PROBLEMS OF THE HAULIER AND CARRIER.
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More About the Calculation of Motor Coach and Motorbus Fares : the Cost of Operation.
T EXPECT that a good many readers of my previous 1. article will have something to say to me about the figures which I quoted therein for cost of operation. I write " will have something to say" because this article is, of necessity, being composed just before the last is in the hands of the public, who do not therefore know as yet what good things are in store for them. For my part I shall derive what satisfaction I can from the fact that some of my critics will claim that the operating costs I have quoted are too low, and others that they are too high. I shall know from that that I am really not so far out after OH Establishment Charges the Crux.
Any argument that does ensue will turn on the amount of the establishment charges. Of that I am quite sure, because only in respect of those charges is there room for a difference of opinion, and if anyone challenges my figures for establishment costs I shall immediately give him best. I shall say to him " Do you know what your establishment costs are?" If he says "Yes," then I shall answer "Good I I am very glad to hear it. You are of a minority. Do you naind telling me what they amount to? " Whereupon he will immediately become very reticent indeed, will talk seriously to me of the fierce competition he has to meet and try to be excused from disclosing, even to me, some information which his competitors would like to have. At that we shall part good friends. He will think he is right : I shall know I am.
This friendly agreement to differ, however, need not prevent me from discussing the effect of establishment charges with those thousands of other haulier readers, the vast majority of them in fact, who not only do not know their own establishment expenses, or " overheads " as they are sometimes called, but, who, often enough, are inclined to doubt the existence of such expenses at all, or at the very least are inclined to the belief that they are negligible.
It is my experience, and that of every hard-headed 038 successful haulier with whom I have come into contact —and I have met many—that the rock on which hauliers' businesses come to grief is nearly always that of establishment costs; it is failure to realize the existence of such expenses, or their extent, that induce so many inexperienced men to cut prices, with disastrous consequences—consequences sometimes delayed by the great good fortune of tile haulier himself, hut nevertheless inevitable.
No Provision for Overheads—No Profit.
In other words, whenever a haulier comes a cropper, it is, in ninety-nine cases out of a hundred, due to the fact that he has, in arranging his fares for coach or bus, or in quoting his prices for haulage, omitted to make due allowance for his expenses upon " overheads." Where there is no proper provision for establishment charges there is little or no profit, at least, as a general rule. •
The real reason for including a set figure for establishment charges in the Tables of Operating Costs is simply to draw attention to the fact that such costs are inevitable and to make sure that no haulier, having those Tables before him, will overlook them. No one can definitely state what the establishment costs of any business are going to be. He can only estimate them if he knows exactly what the business is and how it is going to be run, but that is not the same thing as estimating a figure to enter in a table which shall be applicable to all businesses of one lewd. It is one thing to state that an average figure for the cost of petrol used in the proportion of a four-ton solidtyred lorry is 1.85d., so long as petrol can be bought. for is. 2d. a gallon, or that the
expenditure on tyres for the same vehicle is likely, on the average, to be 0.90d. These figures are sufficiently near the truth for every haulier unacquainted with his own costs to use ha estimating. He is not likely to go far wrong in so doing. He might, however, be very far out in taking the figure of £1 10s. a week for establishment costs, which is the figure given in the Tables for that size vehicle. He certainly would be much farther out, however, if he forgot an about establishment costs, and he cannot forget them if he uses the Tables.
The inclusion of those figures in the Tables, therefore, should have the effect of saving all those hauliers who use them from losing on a contract because they have forgotten those costs. If that result is not always attained it is because there are many who, with these figures before them, deliberately deny their existence. They are like the cockney who, on seeing the hippopotamus for the first time, declared "There aint no sick blinking animile." They lose money because of their obstinacy.
Now, in the Tables which appeared in my previous article, I stated the cost of operating a 32-seater coach, running between London and Bournemouth seven times a week, and coverings therefore, nearly 1,500 miles a week, to be 9.55d. per mile, including establishment costs. That figure, and all the others in the same column, needs explaining.
Suiting Establishment Casts to Circumstances.
The running cost of a 32-seater coach, according to the Tables, is quoted at 6.88d. per mile. That is an average figure. For the high speeds which this kind of work involves we may expect to find the cost a little above the average. Petrol and oil consumption will be higher and tyre wear more rapid. An even figure of 7d. a mile will meet the circumstances.
