How to Obtain Better Rates for Milk Haulage
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Lack of Recorded Costs is a Severe and Serious Handicap to Hauliers When They are Appealing to the Milk Marketing Board. for Higher Rates for Road Transport
Solving the Problems of the Carrier
HOW many times, and over what period of years, I wonder, have I been urging upon hauliers the need for ' keeping accurate, detailed and complete records of their expenditure; not only the money spent on operating their vehicles—" Operating Costs "—but also that expended on running their business—" Establishment Costs." But I can say that I have been urging it for more ;than 20 years. Now, after all that time, I have been taken to task . and, if you please, ,becau-Se a haulier utterly ignored that
recOmmendation. • . The tale is worth the telling, because it points a moral and warns many other hauliers what they may expect when ., their turn comes to be asked what are their costs, as will most certainly happen soon.
It all came about because I consented to act as the representative of a haulier who was appealing against the Milk Marketing Board's assessment of a rate which he was' to receive for hauling milk. I was told that the offer was id. per gallon. I asked for costs data and this is what I received. I should say that the figures related., to three lorries, each having the capacity to carry 600 gallons of milk—say', 3 tons of pay-load, including churns. Each vehicle was some 6-7 years old.
. The figures are clearly open to suspicion. For maintenance to athount to 4300 Per afinum exactly, and for depreciation to work out at 4200 precisely is something no one could possibly be expected to believe. Surely these were estimated and not actual costs. On investigation that proved to be the case. There were, I was told, no accounts.
Well, it was no use grousing, so I set about doing my, best with the tools given me. I began by making the schedule of items, complete. Experienced operators who do keep costs will have noticed that several items are missing. To' take that step was, of course, to add to the number of " estimates," but there was no help for that. My schedule read as follows:— Readers should vote the additional items—garage rent and rates; interest on capital 'outlay ; establishment charges. These need no explanation ; there is another. item, however,
which does. That is the item " Wages (proprietor is driver), 4143." The need for this arises in-this way. Three vehicles were, as I was informed, normally employed on this series of milk collections. Two of them were engaged for the full day, seven days per week. The. drivers were employees and were paid wages up to 45 and 46 per week.These were agreed figures; the amounts are, of course, in excess'of those prescribed by the Road Haulage Wages Act. The third.vehicle was driven by the proprietor of the business, the appellant in the case. ,It did not, however, run' all day, but for only .4i hours per day, still, of course, ffir seven days per week. It seemed to me reasonable that the third vehicle should bear, as part of its cost of operation, .tho wages of a driver. I took, as an amount sufficiently aCcurate for the purpose, one-quarter of the total paid to the two drivers. Before proceeding farther, I deemed it advisable to check' up on the estimated figures given to me, to see how closely they approximated to averages.
First as to the 83 10s. for licences. ft is equivalent to 4.27 16s. 8d. .per vehicle—an odd amount. It is too much if it be assumed that the tax (£25 per annum) was paid annually and the, cost of the " Operational Permits" included in the amount, and' too much, again, by 6s. 8d. per annum per vehicle, if the licences be acquired quarterly. I decided, however, that any inaccuracy present was not of sufficient magnitude to affect the result. With the item " Wages " I have already dealt.
As regards " Garage rent and rates,'" I assumed that £30, just over 10s. per week for three vehicles, was near enongh,. having in mind that the location was rural.
Attitude of insurance Companies to Milk Haulage "
Insurance" at 440 per vehicle reflects the attitudç of the insurance companies towards lorries used for milk haulage. It has always been thus, and apparently the Milk Marketing Board is unable to do anything about it. Evidently, it is the insurance company that decides what the premiums shall be, not the Board.
With regard to ,` Interest on capital outlay on vehicles "I am afraid I slipped up. I assumed an initial outlay of 4400 per vehicle, 41,200 in all„ and assessed the,interest at 3 per cent. on that. It was later disclosed to me that the cost per vehicle was 4300 or less, so' that the total was' under 4900 and the interest, at 3 per -cent., should have been less than 427.
Establishment charges at 4250 are quoted at a round . figure. I had in mind that, on milk haulage, the operator must be put to some expense in order to have a vehicle
• available, at call, • to replace any of the regular machines which may be off, the road for some reason. For that I allowed about 41 a week.
Establishment charges proper are bound to be well below the average. I aSsessed them at 8s. 6d, per ton of payload, 43 16s. 6d. for the three vehicles (9 tons pay-load). The sum total is 4.250 per annum within a shilling or two. Now came the running costs, all of them as estimated by the haulier. Before 'l can deal with these items I must' know the mileage covered by the three vehicles. The three vehicles,. I was told, travel four routes.
Route 1_ is 23 miles long and is covered by the vehicle driven by the proprietor. It takes 4i hours to complete. Route 2 is 71 miles long and needs 7i hours for its completion. Route 3 is 20 miles long, taking four hours and Routt 4 is 35 miles long, taking 4-k hours. Routes 3 and 4 are travelled by the one vehicle. The daily mileage is thus 152 and thefl total per annum 55,480.
The petrol consumption was stated to be 17 gallons per day, which is equiv.a-lent to a small fraction under 9 m.p.g., not at all good for a 3-tonner working in easy, flat country, even if I take into consideration the fact that a small proportion of' the total distance is-run off the road,
and calls for a lot of second-gear work. '
The total quantity of petrol used is G,205 gallons, so that fhe price must be practically' 2s. per gallon, that is, if we accept that figure of ow quoted as the total annual expenditure on fuel.
