such as the difficulty of housing the 'fleet, may make it desirable to -have. the Work done by a 'contractor. It is under these conditions that the considerations already enumerated, in reference to the employment of drivers, do have a bearing on the decision.

There is another way, too, in which fleet-size is of importance. A haulier can buy on better terms than the owner of a medium-Sized fleet. That fact, and the consideration of the spare-vehicle problem, are often enough to provide the haulier with part of his profit. Where there is no binding contract, the haulier can sometimes employ vehicles for several customers and, by spreading his overheads amongst them, effect savings which are beyond the capacity of the ancillary user.

To summarize, then:—In favour of ownership are the two factors; driver-contact and small fleets. In favour of hire —fluctuation in tonnage, and large fleets. • S.T.R.

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