Is It Better to Own Vehicles Or HIRE Them?
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Persistently Recurring Breakdowns and Labour. Difficulties Often Compel Ancillary 'Users to Reconsider Whether it is Really Worth While Running Their Own Outfits
MANY companies are reviewing their transport policies, This is evident from the numerous inquiries received by The Commercial Motor for advice on such problems as the comparative merits of hiring vehicles as opposed to operating one's own. They clearly reveal the extent to which transport is interwoven with the trade or industry it serves. It also becomes equally apparent that an overall policy which may prove admirable in one set of circumstances could be unadvisable in another.
It may assist those who are considering whether to acquire or expand their own fleets if l enumerate some of these factors. Hauliers who can provide vehicles either on a day-by-day basis or on contract may also wish to review the points to be made When canvassing for potential custom. Of the many facets of transport operation, I will deal with five—company structure, vehicles, traffic, finance and labour.
Right at the outset there can obviously be vast differences in the transport requirements of companies. As a result, apparently contradictory policies tan produce equally satisfactory results. The lesson to be learned here is that the success of a particular transport policy which may have been adopted by a nearby company is not necessarily a sound criterion. Superficial similarities may prove to be invalid on closer examination.
Profitable Arrangement
When the organization of a company consists of a number of strategically placed manufacturing units with basic, or semifinished, materials passing between them, in addition to the ultimate delivery of the finished product to the immediate areas, employment of one's own vehicles may well be profitable.
The size of a company may not always have the same effect on transport operation. Where urgent traffic is collected and delivered from a smallor medium-sized company, the personal attention of an efficient haulier may prove satisfactory. Where, however, similarly urgent traffic was required to be delivered over a-wide area, employment of one's own drivers, under direct control of branch managers, may be the only way of maintaining the high standard of delivery times required.
Conversely, whilst a small number of vehicles may facilitate personal control of deliveries, maintenance problems could arise if the services of a public garage were not conveniently available in the vicinity. In such circumstances, an operator may be compelled to setup his own maintenance organization, even though he is aware that it is not strictly economic to do so for
a small fleet.
Preferential Treatment
Two factors which often compel existing ancillary users to reconsider whether it is really worth while running their own vehicles are persistently recurring breakdowns and labour difficulties. Initially, where only, one or twovehicles are employed, such a user may, be fortunate in having drivers with some mechanical knowledge, or being able to receive preferential treatment at the local garage.
As the fleet grew,. however, under present labour conditions it would be unlikely that he would continue to be so fortunate in his selection of drivers. In addition there would be a .limit to the amount of immediate attention he could expect from a local garage when urgent repairs were required.
Even before the stage of maintenance is reached technical knowledge and experience (which a trader or industrialist may not reasonably be expected to have) are required to select the most efficient and economic vehicle for the job on hand. No
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amount of subsequent efficient organization could rectify an initial rriistake in the selection of a vehicle. With such a wide Tange of models offered by -British manufacturers, it would indeed be unfortunate if this were the case. But without the necessary knowledge and experience on which to base an analytical selection, the broad extent of the existing range could cause confusion.
If it is the ancillary users intention to convey the whole of this traffic in his own vehicles he will also have the difficulty of deciding the economic number he will require, in addition to the type. This problem may in turn raise a secondary problem whether some variation in size of vehicles within the fleet is justified, despite the obvious advantages of standardization, so as to meet, at least to some extent, seasonal or other fluctuations in traffic.
This decision must be one of compromise, possibly after an expensive period of trial and error. Neither the responsibility for making such a decision, nor, if it proved to be wrong, the resulting unnecessary expense, would fall on the trader if he hired vehicles.
Whilst many C-licence operators may overcome this problem by conveying a substantial proportion of their traffic—say 75 per cent.—in their own vehicles and hiring for the remainder, so as to iron out any fluctuation, this may not always be so easy to achieve as would at first appear.
Personal Contact
In many distributive trades competition is keen. The personal contact and sales ability of a driver may well be a vital asset to his employer's prosperity. In such circumstances, the company may decide that the risk of disrupting good customer relationship, caused through the inexperience of the driver of a vehicle which may be occasionally hired, more than offsets any saving that the. transport department could show by contracting out some of its traffic.
Another point to be considered, both in the purchase of vehicles and in their subsequent maintenance, is that fleet discounts depend upon the number of vehicles operated. Except for the large ancillary user, a well-established haulier or specialist in contract-hire work would normally be in a better position than a small C-licence operator to obtain the maximum benefit. When reflected in ultimate charges, this saving should go some way to offset the reasonable profit which the professional haulier would expect to make.
