RATES jar the country carrier An Approximate Formula for the
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/Small Operator in a Rural District Who Does not have to Bear the Heavy Overheads of the Regular Parcels Carrier AS every reader of these articles will know, my invariable practice when dealing with inquiries as to the rates to be charged for the carriage of parcels, is to advise the inquirer to ascertain the rates current in his area and to adapt them for his own use. It is not generally practicable to assess the rates for this class of work directly on the usual basis of cost plus profit. My recommendation is that he sets to work on these current rates and endeavours to build up such a quantity of traffic as will show him a profit on his work. As a rule I also tell him what his minimum earnings should be.
I often get these requests, and my replies become almost stereotyped. This week, however, I have received another letter and as the inquirer is insistent, I have evolved a formula which will give approximate figures for this class of business. In this instance the person concerned is a country carrier and presumably, therefore, is not put to such a big expense as the larger parcels-carrying companies, for he has only one vehicle and will be unlikely to make any provision for handing on parcels to other people. Thus he is not necessarily compelled to charge the rates that they do.
He tells me that his principal journey and the one about which he is concerned, is between two townships which are 20 miles apart. It is his intention to do a double journey out and home, once per day for five days per week, leaving himself Saturday for maintaining his vehicle. He proposes to use a 3-ton van for the work and would like to know how to grade hischarges (a) for parcels and packages of various weights. and (b) for different distances.
Cost Higher than Average
The weekly mileage involved in this service is 200. being made up of five days' running at 40 miles per day. According to "The Commercial Motor Tables of Operating Costs," the cost of running a 3-ton goods vehicle for 200 miles per week is Is. 21d. per mile. That of running a van will be a little higher than average because the vehicle is more expensive ia first cost and the bodywork is more expensive teo maintain: I should say that the figure would most likely be Is. 3d. The total weekly cost is therefore £11 17s. 6d., and for the reason given above I shall take £13. That of course is the bare cost of operating a vehicle; there are still establishment costs and profit to be added.
Now in the Tables the sum taken for establishment costs for a 3-tonner is £1 18s. Od. per Week. That amount is, of course, purely arbitrary. Every haulage business differs from its fellows in this respect, and I advise readers to try to find out what are their own establishment charges. Failure to appreciate the importance of these costs accounts for many unfortunate experiences.
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In the case of a business such as the one which we arc now considering,' the eStablishment costs' are particularly heavy,' much higher, than average, -for the following reasons:—Some steps have to be taken t advertise, both at the terminal townsand along the routes. In addition it is usual to. pay commissions to •agents,along the,routes who act as collectors and distributors of parcels.For advertising we might well-assume an average amotintof 2s. per week at each township along the routes, plus 6d. per week at the termini..
. Advertising : £2 a Week
happen to know that on the particular route used by this carrier there are 15 villages or hamlets at which he would like to advertise his business, so that for this item alone he may expect to pay £2 per week. Then commissions, even at as low a rate as 5 per cent., will approximate to £1 5s., in addition to which there is the amount which must be set aside for the ordinary establishment charges, say £1 15s., making a total of £5 per week. Therefore the operator's total expenditure per week is 118, comprised of the £13 per week vehicle operating cost plus £5 per week for the establishment charges detailed above.
As regards profit, the percentage should he high because the business is somewhat precarious, and I am therefore going to suggest 50 per cent. That means that the operator must obtain a revenue of £27 per week for his business to be worth having. The problem we have to solve is how to arrange the schedule of rates in order to ensure that revenue.
First let us ascertain the necessary averagerevenue per trip. There are five journeys per week, so that the revenue per trip must be, in round figures, £5 10s. At this stage in the calculations I recommend the reader to take pencil and paper so that, as I proceed, he can vary my figures and correct them to bring them into line with his own knowledge or experience of his particular route. proposed or actual, as the ease maybe. That is necessary because I am going to make certain assumptions in order to obtain a basis for calculation.
If, for example, the van were to be fully loaded-at one terminal with parcels for delivery at the other, and, on reaching the other could be again loaded to capacity with parcels to be carried for the full distance, our calculation would be simplicity itself. It would be necessary to charge only at the rate of £5 10s. per 3-ton load,•which is approximately Is. 3d. per cwt: for all sizes and conditions of parcels.
That most favourable condition will rarely exist and this, in fact, is one of those problems which are complicated by the presence of two variablequantities, those of lord and distanee. The weight of parcels .taken aboard at the start of a journey in either direction, may be anything from nit
to 3 tons, and the distance that parts of the load may have to be carried can be anything up to 20 miles. There is, too, the further complication that the number of individual parcels is unknown. . The last-named factor is not generally a serious complicas tion as it is not necessarily the case that 100 parcels involve 100 collections and deliveries. Collections will, as a rule, be made only at local agents in each village, although there. may be an occasional call at a house or shop displaying the carrier's card. Deliveries will, however, in most cases be direct.
What we have to consider is: 1-low long will the deliveries and collections take? The actual distance,'20 miles, will be covered in 11 hours actual travelling time, 21 hours being taken for the double journey. If the stops to collect and ieliver take up no more than another 51 hours per day, we may take them as read; they do not affect out calculations. in 51 hours there are 330 'mins., which give an average of 3.1 mins. for each of 100 calls, So that we may accept that as reasonable.
