Assessing Fair Rates for Removals
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Some of the Special Considerations that must be Heeded in Fixing Charges for Furniture Removals
ONE provision in the Transport Bill is that hauliers, engaged in the busines of "ordinary furniture removal" are not to be absorbed into the nationalized transport system, but this exec:tip/ion cities not cover vehicles engaged in the conveyance of new furnitnre. It seems to be quite clear, therefore, that thc practice of furniture manufacturers and merchants operating also as furniture removers will not, when the Bill becomes an Act, be practicable, unless some amendment be made during .he committee stage.
As furniture removers, such operators will he free to haul furniture on behalf of householders and others for any distance. M carriers of new furniture, however, they will presumably, as B-licensees, be subject to the 25-mile radius. If, therefore, the. Bill goes through without amendment, we shall have frequent repetitions of what used often to happen in the days of the Road Haulage Organization.
For instance, a friend of mine in Peterborough, which is, roughly, 80 miles from London, is engaged in the furniture trade, and, as is customary, engages in furaitum removals. During the time when furniture removals were allowed for distances over 60 miles, whereas ordinary haulage was limited to that radius, he was carrying out a number of furniture removals into London, and used, quite naturally, to bring back loads of new furniture from London manufacturers to Peterborough. He did so until the R.H.O. discovered and banned that procedure.
Official Interference
On his protesting against the obvious folly daring the shortage of petrol of 'running vehicles back empty from Landon to Peterboiefugh, he was instructed that his proper come was to refer to the KILO. for return leads. This he did, but only once. The R.H.0 loaded his vehicle for Leicester, and he lost the use of it for an important removal the next day.
When the R.H.O. Found that he was bringing his vehicle track empty from London, it pursued him for that offence." too. I believe that, but for the immediately pending cessation of the regulation under which the 60-nsile limit was applied, he would have been prosecuted.
Difficulties and incidents of that kind are likely to be more rife when the mileage limit for the operation of a vehicle an hire or reward (other than furniture removals) is 25, instead ol 60.
I am often asked to give information about the costs and charges in relation to furniture removals, and I wander sometimes why that should he so; especially at the present, time. I imagine that the majority; of furniture removers belongs to the National Association of Furniture Warehouse' men and Removers, which has, to my knowledge,"fm many years kept its members fully advised as to costs and charges. It has periOdically published a booklet on thesubject, and I have just received from my friend, Mr. Edwin A. Harris, the secretary, a copy of the 1946 edition. After pointing out that the conditions tinder which furniture removals are carried out necessitate a departure from the standard practice of costing as retommended in "The Commercial Motor" Tables of Operating Costs, to which publication full credit is given; the authors proceed to specify an amended method of costing whereby provision is made to meet these aim' ed and 'special conditions.,
Wages Entered Separately The most important departure from standard is the provision for the separate entry of "wages," with which are coupled "expenses of removal work." There are thus three headings in the costing system:—(a) Vehicle operating costs: (b) establishment charges (" overhead charges "); and (c.: wages and expenses of removal work. Ma justification for this departure from the usual practice, it is pointed out that in the removal industry she wages of the -driver are hardly more closely associated with the operating cost of a vehicle than the wages of the packers and porters who sit beside him -during the travelling time, and he, too, is similarly engaged with them in the loading and unloading work.. It is on this account that -the driver's wages and expenses are excluded from the standing charges of the vehicle and included in the charges for labour.
The other modifications are in respect of details. One of interest, as well as importance, is the method of dealing with that always-controversial item, "depreciation."
As is pointed out, this item is ,by some pen* regarded as a standing charge and by others as a running cost. In fact. it is affected by both factors. To meet the criticism that, were the full amount of deffeciation included under the heading & standing charges. -the short-distance customer would be overcharged and the long-distance customer undercharged, half the depreciation is allocated to the standing charges and the other to running costs.