Finance would also have to he given close consideration when the acquisition or expansion of a C-licence flea was contemplated. When expansion takes place, substantial problems, and a possible lowering of standards, will probably occur unless an adequate maintenance scheme is introduced.
The deterioration of standards in these circumstances might well be unfortunately timed in relation to traffic requirements. The need for more vehicles would obviously imply an increase of manufacture and sales. This, in turn, may have resulted in the need for more factory space, which was not readily available. In this situation, manufacture must obviously be given priority and less productive sections of the company may have to surrender space. Stock rooms and warehouses would present an obvious target, and if, in fact, stocks were consequently reduced, it would almost certainly become the transport department's responsibility to maintain a more frequent and strictly time-tabled schedule of collections and deliveries if customers' requirements were to continue to be met. Increasing breakdowns because of inadequate maintenance facilities could not be tolerated.
Whether the capital required for additional vehicles could be put to better use by the trader in his own business is a matter which only he can decide. It is, however, pertinent that Government recognition has recently been given to road transport's. achievement in holding, and even reducing, rates compared with those which applied a few years ago. It is. indeed, doubtful whether any manufacturing industry would be satisfied with the modest margin of return on capital which the road transport operator has to accept.
There may well be a recurring benefit to the trader or manufacturer who decides to employ additional capital in the expansion of his own business, rather than in the proviSion of vehicles. If the expansion achieved the expected results, the return-on the capital would be at a higher. rate than the.saying, if any, obtained by operating, rather than hiring, vehicles, so allowing further expansion if the market permitted.
Leading industrialists admit that labour relations are the most important factor today in the successful running of a company. Wide and detailed knowledge of statutory regulations -applying to particular industries is essential, as well as a current appreciation of the local conditions of supply and demand. Elaborate training schemes are now commonplace in many trades, but seldom extend to the transpOrt department.
Because the possession of a driving licence is now so common, there is a real danger that the importance of the selection and training of commercial-vehicle drivers may be underrated or even ignored. Where no training scheme exists, the. replacement of a C-licence driver is often a matter of extreme urgency, which is the worst possible basis on which to make a prudent selection.
Accent on Sales
There is also a possibility that with an understandably prior concern for the traffic carried, and the customers to whom it is delivered, an ancillary user may attach far greater importance to the sales ability of a vanrnan than to his driving standard, with disastrous results on the condition of his vehicle and regularity of delivery.
Whilst both these aspects of a driver's job are important, in the majority of cases a successful haulier or contract-hire specialist would be in a better position to judge, and possibly arrange training for, prospective drivers. Even under a C-hiring arrangement, where the driver must be the trader's employee, this still does not prohibit the contractor from providing adequate vetting of staff, before engagement. In determining whether to operate one's own vehicles, it is easy to underestimate the amount of administrative time and ability which can, and probably will, be diverted tram the" main business. Theoretically, of course, once the organii_ation is• set
up, emergencies or the need for spot decisions on major matters should not arise. In practice; they inevitably, will, partly because transport is so closely dependent upon the time factor, and many.net.essary decisions Cannot. be postponed. As a result, -the attention Of an. important executiVe MaY,flaVeJCi be diVerted frorteli"6
main job at inconvenient mot:Flints, . •
It is often claimed that mangy ancillary EJSUS do not know the cost of operating their vehicles. But even where this does not apply, the various departments' are, in the interests of simplicity, often charged on overall tonnage or on some other unit of manufacture; Understandable though this may be the result is that it becomes difficult, if not impossible, to determine a fair balance between cost and ,service, whieh is' the essence of goad transport management.
• Increased productive capacity would normally.result in extended sales areas. In the initial stages the coni-., paratively few new sales will prove costly in distrihunon. This is generally accepted, provided that subsequent expansion., of saleS in the same area more than offSets the early high casts. Where, however, a cost per ton at per unit is the only charge made against a sales department, an over-generous assessment.of prospects in a new area may easily be made. If the salesman responsible for such .a delivery had subsequently to justify a haulage account from a profeSsional Operator", there would be a natural tendency to curb unreasonable and expensive
requests for transport. • .
Though not a direct transport cost, packaging can Eprnetime be the deterridifing -factor Whether .vehicleS are hired or bought. Because of the fragile nature of some commodities, or because they are easily pilferabIe, additional packing has to be supplied. Its initial cost, together with the additional labour required, and the time and cost involved in arranging for the collection and return of empty containers, may well add up to a high proportion of the total transport Cost. Alternatively, because of the shortage of materials, it may prove impracticable to supply additional packing. In that event, the employment of one's own vehicles often provides the only solution. S.B.
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