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What a Newcomer

4th April 1952, Page 56
4th April 1952
Page 56
Page 59
Page 56, 4th April 1952 — What a Newcomer
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Which of the following most accurately describes the problem?

Wants to Know

"The Commercial Motor Costs Expert Deals with an Inquiry from a Driver who has Recently Acquired the Business of his Former Employer, and Explains a Number of Points of Difficulty Common to Many Operators

HAVE received, an inquiry from an operator who tells me that he was formerly a driver but has just taken over the business from his former employer who has retired. He puts a number of questions, and as his problems are of the kind which are of wide interest I propose to deal with this inquiry at some length.

For many years he has been employed in the haulage business, so that he has a sound working knowledge of the industry but no experience of management. He knows little of prices and rates, and even less of costs of operation.

His vehicle is new, a 5-6-ton petrolengined lorry with tt platform body having detachable sides and tailboard. He has taken over an informal contract with a local firm. When I use the word " informal," I mean that he has no signed contract but that his -employer, whom he has succeeded, had for some years been engaged on work with this particular .firm and the arrangement seems likely to continue.

At his taking over, however, this particular company has asked him to revise the method of charging so that in future it should be on the basis of time; they have asked him to quote a price per hour for his services. He asks me first of all what the operating costs of his vehicle are and whether he would be wise to accept the offer of work on the basis of time—would it not be more to his advantage to quote on a mileage basis or even on tonnage? The work will consist of short hauls and he anticipates that he will be able to move about 40 tons per day. He hopes, however, that in the event of. Parliament deciding to increase the 25-mile limit, he will be able to engage on work involving mediumand longdistance leads and asks me to keep that in mind when I am replying.

Questions of Interest

I am sure that every haulier who has read this far will agree that all These questions are of great interest to him and that many find occasions weekly, if not daily, to ask similar questions. I cannot, therefore, do better than deal with this inquiry in some detail. First, in connection with the problem of 534

operating costs, an important consideration is that a good deal of the work involves short hauls. These conditions almost inevitably involve increased operating costs. On the other hand, the fact that, for the time being at ay rate, this operator is going to drive and take care of his own vehicle to some extent discounts the additions which must be made to the average figures for expenses as set out in "The Commercial Motor" Tables of Operating Costs on account of the special conditions of the work.

Before going into detail about the cost of operation of this vehicle, we have to decide into which category it

• comes, that in which depreciation is reckoned wholly on the basis of time, mileage, or half on time and halt on mileage, that is equally between the standing charges and the running costs. The inquiry. refers to the possibility of quoting for the hire of the vehicle on the basis of time only. In that -case, the time limit is the important factor in assessing the charge so we must count depreciation entirely as a standing charge.

Depreciation Basis

The 5-ton petrol-engined lorry with drop sides and tailboard completely equipped, painted and ready for the road will cost to-day about £1,000. The tyres will cost £170, and if I take the residual value to be £100 I am left with E730 for the basis of assessment of depreciation, and if I take a life of five years depreciation is £146 per annum or £2 18s. 6d. per week, Weekly standing charges will amount to £13 10s. 6d., comprising licence 14s., wages, including • provision for holidays and insurance, £6 I6s.; garage rent, 10s.; insurance, 11; interest, 16s.; maintenance (d), that is routine maintenance, washing, polishing and the like, 16s.; depreciation, £2 18s. 6d.

The question of establishment charges comes next and it seems likely that as this is a case of an owner-driver who is already in a position to be able to find consistent work for his vehicle without having to look for more, the establishment costs could be set lower than average. However, this operator is new to the job and has no idea about expenditure outside the cost of operating his vehicle. I think I had better make ample provision and suggest that the total of establishment costs will be £2 10s. per week. Adding that to the standing charges makes the total of fixed expenditure per week £16 Os. 6d. For profit 1-propose to add £3 9s, 6d., so that the total amount per week upon which the charge per hour is to be calculated is £19 10s., equivalent to Es. 10d. per hour of a 44-hour week.