Writing Off Cea.pltal Cost Thus, half the capital cost will be written off over the estimated working life—usually taken as five to seven years— and the other half in the -estimated cost of the vehicle .rtinning a fair mileage. If the mileage per annum has been comparatively small, the present value will be fairly reflected, as the time-depreciation will have been charged up. Alternatively, if running has been excessive, the adjustment will have been made -automatically by a larger depreciation charge in the higher running Cost When a vehicle is being used for a large mileage in any year, a larger proportion than half might be charged to depreciation in the running costs and the lesser proportihn in -the standing charges,
In "The Commercial Motor " Tables of Operating Costs I have, of course. acknowledged this difficulty. As I have frequently pointed out, depreciation, whilst always being included as a running cost, is weighted and an allowance is made for vehicles running a low annual mileage by adding a percentage to the basic depreciation charge calculated on the estimated life of the vehicle in miles.
I am pleased to note, further, that this item is regarded sis I have always advocated—as provision for replacement, rather than as a mere book acknowledgment of the waning fife of the vehicle. It is quite rightly recommended that a rise in the cost of new vehicles should be a reason to increase the charge for depreciation.
Included among the standing charges is an item, "administrative expenses" This obviously requires explanation, as, normally, any administrative expense is included in the establishment charges. This explanation is given in pointing out that the contractor should carefully consider what additional costs he incurs in the actuel control of his vehicle in use, e.g,., extra yard labour, garage stores, cleaning and servicing the van equipment, handling containers, etc. The payment of some or all of these charges, are included with those of establishment charges, and the ealculated amount should, therefore, be deducted from the total under that heading and then divided to arrive at the proportion to be charged to each vehicle.
Standing Charges
The standing charges are taken out to cover a period of one year and it is recommended that, whatever costing period he taken, it should be dividea by toe number of working days If it be a year. the working days need not usually exceed 240. and may be fewer. after allowing for half-days, Sundays, compulsory holidays, and repair periods. Similarly, the standing charge per hour can be obtained by dividing the charge per day by the number of working hours in the normal day.
The method of dealing with trailer costs is of special interest. It provides in an ingenious but practical way for the difficult factor of occasional use. Standing charges relating to trailers are dealt with by reckoning interest at the rate of 5 per cent. on the purchase price. Depreciation is assessed on the basis of 10 years' life. which, again, is reasonable, having in mind 'the indefinitely long life of a trailer.
It is pointed out that there is some extra insurance premium to be paid, and this, although small in amount, should not be overlooked.
Trailer Costs Garage rent should be included, and it is suggested that an amount equal to that set apart in respect of a vehicle should be debited. As regards taxation, it is probable that this has already been dealt witn in respect of the standing charges of the hauling vehicle, and, therefore, does not appear. In respect of maintenance and supervision, a reader is warned not to overlook the cost of maintaining a container if the trailer be of the platform type.
It is estimated that the total of these charges will probably amount to about 25 per cent, of those in respect of the hauling vehicle. On the other hand, the average number of working days for the trailer would be, perhaps, half that of the motor, and the standing charges must be spread over these fewer working days. It is suggested that these considerations should be made by fixing a daily charge for the trailer in use at about half the standing charges for the motor vehicle.
To this figure should be added the cost of extra petrol, oil, wear and tear, which falls on the motor vehicle while hauling the trailer. The cost of tyres will be covered by calculating interest and depreciation (of the standing charges) on the full purchase price of the trailer, including the cost
of tyres. It is further suggested that one-third to half of the running cost of the motot pet mile would be an appropriate addition tc the cost of a trailer. To me this seems to be rather excessive.
It is also stressed that the standing charges for the motor vehicle will be based on the number of days which the motor and trailer will take to do the journey (and not on the time required by a solo vehicle to cover the distance). Similarly, the time and cost of labour will be much increased by the slower movement. All these factors must be borne in mind when quoting for removal work where it is proposed to use a trailer.
