AT THE HEART OF THE ROAD TRANSPORT INDUSTRY.

Call our Sales Team on 0208 912 2120

Availability for Service

2nd October 1964, Page 158
2nd October 1964
Page 158
Page 159
Page 158, 2nd October 1964 — Availability for Service
Close
Noticed an error?
If you've noticed an error in this article please click here to report it so we can fix it.

Which of the following most accurately describes the problem?

AT Show time technical specifications of commercial vehicle manufacturers' new products are given critical scrutiny in the technical pages of this journal and by potential purchasers. Operators, too, will have been assessing their future transport requirements, both in step with distribution developments in trade and industry and possibly with the aim of taking advantage of the larger vehicle dimensions now legally permissible.

Yet even when all these considerable problems have been resolved—or more likely reached a stage of acceptable compromise—and the type, make and specification finally determined, there remains to be decided the precise method of acquiring the vehicle.

The term " acquiring " has been chosen deliberately because the use of a commercial vehicle is the fundamental need of anyone requiring a road transport service. Whether he be user or provider, ownership, as such, is not necessarily an essential requirement. Nevertheless, because road transport is a long-established industry old habits die hard and ownership of vehicles, together with the associated policies of comprehensive maintenance to ensure the utmost vehicle life, are still considered by many the essential basis for sound economic operation.

But because road transport is such a universal provider there is the widest possible range of conditions of operation. Not surprisingly there can be a corresponding variation in the policies adopted to run a fleet of vehicles successfully, including the method of acquisition. With the extension in recent years of credit finance facilities as applied to commercial vehicles, it is especially important to ensure that the chosen method best fits the circumstance.

Transport being a service industry it is essential that it should meet—and indeed anticipate—changes in the demands made on its services. It is just at this point that traditional methods of acquiring vehicles, though of proved value in the past, may not always be the best method today —still less tomorrow. Substantial changes are forecast in the commercial an industrial life of this country, irrespective of any politica change, and, correspondingly, the type Of traffic to 131 moved and the pattern of distribution generally can alte much more rapidly and fundamentally than formerly. VVhils the very essence of transport is movement and change, th, rapidity of alterations in the demands on a haulier's ser vices in the future may well pose additional problems whicl will have to be resolved if he is to remain competitive.

The larger vehicle dimensions now possible with tit+ amendment to the Construction and Use Regulations an obviously welcomed in their own context as providing thi opportunity for more economic operation. But, as witl 'every other potential advantage, there are qualifications Obviously capital, or security for such capital, in one fora or another is necessary before advantage can be taken o operating these new and larger vehicles. But the very fac that they are larger would normally imply a higher initia cost as compared with the existing vehicles in the fleet. An whilst there can be exceptions the larger or more specialize( a vehicle the less flexible it will prove to be in operation however efficient on one set task.

Whilst such a contention must not be construed as reason for not taking advantage of the larger vehicles nov permissible, it does stress the even greater need for thi potential purchaser to be absolutely sure that the partieula circumstances to which he proposes to apply these vehicle. are not only suitable now but likely to be of sufficient dura tion to justify the not inconsiderable expense.

But no matter how diligently the operator may examin4 future requirements, there is a limit as to the accuracy t( which such forecasts can be made. If outright ownership was the only method of acquiring a new vehicle, then i might well be that such a condition would inhibit th( operator against purchasing any but the more flexible typt of vehicle. Whilst with small operators this may continut to be an acceptable compromise, in other spheres it woulc seem that the optimum potentiality will not be achievec unless the larger vehicles are exploited to the full.

As stated earlier, transport is a service industry an whilst—theoretically at least--it might be cheaper for E trader to provide his own transport, there are man} occasions where he prefers a professional haulier to do tht work for him because he can then devote himself mor( assiduously to his own business. Even if on paper he iE paying a premium for such a transport service he rna) deliberately decide to do so in the knowledge that overal there is a genuine gain.

A similar argument might well be put forward for the service of finance. Credit facilities as applied to commer. cial vehicles have extended considerably in recent years and whilst this concept of acquiring vehicles is relativel5 new, it is undoubtedly on the increase. As with the hirinp of transport it could well be that any additional charge payable by an operator as compared with direct acquisition could be more than offset by the advantage of being able tc substitute vehicles if changed circumstances demanded.

