AT THE HEART OF THE ROAD TRANSPORT INDUSTRY.

Call our Sales Team on 0208 912 2120

How a Charge Should be Quoted

5th August 1955, Page 68
5th August 1955
Page 68
Page 69
Page 68, 5th August 1955 — How a Charge Should be Quoted
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?

If Weekly Mileages Are Low, Rates Are Best Based on Time, But a Tonnage Scale, as Well as the Usual Mileage Method, May he Considered in Certain Circumstances, States "The Commercial Motor" Costs Expert

IHAD a most interesting letter froth a reader the other day criticizing The Commercial Motor' Tables of Operating Costs." The writer was most apologetic, feeling, no doubt, that I should regard such an act as lese-majesty. Actually 1 do not mind criticism; it leads to betterment if it is justified, and if it is not it is easily dealt with.

It is rare that a criticism has not been made before, and I had come to the conclusion that I should have no more new ones, but out of the blue came this letter, raising a new subject for consideration.

The writer stated: "I am a haulier in a small way operating under a B licence (10 miles radius), and when making a charge for a job based on your Table 1 under the section Time and Mileage Charges I could not reconcile this with the Minimum Charges per Mile, using column six in each case, and the line. referring to mileage as 100 miles

per week. Neither does it, to me. seem to tally with column six of Total Operating Costs in Pence per Mile (100 miles per week).

" Art example (based on your Time and Mileage Charges) is as follows; a job which takes two hours and entails nine miles (round trip) equals Ils. 6d. for time and 9s. for mileage at Is. a mile). This equals 20s. 6d., roughly 10s. per hour and 2s. 3d. per mile.

"Rut another example is a job which takes three hours and involves 16 miles, and equals 17s. 3d. for time and 1 ls. for mileage (at 8id. a mile). This equals Ms. 3d., 9s. 5d. per hour and roughly Is. 9d. per mile.

"My problem is therefore how to relate the foregoing 2s. Id. and/or ls. 9d. to the 3s. 74d. given in your Minimum Charges per Mile."

The answer is, briefly, that the 3s. 7-1-d. per mile applies when the weekly mileage is 100. Now nine miles per two hours is not exactly 100 miles per week, nor is 16 miles per three hours equal to 100 miles per week. It is in that discrepancy that the answer to this problem resides.

44-hour Week Take the first example, according to which the vehisk travels nine miles in two hours. In a 44-hour week, wh1115 is the fundamental basis of the Tables, if the vehicle were to keep up that speed the mileage would be 192, nearly 200 miles per week. For that, according to the Minimum Charges per Mile section, the charge should be a little more than the 2s. 2d. per mile.recommended for 200 miles per week. A charge of 2s. 3d. would be correct, and as nearly accurate as these figures for charges can be.

In the other example, the vehicle runs 16 miles in three hours. That is at the rate of 235 miles per week. The charge should be approximately midway between that for a vehicle running 200 miles per week, 2s. 2d., and that for 300 miles per week, I& 7-1-cl. A charge of Is. 9d. per mile run would be fair and reasonable.

As I have said, the criticism was interesting; it was useful, too, in that it enabled me to draw attention to the limitations of the Minimum Charges per Mile section of the Tables. The same criticism applies, as my correspondent points out, to that section headed Total Cost of Operation. The weekly mileage must be very nearly 100, 200, 300 miles per week, etc., if the'figures are to be applicable with any degree of accuracy.

A34 In point of fact, the extraordinary thing about these articles and the Tables is that there are always new problems coming forward for solution. At least, they appear to be new until the solution is sought, when it usually becomes apparent that they have been dealt with before, although in a different guise.

This particular letter, for example, suggests that a useful subject for discussion at this juncture would be whether a haulier should quote per hour, per mile or per ton. I have often, in these articles, discussed the conditions which determine whether a quotation per hour or per mile is preferable, but have never had to consider, as one problem, all three possible ways of tendering for a contract. A consideration of the three methods together should make interesting reading.

On previous occasions, when asked to advise whether quotations should be per hour or per mile, I have dealt briefly with the matter in this way: If the mileage per week has been particularly low, I have strongly recommended the haulier concerned to quote per hour. The justification is that if he quotes per mile his charge will seem so extraordinarily and extravagantly high as to cause his prospective client to have grave doubts as to the wisdom of employing him at all.

Negligible Mileage

I can best illustrate this by an example and, to make my meaning clear, I will take what is admittedly an extreme case but, nevertheless, an actual one, wherein the mileage per week was almost negligible.

It arose in connection with the carriage of coal for a gas company, and the haulier who raised the point had been invited to quote for the transfer of a huge heap of coal from a dump in a gas company's yard to the loading platform whence the conveyors to the furnaces were fed. The actual distance from the dump to the loading platform was a matter of yards.