Next comes the significant remark—sit probably arises from the effect of the increased cost and of the reduced flexibility of the unit while engaged in remo–al work—that the use of trailers in the industry is being discontinued.
Establishment Costs Underestimated It is clear, in reading the chapter which deals with establishment charges, that there is the same tendency among furniture removers as among hauliers generally, to belittle the importance of this item. The chapter opens with a complete list of the sub-items comprised in establishment costs, and concludes with the remark that, unless a record of the cost is kept and the due proportion contributed to the operating costs for all or each vehicle, the total cost incurred in any work undertaken will surely be under-assessed.
In dealing with establishment costs, furniture removers are in the unfortunate position of having to divide them first and allocate a proportion each to the storage and removals departments.
Having done that, it is recommended that the proportion of establishment costs to be debited against the vehicle should again be sub-divided. and pan assessed as ,a percentage on labour, The rest being debited in the ordinary way as a fixed charge against transport. It is important to note this, as reference is made to it subsequeet,y.
Now I come to the third big sub-division-----removal labour costs. These costs must include all the wages and expenses of 'about during employment, whether in the loading or unloading of vans while acc smpanying vans on removal journeys or while engaged on any other incidental work. Apart from the basic wages, certain additions must be made to the wage rates paid for 'about in order to fix the real cost per hour per man to be reckoned for the work actually done. There are five of these items. The first and second have repeatedly been mentioned by me, as they are common to all operators. They are:-
Removal Labour Charges (I) Payments made in respect of health, unemployment, employers' liability, and third-party insurances.
(2) Cost of holidays with pay, spread over the yearly total hours of employment.
(3) Adjustment to cover the averaged increase of overtime hours.
(4) Addition of an estimated cost of the yearly total houre of unremunerative employment from unavoidable causes.
(5) Proportion of establishment charges, allocated to the labour costs as just explained.
It is estimated that the total of these five is equivalent to approximately 40 per Cent., comprising 5 per cent, each for numbers I and 2, 5 per cent, for numbers 3 and 4, and 15-25 per cent. for establishment charges.
It is pointed out that expenses and road charges are additional costs, but, as they are irregular, they should be added as they arise, or be anticipated when estimating the amount of work to be undertaken.
There are two sundry items to be considered. One relates to packing material and van equipment. There will be expenditure involved in the provision and renewing of equipment and tackle required in removal work, and the cases, wrappers, sheets, blankets, etc., needed to safeguard the loaded contents of vans during transit. The operator is recommended to keep a record of the total expenditure on all these items and to average it over a period, so that he can obtain a fair allocation of expenses under this head per day or per year.
Finally, a small percentage must be added when fixing the charge for work undertaken, in order to cover the con
tractor's liability for claims arising under the removal contract.
Examples of summaries, both of standing charges and of running costs are given in the handbook, and a portion of each is reproduced herewith.
Table 1 shows the extract from the annual summaryof standing charges. It will be noticed, as already mentioned, that half of the depreciation appears, and there is provision for establishment charges of £90, but that is not the total. There is an addition In respect of wages, to which reference is made elsewhere, to cover tne balance of the establishment charges.
The resultant data, 3s, per hour and 6d. per mile, correspond to tha time and mileage charges which are so familiar a feature of " The Commercial Motor" Tables of Operating
Costs, but it must be emphasized that there is no provision for wages of labour, which is treated separately. How this is done can be seen on refeience. to 1 able Ill, which shows an example of estimating for a removal. This relates to a local removal job in whim nine hours are needed to load and unload, and another hour for travelling time.
. The allowance of Is. per day for packing materials should be noted, and provision for insurance risk, which is on the basis of 4 per cent. of the net haulage cost.
Having dealt with this aspect of the matter, the authors then go on to indicate a simple method of keeping records of these costs. The booklet is well worth careful study by every haulier who is interested in furniture removals, and he would be wise to keep it handy for reference.