What They Should Charge
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Aiiy article in last week's issue resulted in my ieceiving many letters on the various ways of assessing charges . for haulage. The first correspondent stated that he had been asked to quote for the conveyance of eight 5-ton loads of sheet metal per week between two factories, both belonging to the 'same manufacturing company. The pointto-point distance was '12 miles, and there was tittle or no prospect of a return load
The writer said. that he would like me to let him know what was the lowest possible price he Should get for the job, bearing in mind that he gets a lot of work from this particular customer. ' He mentioned that the 5-ton vehicle he proposed to use cost £1,000, and its petrol-consumption rate was 10 m.p.g. He added that he would also like me to let him know What he should charge per mile and per day for this vehicle, which normally ran 400 miles per week.
He did not say how the eight loads per week were spread during that period-whether, they were two per day on three days per week or one per day on the other days, or whether he was allowed to pick them up as and when it was convenient to him. It was clear from his letter that the vehicle was more or less regularly engaged throughout the week. At least. this particular job involving the eight loads provided for running only 196 miles per week, and since he stated that the vehicle was doing 400 miles per week, it could be assumed that it was reasonably well occupied on other work as well.
Depreciation Figure
Figures for the operating costs for a vehicle of this type can be set out quite simply as follows: the purchase price was £1,000; the tyres would be £160, and if I take that and £80 for residual value from the original cost, I get £760 as the figure on which I must calculate depreCiation.
If I split that, taking half of it to be depreciation on the basis of time and the other half on the basis of miles run, I get, assuming six years as the basis for depreciation for time ancl'l 60,000 miles as the basis for mileage, £63 13s. 4d. for the depreciation over time and 0.51d. for depreciation per Mile.
The standing charges per annum come out as follows: licence, £35; wages, £327 12s.; garage rent, £26; insurance, £33 I5s.; interest at 3 per cent. per annum, £30; maintenance (d), £37 .10s.; depreciation (half), £63 13s. 4d.; overheads, £160. The total is £713 10s. 4d. That is equivalent to 6s. 6d. per hour, reckoning on 2,200 hours each year.
For running costs I take: fuel, 4.10d per mile; lubricants, 534 0.13d.; tyres, 1.92d.; maintenance (e), 1.34d.; depreciation (half), 0.51d. total, 8d. per mile. Regarding this as an oddjob type of haulage, I should add 25 per cent, to those cost figures to arrive at my time and mileage charges, which would make them 8s. 2d. per hour and 10d. per mile.
Assuming Ii hours for loading and the same time for unloading and a total of one hour travelling time out and home, I must charge for four hours at 8s. 2d., which is £1 12s. 8d., plus 24 miles at 10d, per mile, which is £1. The total is £2 4s. 84., which is lOs 10d. per ton.
The inquiry also covered information about charges per mile and/or per day, and it is here that we can make use of some of the other methods of calculating charges that were described in the previous article. It may be noted that this is a simple example as the operator stated that he ran a regular 400 miles per week. If it be assumed that he does that 400 miles in a standard 44-hour week, then his average mileage per hour is about nine.
Charge Per Mile His charge per mile should be assessed in this way. We have time and mileage figures of 8s. 2d. per hour and 8d. per mile; take nine miles at 8d., 6s., and add that to 8s. 2d. and we get 14s. 2d. for nine miles of running, which is, as near as makes no matter, Is. 7d. per mile. The charge per day, reckoning on 8i hours per day, would be 81 times 14s. 2d., which is £6 Os. 5d. per day.
Here is a warning; this operator asked me to tell him what the charge per mile should be when averaging 400 miles per week, and I have assessed it at Is. 7d. He will make a big mistake if he applies that charge of Is. 7d. per mile to the particular traffic with which his letter is principally concerned, for if he charges for that 12 miles out-and-home job at Is. 7d. per mile, he will get only 38s. for it, instead of 52s. 8d., or 10s. 10d. per ton, which I have already recommended.
The reason for this difference between the charges as reckoned by the alternative methods is, of course, the extensive terminal delays involved in the conveyance of steel sheets, and the moral of the story is that before making a quotation, the haulier should examine carefully the conditions and note the likelihood of extensive delays.
In this particular job of conveying sheet metal over a 12-mile lead and taking , four hours per load, the average mileage per hour is only six, compared with 9 m.p.h., the average for the whole week.
Another inquiry also related to a 5-tonner which was on a B licende and as the inquirer put it, was "used in our own business and also for a few outside jobs." lie stated: "I have been charging 8s. per hour, the time starting from when the vehicle leaves here until it returns. Does this pay? If not how much should I charge?" The first thing I emphasized in dealing with this inquiry was that running costs should not be given on a time basis, but only on mileage. I advised this correspondent that his vehicle cost him £11 7s. 4d. per week for standing charges plus 8d. per mile. (Those figures arc taken from those already used in connection with the first inquiry.)
On a 44-hour week that is 5s, 2d. per hour and 8d. per mile, so that if 10 miles be covered per hour when the vehicle is on hire, -then the bare cost is 5s. 2d. plus 10 times fict, which is 6s. 8d Total, Ils. 10d., as against a revenue of 8s. Obviously that is insufficient; it is not even covering the operator's costs.
I advised him that his establishment costs probably amounted to another Is. 4d. per hour (that is nearly £3 per week). so that his actual hourly cost will be I is. 10d. plus Is. 4c1., which is 13s. 24., thus emphasizing still further the Now, in his letter he said: "I have been asked by a firm to quote them for transporting their goods to St. Albans, picking up usually at docks and railway yards where long delays take place and I have been asked to quote per ton. I -should-be very pleased if you would advise me what I should quote for this work."