Road transport is distinct from most other commercia: ventures in that it is conditioned by the effects of the

:arrier's licensing system. Not only does the potential verator have to determine the most suitable type of rehicle as regards, for example, its technical specification, followed by alternative methods of acquiring the vehicle. iut also the conditions and length period of validity of the :arrier's licence under which it is proposed to operate.

As the licensing requirements stand at the moment, no lifficulties arise with the issue of a C licence, which for vactical purposes is valid by process of renewal as long Ls the operator wishes. An A licence is valid for a naximum period of five years or such shorter period as he Licensing Authority may determine. In the case of a 'chicle operating under Contract A licence a minimum ieriod of one year, during which it is provided for the !xclusive use of one customer, is the legal requirement, vhilst a B licence is valid for two years.

Whilst common knowledge to the established operator, hese licensing validity conditions must obviously condition he selection of a vehicle, particularly as regards the potential life where a choice exists between quantity and tuality produced vehicles.

Although a high proportion of commercial vehicles are 'ought outright for cash, particularly by the larger operator, n actual practice many such vehicles are bought either hrough loans with the operator's own bank or by similar xrangements with such banks. Accordingly, if alternative nethods of purchase—either by credit finance through one if the established finance houses, by the newer facility of tasing or by one form or another of contract hire—then fly bank charges arising out of the so-called direct purchase hould be deducted from the charges raised for the other acilities before a true evaluation can be made.

There is a psychological aspect of leasing which could ave a tangible advantage. If an operator has agreed to tase a vehicle for a specific rental over a given period then

e has a clear objective over and above that rental which ie has to earn before the vehicle is proved profitable. ,Ithough when so stated this may seem self-evident, each ionthly rental is a reminder of this prerequisite in a way la outright ownership may not be. The knowledge that he vehicle is virtually a permanent possession couldiough admittedly wrongly—lessen the sense of urgency ) ensure that it was operated profitably on every occasion. Because a finance house, when arranging to supply a ommercial vehicle on a leasing arrangement, is doing so tithout the deposit that would otherwise be necessary nder a hire-purchase agreement, it must be doubly sure f the financial standing of its potential client. As a result tasing is more commonly arranged with large, wellstablished companies often in such a successful way of usiness that the profits on their main line of business more an offset any charges incurred on a leasing agreement. For the smaller operator it may be found that whilst he lay satisfy the finance house as to his standing for a hireurchase agreement he would not do so for a leasing rrangement. In a recent return on business done in the ire-purchase of commercial vehicles, a substantial proortion of such agreements were completed before the ctual period originally arranged. Whilst there could be a driety of reasons for this, this pattern in hire-purchase -ansaction does suggest that a policy of more frequent hange of commercial vehicle is being adopted. It is ignificant that even the chairman of one of the largest ationalized operators, and thereby not presumably short f maintenance facilities, announced recently that in future ley were to invest more in " depreciation " than in maintenance ". In effect this implied a policy of more requent vehicle replacement, rather than an extended life -trough comprehensive maintenance policies.

With the increasing adoption of automation to industry, and the motor manufacturing industry in particular, it would seem that the initial cost of a commercial vehicle in relation to the subsequent cost of maintenance must decrease to the advantage of more frequent vehicle replacement. Such an advantage would not be affected by possible changes in money values generally—rather the reverse, as labour is such a high proportion of overall maintenance costs. And, if, as seems likely, the total number of commercial vehicles in the U.K. is to increase, then there must be a corresponding increase in the number of vehicles requiring to be sold on the used market. This must be a factor to be borne in mind when purchase of vehicles is under review and also when costing the likely operation in the future with due allowance for a higher cost of writing a vehicle off because of lower residual values. Here again, whilst the finance house arranging a leasing agreement would also have to take into account such possible trends, the additional charge, if any, would be at least averaged

out over the several rentals. In the majority of cases, at least with the smaller operator, it is the sudden demand for a relatively large expenditure which causes difficulties.

In contrast, the need to provide for each monthly rental as it becomes due will re-emphasize the need for adequate costing before submitting charges to customers.

Tags

Organisations: Licensing Authority

comments powered by Disqus