Now for the oil—another nice round figure of £70. But that is actually equivalent ho more than 0.3d. per mile for lubricants. If I take it that the price is 5s. per gallon, andj can be quite sure that no mdre is being paid, the consumption is at the rate of 200 m.p.g., which is very poor, having in mind the expenditure 'on maintenance as disclosed below.
Next come tyres at £288 per annum. This is equivalent to 1.25d. per mile. Reference was made to an instance of new tyres having to he replaced after 4,000 miles of running, and the claim was made that 10,000 miles per set was all that could be expected. My figure, in the current issue of " The Commercial Motor F.' Tables of Operating Costs, which was compiled before these new tyres came into use, was 0.55d. per mile. I should have ,thought id. per mile would be nearer than 1.25d.
, Now we come to maintenance. A figure of £300 perannum means an allowance of 1.29d, per mile. Again I compare it with the figure in the Tables-1:20d. The difference is not great ; it is probably due to the age of. the vehicles; 6-7 i getting-on in years " for a lorry engagedin milk haulage.
Making an Assessment for
• the Cost of Depreciation Finally, there is depreciation—£200 per annum for three vehicles, £66 13s. 4d, each, or 0.80d. per mile. Assuming the original price to be £300 each and assuming, as is usual in the case of vehicles of this type, •a life of 100,000 miles and a residual value, at that mileage, of £30, there is £270 to be spread over that mileage, giving a basic figure of 0.65d. per mile.
The average mileage is.18.490 per annum. For the purpose of assessing depreciation plus obsolescence 20000 miles is sufficiently near the truth, An addition of 10 per cent, must be made. to the basic. figure to allow for the fact that the annual mileage is less than 24,000. That brings the depreciation figure up to 0.72d., as against 0.80d. A slight difference, but one, unfortunately, in favour of the haulier.
It is of interest to place these " estimated " figures put forward by this haulier, side by side With what I have suggested. They are as follow The difference is £286 125. in favour of the haulier.
In endeavouring to arrive at a price to be paid for, milk haulage, two things must be known—the total cost of the haulage (shown earlier to be £2,711 10s., estimated figures) and the number of gallons of milk to be carried. • Here again, unfortunately, I had to rely upon estimates. The haulier had been working on these particular collection mutes for only five months. At the beginning of the period (April), the gallonage was stated by him_ to be 2,100 per day. In August it had fallen to 1,200, and these were the latest figures available to me. I was informed that it was fair to take the August figure as representing the average for the year and that, in „fact, the average was likely to be lest as the gallonage was at its lowest from September to December.
I accepted the August figure of 1,200 gallons per day, which is equivalent to 438,000 gallons per annum. At that, the net cost to the operator .would appear to be 1.46d. per
gallon, practically .1d., or almost double the id. per gallon offered by the Milk Marketing Board.
There is still, however, the profit to be added-20 per cent. on £2,711 10s.—giving a figure for total revenue of £3,253 16s. and a rate per gallon of 1.78d„ just over 11d. per gallon.
I felt, at least, that there was a sufficiently large margin between the haulier's figure of 11d. and the Board's offer of id. to justify action, as well as some optimism as to the result of the appeal. I quite expected that some of the estimated figures Would be challenged and that I should have to. give way on some of them.
The first blow dame, however, from a most unexpected quarter. The representative for the Milk Marketing Board asserted that, for part of the year at least, the work could be carried out bY two and not 'three vehicles and, moreover, that it was actually being done by two lorries, Naturally, I protested at that, quoting the figures given to me, and denying that two vehicles only were being employed. Whereupon, to my amazement, my client admitted that for the past week or two he' had been doing the work with two vehicles!
That admission, of course, wrecked all my figures. From there, the Milk Marketing Board representative went on to criticize the individual items in the achount. In addition to cutting down the running-costs figures, to an extent not fully disclosed but probably approximating clbsely to those in the second column of the comparison given above, he queried the amount for establishment costs. In the end, I iinagine, he arrived at a figure of something like £2,250
for total 'annual expenditure, instead of £2,711 10s. , The rate allowed was 1.154. per gallon, which gives a revenne of £2,604 7s. 4d., showing a net profit of £354 per annum (in round figures), which is rather more than 15 per cent, of cost.
Method of Hearing Hauliers' Appeals is Satisfactory
Taking the whole matter by and large, I am of the opinion. that the haulier has little of which to•complain in
the method of hearing these appeals. The procedure is that the haulier speaks first, quoting his figures and justifying, on the basis of those figiires, his claim for a higher rate. I should imagine that if he can produce authenticated and audited figures he will meet with little difficulty and should obtain the rate for which he asks.
The chairman struck me as being fair. The Milk Marketing Board representative may appear M be somewhat brusque in. his manner of presenting his case. I am not of the opinion, however, that any complaint is to be found, on that score: after all, he is fighting-for his own side, just as is the haulier.
However, two thingS'I think might be altered. First,' it seems to be reasonable to ask that the representative of the Milk Marketing Board, as well as the haulier, should retire from the room whilst the committee adjudicates. The haulier comes out with a feeling that he has left his opponent with a clear field.
Secondly, the Milk Marketing Board makes free use of its own figures for costs of operation as a basis for checking those of the haulier. That is all right up to a point. It is not, however, fair to compare individual items, especially malatenance and depreciation, without both side-'being fully aware of. the method used in compiling the data on which the maintenance per mile and depreciation per mile' are -assessed. Considerable differences of opinion and wide variations in methods prevail. Comparisons may, therefore, he impossible and', most, certainly, unfair.
To the haulier I would say : Compile some real figures for costs and gallonage. If 'you hate not any, get your representative to agree all your figures beforehand, and do not hide anything from him. S.T.R.