The vehicle employed was a 2+-ton tipper, and the time needed per load (it was unduly extended because of difficulties of access both to the dump and to the loading platform) was approximately T1 hour. The number of journeys per day was 10. I do not recall the actual distance from dump to loading platform, but it was Certainly no more than 50 yards. That meant that the total distance travelled by the lorry during a day's work was only 1,000 yards. Moreover, as the distance from the haulier's yard to the dump was almost equally negligible, the total mileage per week was only five or six, if as much as that,

Referring to the Tables, it can be shown that the standing charges in connection with the operation of a 2+-ton lorry amount to a little more than £9 10s. per week. The running cost, on the lowest scale of weekly mileage quoted, is 10d. per mile. (I am taking the mean of the figures for a 2-tonner and a 3-tonner, as there are no specific figures for 21-tonners.) If it is taken that the gross profit this haulier wished to make was £6 (gross profit being net profit plus establishment costs), his charge for a week's work should be made up as follows: £9 10s. for standing charges, £6 for gross profit, plus six miles at, say, Is. per mile; total. £15 16s. If he were to charge according to the mileage, his quotation would be £2 12.s. Sc!. per mile, which is absurd. If he were to charge per hour, the charge would be 7s. 3d., which is a much more reasonable-soundintfigure. There, if ever, was a case where the charge should be on a time basis and not according to mileage.

The problem as a whole can be dealt with in this way. If there is much waiting time for loading and unloading and queuing up for either of these operations, so that the weekly mileage is low, in consequence of such conditions quote by the hour; if the weekly mileage is high and there is comparatively little delay at terminal points, quote by the mile. On the other hand, should the mileage be low and there is not much delay for loading or unloading or for any other reason, it is sometimes preferable to quote by the ton.

The arguments for this, if any are needed, can best be given by reference to the particular problem which has brought this subject to mind. The inquirer had been invited to quote for the haulage of cement. He proposed to use a 6-ton oiler for the job and advised me that the total tonnage to be moved per day was 40. The journeys would, it was stated, be short, the work being, for thernost part, collection of the cement from a central warehouse and its delivery to building sites within a comparatively short radius. Having given me that information, he asked whether it would be better to quote per hour, per mile Or per ton.

I answered him according to the foregoing, and then dealt specifically with his own problem, as follows:—

The standing charges of a 6-ton oil-engined lorry amount, according to the Tables, to £10 16s. per week. .(1n this and following references to the Tables it must be understood that I am bringing the figures up to date as I go along. Any differences between these figures and those actually in the Tables must be set down to that fact.) It was laid down in the letter of inquiry that the operator wished to make a gross profit of not less than'£10 per week From the work. I assume therefore that the total of standing charges and gross profit would be £21.

9s. 6341. Per Hour

On the basis of a 44-hour week, that means that the minimum charge irrespective of mileage, must be 9s. 64d. per hour. In assessing the price to be quoted, there must be enough to provide for that payment-9s. 6id.--for time.

The running cost of a 6-ton oiler is approximately 9d. per mile. When charging for mileage, however, it is advisable (even when the profit has been allowed for in the time charge, as in this case) to add an amount to the basic figure for running costs .to allow for dead mileage, the possibility of excessive consumption, and the extra work involved in rnanceuvring at each end of each journey and sundry other additions to the actual running expense. A driver who has the habit of letting the engine idle all the time he is making a delivery is anotherfactor which enters into this matter.

Moreover, the fact that a charge per hour is being considered is an indication, that the journeys are short and frequent, and short runs invariably involve consumption of fuel and lubricants in excess of the normal. Bear in mind that short journeys with many stops and a good deal of manceuvring entail additional expense in maintenance. In this case a minimum charge of 10d. per mile should be made.

Now, if a quotation is to be made per hour, it is necessary, before a proper estimate can he made, to arrive at an approximate calculation of the average hourly mileage. In this case I had no figure but the total daily tonnage, quoted as 40; 40 tons per day is equivalent to 5 tons per hour, which does not help a lot. Better to use the figure for the number of journeys per day which is seven.

25 Minutes Travelling

That means that the average time must be 1 hour 10 minutes each journey, approximately. If it takes i-hour to load and unload, there is left only 25 minutes as the average travelling time per journey. If the average speed is 20 m.p.h., and it will not be more, the average distance run per journey is likely to be about eight miles (fractions of a mile omitted). The daily mileage is thus to be taken as being 56. That is for eight hours, so that the average m.p.h. on which the charge must be calculated is seven.

Seven miles at 1.0d. per mile is 5s. 10d. per hour. Add that to 9s. 64d., call it 9s. 7d., and we get 15s. 5d. per hour— charge 15s. 6d. If the mileage is less than this—in the actual reply I assumed 6 m.p.h,—the charge should be varied accordingly.

Considering, now, what the charge should be on a mileage basis, I may first of all take the figure of 56 miles per day or 308 miles per week. On that mileage, taking the figure from the Tables, the charge should be 2s. per mile. If, however, the alternative figure, namely 6 m.p.h. or 264 miles per week, is correct, the charge should be 2s. 4d, per mile. That amount, 2s. 4d. per mile, is the mean of the Tables figure of 2s. 8d. per mile for a vehicle running 200 miles per week and 2s., the amount to be charged when the weekly mileage is 300.

Finally, there is the problem of charging according to tonnage. Here we have a definite figure of 40 tons per day or, say, 220 tons per week. Before any useful figure can be reached, we must again arrive at an estimate of the probable mileage. If it is 308 miles a week, the total charge for a week's work, again referring to the Tables, is £31, which is equivalent to 2s. 101 per ton, to the nearest penny. On the other hand, if the weekly mileage is 264, then the charge need be only 2s. 7d, per ton. S.T.R.

Tags

Organisations: US Federal Reserve

comments powered by Disqus