The Thirst for Costing Knowledge Grows
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Special Problems Arising Out of the Present Tendency to Buy New Vehicles ANOTHER season of lectures is now in full swing and I am meeting my friends in the haulage industry, not in ones and twos, but in dozens. Every time I have a meeting, every time there occurs one of those little informal talks that sometimes precedes and sometimes follows a lecture, I learn a little more of what is really going on inside the industry and add a little to my appreciation of the difficulties with which those who are engaged in it have to contend.
A fact that emerges—and it may surprise some of the readers of this feature—is that the need and demand for help in elucidating problems of costs and rates are greater than ever before.
For some time past I have been giving some thought to the question whether, in the near future, these articles should not be modified, at least to the extent of assuming a certain amount of knowledge, on the part of the reader, of some of the basic features of costing and charging. That question has been answered for me, definitely in the negative.
Solving
Questions Change Nature.
The character of the requests which are now being put to me differs, in some way not easy to define, from those to which I have previously been accustomed. An analysis reveals this important feature. My haulier friends, in much greater proportion than ever before, are buying new vehicles, and their questions turn on the effect that such a step will have on cost.
That there should be this tendency and that it should be so strong as to be unmistakable is not without its significance. It demonstrates most emphatically the virility of the industry. Notwithstanding the persecution from which it is suffering, road haulage is expanding. The demand is growing ; the need will not be denied. This has been the burden of the concluding remarks in my addresses to hauliers' meetings for two years past.
But why—the question will occur to almost every B1.2 reader—should the intention to buy a new vehicle make a haulier desirous of improving his knowledge of costs? On the face of it, the fact that he has arrived at a position justifying such a step would seem to provide some definite indication that his business is prosperous.
It is necessary to go a little further in order to understand the position. Prosperity, as exemplified in the need for new vehicles, in replacement, often enough, of old ones, has revealed weaknesses. The old vehicle has not done quite so well as was expected. The haulier, faced rather suddenly with the fact that he must replace, becomes retrospective. Looking back, he begins to realize that whatever ideas he may have had 'about the two important items, maintenance and depreciation, they are not so accurate as they should be.
Working at high pressure has, during the past year, brought about SOMQ particularly noticeable increases in maintenance cost. That, perhaps more than any other fac r, has compelled the purchase of this new vehicle. An it has occurred to the haulier that this renewal has be me necessary much sooner than he had anticipated vy-o id be the case.
the Problems
A Second Setback.
nother disturbing factor of the same order has an n, but involving consideration from another viewpoi t. When making. his preliminary inquiries about the cost of his new vehicle, particularly as to what all ance would be made to him on account of the old one, he suffers another shock: the allowance offered fall far short of his anticipations and is much less than pre ous experience had led him to expect.
I other words, many hauliers are, at long last, co ng to face realities in the way of costs; they are beg nning to wonder whether they had not better take ste us to keep these realities permanently before them, lest the next time a new vehicle is required, they may lac the wherewithal to effect the purchase.
he conversation I had with one such haulier, which I relate almost verbatim, is illuminating.
It stems to show, first of a, 'that there is a tendency to dispose at vehicles at a lower mileage than was at one time custonaary, and it demonstrates that maintenance, or, at least, that portion of maintenance which ought really to be described as repairs, is costing hauliers More than it used to cost. In other words, motor repairers are ahead of users in their appreciation of the fact that the cost of materials and labour is rising, and that if they are to remain in business they must of necessity hand on these increases to their customers.
The conversation started with. a discussion of the difficulty which this particular haulier was having, first, in apportioning certain items of expense among three vehicles which were alike as to make, capacity and use, and, secondly, in being able to collect and record information about detail expenses. That part of the conversation may well serve as the subject for another article.
I should, perhaps, mention to those who have not yet listened to one of my addresses, that, in the course of one or two of them, I refer to the allowance which an operator is likely to receive for a second-hand vehicle in effecting an exchange. Apparently there has been an idea prevalent that the allowance I suggest is rather low. At any rate, after one meeting, one of those present took me aside and said that this question of allowance in part exchange was one that was troubling him.
Selling After 58,000 Miles.
"I went to Earls Court," he said, "because I had in mind buying a new vehicle to replace a 2-tonner which I put into service at the beginning of last year. I gave £330 for it and it has covered 58,000 miles."
"You have soon got tired of it," I rejoined.
"It's not Standing up to the work so well as I expected," he answered.
"What load does it carry?"
He looked at me, and, with a kind of half-shy grin, replied: "Three tons."
"I see," I said. "How did you get on?"
."Not very well," he answered. "For one thing, I didn't get what I thought was a decent offer for the old vehicle. The most I could get was £135, and, mind you, that was in connection with a deal involving a much more expensive vehicle."
" It doesn't seem to me to be a bad bargain," I replied. "You have had nearly two-thirds of the life from it that you are likely to get and the dealers have not deducted two-thirds of the purchase price, which would have been £200, leaving only £100 as a fair offer in part exchange."
• "How do you .get at £200?," he asked. • '; The original price was £330."
" Ah !" I said. "You must take off the value of a set of tyres—about £30."
'Why must I do that? The vehicle still has tyres."
"Because, unless the tyres are very 'good indeed, and I don't suppose they are, the agent who takes the vehicle in part exchange must fit it with a new set before he can expect to make a sale. What were the tyres like?"
Another sheepish grin. 'As a2 matter of fact," he said, "I don't mind telling you they wouldn't have been very good, because I have three machines, all of the
same size, and I should certainly have put the poorest set of tyres on to the one that I was offering. But," he went on, "I was taking figures from The Commercial Motor Tables of Operating Costs, where you give 0.55d. per mile as the figure for depreciation. 'Well, 58,000 miles at 0.55d. per mile equals £133, and subtracting £133 from—taking your figure2300 leaves £167, so that I seem to be losing £32 on the deal. How is that? "
"There are two reasons. First, that those depreciation figures are calculated on the basis of a vehicle running its full life and they are likely to be upset if that condition is voided. Secondly, the agent probably knows your vehicle, knows that you are in the habit of overloading and is basing his offer accordingly. If he is taking 3-ton figures, which he is justified in doing, then for depreciation the figure is 0.60d. per mile, in which case the absolute value of your vehicle is £155. The difference of £20 is probably due to the fact that your vehicle is in poor condition.
"In addition, it is a fact that the market for secondhand vehicles is not so good as it was; only vehicles in first-class condition can find a sale, and the fact that you have been consistently overloading yours puts it out of.the category of those that are in first-class order."