Problems of
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THE HAULIER AND CARRIER
IN view of the fact that last week's issue was a special number, it is likely that The Commercial Motor has obtained further new readers, so I propose to deal, not with a particular problem, treated so as to make it of general interest—that being my wont—but to consider the problems of the haulier from a broader aspect.
I am going to discuss them in their relation to the problems of traders generally and thence to show how they are peculiar and why it is necessary, first, for the haulier himself to beware of the incidence of those problems; and, secondly, how by following these articles and by taking advantage of the editorial service which goes with them, he may lessen his own risks by having any particular problem solved for him.
Broadly speaking, the problems that the haulier has to solve are the same in their essentials as are those of every other trader. In the term haulier, I should explain, I also include the coach and bus operator, for his problems are practically the same. He has something to sell and he endeavours to sell it so that the transaction shall show him a profit—only a reasonable profit, if he can do no better, but at least a reasonable profit. His product is transport and his machinery, the means for production, is comprised in the vehicles that he owns. The cost of his profit is the cost of operating his vehicles; the profit he makes is the difference between that cost of operation and the revenue he receives, less the overhead charges incidental to the carrying-on of the business itself.
Which is the Haulier's Special Difficulty?
So it is with every manufacturer and with every merchant. Each has his cost of production or his buying price, as the case may be; each has his expenses of management and so on, his overhead charges, to wit ; and each is mainly concerned with the difference between the sum of those costs and the revenue that he earns, for that difference is his profit—or loss.
Wherein then lies the special difficulty of the haulier? Why should he be assumed to need special guidance so that he may not fall into error? What are the pitfalls which beset his path, from which he must be protected?
The question can best be answered indirectly by showing that he is, in some sense, placed differently from other traders. His chief difficulty—the one which, indeed, embodies all the others—is his lack of knowledge of the basic facts of business management, his ignorance of the fundamentals of the economics of transport.
_ Other trades—as to most of them, at any rate—are old and long-established; those persons who enter them B46 usually do so either after having served an apprenticeship or, at least, with some preliminary experience of the orthodox procedure. In any event, there is always available some reasonably accurate method of ascertaining the costs of buying and selling, and some sort of precise information as to the selling prices which will bring a profit, always provided that the general conduct of the business proceeds in accordance with known traditions.
It is not easy for the ordinary, man in the street to enter such trades unless he has at least the rudiments of that essential knowledge. Moreover, the knowledge of the c:.onomics of the business is usually embodied in the tsehnical side of it. The two go hand in hand.
The peculiar difficulties of the haulage business are bound up in the facts that, first of all, it is a business of comparatively recent growth—the end of the war 'saw its real beginnings, so far as the small owner is concerned; secondly, that its technique is wrongly presumed to be altogether comprehended in the knowledge of the management of the vehicle employed, which it most emphatically is not.
How Undercutting Originates.
The upshot is that any individual who can raise the first instalment for the hire-purchase of a vehicle, or who can find the money to buy a second-hand one, immediately presumes that, with the ability to drive his vehicle, he has acquired all that is necessary to enable' him to enter a most difficult trade and to make a living at it. That is where his troubles begin, and that, too, is where the troubles of all those engaged in operating motor vehicles for a living originate, because it is those who, in their ignorance of proper business methods, quote impossible and absurd rates, upset the whole fabric of that business, succeed in complicating it for the wiser members, who find their own proper prices undercut and lose either work or profit, according to whether they themselves cut prices, too, or refuse to do so.
The major problem of the haulier, considering him as representing an industry, is, therefore, how to circumvent the price-cutter, and, if it be agreed that a considerable amount of that price-cutting arises from ignorance, how to remove the cause, by educating the less knowledgeable members of the industry.
I should like to emphasize the fact that the problem is quite incapable of solution by what I might term " militant " means. They are wrong in principle—a child is not guillotined—and, as may have a more direct appeal to those who would adopt them, they are totally' unsuccessful in practice. They have been tried. Some of the more powerful and wealthy haulage contractors have attempted to squash their smaller brethren by prolonged and rigorous price-cutting. The result was
'unfavourable only to themselves. It is far too easy for new men to arise to take the place of the fallen amongst small hauliers for such direct methods to have any deterrent effect.