The weekly standing charges are quoted in these same Tables as 1,906d., and the establishment cost as £37 (720d.). Standing charges and establishment cost together amount, therefore, to 2,626d., according to the Tables, and that is equivalent to 1.75d. Sevenpence and 1.75d. together make 8.75d. Whence, therefore, the 9.55d. which I quoted?
The difference is due to two things. First of all, I have allowed for an extra man (a conductor), because it is usual on coaches engaged on such work as this to carry a man to look after the passengers, leaving the driver to concentrate on his driving. I submit, too, that this is a very necessary provision. I have allowed £3 a
week as the wages Of • How Latil Industrial Vehicles, Ltd., solved one. of its this conductor, transport problems. A Latil low-loading chassis car
Then I have allowed rying a tractor of the same make to a point where it
of 13. The 15 may be wrong but, in the ordinary course of events, it is more likely to be right than the £3. The organization of coach trips of this kind is a fairly expensive business, necessitating the provision of premises not. only at headquarters, which in this case will, presumably, be in London, but also as offices in each of the towns to which the coaches run. Then there is advertising and commission, some small and some large, but all likely to add up to a considerable sum.
The commission alone on work of this kind may easily amount to more than the £5 a week which I have set down for the total establishment cost. Suppose, for example, it is five per cent, per passenger and that it has to be paid on, say, half the number of passengers carried. Assume these to be an average of 20 passengers a day, seven days a week. That means that five per cent, commission will have to be paid on 70 passengers. The fare is a pound per passenger, so that the commission will be £3 5s. a week !
Actually, experienced coach and bus owners, operating in a big way, reckon their establishment expenses to be equal to their Operating costs. In that case, as the cost of operating a 32-seater coach for 1,500 miles amounts to over 155, the establishment costs would be 155 too, and the total cost of running the service 1110 a week, which is very nearly Is. 6d. a mile. Even at that there is a profit of 5d. per mile, which is 131 5s. a week per coach. Not so bad, eh?
A consideration of these matters seems to make it worth while to consider the basis on which another coach proprietor calculates his schedule of fares. His fare to Plymouth from London is 12s. 6d. single and no reduction for return. The cost of journeying to Plymouth and back by thcss.,. coaches is therefore 25s. as against the 35s. return fare quoted in the previous article.
Now, the distance from London to Plymouth is 214 miles, so that it will be impracticable to make the double journey, out and home, in a day. A daily service will involve the use of at least two coaches, and each vehicle on this trip, if it runs seven days a week, will do approximately 1,500 miles a week. The cost will, therefore, be the same as that of the Bournemouth one, namely, anything from 9.55d. to is. fid. per mile, according to the amount of the establishment expenses. The revenue, assuming 20 passengers per trip to be the average load, is 112 10s. per trip--44d. a mile----so that is devoutly to be hoped that the overhead expenses of this coach owner are not equal to his operating costs, or, alternatively, that he carries an average of 30 passengers per trip. In the latter event his revenue will be is. 9d. a mile and his profit £18 15s. per week per coach.
Supply and Demand.
If I have shown how indeterminate costs and fares may be, I have attained one part of my object. The other part is to indicate how fares should be calculated. I think I have done that too, especially if I have left my readers with the fixed deter
mination never to overlook their establishment costs when calculating their charges, whether those charges be for the conveyance of goods or passengers.
There is, however, still one point to discuss. I stated, In the previous article, that the coach-owner's chief concern, in reckoning his revenue, is what he is going to get per vehicle mile, and that he calculates his fares per passenger mile from that by dividing the probable number of passengers into the revenue he desires. Critical readers will have observed a flaw in this argil. ment, studying it in conjunction with the tables of fares given in the article mentioned. The fare to Bournemouth is easily the highest per passenger mile, being 1.44d. for the single trip, as against that of Bath, 1.08d. Bath being about the same distance from London. If our reasoning is strictly applicable, then we must conclude that the probabilities are that the average num-, her of passengers to be expected on the coach running for Bath there will be at least 30 for Bournemouth. for those on the Bournemouth coach. Now, our own practical knowledge of the circumstances is enough to make us quite sure that the reverse is more likely to be the case, that if there are 20 passengers offering for Bath, there will be at least 30 for Bournemouth.
The truth is that the fare to Bath is the commercially economic one, calculated in the manner outlined above. That to Bournemouth is higher because the customers are willing to pay it. The " demand " for seats on coaches to Bournemouth more nearly approaches the "supply." The coach owner can charge a higher fare, and get it. S.T.R.