We are faced with the difficulty, here that on some days three journeys may be accomplished at the cost of £8 8s., but at other times it may be possible to do only two journeys at the cost of £6 3s. Id. What we would like to know is the proportion of days upon which only two journeys are possible, and those upon which three journeys can be run. I think the safest way is to take it that there are three days out of live when two journeys are covered-and only two days when three trips are made. That gives us a cost fOr the two three-journey days, £16 16s., and for the other three days, £18 9s. 3d, The' total cost per week is thus £35 5s. 3d. As this is a fairly regular job, it would be reasonable to add only 20 per cent. to the cost in order to arrive at the profit, that is £7 Is., so that the total charge for the week's work should be £42 6s. 3d.
In that time he has altogether carried 12 loads of 7 tons each, that is 90 tons, so that he should charge not less than 7s. Id. per ton.
Finally, there was an inquiry about a short-distance coal-haulage job. This correspondent said that he had been asked to contract for the haulage of 50 tons of coal per day and that he proposed to use an articulated vehicle capable of carrying 10 tons. He was going to purchase one tractor and two trailer units, so that he could leave one trailer to be loaded while he made the journey and tipped coal with the other.
loss he is making on a charge of 8s. per hour. Actually, he should add at least 3s. 4d. to that amount of 13s. 2d., the cost per hour, in order to ascertain his charges which should thus be 16s. 6d., rather snore than double what he proposes. The next inquiry was about London traffic. This time the operator was using a 7-8-ton oil-engined vehicle carrying traffic regularly from south-east London to St. Albans; the actual distance, he informed me, was 23 miles from point to point. On a good day, when terminal delays were not extensive he could do three journeys in 10 hours, but as frequently happened, only two were possible and he wanted to know what his charge should be.
First of all let us get the details of his operating costs in the usual manner.-A 7-8-ton oiler will cost about £2,200, and from that I propose to deduct £230 for tyres, and £200 for residual value, leaving £1,770. One half of this, £88$, must be depreciated over time and the other half over mileage. On the basis of eight years and 240,000 miles, the figures for depreciation become, on a time basis, £110 12s. 6d., and on a mileage basis 0.89d. per mile.
Details of the operating costs can be set out as follows: standing charges per annum; licence, £70; wages, /338; rent, £30; insurance, £36 10s.; interest, £66; maintenance (d), £50; depreciation (half), £110 12s. 6d.; overheads, £220; total per annum, £921 2s. 6d., which is 8s. 4d. per hour. For the running costs: fuel, 2.47d. per mile; lubricants, 0.20d.; lyres, 2.10d.; maintenance (e),.1.50d.; depreciation (half), 0.89d.: total, '736d.
Now assume that this operator is doing three journeys per 10-hour day; the mileage, 23 in each direction, 46 per trip, is 138, and at 7.36d. per mile that costs £4 4s. 8c1. Add for 10 hours at 8s. 4d., £4 3s. 4d., and the total cost per journey is £8 8s. Bear in mind that that is cost only, If only two journeys be done per eight-hour day, then the distance travelled is 92 miles, and that at 7.36d. per mile is £2 16s. 5d. For eight hours at 8s. 4d., the cost is £3 6s. 8d., and the total cost is £6 3s-1d. He said that the d1stance to be travelled was 10 miles per journey and he estimated that he would be able to carry the whole of the 50 tons in one eight-hour day.
A suitable tractor unit and trailer will cost £1,150 for the tractor and £525 for the trailer. Allowing for two trailers, therefore, his initial outlay will be £2,200. His tyres will cost £380,and taking a residual value of £220, the basic figure for calculating depreciation must be £1,600.
I am going to assume a life of six years and 160,000 miles on which bases the two depreciation figures are £133 per annum for time and 1.20d. for mileage. The fixed expenses per annum will be as follows : tax, £44; wages, £348; rent, £30; insurance, £50; interest, £51; maintenance (d), £50; depreciation (half), £133; overheads, £154; total, £860, which is £17 4s. per week.
The running costs will approximate to !Id, per mile made up of fuel, 5.70d.; lubricants, 0.20d.; tyres, 2.70d.; maintenance (e), 1.20d.; and depreciation (half), 1.20d.
am not quite clear from the letter whether this operator meant that the lead distance was-five miles, that is 10 miles out and home, or 10 miles involving 20 miles out and home.
If the distance be five miles out, and the daily mileage involved in carting 50 tons be 50 miles, assuming a five-day week, that means 250 riles per week and carting 250 tons. For that, the charge should be made up as follows: £17 4s. per week for fixed charges, plus the cost of 250 miles at 11d, per mile, -which is £1.1 9s. 2d. The total is £28 13s. 2d., and adding 20 per cent. for profit.that is £5 14s. 10d., the sum which must be charged is £34 8s. For that, 250 tons have been carried, so that the price is 2s. 9d. per ton.
If the distance be 10 miles out, then the mileage per week is doubled, becoming 500. The cost of 500 miles at 11d. per mile is £22 18s, 4d, Add £17 4s. for fixed charges and the total cost is seen to be £40 2s. 4d. Add £8 Os. 8d, profit and the charge should be £48 3s. That is for the conveyance of 250 tons, so that the charge per ton might conveniently be made 4s, S.T.R.