The right and proper way to tackle the problem is the educative one and to use every possible means for bringing the smaller and less responsible members of the industry to the point of appreciating what their charges must be, if they themselves are to continue in business.
In order to realize just what direction that education should take, it is necessary to consider for a moment what are the fundamental factors which govern the determination of rates and fares.
These factors are the cost of operating the vehicles employed, the, cost of running the business and the profit to be earned. It is necessary, therefore, to take steps to educate all those who use motor vehicles as a means for earning a living to appreciate what their vehicles cost them, what it costs them to run their businesses—for that is quite a different matter—and to a realization of what constitutes a proper and reasonable profit on that work.
It might have been thought that there was little in all that—that even if a man were not well acquainted with these facts when he started in business he would soon become aware of them and shape his activities accordingly. Nothing could be farther from the truth. Let us take the best possible case, and one, incidentally, which rarely arises—namely, that in which the operator takes the wise precaution of keeping accurate records of his expenditure. He is liable to grievous error, and, that being the case, how much more vulnerable must be most hauliers who do not think of keeping cost records until the arrival of their first communication from the income-tax assessor?
It is the peculiar nature of the transport industry, in -so far as it appears to the newcomer, in that the Initial costs are low, which makes it so easy for that newcomer to go astray. Those who enter the industry by way of the Aire-purchase companies' portals are particularly liable to this error.
"Once the initial Outlay is Over... ."
Considering first the cost of operation of the vehicle, once the initial outlay is over there is no immediate expenditure of any importance beyond that necessary for petrol, oil and garage rent. (I am considering for the moment the majority of cases, wherein the owner is also the driver.) If the weekly mileage be not large those charges may be all that are necessary for the first 12 months. There will be no repairs in connection with a new vehicle, which is, as a rule, guaranteed for that period. The damages arising from any accident will be met by the insurance company. The tyres will last the first year and any idea of providing against depreciation will not have been conceived. So far as items of operating expenditure are concerned, therefore, the weekly outgoings are practically negligible. In the case, for example, of a 30-cwt. vehicle covering 300 miles per week they amount to no more than about 25s. If for that 300 miles the haulier is being paid at the rate of 6d. per mile, his revenue is £7 10s. per week and his gross profit is £6 5s. per week. He regards that as most satisfactory, and because, as I have stated, it is possible for him to carry on in that fashion for a year—until, in fact, the time for the renewal of his licence and insurance premiums arrives—he sees no reason for revising his prices, and would certainly be very astonished if he were told that his rate is a ruinous one.
Peculiar Difficulty of Establishment Costs.
Almost as important, in their way, are the establishment costs. The peculiar difficulty about these, considered in their relation to the operations of the beginner, is that for him they are, to all intents and purposes, non-existent; at least, for the first_ few months of his business. Most beginners commence with a contract given to them by a well-wisher, and so long as that keeps them busy they are free from the ordinary cares and expenses of running a business.
Consideration of the third factor—namely, the amount of profit that is reasonable in a business of this kind—obviously cannot be discussed until the costs of operation both of the business and of the vehicle are appreciated at their true worth.
Now I come to the crux of the matter—the discussion of a practical method of proceeding with this education. Fortunately, there are means ready to hand for making a beginning, if not for completing the task. They are provided in the Tables of Operating Costs which The Commercial Motor not only publishes and revises annually but reprints in handy form. These the Editor will present; on request, to any haulier, oither for his own edification or for that of a friend, i,ir-ho may be in a position to benefit by their use.
In these Tables are average figures of cost of all classes and sizes of vehicle, calculated for numerous' weekly mileages up to 1,000 per week. They embody figures for establishment costs, which, although they may not invariably meet the cases of individuals, do at least remind him of the existence of such costs, leaving him with no excuse for oversight.
Finally, these same Tables show minimum charges which should be made.for the use of any vehicle, those charges being set out in two ways—one giving the appropriate charges per week, the other giving rates per mile. In both, the importance of taking the weekly mileage into consideration is emphasized.