Load and Distance
Now what are we to do about the other variable quantities—the load and the distance? Suppose that instead of a full load at the start of the day the van takes on only 1 ton at the first stop; about three miles out, a little more load is taken aboard and none discharged. Farther on. say eight miles from the start, 5 cwt, is delivered but none taken aboard. That state of affairs is probably typical. Sometimes more than 1 ton may be accepted at the start, but on other occasions less. On certain days the early part of the journey will bring additions to the load, and, at other times, that augmentation will not come until near the other end, or it may not happen at all.
For our purpose, we must assume that the average load throughout the journey will be one-third of the capacity of the vehicle, namely, I ton. That assumption will meet the conditions, as they are affected by either of our two variables, for it will answer the requirements to be met by a case in which a full load is carried for one-third of the distance just as well as one in which one-third of the load is carried the whole way.
There is yet another factor to be taken into account. The traffic on the majority of these routes is. to a large extent. oneway. It is necessary, therefore, so to assess the rates that the amount of £5 10s., which was shown to be the minimum revenue, is earned on one outward or one inward journey. On that assumption, the total revenue of £5 10s. per journey must be earned by the conveyance, on the average, of one ton per 20 miles, making an average charge of 5s. 6d. per cwt. for this distance.
Loading Time
It still remains however, to take into account the fact that, generally speaking, a small parcel takes as long to deliver as a large one, so that a van full of small parcels would take much longer to complete a journey than one loaded with a few large ones. Some extra charge must be made to compensate for the extra cost of handling. It is usual to make this allowance by adding a fixed amount to the calculated charge, say 6d. per parcel. That is a rough and ready way of dealing with the difficulty and is not strictly or mathematically correct. it serves its purpose, however, quite satisfactorily,
The charge for a parcel weighing 1 cwt. to be carried the full distance of 20 miles, will, on that basis, be 6s., of which 5s. 6d. is the calculated' charge and 6d. the fixed allowance for collection and delivery. Calculations for parcels of different weights to be carried various distances can now be mad:: If I cwt. has to be carried only half the full distance, say 10 miles, the charge is half of 5s. _6d., which is 2s. 9d., plus 6d., making 3s. 3d. in all. A parcel of cwt, to be carried 5 miles should be charged at the rate of a quarter of 5s. 6d., which is is. 41d., plus 6d.; total Is 101d.
Reduced to a formula, the charge is 5s. 6d. per cwt. for 20 miles with 6d. added. This may be set out as follows:— 66 x W x leI +6 20 112 where W. is the weight of the parcel in lb.. M. the distance it is to be carried in miles. The figure 66 is 5s. 6d. in pence,
the 20 below the line is the full distance of 20 miles for which the charge is 5s. 6d. and the figure 112 is put in to reduce from cwt. to lb. The plus 6d. at the end is the fiat rate of charge for collection and delivery. The answer is in pence. Fractions of a pound and of a mile to be treated as the next higher unit. Thus, if the figure for weight or distance be 7} it will be more convenient if it be treated as 8.
I will give an example: Take the case of a parcel weighing 9 lb. to be carried 15 miles. The formula then becomes 66 x 9 x 15 46 20x 112
which amounts to very nearly 10e1 As it is not convenient to calculate the cost of each parcel every time a customer presents one to be carried, the haulier should make hi% own calculations beforehand and draw up a proper schedule of rates. 1 have done so in application to this problem and the one I have prepared is shown in the accompanying table of ,parcels rates.
If the operator finds, over a lengthy period of working, that he is regularly carrying more than an average of onethird of the capacity of his vehicle or that he is getting traffic in both directions instead of in only one, as assumed for the purpose of these calculations, he has no need to worry. It Merely means that he is making a little more profit. Actually tlie payment for each parcel over that specified average is profit--except, of course, for the commission paid to the agent who has collected those packages.
A Danger Signal
On the other hand, if he observes—again I must emphasize the importance of records being taken over a lengthy period of working—that he is carrying, on the average, loads less than one-third of the capacity of the van and that the traffic still continues to be. in the main, one way, that is an indication that he is making less than the specified profit and he must act accordingly.
There are, in such circumstances, two courses open to him. 14e may either persevere with his existing rates, whilst devoting his energies to improving the service he renders to his customers, or he may have to cut his prices if he finds on investigation that his charges are not competitive with those of other carriers in the district who give as good service as he does. In any case he must strive to improve his service so as to increase his loading to the point at which his returns show that he is, at least, making his revenue up to the minimum.
One thing at least must, I think, have occurred to readers of this article, and that is the necessity of keeping a close watch on 'the revenue, comparing it with the amount that I have set down as a minimum. If it falls short for more than one or two weeks, prompt and close investigation to ascertain the cause must be made.
In this article I have taken a 3-ton van as the vehicle to he employed. although I am aware that other sizes of vehicle are used for similar purposes. Only the other day. for example. I had a letter from an operator who told me that hs, was thinking of putting a 10-cwt. vehicle into such service.
Actually, there is hardly a living to be made with a 30-cwt. machine, but nevertheless the same. method of working out the rates applies. Take the figures for total operating costs from "The Commercial Motor Tables of Operating Costs," add about 5 per cent. to allow for the greater cost of a suitable van, then a reasonable amount for establishment costs, add to that again 50 per cent, as profit and, thereafter, the method described in this article should be followed.
S.T.R.