That is not the total charge, for no provision has as yet been made for the mileage which the vehicle will run. The running costs total 9.60d, per mile, and I arrive at that figure in this way. According to the Tables, 11 m.p.g. is 'what is likely to be experienced in the way of petrol consumption with a 5-tonner running about 200 miles per week, but as this vehicle is likely to be engaged on extremely short ;runs it is not likely that more than 9 m.p.g. will be practicable.,

That means that, assuming the operator buys petrol in bulk at 4s. per gallon, the cost per mile for fuel will

be 5.67d. For oil I take 0.24d. as being likely, again having in mind that the work is nearly all short runs. The tyres, reckoned in the Tables at 24,000 miles per set, will probably do only 20,000 miles, and as they cost £170 that is equivalent to 2.04d. per mile. Maintenance (c) I also assume to be more expensive, and I take it at 1.65d. per mile, making a total of 9.60d. I add profit at the rate of 1.9d. per mile and get a mileage charge of 11 id.

Contract Terms

Now we must again state the terms of the contract. The letter states that the vehicle will be expected to shift 40 tons (of cement) per day. That means eight loads in a day. It is not to be expected that 5 tons of cement would be loaded in less than half an hour, and it is likely that the same time will be necessary for unloading, and if there be eight loads, eight hours per day will be spent loading and unloading the vehicle.

That is not a practicable proposition unless there is plenty of help given; no man can be expected to load and pnload cement coutinuously for eight

hours. I mention that, and I put it in my letter of reply, to this inquirer, not because it is going to make any difference to the cateulations-of the charges. but merely to make sure that it is understood that the contract is impracticable without assistance.

The point is that the whole eight

hour day is going to be occupied in loadtng and unloading and, therefore, if the cement be going to be moved at ail, 10 hours per day will have to be worked, which will leave only a quarter of an hour travelling time for each run: The lead distance is, therefore, about' 2-21. mires, and the daily mileage is a maximum of 40, equivalent to 4 m.p.h. throughout the 10-hour day. It seems obvious to me that the onlyprofitable quotation is at be on the basis of time, and in this case the rates should be gs. 9d. per hour phis 3s, 10d. for four miles of running at I lid, per mile; the total is 12a, 7d.. and personally I should quote 13s. as the minimum. In the event of an offer of 6s. per hour, it is useful to bear in mind the following figures. First of all, 6s. per hour will just dear the standing charges and 91-d. the running cost per mile. On the basis of 4 m.p.h., the bare cost is thus 6s.-p1'us 35. 2d., that_ is 9& 2d. per hour. If the operator goes as low as that, he will only just be able to meet his total expenditure on the vehicle without maktrig any provision for establishment costs.

Rock BottOm

To recoup his vehick,operating costs and establishment costs, he must get us. per hour, and I should regard that as rock bottom, even for an ownerdriver. For each Id. per, hour over lls., his weekly profit on an average of 50 working hours is 4s. 2d., and if he can get 128. per week' his net profit will amount to-50s.

This profitable charge of 12s. 7d. per hour is applicable only to leads of up tb 21-3 miles. When the distance the load has to be carried exceeds that, the only basis for assessing the charge is the time-and-mileage one.

Assume that one hour is still sufficient for terminals, that is to say half, an hour for loading and half an hour

for unloading. The travelling time

, for 20 miles will probably average MC hour, so that the total time is two hours ., and the total mileage 20. For two, hours at gs. 9d., the time charge works out at 178. 6d., and 20 miles at Md. per mile, 19s d total it 16S. 8d. The operatormay therefore charge either at the rate of 7s. 4d. per ton, Is. 10d. per mile run, or 3s. 8d per lead mile.

Perhaps the best thing to do is to work out a formula which the operator can apply and get an approximate rate per ton for anY reasonable mileage. The basis still remains at gs. 9d per hour plus 110. per mile. Take it that eachmile • lead, that is. two miles of running, takes five minutes, which is Sid. at gs. 9d. per hour. Two miles of running cost ls. 1 Id., so that the total charge 2s. 71d. per mile lead, say 2s. 8d. Thus for a five mile lead,

as an example, we Should have 8s. as terminalsterminals plus five times 2s. gd..

which is 13s. 4de so that the charge is 22s. Id. for the journey or 4s. 6d. in round figures per ton.

For. a 10-mile lead, the charge would be made up of 8s. 9th for terminals plus' 10 times 2s. gd., this being £1 6s. &L; total 35s. 5d., which is 7s. ld. per ton. When the operator is asked to go beyond the minimum of 21 miles lead, he should arrange to quote by the ton. S.T.R.


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