PROBLEMS OF THE HAULIER AND CARRIER.
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Overloading Lorries as a Means for Making Cut-price Haulage Contracts Profitable.
IN an article whieh appeared on page 749 of the issue of The Comarterelal Motor for July 17th, dealt with certain examples of price-cutting in connection with haulage contracts. In particular, I considered one in which a rate of as. 4c1. per ton had been quoted for carting road materials 11 miles. I showed that this was equivalent to a revenue of 9d. per mile, assuming that a 5-ton lorry was engaged upon the work, and that the bare operating cost of such a vehicle, covering 330 miles a week, would be 1s. per mile, so that there was a loss of 3d. a mile, reckoning the cost of operation only and without taking establishment expenses into consideration at all. In my opinion, a man is better employed cleaning his lorry at home, picking flints out of the tyres or doing some work of that kind than in hauling material of any kind at a cost, to him, of 3d. a mile.
Fresh Views on a Vexed Question.
I have since received a most interesting letter from a north-country firm commenting on my argument in an indirect but most helpful way by drawing attention to some actual costs in connection with work of a similar nature.
The writer of this letter advises me that he is at the present time paying Os. 6d. a ton• for road material which is carried a distance of 33 miles. The number of journeys made per week on this contract is eight, so that the total weekly mileage is 528. The average weight conveyed per week is 56 tons, which means that seven tons are carried on each journey. At Os. 6d. per ton the revenue from this job is £18 4s., which is roughly equivalent to 80. per mile. The income per annum, taking it that there are 50 weeks to the year, is £910.
The total cost of operation, according to this correspondent, amounts to £529 19s. a year, which is made up as follows :—Driver's wages at £3 5s. a week (no second man is required), 1169; petrol, costing is. id. a gallon, for 26,400 miles, at seven miles per gallon (3,771 gallons), accounts for £204 5s. The oil consumption is at the rate of 400 miles to the gallon; it costs 4s. per gallon, and the quantity used in a year is therefore 66 gallons, costing £12 14s. Licences and insurance together amount to £70. Tyres cost in all £74 a year, this outlay being sufficient for two sets of rear tyres at £30 a set and a set of front tyres at £14.
B30 This, according to the writer of the letter, leaves a balance of 1380 to cover establishment charges, depreciation and renewals, and is considered to be good for one machine.
The vehicles used, I am informed, are petrol lorries having a rated capacity of four tons each. They are regularly loaded to seven tons, and that, adds my
correspondent, is usual. lie does not himself know anyone, he writes, who does not habitually load the four or five-ton lorries customarily employed in this work up to seven tons. He adds: "There are very few contracts obtained at the present time for which the petrol-lorry owners do not considerably overload their machines. We personally are of the opinion that a good English machine of five-tons capacity is quite capable of handling seven tons."
Wherein Lies the Fallacy ?
The writer of this letter, it should he observed, does' not criticise me on my articles. He does not question the figures I give or. the accuracy of my claim that a man who hauls similar material 11 miles for 3s. 4d. a ton is working at a loss. He merely says, in effect: "Here are my figures; what about it'?"
Now here, if I may state so without offence, is a typical example of the sort of thing which I have described so often in these articles-namely, a complete absence of any real provision for maintenance and depreciation. The writer makes no allowance whatever for rent and rates of the building in which his vehicles are housed, and he entirely ignores the item of "interest," which, I stoutly maintain, is just as relevant an item of expenditure as the licence and insurance. To get a true picture of the real state of affairs. I will set out side by side the figures from our own tables of costs for a four-ton lorry and those
given me by this correspondent. In addition, as it may be necessary to refer to them, I will include the corresponding figures for five-ton and seven-ton vehicles. In order to make the figures more nearly comparable, I have altered those of our table so as to provide for petrol at is. 16. a gallon, and oil at 4s. a gallon. (It may be remembered that in the tables 1s. 2d. and 5s. are the basic prices of these commodities.) For the same reason I have altered the item of wages, as given in the tables, on the assumption that £3 5s. is the regular wage of a heavyvehicle driver in the district whence this letter has come. Readers must realize that these alterations are permissible, since I have always insisted that the tables only show averages and are subject to correction at all times in order to meet the circumstances of individual cases. Indeed, I have, times without number, recommended readers to follow that course whenever they make practical use of the tables in application to their own work. The tables are set out at the end of this article.
Before discussing the details of these costs any further, beyond pointing out that my correspondent anticipates that f380 a year, or 3id. a mile, is going to be sufficient, not only to cover the four important items of maintenance, depreciation, rent and rates, and interest on first cost, as well as provide for establishment and profit, I propose to calculate the cost per mile of .each of the four lorries Quoted in these tables.
The mileage is 528 per week and it is therefore necessary, in order to ascertain the total operating cost per mile, to divide the standing charges in each ease by 528, adding the quotients thus obtained to the running cost. The result of this' division in the four eases is 2.18, 2.80, 2.90 and 2.97 respectively. Adding these figures to those for the running costs, as they correspond-namely, 2.65, 5.68, 6.38 and 8,27we get 4.83d., 8.48d., 9.28d. and 11.24d. respectively. "Noow the revenue per mile from the contract which is the subject of this article has already been given as 8.25d. per mile, showing a gross profit of 3.42d. per mile on the figures given to me, but a dead loss in all the other cases.
The fallacy underlying these figures and the folly of overloading, vehicles in order, to get an immediate profit will be considered in my next article.